Learning and Teaching Scotland 1

Business EnterpriseBusiness Enterprise

Decision-making

Nature of decisions

Decision-making is choosing between alternative courses of action.

Typical decisions:• what to produce or provide• where to locate• what method of production to use• how many people to employ• what prices to charge.

Objectives

Objectives are the goals of the organisation:

• survival

• profit maximisation

• growth

• image and social responsibility.

Objectives and strategy

• Where are we?

• Where do we want to be?

• How do we get there?

• Managers decide business objectives then organise objectives into targets.

Mission statements

• A company’s raison d’être.

Why define aims/objectives?

• An end result to work to.

• Goals motivate people.

• Keeps focus and direction.

Click for Clip

Mission statements

• ‘We exist to refresh everyone we touch’ – Coca Cola

• ‘We strive to lead in the invention, development and manufacture of the industry's most advanced information technologies’ – IBM

Answer a question

• Explain the reasons why some organisations produce a mission statement.(3 marks) 2010

• 6 minutes

Peer marking

• You are going to swap answers.

• Has your partner answered well?

• Does the answer make sense?

• Is it worth a mark?

Solution • Could be released to the press, which would help

market the business and its products.• Issued to all employees, allowing them to see the firm’s

aims and objectives linked to their roles as workers.• Shows the firm’s plans for the future and how the

customers will be treated/affected.• Details social responsibilities of the organisation, which

may attract customers to the organisation.• Could be used to attract quality staff, who would agree

with the values created by the mission statement.• Improves image of the organisation, which could

increase sales.

Types of decision

• Strategic

• Tactical

• Operational

Strategic decisions

• Long-term• Made by senior

management• More general in

nature• Major policy

statements are strategic

Examples• What products to

make?• Increase market

share• Which market

segment will we target?

Tactical decisions

• Short-term• Made by middle

managers in functional areas

• Based on aims or goals of organisation

• More detailed and specific

• May change due to PESTEC factors

Examples• Hire/fire employees• Instore promotions• To float a share

issue• Re-brand the

business

Operational decisions• Day-to-day, routine

decisions• Mainly made by low-

level managers/supervisors

• Respond to usually regular problems

Examples• Arranging staff rotas• Procuring raw materials

from suppliers• Payroll – paying wages

and salaries• Dealing with customers

enquiries (including complaints)

Policy decisions

Long-term

Complex

Non-routine

How to achieve policy

Medium-term

Less complex

Day-to-day decisions

Simple

Routine

Strategic

(Senior management)

Tactical

(Middle management)

Operational

(Junior management)

Examples of decisions

Strategic Tactical Operational

Bus company

Expand market share by establishing a new route

Develop new price structure to attract customers

Extra buses on due to increase in demand

School Increase attainment levels by 10%

Make bus mgt compulsory

Arrange cover for Staff absences

Strategic decision examples

• Increase market share.

• To grow by expanding and taking over firms.

• Sell off an under-performing part of the company (divestment).

• Invest new capital into business.

Tactical decision examples

• Launch new product.

• Hire/fire employees.

• Buy or rent premises.

• Buy or lease equipment.

Operational decision examples

• Arrange employee rotas.• Training needs of employees.• Layout of factory/office.• Deal with customer enquiries.• Payroll – payment of wages and salaries.• Procure raw materials from suppliers.• Implement methods of production.• Make decisions on working hours.

Answer a question

(a) A manager decides to grant a worker’s request for a holiday. Identify and justify this type of decision.(2 marks) 2010

(b) Describe two other types of decisions and give an example of each.(4 marks) 2010

• 12 minutes

Peer marking

• You are going to swap answers.

• Has your partner answered well?

• Does the answer make sense?

• Is it worth a mark?

Solution to (a)

• Operational decision.

This is an operational decision because:• it is a decision made by a lower

level/junior manager• it has little or no risk• it is made on a short-term basis.

Solution to (b)

• Tactical decision is medium-term/is made by middle level managers/has a slightly increased risk.

• Any appropriate example.

• Strategic decision is long-term/made by senior managers/has a greater risk.

• Any appropriate example.

What is management?

• Managers are responsible for getting things done.

• This involves delegation – passing responsibility onto others.

• Managers act on behalf of owners and are accountable to shareholders.

• Managers set objectives for the organisation and try to achieve them.

Click for clip

History of management

• Here is a short video outlining some of the major concepts of management history.

Henry Mintzberg’s nature of managers

• Interpersonal role – relationships with others.

• Informational role – collecting and passing on information.

• Decisional role – making different kinds of decisions.

Henri Fayol

• (1841–1925)• French mining

engineer and manager.

• First to ask ‘What is management?’

Fayol’s role of manager

• Plan – examining the future and drawing up a plan of action.

• Organise – building up human and material resources and putting plan into action.

• Command – maintaining worker activity.• Co-ordinate – unifying effort between

departments.• Control – checks on efficiency of plan. • Implement – put into practice.

Functions of management

• Planning

• Organising

• Commanding

• Co-ordinating

• Controlling

• Motivation

• Delegation

POGADSCIE

• Identify the problem.

• Identify the objectives of the solution.

• Gather information.

• Analyse information.

POGADSCIE

• Devise possible solutions.• Select the best possible solution.• Communicate the decision.• Plan and implement the solution.• Evaluate the effectiveness of the

solution.

Example of POGADSCIEProblem Select candidate Select solution Make final choice

Objective Select suitable candidate

Communicate Contact successful candidate

Gather info CV, application forms Implement Appoint and training

Analyse Info Look through above documents

Evaluate Monitor new recruit’s progress

Devise solution

Produce short list

Problems with structured models

• Time.

• Ability to collect all relevant information.

• Lack of creativity of managers.

• Changes might affect decision.

Benefits of structured models

• No hasty decisions will be made.• Quality/quantity of information you will

have.• Availability of all alternative solutions.• Enhances innovation and

responsiveness.

SWOT analysis

• Strengths – strong points of business.• Weaknesses – present problems.• Opportunities – may arise in future.• Threats – may arise in future and be

avoided.

• Strengths and weaknesses are internal.• Opportunities and threats are external.

Click for clip

SWOT analysis

Strengths Weaknesses

Opportunities Threats

SWOT analysis of 20th Century Fox

Strengths•Talented workers•Merchandising•Back catalogue

Weaknesses•No new movie blockbusters•Outdated studio facilities

Opportunities•Blu-Ray•IMAX•3-D•Asian market

Threats•Competitors•TV•Piracy•Internet

Recommendations

• Next we try to form a strategy.

Use your strengths to:

• exploit opportunities

• improve your weaknesses

• eliminate/deal with threats.

Recommendations for 20th Century Fox

• Improve and update studio facilities.

• Transfer back catalogue onto DVD.

• Tailor more films for Asian market and push merchandising.

• Tackle TV by creating IMAX spectaculars.

• Increased copyright security tabs.

Answer a question

• Describe how a manager could evaluate the effectiveness of a decision.(4 marks) 2008

• 8 minutes

Self-marking

• You are to answer.

• Have you answered well?

• Does the answer make sense?

• Is it worth a mark?

Solution

• Have the objectives been reached?

• Is the organisation operating effectively?

• Is there an increase in sales/profits?

• Has staff turnover/absenteeism decreased?

• Has staff morale improved?

• They may issue questionnaires/interview staff/observe.