Business Enterprise
Decision-making
Learning and Teaching Scotland
1
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 lowlevel
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
Strategic
(Senior management)
Complex
Non-routine
How to achieve
policy
Medium-term
Tactical
Less complex
(Middle management)
Operational
(Junior management)
Day-to-day
decisions
Simple
Routine
Examples of decisions
Bus
company
School
Strategic
Tactical
Operational
Expand
market share
by
establishing a
new route
Increase
attainment
levels by
10%
Develop new
price
structure to
attract
customers
Make bus
mgt
compulsory
Extra buses
on due to
increase in
demand
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.
History of management
• Here is a short video outlining
some of the major concepts of
management history.
Click for clip
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 POGADSCIE
Problem
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.