Decision Making Models

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6 Terms

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Strategic decisions

  • Long term and will affect the direction the business takes

  • These decisions will affect the entire business and will be made by the owners or senior management.

  • Are often complex and may result in major organisational change internal to the business or in the markets, or new markets they operate in

  • Involve a large financial commitment in order to carry out the decision, may take a few

years, and a few million pounds, to see if strategic decisions have had the positive affect anticipated by the business

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Tactical Decisions

  • Tend to be medium term, they should aim to implement strategic decisions

  • Less complex than strategic decisions and are usually carried out by middle management

  • Can also be more flexible – if it is failing to meets its objective then it can be changed

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Operational Decisions

  • Are the day to day decisions made in a business

  • These are lower level decisions that tend to be short term and have little risk

  • A business will make hundreds of operational decisions in a typical day by a range of employees, as they do not need the careful thought and planning of strategic and tactical decisions

  • Many decisions at this level are routine and can be taken fairly quickly

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Why is decision making important?

  • Decision-making can solve problems for a business

  • Some decisions will be difficult to make and they may have negative outcomes for certain stakeholders of the business, such as redundancy for employees.

  • Whoever is making the decision, it is important that the decision made is based on the common good for the business in order to help achieve its aims and objectives.

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Scientific Decision Making

  • Is favoured by most businesses making strategic and tactical decisions as it is based on logic and evidence and should reduce the risk of failure

  • Includes the consideration of alternative decisions, so all possible courses of action are included and the business will undertake a full analysis before making any decisions

<ul><li><p>Is favoured by most businesses making strategic and tactical decisions as it is based on logic and evidence and should reduce the risk of failure</p></li><li><p>Includes the consideration of alternative decisions, so all possible courses of action are included and the business will undertake a full analysis before making any decisions</p></li></ul><p></p>
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Intuitive Decision Making

  • Uses experience and intuition (gut feeling) to make a decision

  • This has proved successful for many entrepreneurs and managers who use their experiences and emotions to make a decision

  • Can be made quickly and are often useful for operational decisions, however at strategic and tactical level there is a large risk on relying on intuitive decision making alone