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ReviewReview

● What is SWOT?● What are Porter’s Generic Strategies?● What is the Miles and Snow Typology?● What is the Product Life Cycle?● What types of diversification strategies are there?

– What are there strengths/weaknesses?● How does one evaluate opportunities?

– BCG Matrix– GE Business Screen

● What is the Prisoners’ Dilemma?

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Decision Making and Problem SolvingDecision Making and Problem Solving

● Choosing one alternative from among a set of alternatives.– Not simply multiple choice– You also have to identify the choices

● Types of decisions– Programmed

Structured and re-occurs– Nonprogrammed

Unstructured and infrequent● Examples?

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Decision Making ConditionsDecision Making Conditions

● Certainty– Know all alternatives– Know outcome for each alternative

● Risk– Know all alternatives– Each alternative has a probability

● Uncertainty– Do not even know all the alternatives

● Examples

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Classical Decision MakingClassical Decision Making

Theory●Obtain complete and perfect information on alternatives●Eliminate uncertainty●Evaluate alternatives

Practice●Good or bad approach?

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Rational Decision MakingRational Decision MakingTheory

1.Recognize and define the decision situation

- Sometimes hard to see the problem

2.Identify alternatives

3.Evaluate alternatives

4.Select best alternative

5.Implement choice

6.Evaluate results

Practice●Sometimes projects go on too long when should be killed●People get invested in a particular approach●Just because it is “rational” doesn’t mean it will produce good results. E.g. New Coke, Netflix, others?

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Administrative ModelAdministrative Model

Theory●Describes how decisions are made, not how they should be made●Characteristics

– Bounded Rationality Decision makers are limited by skills and

incomplete information– Satisficing

Search until find solution meeting min. req.●Does not necessarily lead to the “best” decisions●Examples

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Other Factors in Decision MakingOther Factors in Decision Making

Practice●Political forces

– Power of customers and suppliers McDonalds Styrofoam, animal testing, etc.

●Intuition– As opposed to “Paralysis by Analysis”

●Escalation of commitment– Sticking with a decision even when looks wrong– “Sunk costs are sunk”

●Risk propensity– Willingness to take and comfort with risk

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Group Decision MakingGroup Decision Making

Practice●Interactive groups (teams)●Delphi groups

– Ask group of experts for opinion, e.g. on date– Average the inputs and repeat until consensus

●Nominal groups– Group in name only– Bring experts together, get ideas, and vote

●Manager implications:– If you ask, be prepared for all responses– Do you retain the right to accept or reject?

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Group Decision MakingGroup Decision Making

● Advantages– More information– More alternatives– Greater acceptance– May get better comm.– Usually better decisions

● Disadvantages– Slower– Costlier– Compromises are not

necessarily better decisions

– One person may dominate

– “Groupthink” where desire for consensus overwhelms getting to correct decision

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Managing Group Decision MakingManaging Group Decision Making

Practice●Need to be careful that you don’t abdicate your responsibility●Need to be careful that you don’t empower group and then take it back●Set deadlines●Carefully select members●Make it clear that all decisions will be subject to testing and scrutiny

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ExerciseExercise

● Deal or No Deal– You have a 50/50 chance of getting either

$500,000 or $1. I offer you either those odds or $200,000 guaranteed. What do you take?

– You have a 50/50 chance of either losing $100 or losing $1. I offer you either those odds or a guaranteed loss of $45. What do you take?

● What affects your decision?– Expected value– Expected utility

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More Mental ExercisesMore Mental Exercises

• Exercise C1. Have a 3K sq. ft. home when everyone

else has 4K sq. ft. or2. Have a 2K sq. ft. home when everyone

else has a 1K sq. ft. home

• Exercise D1. Get 4 weeks vacation when everyone

else gets 6 weeks or2. Get 2 weeks vacation when everyone

else gets 1 week.

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VideosVideos

● DVD – McDonalds – One Owner● DVD – Google Ch. 5, Guess Where Google is Now