BNAD 302 10/8/13 Lecture 10Outline of Last Lecture I. The Dynamics of Strategic PlanningII. What is an effective strategy?III. How companies can implement grand strategiesIV. The Strategic Management ProcessV. SWOT AnalysisVI. Porter’s Five Competitive ForcesOutline of Current LectureI. Decision MakingII. Satisficing and Incremental ModelsCurrent LectureI. Decision Makinga. Rational model of decision makingi. Explains how managers should make decisionsii. Assumes managers will make logical decisions that will be optimum in furthering the organizations interest also called the classical modelb. Non-Rational models of decision makingi. Assume that decision making is nearly always uncertain and risky, making it difficult for managers to make optimal decisionsc. Rational Decision Making1. Identify the problem or opportunity2. Think up alternative solutions (seeking the root cause)3. Evaluates alternatives and select a solution4. Implement and evaluate the solution chosend. Assumptions of the Rational Modeli. Complete information, no uncertainty1. You should obtain complete, error free information about all alternative courses of action and the consequences that would follow from each choiceii. Logical, unemotional analysis1. Having no prejudices or emotional blind spots, you are able to logically evaluate the alternatives, ranking them from best to worst according to your personal preferences.These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.iii. Best decision for the organization1. Confident of the best future course of action, you coolly choose the alternative that you believe will most benefit the organization.e. Bounded Rationalityi. Suggests that the ability of decision makers to be rational is limited by numerous constraintsii. Complexity, time and money, cognitive capacityf. Some hindrances to perfectly rational decision makingi. Complexity:1. The problems that need solving are often exceedingly complex, beyond understandingii. Time and money constraints1. There is not enough time or money to gather all relevant informationiii. Different cognitive capacity, values, skills, habits, and unconscious reflexes1. Managers aren’t all built the same way, of course, and all have personal limitations and biases that affect their judgmentiv. Imperfect information1. Managers have imperfect, fragmentary information about the alternatives and their consequencesv. Information overload1. There is too much information for one person to processvi. Different priorities1. Some data are considered more important, so certain facts are ignoredvii. Conflicting goals1. Other managers, including colleagues, have conflicting goals.II. Satisficing and Incremental Modelsa. Satisficing Modeli. Managers seek alternatives until they find one that is satisfactory, not optimalb. Incremental Modeli. Managers take small, short term steps to alleviate a problemc. Intuitioni. Making a choice without the use of conscious thought or logical inferenceii. Sources are expertise and feelingsd. Implementation principles of evidence based decision makingi. Treat your organization as an unfinished prototypeii. No brags, just factsiii. See yourself and your organization as outsiders do iv. Evidence based management is not just for senior executivesv. Like everything else, you still need to sell itvi. If all else fails, slow the spread of bad practicevii. The best diagnostic question: what happens when people faile. What makes it hard to be evidence based1. There’s too much evidence 2. There’s not enough good evidence3. The evidence doesn’t exactly apply4. People are trying to mislead you5. You are trying to mislead you6. The side effects outweigh the cure7. Stories are more persuasive anywaysf. Analyticsi. Sophisticated forms of business data analysisii. Portfolio analysis, time series forecastiii. Also called business