Business organisation and environment

Table of Contents

1. Topic pack - introduction
2. 1.1 Nature of business activity - notes
3. 1.1 Nature of business activity - questions
4. 1.2 Types of organisation - notes
5. 1.2 Types of organisation - questions
6. 1.3 Organisational objectives - notes
7. 1.3 Organisational objectives - questions
8. 1.4 Stakeholders - notes
9. 1.4 Stakeholders - questions
10. 1.5 External environment - notes
11. 1.5 External environment - questions
12. 1.5 External environment - simulations and activities
13. 1.6 Organisational planning tools - notes
    1. Organisational planning tools
    2. Business plan
    3. Decision-making processes - introduction
    4. Decision-making processes
    5. Decision-making - fishbone diagram
    6. Decision trees
    7. Decision trees - worked example
    8. SWOT analysis
14. 1.6 Growth and evolution - notes
15. 1.7 Growth and evolution - questions
16. 1.7 Growth and evolution - simulations and activities
17. 1.6 Change (HL only) - notes
18. 1.9 Globalisation - notes
19. 1.9 Globalisation - questions
20. Print View

Decision-making processes

A decision-making framework

If you would prefer to view this interaction in a new web window, then please follow the link below:

• Decision-making framework

Bill Gates, founder of Microsoft is a keen supporter of scientific approaches to decision making. It is not unexpected that he believes that new technologies - and Microsoft software - should be used to underpin this approach!

However, some management writers, such as Henry Mintzberg and Tom Peters, argue that over emphasis on scientific approaches and repetitive planning processes can lead firms into fixed patterns and inflexible structures. This can be dangerous in high technology industries or those subject to continuous change. Mintzberg's recent work focused on how decision makers respond to significant changes in the external environment.

Experience

The scientific decision-making model is not required for all decisions. Many decisions are simple and/or routine and do not require any detailed analysis. Managers may decide to rely on their experience of similar situations. This is likely to be the case in 'programmed' or routine decisions, which have been made many times before, such as ordering supplies like paper or raw materials.

It is possible that this is a good approach to adopt, as it does not use up unnecessary time. However, it may be that a more scientific approach to even routine decisions like these may lead to cost savings if, for instance, cheaper suppliers can be found, or alternative products sourced.

Intuition or 'gut feeling'

It may be that decisions about selling original or innovative products or services cannot be based on past experience or previous data as this does not exist. Entrepreneurs are often risk takers and are prepared to 'go into the unknown'.

Other managers are so confident in their own abilities that they will act on their own feelings about what is 'right', based upon the patterns they see and their knowledge of the markets. Certainly this approach is quicker and less expensive than scientific approaches, although the risks of failure may be higher as a result.

Decision-making techniques

There are a number of techniques that may help managers make more effective decisions. These include:

• Decision trees (probability diagrams)
• The Five Whys
• The Cause and Effect diagram (Fishbone diagram)

We go on to look in more detail at these on the next few pages.