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When Decisions are Made

Decisions in response to opportunities: managers respond to ways to improve organizational performance.
Decisions in response to threats: occurs when managers are impacted by adverse events to the organization.

Types of Decision Making

  • Programmed Decisions—are routine decisions and follow almost automatic process. Following are some of the attributes of Programmed decisions:
    • Managers have made decision many times before.
    • There are rules or guidelines to follow.
      Example: Deciding to reorder office supplies.
  • Non-programmed Decisions—are required to be taken when some new situation has arisen, or a unusual situations that have not been often addressed has arisen.
    • No rules or established norms to follow since the situation is new to the organization. In some of the cases, managers take the cue of decisions made by other firms facing similar situations. However, these “other firms” may be the closest competitor and hence following their strategy may not produce the desired results.
    • Hence, these decisions are made based on qualitative information, quantitative information, intuition, and judgment.
    • Rather, looking from an organizational perspective, if we look on a personal level, question asked in CAT 2007 was a similar situation of decision making.
      Example: Should the firm invest in a new echnology?
Let us have a look at the questions from CAT 2007:


Directions for questions 1 and 2

Shabnam is considering three alternatives to invest her surplus cash for a week. She wishes to guarantee maximum returns on her investment. She has three options, each of which can be utilized fully or partially in conjunction with others.


Option A: Invest in a public sector bank. It promises a return of +0.10%.


Option B: Invest in mutual funds of ABC Ltd. A rise in the stock market will result in a return of +5%, while a fall will entail a return of –3%.


Option C: Invest in mutual funds of CBA Ltd. A rise in the stock market will result in a return of –2.5%, while a fall will entail of +2%.


The maximum guaranteed return to Shabnam is
  1. 0.20%
  2. 0.15%
  3. 0.30%
  4. 0.25%
  5. 0.10%
Option (a)- 0.20%


What strategy will maximize the guaranteed return to Shabnam?
  1. 64% in option B and 36% in option C
  2. 1/3 in each of the three options
  3. 30% in option A, 32% in option B and 38% in option C
  4. 100% in option A
  5. 36% in option B and 64% in option C
Option (a)- 64% in option B and 36% in option C


In this chapter, we would be discussing the following types/tools of decision making:
  1. Basics of Linear programming
  2. Scheduling problems

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