Decisions are part of the manager's remit. Difficult choices may have to be made for the common good of the organisation. There are three types of decision in business:Strategic decisions,Tactical decisions, Operational decisions.
Strategic decisions are long term, complex decisions made by senior management. These decisions will affect the entire direction of the firm. An example may be to become the market leader in their field.
Tactical decisions are medium term, less complex decisions made by middle managers. They follow on from strategic decisions and aim to meet the objectives stated in any strategic decision. For example in order to become the market leader, a firm may have to launch new products/services or open new branches.
Operational decisions are day to day decisions made by junior managers that are simple and routine. This could involve the regular ordering of supplies or the creation of a staff rota.
Role of managers
Managers have different jobs or roles they undertake in order to be efficient and effective. The French miner turned management guru, Henri Fayol was the first to really ask what management involved. He broke the role of the manager into:
- Plan - to prepare for the future and create action points
- Organise - having resources ready and putting plan into action
- Command - ensuring employees are working
- Co-ordinate - making sure all departments work together to achieve the end goal or objective
- Control - checking the effectiveness and efficiency of the proposed plan
- Implement - the art of putting the plan into physcial action
A SWOT Analysis is a managerial decision making tool used to identify a firm's internal strengths and weaknesses, as well as external threats and opportunities. Strengths identified should be matched up to potential opportunities for the company. Weaknesses should be improved, and threats should be allowed for and an action plan to try and limit their impact. There is a structured decision making model known by the acronym POGADSCIE. This is used by businesses to make an effective decision. The letters in the acronym stand for:
- Identify the Problem
- Identify Objectives of solution
- Gather information
- Analyse information
- Devise possible solutions
- Select best possible solution
- Communicate the decision
- Plan and Implement solution
- Evaulate effectiveness of the solution
What affects a decision? What can make or break a quality decision from being made? The value and quality of the information the people making decisions have at hand. How able or skilled or experienced are the managers? How able are employees to use decision making tools? Is there personal bias or a vested interest in the outcome of the decision? Decision making models do not guarantee the success of a decision. Factors to be taken into consideration are: The finance available to the firm, it may not be viable to implement the favoured or best decision. Employees are usually resistant to change and may be reluctant to 'buy into' the decision.
Does the firm have the technology needed to implement any decision? A decision may involve a major change in the way the firm works or operates and this may require capital investment.
PESTEC factors could have an impact on the decision being made, for example a recession could have a significant impact on any decisions or choices made.
What is a Business? It can be defined as:
- "An organisation that aims to satisfy customer needs and wants".
This diagram shows the business cycle.
It illustrates how what businesses decide to make and produce are driven by customer needs and wants.
Then with the money and profit created by sales to customers, employees are paid and they themselves become customers as they go and buy other goods and services. This is a continual process which is the basis of our economy.
This is why when people are out of work (unemployment) less money is in the economy and inflation (the rise in prices) will be generally low. On the other hand when many people are in work with disposable income to spend, then inflation will rise as goods and services will have a high demand. Where demand is high companies can choose to raise prices to maximise their profits.