Class 12 Business Studies Lesson 5

Concept of decision making:

Decision making means to select the course of action from two or more alternatives. In other words, the act of choosing one alternative from among a group of alternative is known a decision Making. It is the process of solving problems by selecting the best alternative from various alternative to achieve the common good. It is an integral part of modern management. Everyday a manager has to take different types of decision to solve the problem.

According to George Terry, “Decision making is the selection based on some criteria from two or more possible alternative”

Process/step of decision making:

The process of decision making are as follows:

a. Identification of problem: Identification of problem is the first step in the process of decision making. It is lightly said that “Problem well defined is problem half solved”. Information relevant to the problems should be gathered so that critical analysis of problem is possible.

b. Analyzing the problem: After identification of problem the next step is to analyze the problem. The problem should be analyzed on the basis of available data and information related to the problems. A decision maker should find out the basis and minor reason for creation of the problems.

c. Development of alternative: The decision maker should be creative. He should develop the various alternative to solve the problem. All possible solution should be develop and studied.

d. Selecting the best alternative: After development of alternative the next step is to select the best alternative. That alternative is the best alternative which can fully contribute and can be implemented for the success of execution of plan. If the selected alternatives couldn’t become the best then it might lead to failure o the business.

e. Implement the selected alternative: After selecting, the best alternative, the next Step is to implement the selected alternatives and to implement the activities, managers need support from every corner. If he fails to get the support he can’t implement the selected alternative into action. This may lead to failure of the business. Therefore, the success totally depends upon the ability to translate into action.

f. Evaluate the results and follow up: In the last step, the implemented activities are continuously monitored and evaluated and the results obtained should also be evaluated. If the result is not in accordance with the expectation, certain changes have to be made to make it success! That can be follow-up by controlling.

 

Types of decision making:

A. Programmed and non non-programmed: A programmed decision is applied to structured a routine problems. This used for routine and respective work. Decision maker know in advance what decision one has to take in a particular set of conditions. Programmed decision is also known as ready made decision. Under this type of decision it is not necessary to make detailed study to solve any kind of problem. Non-programmed decision are used for unstructured novel and will defined situation of a nonrecurring nature. They have no ready made courses of action as decision may be changed with the changed in environment factors.

B. Major and minor decision making: Among several decisions some decision are considered more important than others. The decision which are relatively more important are considered a major and which are less important are considered as minor decisions. The major decisions are those which have long range impact like replacement of man by machine.

C. Routine and basic decision making: Routine decisions relate by day to day working of the organization. Such decision are made within the framework of set rules, policies and procedures. Such decisions are taken frequently by middle and the lower level manager who are responsible for the supervision of actual operation. But those decision which are very crucial, unique and which involved long term commitment, large investment policy decision etc are basic decisions.

D. Individual and group decision making: Decision can also be classified on the basis of persons involved in the decision making process. When an individual takes a decision it is known as individual decision. Individual decision are generally taken in small organization. Individual decision are also taken in big organization if they are of routine nature. When a number of persons collectively take the decisions it is known as group decision such as decision taken by the board of directors, committee etc. Such decision are generally taken in big organization which follow the participative style of management.

E. Policy and operating decision making: Decision which are involved in a change of the procedure, programme or strategy of the organization and which are taken by the top level management are called policy decision, where as operating decisions are related to the day to day operation of the enterprise. This type of decision is taken by lower level management. It is generally related with routine activities for smooth functioning of policy.

Importance of decision making:

a. Fundamental function: Decision making is the fundamental basic function of a manager which is directed to obtain the organizational goal. The function or task is performed by manager at all the levels of organizations.

b. Indispensable component: Decision making is an indispensable component of management process. Every manager is engaged in decision making for what is to be done? Who will do it? How it is to be done? Why it is to be done? and Where it is to be done?

c. Pervasive function: Decision making is the pervasive function of manager aimed at achieving organizational goal. All managerial functions such as planning, organizing leading and controlling as well as all functional area such as production, sells, marketing and finance involved in decision making. The function of decision making is performed by managers at all level of managerial hierarchy.

d. Selecting the best alternative: A decision making is basically a choice making process. It is necessary in every organization because there are many alternative courses of action to most situations. The decision maker evaluates various merits and demerits of the every alternative and select the most acceptable alternative.

e. Evaluation of managerial performance: Managers spend a great deal of their time in decision making. Making good decision is not only important but also essential to managerial success. Hence, managerial performance is evaluated on a the basis of a number and the importance of good and effective decision.

f. Successful operation of business: In every organization all activities are done through decision. In this competitive age, the organization can exist and develop only when practical, appropriate and correct decision are made. Therefore, successful operation of business depend upon wise proper decisions.

Important Questions.

What is decision making? Explain the process and step of decision making.

Explain the different types of decision.

What is decision making. Explain the importance of decision making.