COLLAB 2N03 Lecture Notes - Lecture 4: Decision-Making, Rationality, Bounded Rationality

102 views6 pages

salmonalligator636

17 Jan 2016

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

What is decision making: decision making is the process of developing a commitment to some course of action. Three things are noteworthy about decision making: it involves making a choice among several action alternatives. The store can carry more or less inventory: it is a process. That involves more than simply the final choice among alternatives: it involves a commitment of resources. A rational decision maker might use a model that involves a sequence of steps that are followed when making a decision: the rational decision-making process. Perfect rationality is a decision strategy that is completely informed, perfectly logical, and oriented toward economic gain. The prototype for perfect rationality is the economic person who is the perfect, cool, calculating decision maker. Economic person: can gather information without cost and is completely informed, is perfectly logical, has only one criterion for decision making: economic gain. These perfectly rational characteristics do not exist in real decision makers.

Related Questions

The year is 2020. Youjust got your dream job as a stock broker on Wall Street. They gaveyou a nice signing bonus and you are making a lot of money. Youalso have the opportunity to make a large year-end bonus if youmeet your sales quota. But your Boss has a reputation for firingnew employees that donât reach those sales goals. Timing could nothave been better because your student loans are thru the roof andyour parents were just threatening to kick you out of the basement.You buy yourself a couple new suits, rent your apartment inManhattan and show up 30 minutes early to work ready to start yourcareer.

Your Boss, Mr. Moneybags, has you start cold calling people to get them to buy stock inTEXLA corporation. He says that TEXLA is a great new company thatis working on a new drug that might cure cancer. He failed to tellyou that the President of Texla is his brother-in-law. You startmaking sales calls and find out that the easiest people to convinceto buy the stock are senior citizens.

The first year youmake reach your sales quota and receive a 1 Million Dollars bonuswhich you immediately invest in TEXLA stock because it has beendoing so well. You also invested all of your parentâs retirementsavings in TEXLA. Later that year you accidentlyreceive an email that was addressed to Mr. Moneybags from hisbrother-in-law the President of TEXLA which informed him that thetesting shows their new drug actually makes cancer worse. You arethe only one who has this information and know that once thisinformation hits the internet the value of the stock will drop toZERO but no one will ever find out that you have this insideinformation. You also remembered from your awesome business lawclass that it is illegal to use âInside Informationâ to benefityourself or your clients.

Your Boss will losehis investment, you will lose your investment, your parentâsretirement savings will be lost along with all of those seniorcitizens that listened to your advice.

You only have an hourbefore the news will hit the press which means you canât calleveryone. What do you do?????

Identify theethical dilemma(s) in this situation.

REQUIREMENT

Use an ethical decision making model to determine theright course of action to take in thissituation.Use the Business Process Pragmatism as aguide for your answer.

BusinessProcess Pragmatism is :

Step 1
Inquiry

First, the decision maker must understand the problem. This stepinvolves identifying the parties involved (the stakeholders) andcollecting the relevant facts. Once the ethical problem or problemsare clarified, the decision maker lists any relevant legal andethical principles that will guide the decision.
Step 2
Discussion

In this step, the decision maker lists possible actions. Theultimate goals for the decision are determined, and each option isevaluated using the laws and ethical principles listed in Step1.
Step 3
Decision

In this step, those participating in the decision making worktogether to craft a consensus decision or consensus plan of actionfor the corporation.
Step 4
Justification

In this step, the decision maker articulates the reasons for theproposed action or series of actions. Generally, these reasonsshould come from the analysis done in Step 3.

The following case further demonstrates the types of situationsthat can occur when management demonstrates a lack of concern aboutethics.

5. Evaluation

This final step occursonce the decision has been made and implemented. The solutionshould be analyzed to determine if it was effective. The results ofthis evaluation may be used in making future decision

aquamarinezebra969

Tactical decision making

Tactical decision making means choosing among alternatives withan immediate or limited end in view. For example, a company mayaccept a special order for less than the normal selling price touse idle capacity. Tactical decisions tend to be short-runin nature; however, it should be emphasized that short-rundecisions often have long-run consequences. A general tacticaldecision-making model is outlined here.

1.	Recognize and define theproblem.
2.	Identify possible alternativesolutions to the problem, and eliminate any unfeasiblealternatives.
3.	Identify the costs and benefitsassociated with each feasible alternative. Eliminate the costs andbenefits that are not relevant to the decision.
4.	Compare the relevant costsand benefits for each alternative.
5.	Assess qualitative factors.
6.	Select the alternative with thegreatest overall benefit.

Identifying and comparing relevant costs and revenues is theheart of the tactical decision model. Relevant costs (revenues) arefuture costs (revenues) that differ across alternatives. (Revenuesare treated in the same way as costs, so we will simplify thediscussion by referring to costs.) All decisions relate to thefuture; so, only future costs can be relevant. In addition, thecost must differ from one alternative to another. If a future costis the same for more than one alternative, it has no effect on thedecision. Such a cost is an irrelevant cost.

Assume that Reeves Company is considering accepting a specialorder for $25 per unit when the normal selling price is $30 perunit. Reeves has enough excess capacity to make the order withoutdisplacing normal sales. The alternatives facing Reeves Company are(Select "Yes" for the statements that are applicable and "No" forthe items that do not apply):

Accept the special order.	- Select your answer -YesNoItem1
Reject the special order.	- Select your answer -YesNoItem2
Sell normal sales for $25 perunit.	- Select your answer -YesNoItem3

Choose which of the following are relevant in deciding whetheror not to accept the special order. (Select "Yes" for thestatements that are applicable and "No" for the items that do notapply)

$25 price.	- Select your answer -YesNoItem4
$30 normal price.	- Select your answer -YesNoItem5
Variable cost of making the unitsin the special order.	- Select your answer -YesNoItem6
Depreciation on factory equipmentused in making the special order units.	- Select your answer -YesNoItem7
Increased property taxes on thefactory building which are due while the special order would bemade.	- Select your answer -YesNoItem8

While cost and revenue information is important, otherinformation may be needed to make an informed decision. Thesenon-financial factors are termed qualitative and are often relevantin decision making. For example, in deciding whether to make acomponent in-house or purchase it from an outside supplier, thecompany may consider any difference in quality or in responsivenessto the company's production schedules.

goldmoose557

The purpose behind much of advertising is to influence each of the five Consumer Decision Making process (Problem Recognition, Information Search, Evaluation of Alternatives, Product Choice (i.e. Purchase) and Outcomes (i.e. Postpurchase). Each stage of the Consumer Decision Making process has techniques that help consumers to manage the stage and then move onto the next one successfully. Eventually, the consumer moves to purchase (where we get excited to make the sale) but don't underestimate how important the last stage (post purchase) is to making additional sales in the future. Below are guidelines that show basic techiniques used to target and manipulate each Consumer Decision Stage through advertising.

Below are some issues that you will want to consider as you evaluate each of the five chosen advertisements. Please remember that your goal is not simply to answer these questions, but to provide insights into the consumerâs decision making process that you feel would be useful to a marketing manager (e.g., if an ad triggered the consumerâs decision to purchase the product). Other areas to comment on would be level of involvement, etc.

Consumer Decision Making Stage:	Considerations for Stage:	Common Ad Techniques:
Problem Recognition	What problems does this product solve for the consumer? â¢ What triggered the decision to purchase this product? â¢ Was this the first time the consumer purchased such a product? Define and discern the Actual and Desired States	Ask a question (Whatâs for dinner tonight?) Show before (actual state) and after (desired state) Use the word ânewâ or âintroducingâ to initiate curiosity.
Information Search	â¢ Did the consumer seek information about the product and about various brands? How was this information collected, and how much information was collected? â¢ Was the consumer searching for any advertisements for the product? What was the consumerâs reaction to these advertisements?	Match amount of information with type of product. Direct consumers to website, free kit or other information venues. Show role models that âlookâ like the target market. Show the entire line of product offerings (all the flavors and colors, etc.) Testimonials, etc.
Evaluation of Alternatives	â¢ How many alternatives were considered? How were they selected?â¢ What features and characteristics of the product were most important to the consumer? Salient and Determinant defined attributes. â¢ How important was the brand of the product to the consumer?	Featuring specific variables that the product is known for (ex. Volvo=Safety). This is known as âpositioningâ a product. Competitive method (brand compares themselves to âleading brand or categoryâ) Comparative method (brand compares themselves to another brand by name (Coke vs. Pepsi)
Product Choice	â¢ Did any other people play a role in the decision process? Describe theroles that each person played. â¢ How was the final choice determined? How carefully was the decision made? â¢ Where did the consumer make the purchase? Why? â¢ Did the consumer pay full price for the product?	Tell consumers where and how the product is sold. Offer many ways to pay for the product. Divide payments. Offer sales promotion (coupons, rebates)
Post-Purchase Evaluation	â¢ How is the product used and consumed? How does the consumer feel when he or she uses the product? â¢ What is the meaning of this product to the consumer? Does it merely serve a function for the consumer, or does it say something about who the consumer is? Does the Ad encourage repeat purchase or loyalty to the brand- how?	Show awards the brand has won. Show how a brand should be consumed. Allow consumers many ways to return the product. Allow consumers to easily provide feedback. Reward consumers loyalty

This assignment asks you to find one ad that addresses each of the needs of the five stages (in other words five different ads). This means that there must be five different ads for the total project, one for each stage (all ads are different from one another). Create a Power Point Presentation that shows how the advertiser is addressing the needs of the consumer for the specific Consumer Decision Making stage.

*Be aware that there is a helpful power point demonstration in a conference opened this week marked as "Advertising and the Consumer Decision Process (Ad Examples)". This is informative only and does not need to be commented on.

First, show the ad in a slide and then follow-up with a slide which explains (bullet form) why the ad slide targets the Consumer Decision Making process stage. ALL ADS MUST BE STILL ADS (NO VIDEOS or LINKS). Therefore the ad MUST be able to be copied and pasted within the power point slide (NO LINKS). Here is the format of the presentation:

Slide 1: Name, date

Slide 2: Problem Recognition Ad

Slide 3: Explanation why it addresses this stage

Slide 4: Information Search Ad

Slide 5: Explanation why it addresses this stage

Slide 6: Evaluation of Alternatives Ad

Slide 7: Explanation why it addresses this stage

Slide 8: Product Choice (Purchase) Ad

Slide 9: Explanation why it addresses this stage

Slide 10: Outcomes (Postpurchase) Ad

Slide 11: Explanation why it addresses this stage

Slide 12: Conclusion

In the conclusion of the slide presentation choose which ad is most effective (overall) and why.

Logistics Run Down:

-No more than 18 slides in length (includes cover page and bibliography)

-Include a cover page and bibliography of sources. Outside sources (esp. learning resources from weeks covered) are encouraged to be cited and used.

-Organize and utilize the headings given above.

-No more than 2 grammatical/spelling errors are allowed (please proof before submitting).

-Text is required to be in Times Roman, 12 pt font, double space the text.

- Keep voice in business third person. Do not include visuals in text analysis, if need to add create an appendix and refer your reader to such.

COLLAB 2N03 Lecture Notes - Lecture 4: Decision-Making, Rationality, Bounded Rationality

Document Summary

Get access

Related Documents

COLLAB 2N03 Chapter Notes - Chapter 11: Bounded Rationality, Confirmation Bias, Selective Perception

COLLAB 2N03 Lecture Notes - Lecture 11: Bounded Rationality, Decision-Making, Satisficing

COLLAB 2N03 Study Guide - Final Guide: Risk Neutral, Confirmation Bias, Norm (Social)

Related Questions