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Lecture

GMS200 Lecture 2.docx

4 Pages
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Department
Global Management Studies
Course Code
GMS 200
Professor
Rasha Nasra

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GMS200 Lecture 2 nformation and Decision-making Decision making action -> Outcomes and Consequences What are the 5 characteristics of useful information Timely: available when needed Understandable: info is clear and easily understood. Complete: up-to-date and sufficient Relevant: info is appropriate for the task High Quality: accurate and reliable Making sense of Business Decisions GM: Market Share GM: Near Bankruptcy (became a money loosing operation, received a bailout load of 50.2 billion from the US govnt GM: Recent Achievements (Red corvette) GM: Stock performance Because the decisions made my managers have serious consquences; we need to know how How managers make decisions or ought to make decisions and Classical model -> structured problems, clearly defined, certain environment, complete info, all alternatives and consequences known [Rationality: Acts in perfect world] Optimizing decision: choose absolute best among alternatives Behavioral Model -> unstructured problem, unclearly defined, uncertain environment, incomplete info, not all alternatives and consequences known [Bounded Rationality: acts with cognitive limitations] Satisficing Decision: choose first “satisfactory” alternative What pitfalls managers should avail in making decisions   How people make decisions Heuristics: strategies (“quick and dirty rules”) that people use to simplify decision making when  there is a lack of time, info and energy to make them Availability Heuristic: people use information readily available form memory as a basis for  assessing a current event or situation (using previous experiences of a similar product to decide  whether to buy a new product, one that you are not familiar with). Decision can be flawed, if info is  not relevant Representativeness Heuristic: people assess the likely hood of something occurring based on its  similarity to a stereotype or set of occurrences (Hiring someone from Ryerson university based on  the stereotype that these university students perform well) Anchoring and adjustment heuristic: involves making decisions based on adjustment to a  previously existing value or starting point (using starting salary as an anchor for future negotiations)  Decision Errors and Trap Framing Error: if you put something positive or negative in light, peoples decisions change A store had two locations, one with normal prices and one with taxes included; the one with taxes  included sold more (nervous as to knowing what they will actually be paying)  Confirmation Error: Occurs when focusing only on info that confirms a decision already made Escalating commitment: people continue to do an action even though it is not working When you get a loan from a bank and when that’s not enough you ask family members, and then  you ask friends. (It just keeps going down hill, where you might hit bankruptcy at one point)  GM Managers: Decision Traps   GM was making cars that people did not like; and sold them at a loss – This is an example of  Escalating Commitment
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