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Louisiana State University
MGT 3200

1MANAGEMENT 3200 EXAM TWO OBJECTIVES FROM THE NOTESOUTSIDE READINGDECISIONMAKING 1Is decisionmaking a function of management No Planning Organizing Staffing Leading and Controlling are functions of management Decision making happens at all levels and in all functions of management but its most closely related to the planning function2Why do we make decisions as managersManagers make decisions to accomplish organizational goals more effectively They are a means to an end not the end itself3Whats the difference between programmed and nonprogrammed decisionsA Programmed decision is a standard operating procedure that has been developed for repetitive and routine problems where a specific procedure is established for handling a problemIts a rule made to save time money and effortProgram decisions occur in certainty and risk situations NonProgram decisions are specific to management problems that are novel unique complex and unstructuredTop Managers make mostly non program decisions because you must think analyze and generate solutionsMore resources are spent on nonprogram decisions and they are made under risk and uncertainty4Do managers make more programmed or nonprogrammed decisions in generalst1 line managers typically deal with program decisions while upper management deal with nonprogram decisionsThe further up the mgt pyramid you go the more nonprogram decisions are made 5What is decisionmaking under conditions of certaintyDecisions made under certainty are program decisionsYou know all the alternatives outcomes and probabilities are 100No element of chanceriskManagement decisions are rarely made under conditions of certainty least common6What is decisionmaking under conditions of riskDecisions under risk are most commonThere is a lack of complete certainty regarding the outcomes and probabilities are less than 1Alternatives are known but outcomes are in doubtIts a gambleThe key element in making a decision under risk is to accurately determine the probabilities7What is decisionmaking under conditions of uncertaintyDecisions are made under uncertainty when managers dont know the alternatives most difficult decisions because probabilities or potential outcomes These are the there is no historic data available and usually involve the introduction of new technology nonprogram decision8What is the key to making good decisions under riskThe key is making sure the probabilities are correct 29How do programmednonprogrammed decisions and the different decisionmaking conditions relate10What does the traditional economic model assume about decisionmakers2 assumptionsAssumes managers are 1 completely rational and 2 that they seek to maximize benefits or minimize costs11Under what decisionmaking condition do decisions get made in the traditional economic modelIn Traditional Economic model decisions are made under conditions of certainty Probabilities are certain 100 and manager has complete knowledge This is called Economic Man and represents what a manager should do 12What does the behavioral model assume about decisionmakersIn Behavioral Bounded Rationality model decisions are made under conditions of risk or uncertainty This is what managers actually do1 Suggests that managerial decisions are bounded by the managers limited mental capacity and emotions as well as well as unforeseeable future events of which there is no controlManagers can only consider a limited number of alternatives and consequences 7 2pieces of info2 Satisficing a type of heuristicmental shortcut used when managersselect the first alternative that meets minimal acceptable standards rather than going through and evaluating all alternativesThis saves timemoney and makes more efficient13What is satisficingHow does it differ from maximizingIs it irrationalIt is part of behavior model of decision making Satisficing when managers select the first alternative that meets minimal acceptable standards good enough rather than going through and evaluating all alternativesThis saves timemoney and makes more efficient but typically doesnt maximize benefits because its not necessarily the best decisionIt is not irrational14What is a heuristicWhat are the advantages of and disadvantages of heuristicsPart of behavior decision making model Heuristic is a labortime saving mental shortcut used in decision making Makes us more efficient The best predictor of future behavior is past behaviorDisadvantage over rely on them and can lead to errorsWhen heuristics lead to error in judgments they are called biasesAdvantage saves time and usually produces more good decisions than bad ones 15What is the availability heuristicWhat factors cause you to overestimate the frequency of an eventUnderestimate the frequency of an eventPart of behavior decision making model Availability Heuristic is used when managers assess the frequency of an event by how easily it is recalled in memoryThe frequency of an event can be overestimated if it is emotional or vivid or very
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