business

Decision Making In Business

Decision Making

Decisions are a part of our every day life, and it is no different in the business sector.

“A decision is the choice between alternatives that individuals must make to get from where they are, to where they want to be.”

Business’ have to make decisions on the following:
What to produce?
What method of production?
What price to charge customers?
What suppliers to use?
Where to locate?
How many people to employ?
What wages to pay staff?
What method of advertising?

Although all decisions are important, some decisions are more vital than others, as they can effect the survival of the business.
Other decisions will be of a more routine nature.
Eg – Do we take over a competitor?
Do we need to order more stationary?

3 Man Types of Decisions:

-Strategic Decisions-
Long-term decisions that effect the profitability and survival of a business.
Closely related to the aims of the business.
These decisions involve the most risk.
Strategic decisions are made by the top people in an organisation; CEs, Boards of Directors and Senior Managers.
Decisions that form the business’ long-term strategy, 10-15 years.
Example; Increase market share by 12% over the next 5 years.

-Tactical Decisions-
Short to medium decisions that are based upon the strategic decisions of the business.
Closely related to the objectives of the business (how will the strategic aims be met)
Tactical decisions are constantly reviewed and updated.
Example; Setting sales targets for the next 12 months.

-Operational Decisions-
Routine day to day decisions made by a business.
Helps organizations to achieve their objectives.
Involve solving short-term practical problems.
Sales managers assigning jobs to sale staff.