Decision making

 decision making is the process of developing and deciding among alternative ways of resolving a problem
or choosing from among alternative opportunities
 the decisions are brought about as the firm either seeks to capitalize on some opportunity or to reduce
any potential negative impacts related to some business problem.
 A business opportunity is a situation that makes some potential competitive advantage possible. The
discovery of some underserved segment presents such an opportunity.
 A business problem is a situation that makes some significant negative consequence more likely.
 All problems are not obvious. Problems are inferred from symptoms which are observable cues that serve
as a signal of a problem because they are caused by that problem.
 Research may help identify what is causing this symptom so that decision makers can actually attack the
problem, not just the symptom.
 decision makers usually hear about symptoms and often need help from research to identify and attack
problems.
 Steps –
1. Recognize nature of problem or opportunity
2. Identify information available and its reliability
3. What more information is needed
 Classification of decision-making situation-
1. Certainty- decision maker has all information needed to make an optimal decision. This includes
the exact nature of the business problem or opportunity. If a manager is completely certain
about both the problem or opportunity and future outcomes, then research may not be needed
at all. However, perfect certainty, especially about the future, is rare
2. Uncertainty- Uncertainty means that the manager grasps the general nature of desired
objectives, but the information about alternatives is incomplete. Predictions in this case are
educated guesses. Additional time to gather data that clarify the nature of a decision is needed.
Business decisions are generally uncertain.
3. Ambiguity- Ambiguity means that the nature of the problem itself is unclear. Objectives are
vague and decision alternatives are difficult to define. most difficult decision situation and most
common.
 Problems and Opportunities
1. Under problem focused decision making and conditions of high ambiguity, symptoms may not
clearly point to some problem. they may be quite vague or subtle. As ambiguity is lessened, the
symptoms are clearer and are better indicators of a problem.
2. Similarly, in opportunity-oriented research, ambiguity is characterized by environmental trends
that do not suggest a clear direction. As the trends become larger and clearer, they are more
diagnostic, meaning they point more clearly to a single opportunity. Similarly, in opportunity-
oriented research, ambiguity is characterized by environmental trends that do not suggest a clear
direction. As the trends become larger and clearer, they are more diagnostic, meaning they point
more clearly to a single opportunity.
Business Research

 Business research is undertaken to reduce uncertainty and focus decision making.

 Business research can be classified on the basis of either technique or purpose. Experiments, surveys, and
observational studies are just a few common research techniques
 Types-
1. Exploratory research-
(a) conducted to clarify ambiguous situations or discover potential business opportunities.
(b) Does not provide conclusive results.
(c) Usually, exploratory research is a first step, conducted with the expectation that additional
research will be needed to provide more conclusive evidence
(d) Exploratory research is particularly useful in new product development.
(e) Exploratory research is particularly useful in new product development.
(f) rushing into detailed surveys before it is clear exactly what decisions need to be made can
waste time, money, and effort by providing irrelevant information.
(g) exploratory research results usually need further testing and evaluation before they can be
made actionable. At times, however, managers do take action based only on exploratory
research results. Sometimes, management may not be able or may not care to invest the
time and resources needed to conduct further research. Decisions made based only on
exploratory research can be more risky, since exploratory research does not test ideas
among a scientific sample.
2. Descriptive research-
(a) describe characteristics of objects, people, groups, organizations, or environments
(b) paint a picture” of a given situation by addressing who, what, when, where, and how
questions.
(c) Unlike exploratory research, descriptive studies are conducted after the researcher has
gained a firm grasp of the situation being studied
(d) Research ques and hypothesis is imp for conducting descriptive research. Without these the
researcher won’t be knowing what ques to ask.
(e) Descriptive research often helps describe market segments.
(f) Accuracy is critically important in descriptive research
3. Causal Research-
 (a) Causal research seeks to identify cause-and-effect. relationships. When something causes an
effect, it means it brings it about or makes it happen. The effect is the outcome. e.g., Rain
causes grass to get wet. Rain is the cause and wet grass is the effect.
(b) exploratory research builds the foundation for descriptive research, which usually
establishes the basis for causal research.
(c) , before causal studies are undertaken, researchers typically have a good understanding of
the phenomena being studied. Because of this, the researcher can make an educated
prediction about the cause-and-effect relationships that will be tested
(d) Causal research designs can take a long time to implement and is expensive.
(e) Causal research is usually very focused around a small number of research hypotheses.
Experimental methods require tight control of research procedures. Thus, causal research is
highly structured to produce specific results
(f) Causality- how a change in one event will change another event of interest. Three critical
pieces of causal evidence are:
 Temporal sequence deals with the time order of events. In other words, having an
appropriate causal order of events, or temporal sequence, is one criterion for causality.
Simply put, the cause must occur before the effect.
 concomitant variation means that when a change in the cause occurs, a change in the
outcome also is observed. Causality cannot possibly exist when there is no systematic
variation between the variables. For example, if a retail store never changes its
employees’ vacation policy, then the vacation policy cannot possibly be responsible for a
change in employee satisfaction.
 Nonspurious association means any covariation between a cause and an effect is true,
rather than due to some other variable. Establishing evidence of nonspuriousness can
be difficult. If a researcher finds a third variable that is related to both the cause and
effect, which causes a significant drop in the correlation between the cause and effect,
then a causal inference becomes difficult to support.
 causal research should do all of the following:
1. Establish the appropriate causal order or sequence of events
2. Measure the concomitant variation between the presumed cause and the presumed effect
3. Examine the possibility of spuriousness by considering the presence of alternative plausible causal factors
 Degrees of causality - Absolute causality means the cause is necessary and sufficient to bring about the effect.
Conditional causality means that a cause is necessary but not sufficient to bring about an effect. This is a
weaker causal inference. Contributory causality is the weakest form of causality, but it is still a useful concept.
A cause need be neither necessary nor sufficient to bring about an effect.
 Experiments- Business experiments hold the greatest potential for establishing cause-and-effect relationships.
An experiment is a carefully controlled study in which the researcher manipulates a proposed cause and
observes any corresponding change in the proposed effect. Manipulation means that the researcher alters the
level of the variable in specific increments. To predict a relationship between, say, price and perceived quality
of a product, causal studies often create statistical experiments with controls that establish contrast groups
 What type of research- uncertainty influences the decision. When the problem or opportunity is not clearly
known and is highly uncertain then exploratory research is used. When the problem is known but lacks
knowledge about the same, descriptive is used. Causal research requires sharply defined problems.