BUSM2567

Business Decision Making

Module 1: Decision Making Processes
Week 1: Introduction to Business Decision Making
1.1 Introducing
business decision
making

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Overview
In week 1, we will explore:
• some of the fundamentals of business
decision making
• different types of decisions
• PESTLE and SWOT analyses to help
guide business decision making
Business decision making

• Making good decisions — both large and small — is

critical to the success of a business
• In business, decisions are made to:
• solve a problem, or
• respond to a potential opportunity
The decision-making process

The decision-making process involves:

• identifying a goal
• getting the relevant information and data
• weighing the alternatives
• making an informed decision
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Steps in making a business
decision

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Effective decision-making is…
• Successful in that it achieves its purpose – over the
longer term
• Responsible in that the decision-makers have acted
according to their delegated responsibilities
• Robust because a sound process has been used to
make the decision
• Defensible in that the rationale for the decision can
be explained to others
• Inclusive in that people who will be affected by the
decision have been consulted
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Apply the steps to a decision

Consider a decision you made
recently. For example, a
personal, non-trivial purchase
(such as buying a car or
property); or a decision you
made for your work or studies.
Walk through each of the
decision-making steps and note
down the corresponding activity
you undertook against each
one.
If you didn’t undertake a
particular step, pause and
reflect. What impact might this
have had on your outcome?
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Record in your learning journal

Record these insights in a

notebook or word document so
you can refer to them later.

This will be your learning journal.

It is good to have these insights

and thoughts available in a
document so that you can reflect
on them at the end of the
course.

It is also a good idea to label

each entry with the week number
and title for easy reference.

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1.2 Types of business
decisions

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Overview
• In this video, we consider the types of
decisions organisations make at the
broadest level so that decision making
can inform the right purpose
• You will also reflect and consider
examples of each decision type in your
own workplace
Types of business decisions

• Many different types of decisions are made in the business

environment
• Understanding the type of decision being made can
assist in:
• determining the information required to make that
decision
• understanding the potential impact that decision might
have across the organisation
Strategic objectives - the why of
decision making
Businesses create strategic objectives to:
• further the company vision,
• align company goals, and
• drive decisions that impact daily productivity from the
highest levels of the organisation to all other employees
Strategic objectives are long-term organisational goals
that help to convert a mission statement from a broad
vision into more specific plans and projects
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Types of business decisions

• Decision making can be classified

into three categories based on the
level at which they occur:

• strategic decisions
• tactical decisions
• operational decisions

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Strategic decisions

• Set the course of an organisation and have long-

range impacts
• Typically involve a multi-year commitment and often
impact various parts of the organisation
• e.g. embarking on new lines of business, acquisition
of companies and assets
Tactical decisions

• Medium-term decisions about how to implement

strategy
• e.g. type of marketing, recruiting additional staff
Operational decisions

• Short-term administrative decisions that employees

make every day to run the organisation
• Part of the organisation’s existing possesses and
practices
• e.g. which firm to use for deliveries, creating a staff
roster
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Record in your learning journal

Reflect on the types of
decisions you have in your
working life so far, based
on the three decision types
(strategic, tactical and
operational) outlined
earlier.

Record these in your

learning journal.

We will be discussing
these in the workshop this
week.

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1.3 A day in the life of
a rideshare driver

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Overview
• In this video, you will play an online
simulation game in which you undertake
the role of an Uber driver
• Your aim is to make the right decisions to
earn enough to cover your living
expenses
Decision making

• Every day, at work and in our personal lives, we make

many decisions
• Sometimes, we might not even recognise that we
make them
• From what to wear and what to eat, to when to reply
to an email and whether to attend a meeting, these
are all decisions we often make
• Some of these decisions have little impact on our
overall day, while others have a larger impact
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Activity
• To help you realise how decisions
can impact outcomes, as well as the
number of decisions we make in
seemingly straightforward scenarios,
you’ll now play the role of an Uber
driver in the gig-economy
• The purpose of this exercise is to
show the typical types of decisions
made by workers on a day-to-day
basis
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Become an Uber driver

• In this simulation you will play the role of an

Uber driver
• You will need to make multiple decisions each
day that affect the outcome of the game
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Play the simulation

Navigate to Uber game

and complete the
simulation.
You’ll need about 20 to 30
minutes to complete the
whole simulation.
Take note of your end
outcome (i.e., how much
you made) as we will be
discussing it in this week’s
workshops.

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Record in your learning journal

In your reflective journal,
describe how you felt in the
simulation.

In your response, explore some

or all of the following questions:

* How difficult was it to play the

game?
* Which decisions had
unintended consequences?
* What type of decisions did you
make in the game (strategic,
tactical, operational)?

We will be discussing these in

the workshop this week.
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1.4 Making decisions
as a leader

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Overview
• In this video, we explore the types of
decisions being made by the leaders of
organisations using a study from leading
global consultancy firm McKinsey &
Company
• You will then reflect on the success of a
recent decision you made at work or in
relation to your study to explore whether
it could have been made more effectively
Leadership decision making
• In Video 1.2, we explored three types of decisions
(strategic, tactical and operational)
• We now explore the types of decisions made by
leaders of organisations using a study from McKinsey
& Company (often referred to as McKinsey)
• McKinsey identify three more types of decisions,
which relate to the scale of the decision to be made,
particularly at the executive level
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Read the article

Read Decision making in the
age of urgency, which is
based on a survey of
business leaders.
As you read it, consider your
organisation and relate their
findings to your own
experience. If you are not
currently working, think of a
previous organisation or an
organisation you’d like to work
for, and how decisions might
be made there. Alternatively
you can relate this to your
studies.

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McKinsey identify 3 types of decisions
Big bets
• Infrequent and high-stakes decisions
• Often have the potential to shape the company’s future
• e.g. acquisitions and annual resource allocation
Cross-cutting decisions
• Broad in scope, but more frequent and familiar than big bets
• Series of smaller, interconnected decisions made by different
groups as part of a collaborative, end-to-end decision process
• e.g. pricing decision
Delegated decisions
• Frequent decisions that are much narrower in scope
• Typically handled by a single individual or working team with
limited input from others
• e.g. changes to HR policy, changes to work rosters
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Source: McKinsey & Company (2019), Decision making in the age of

urgency, p.4 https://www.mckinsey.com/business-
functions/organization/our-insights/decision-making-in-the-age-of-urgency

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Best practices to support

good decision making

McKinsey & Company (2019) report the

following best practices to support good
decision making across all three decision types:
1. Make decisions at the right level
2. Focus on enterprise-level value
3. Get commitment from relevant stakeholders

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1. Make decisions at the right level

• In many cases, this means delegating decisions

down to lower levels of the organisation
• When this occurs, McKinsey & Company (2019)
found that:
• respondents to their survey were 6.8 times more
likely to be part of a winning company
• both high-quality decisions and quick ones were
more common at organisations with fewer reporting
layers
2. Focus on enterprise-level value

• It might seem intuitive, but only 41% of respondents

to the McKinsey & Company (2019) survey say that
• their organisations’ decisions align with corporate
strategy, and
• they allocate human and financial resources toward
high-value projects
• Those that do focus on enterprise-level value are
much more likely (2.9 times) than others to be a
winner
3. Get commitment from relevant
stakeholders
• Build commitment to executing decisions once they have
been made, especially among the people who are
ultimately accountable for a given decision
• Requires that accountable stakeholders know the decision
process was robust and were involved in a meaningful
way
• While fostering commitment can mean involving more
people and getting more buy-in, that doesn’t mean
companies have to compromise on speed
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Record in your learning journal

Take a minute to consider how
these findings from McKinsey
relate to a decision recently
made in your workplace or
studies.

Were each of these factors

clearly present in the decision-
making process?

If not, why not? How do you

think the inclusion of them would
have enhanced the outcome?

Note this down in your learning

journal.

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1.5 Understanding the
business environment
(PESTLE analysis)

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Overview
• In this video, we explore some of the key
analytical techniques that apply to the:
• external environment
• decision-making organisation itself and
how it compares to competitors
• Having an understanding of these factors
can assist in making the right decision, as
well as increase the chances of
successfully implementing the decision

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PESTLE analysis
• Understanding how external factors
affect an organisation can enhance our
ability to make a good decision
• A PESTLE analysis is a common
analytical tool to help understand the
environment and inform decisions
• It offers insight into the external factors
impacting an organisation at a macro
(large scale or overall) level

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PESTLE analysis
A PESTLE analysis is a framework to analyse
the key external factors influencing an
organisation:
• Political
• Economic
• Sociological
• Technological
• Legal
• Environmental
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Watch the video

PESTLE analysis (3:17)

Watch the short
introductory video about
the components of a
PESTLE analysis.
https://www.youtube.com/
watch?v=GFVKKTwkANY
&t=19s

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Political factors
• Political factors relate to government controls and
influences over the economy or industry, such as
legislation or economic policies
• The political environment can affect an industry
through a range of factors, including:
• Trade tariffs
• Conflicts
• Taxation policies
• Fiscal policies
Economic factors
• Economic factors a have direct impact on an
organisation’s long-term prospects in a market
• The economic environment may affect how products
are priced or influence the supply and demand model
• Environmental factors can include:
• Inflation rate
• Disposable income
• Unemployment rates
• Interest rates
• Foreign exchange rates
• Economic growth patterns
 Social factors
• Social factors, such as demographics and culture can
impact the industry environment by influencing peak buying
periods, purchasing habits, and lifestyle choices
• People’s culture and lifestyle can influence when, where and
how they are likely to engage with products and services
• Social factors can include:
• Religion and ethics • Opinions and attitudes
• Consumer buying patterns • Media
• Demographics • Brand preferences
• Health • Education
 Technological factors
• Technological factors may have a direct or an indirect
influence on an industry
• While some industries will be more affected by technology
than others, innovations in technology may affect the
market and consumer choices and buying power
• Technological factors can include:
• Automation • Technological development
• Communication • Information technology
• Patents • Research and Development
• Licensing • Technological awareness
Legal factors
• Legal factors may affect both the internal and external
environment of an organisation
• The legal and regulatory environment can affect the
policies and procedures of an industry, and can
control employment, safety and regulations
• Legal factors can include:
• Employment laws
• Consumer protection
• Industry specific regulations
• Regulatory bodies
• Environmental regulations
 Environmental factors
• Environmental factors include all those relating to the
physical environment and to general environmental
protection requirements
• While the environment is more important to some
industries, such as tourism, agriculture or food production,
these factors may influence a range of different industries
• Environmental factors include:
• Climate • Environmental offsets
• Weather • Stakeholder and consumer values
• Geographical location • Global climate change
Other considerations
• When undertaking an analysis, you should consider these
factors as well as other organisational or context-specific
factors
• You should research relevant trends and consider how
that particular factor could impact your organisation
• For example:
• Will this factor positively or negatively impact my
organisation?
• Will the impact be low impact, medium impact or high
impact?
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Search for examples

Spend 10 minutes searching

for some PESTLE analyses
on the internet.
When searching, consider
which ones you like better
than others and why that’s the
case. What are their benefits?
Keep a copy of the PESTLE
analyses you find and put
them into your learning
journal for future reference.

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1.6 SWOT Analysis

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Overview
• In this video, we take a look at SWOT
analysis
• It’s an important tool to use when
making strategic decisions and can
assist in maximising business value
• You will watch a video and explore
examples of SWOT analyses to help you
understand how they are used to make
decisions in the business environment
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SWOT analysis
• Is a common technique used to understand
both the inherently beneficial and potentially
harmful factors found within, as well as
outside, an organisation
• Stands for Strengths, Weaknesses,
Opportunities, and Threats
• Is a technique for assessing these four aspects
of an organisation
• While PESTLE provides information on
external factors, a SWOT analysis focuses on
a company's internal processes
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 Strengths
• Strengths are things that the organisation does well, or in a
way that distinguishes them from their competitors
• Strengths can also include advantages an organisation has,
such as its location, reputation or size
• E.g. efficient processes, highly motivated staff, access to
markets and strong relationships with clients or customers
• Strengths should distinguish an organisation from their
competitors
• E.g. if all organisations within a particular market have highly
motivated staff, then this isn’t a strength
Weaknesses

• Weaknesses represent the things an organisation

does not do well
• It also includes features of the organisation that are
more inherent, such as its location or size
• Weaknesses, like strengths, can relate to processes,
policies, people, place, platforms and any other area
that can be improved
• Looking at an organisation’s competition, and seeing
where the organisation is falling behind, is also a
good way to identify weaknesses
 Opportunities
• Opportunities offer an organisation the chance to achieve
something good
• They usually require an organisation to act proactively in
order to bring about that opportunity
• Opportunities can often be found by looking for new
technologies and new markets that can help an organisation
gain or maintain a competitive edge
• External factors such as government policy, social trends
and missteps by the competition can also bring opportunities
• Being able to spot and exploit opportunities can make a
huge difference to an organisation's ability to compete and
take the lead in their market
 Threats
• Threats represent anything that might adversely impact an
organisation
• This can include economic conditions, new competitors or
new regulations
• Anticipating and responding pre-emptively to threats can
help organisations limit their impact
• Other examples include disruption to supply chains,
increasing costs of raw materials, and digital threats such
as server downtime and malicious hacking
• Financial threats can include increasing levels of
organisational debt and cash-flow problems
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Watch the video

Starbucks SWOT Analysis

(3:35)
The video explores a
SWOT analysis being
undertaken for Starbucks.
Seeing how a SWOT is
completed will help you
put one together in the
workshop.
https://youtu.be/mR9eICQ
JLXA

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Search for examples

Spend 10 minutes
searching for SWOT
analyses on the internet.
When searching, look for
differences in the way they
are presented. What are the
benefits of some over
others?
Keep a copy of the SWOT
analyses you find and put
them into your learning
journal for future reference.

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