Complete the Problem Solving application outlined in the document uploaded and apply the information you have learned. Complete using method uploaded.
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Risk Environment A.
A basic fact of managerial decision making is that many, if not most, management problems
A risk environment lacks complete emerge in risk environments where facts and information on action alternatives and their
information bUt Offers “Pl’Obabihties” of consequences are incomplete. Decision making in risk environments requires the use of
the likely omwmes for pOSSlble “lion probabilities to estimate the likelihood that a particular outcome will occur (e.g., 4 chances
alternatwes‘ out of 10). Because probabilities are only possibilities, people vary in how they act under risk
conditions. Some of us are risk takers and some are risk avoiders; some of us gain from tak-
ing risks and others lose.
Domino’s Pizza CEO]. Patrick Doyle is a risk taker. When deciding to change the firm’s
pizza recipe, he ran a television ad admitting that customers really disliked the old one
because it was “totally devoid of flavor” and had a crust “like cardboard.” Whereas some
executives might want to hide or downplay such customer reviews, Doyle used them to help
launch the new recipe. He says it was a “calculated risk” and that “we’re proving to our cus-
tomers that we are listening to them by brutally accepting the criticism that’s out there.” 23
General Motors’ former Vice Chairman of Global Product Development, Bob Lutz, wasn’t
a risk taker. He once said: “GM had the technology to do hybrids back when Toyota was
launching the first Prius, but we opted not to ask the board to approve a product program
that’d be destined to lose hundreds of millions of dollars.”24 He and other GM executives either
miscalculated the probabilities of positive payoffs from hybrid vehicles or didn’t believe the
probabilities were high enough to justify the financial risk. Their Japanese competitors, facing
the same risk environment, decided differently and gained the early mover advantage.
When facts are few and information is so poor that managers are unable to even assign probabil-
An uncertain environment lacks so ities to the likely outcomes of alternatives, an uncertain environment exists. This is the most
much information that it is dimmflt difficult decision-making condition. The high level of uncertainty forces managers to rely heavily
to aSSign pmbabmtieé to the likely on intuition, judgment, informed guessing, and hunches-all of which leave considerable room
outcomes of alternatives.
for error. Perhaps there IS no better example of the challenges of uncertainty than the Situation
faced by government and business leaders as they struggle to deal with global economic turmoil.
Even as they struggle to find the right paths forward, great political, social, and economic uncer-
tainties make their tasks difficult and the outcomes of their decisions hard to predict.
TAKEAWAYQUESTION 2 How do managers address problems and make decisions?
BE SURE YOU CAN – describe how IT influences the four functions of management 0 define problem solving and decision
making 0 explain systematic and intuitive thinking 0 list four cognitive styles in decision making – differentiate programmed
and nonprogrammed decisions – describe the challenges of crisis decision making – explain decision making in certain, risk,
and uncertain environments
TAKEAWAY 3 What are the steps in the decision-making process?
LEARN MORE i Igl:nl:iiy and define the problem ° Generate and evaluate alternative courses of action
ABOUT : oose a preferred course of actlon 0 Implement the decision
l Evaluate results 0 At all steps-check ethical reasoning
All ofthose case studies, experiential exercises, class discussions, and even essay exam questions
in your courses are intended to get students to experience some of the complexities involved in
managerial decision making, the potential problems and pitfalls, and even the pressures of crisis A.
Sltuations. From the classroom forward, however, it’s all up to you. Only you can determine
The decision-making Process b egins whether you step up and make the best out ofvery difficult problems, or collapse under pressure.
2:111 identification ofa Problem and Figure 7.4 describes five steps in the decision-making process: (1) Identify and define
s With evaluation oi results. the problem, (2) generate and evaluate alternative solutions, (3) choose a preferred course of
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