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Summary Decision making

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Summary notes for decision making.

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  • August 12, 2022
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Decision making

Types of decisions:

 Strategic by senior management (long-term)
 Tactical by middle management (medium-term)
 Operational by junior management (short-term)



Decision trees:

This is where decisions come out from (decision nodes)




Chance nodes




This line represents decision or probability




1000 + 480 = 1480 300 + 450 = 750




COST of Expected revenue
DO NOTHING decision of decision



Advantages of decision trees:

 Highlights probabilities that had not previously been considered.
 Numerical values placed on decisions tends to require research and thus improves results.

,  The methods take account of the risks involved in decisions and makes the decision-maker
aware of them.

Disadvantages of decision trees:

 Probabilities are often estimating hence may be inaccurate/incorrect.
 Don’t take into account non-numerical factors e.g., legal constraints.
 Time lag may make numerical data out of date.
 Process can be quite time-consuming.
 Diagrams can become unmanageable for complex decisions.



Critical path analysis



Critical path analysis is a planning technique that identifies the individual tasks of a project, places
them in the correct sequence and allows for identification of the critical path.

The diagrams:

 Arrows show activities
 Must go left to right
 Begin and end with a node
 Length is not important

Nodes

 Represents the start and end of an activity




Rules:

 All diagrams start and end with a node.
 There is no limit to the number of activities that link to a single node.
 Line must not cross.

Calculating EST:

 Work from left to right.
 EST is 0 for first node.

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