Effective Planning and Strategic Decision-Making

Posted on Nov 18, 2024 in Economy

Planning Stages

  1. Evaluate Current Situation (Pre-planning, SWOT analysis)
  2. Set Objectives (Hierarchical levels, timeframes)
  3. Anticipate Future Conditions (Political, economic, technological predictions)
  4. Define Strategy (Identify, assess, and select action courses)
  5. Allocate Resources (Budget development)
  6. Implement Plan (Organization, responsibilities)
  7. Monitor and Control (Track progress, remedies)

Management by Objectives (MBO)

Stages

  1. Goal Setting (Employees and directors, SMART goals)
  2. Action Plan Development
  3. Progress Monitoring
  4. Performance Evaluation

Benefits

  • Focus on achieving objectives
  • Aligned objectives for members
  • Consistency across levels

Limitations

  • Environment not considered
  • Inflexibility
  • Unethical practices for goal achievement
  • Bureaucracy
  • Imbalance between strategic and operational targets

Strategic Decisions

  • Determine company success or failure
  • Complex management activity
  • Involves intuition, experience, knowledge, creativity, risk-taking
  • Continuous decision-making (strategic and contingency)

Decision-Making Process

  1. Determine Need
  2. Evaluate and Prioritize
  3. Identify Causes
  4. Explore Solutions
  5. Assess Alternatives
  6. Choose Solution
  7. Implement
  8. Evaluate Results

Decision-Making Aids

Scenario: Force of Nature

  • Certainty: 100% known state of nature (e.g., classroom assignment)
  • Risk: Known probabilities of outcomes (e.g., defective products)
  • Uncertainty: Unknown probabilities of outcomes (e.g., war, economic crisis)

Decision Matrix

  • Presents decision problem information
  • Applies different criteria for risk and uncertainty
Risk Assessment
  • Expected monetary value criterion
Uncertainty Assessment
  • Laplace Criterion: Equal probabilities
  • Hurwicz Criterion: Optimism/pessimism measure
  • Wald Criterion (Pessimistic): Maximin, minimax
  • Maximax Criterion (Optimistic): Highest maximum outcome
  • Savage Criterion: Minimize regret

Decision Tree

  • Represents sequential decisions and consequences
  • Decisions (squares), risk/uncertainty (circles), results (triangles), strategies (lines/branches)