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Unit 10: Enhancing Decision Making for the Digital Firm

Introduction Notes

Decision making is an integral part of every manager’s day-to-day activities at work place. Due
to this fact manager’s are also known as “decision makers” in business organizations. Now,
what is a decision and what is a decision-making process. The word decision is derived from the
Latin word “Decide”, meaning “to cut off” or “to come to a conclusion”. So the word decision
means a resolution, a settlement, a judgement, etc. More precisely decision is a course of action
consciously selected from available alternatives to achieve a desired goal. So it is an outcome of
judgement and represents a commitment. Simply decision is a choice of an alternatives among
the various available alternatives.
10.1 Decision Making and Decision Support Systems

Everybody makes decisions. It’s a natural part of life, and most of the time we don’t even think
about the process. In an organization, decisions are made at every level.

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Caution The level at which the decision is made can also determine the complexity of the
decision in relation to the input of data and output of information.

10.1.1 Levels of Decision Making

The levels of decision-making are:

 Strategic Decision Making: These decisions are usually concerned with the major objectives
of the organization, such as “Do we need to change the core business we are in?” They also
concern policies of the organization, such as “Do we want to support affirmative action?”
 Management Control: These decisions affect the use of resources, such as “Do we need to
find a different supplier of packaging materials?” Management-level decisions also
determine the performance of the operational units, such as “How much is the bottleneck
in Production affecting the overall profit and loss of the organization, and what can we do
about it?”
 Knowledge-Level Decision Making: These decisions determine new ideas or improvements
to current products or services. A decision made at this level could be “Do we need to find
a new chocolate recipe that result in a radically different taste for our candy bar?”

 Operational control: These decisions determine specific tasks that support decisions made
at the strategic or managerial levels.

Example: “How many candy bars do we produce today?”

10.1.2 Structured and Unstructured Decisions

Structured Decision

Many analysts categorize decisions according to the degree of structure involved in the decision-
making activity. Business analysts describe a structured decision as one in which all three
components of a decision—the data, process, and evaluation are determined. Since structured
decisions are made on a regular basis in business environments, it makes sense to place a
comparatively rigid framework around the decision and the people making it.

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