Decision Making In Business

By Author: Anthony W Bills
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Decision Making in Business
Decision making forms a very significant part in the success of any business. This would mean that business management and outcomes largely depend on the nature of decisions made. Therefore business directors, managers and employees should continuously be informed with good information and experience in handling emerging problems or issues which need attentions. On the other hand, they need to make consultations in seeking other views and expertise from other people. This essay is going to explore decision making process with special attentions to the types of business decisions, levels of business decisions, constraints to business decision making and quality judgments.
Decision making in any business occurs increasingly at all business levels. In this regard, the board of directors normally makes striking strategic decisions which form the basis for the nature of investment and its future growth (Bowett 2011). Similarly mangers make decisions about tactical issues about the performance and contributions of their various departments toward the entire business objectives. However the ...
... ordinary employees, though not often, are highly expected to make decisions on theirs daily conducts, assigned roles, customer handling and decisions related to how the business practices may be improved. Whichever the case, the process needs careful considerations, analysis and diverse knowledge and experience (Bowett 2011).
In every occasion, business decisions take various forms. On this context, some decisions may be quite straight-forward and simple while others may be very complex and needs in-depth considerations (Bowett 2011). In complex business decisions, it becomes hard to reach the final decision point due to the fact that it feature with many cases of uncertainty, complexities, high risk consequences, alternatives and interpersonal issues. To elaborate on these elements first, in this case of complex business decisions, the decision makers seem to have limited information. Secondly, one has to revisit many interrelated facts and neither is he sure on the impacts of his decision position. Finally in the comparison of the possible decisions, each alternative has its own set of uncertainty and consequences thus making it even harder to predict the reaction of the set of colleagues. Once it has been realized that a company or organization faces such difficulties, effective business making process should be adopted as they clearly yield consistent and results of very high quality (Facione & Facione 2007).
Business decisions fall into various classes depending on its nature .So it is normally important to make decisions while at the same time knowing the class in which ones decision falls into. To start with, there are programmed decisions (Facione & Facione 2007). In this type of decisions, they are always standard thus the best way to make decision here is by following the same routine. In this sense, they are always written down in chains of set steps which can easily be understood by anyone. Similarly they can be in the form of computer programs. Secondly, there are non-programmed decisions (Facione & Facione 2007). These types of decision are non-standard and do not follow a standard routine thus the business decisions made do not, in any way, match with previous decisions. Thirdly, there are strategic decisions. In these decisions, their effects are on along term scale of business. For instance decisions made by company X to overtake company B. On the other hand, there are tactical business decisions. These types of business decision are made on medium term issues of the business. For instance, a company may decide to either add more employees or adopt some marketing strategy. Finally, there are operational business decisions making. In these decisions, administration weighs and implement various strategies in short term business issues (Facione & Facione 2007).

Task 2
Calculating the sample correlation coefficient by hand
Correlation(r) = [N∑XY-(∑X) (∑Y)/ Sqrt ([N∑X2 – (∑X) 2] [N∑Y2-(∑Y) 2])]
Where N=number of elements
X=first score
Y=Second Score
∑XY=Sum of the product of first and Second Scores
∑X= Sum of First Scores
∑Y=Sum of second scores
∑X2= sum of the square of first scores
To find correlation of these variables below

x y
51 75
52 72
59 82
45 67
61 75
54 79
56 78
67 82
63 87
53 72

Step1

Is to find value of N=10

Step 2

To find XY, X2, Y2

x value y value x*y x*x y*y
1 51 75 3825 2601 5625
2 52 72 3744 2704 5184
3 59 82 4838 3481 6724
4 45 67 3015 2025 4489
5 61 75 4575 3721 5625
6 54 79 4266 2916 6241
7 56 78 4368 3136 6084
8 67 82 5494 4489 6724
9 63 87 5481 3969 7569
10 53 72 3816 2809 5184
Totals 561 769 43422 31851 59449

Step 3 is to find summation of the below values
∑X=561
∑Y=769
∑XY=43422
∑X2=31851
∑Y2=59449
Step 4
Substituting above calculations in the formula below
Correlation(r) = [N∑XY-(∑X) (∑Y)/ Sqrt ([N∑X2 – (∑X) 2] [N∑Y2-(∑Y) 2])]
= ((10)*(43422)-(561)*(769))/ Sqrt ([(10)*(31851)-(561)2]*[(10)*(59449)-(769)2])
= (434220-431409)/Sqrt ([318510-314721]*[594490-591361]
=2811/sqrt (3789*3129)
=2811/Sqrt (11855781)
=2811/3443.222
=0.816386

b).Using of a spreadsheet to calculate the sample correlation coefficient
x value y value
51 75
52 72
59 82
45 67
61 75
54 79
56 78
67 82
63 87
53 72

Correlation 0.816386

c) Using a spreadsheet produce a graph of the results

Scatter plot

d) What do you deduce from the above?
The result shows presence of positive correlation as portrayed by correlation coefficient of 0.816386 which cross to +1. This means that when that an increase of one variable leads to an increase of the other one. This visual result exhibit strong correlation between induction and final score as the points are clouded along a straight line.

Task 3
a) Compile a spreadsheet and using the appropriate function insert the totals

January February March Total
£’000 £’000 £’000 £’000
North 2,431 3,001 2,189 7,621
South 6,532 5,826 6,124 18,482
West 895 432 596 1,923
Total 9,858 9,259 8,909 28,026

b). Use at least three (3), appropriate graphical formats, to display this information

Task 4
a). Calculate the Economic Order Quantity using an Excel spreadsheet

CALCULATING ECONOMIC ORDER QUANTITY AND TOTAL COST
First quantity 175
Quantity increment 25
Sales 3600
Order cost 3.5
Store cost 0.4
Economic order quantity 250.998008

Order Quantity(Units) Orders Ordering Cost(£) Average stock(Units) Store cost(£) Total Cost(£)
251 14.34274377 50.19960318 125.499 50.1996 100.3992032

b). Graph the ordering costs, the store costs and the total costs. Show, by the intersect on the x axis, the EOQ

EOQ MODEL
Units Total Costs (£) Ordering Costs (£) Store Costs (£)
Sales 3600 units/year 175 107 72 35
ordering cost £3.5 Per order 200 103 63 40
Store cost £0.4 per Unit/Year 225 101 56 45
250 100.4 50.4 50
275 100.81818 45.81818 55
300 102 42 60
325 103.7692 38.7692 65
350 106 36 70
375 108.6 33.6 75
400 111.5 31.5 80
425 114.64705 29.64705 85
450 118 28 90
475 121.5263 26.5263 95
500 125.2 25.2 100

Reference:
Bowett, R. (January 18, 2011) Organization- Business Decision- making [online] available from [January 18, 2011]
Facione, P. & Facione, N. (2007) Thinking and Reasoning in Human Decision Making. The California Academic Press

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