Table of ContentsINTRODUCTION...................................................................................................................... 1 MODELS OF DECISION MAKING PROCESS ...................................................................... 3 1) 2) Econologic Model or Economic Man Model ............................................................... 3 Bounded Rationality Model or Administrative Man Model ........................................ 6 Causes of Bounded Rationality .......................................................................................... 8 3) Implicit Favourite Model or Gamesman Model ......................................................... 10 CASE STUDY ......................................................................................................................... 12 BIBLIOGRAPHY .................................................................................................................... 14 Decision-making is a process by which a decision (course of action) is taken. According to Peter Drucker. Thus. management is rightly described as decision-making process. Decision-making is the key part of manager's activities. In this sense. He takes hundreds of decisions consciously and subconsciously. The effectiveness of management depends on the quality of decision-making. A manager's major job is sound/rational decision-making. It is a primary function of management. his ability is very often judged by the quality of decisions he takes. A manager has to take a decision before acting or before preparing a plan for execution. management is always a decision-making process. Decisions are important as they determine both managerial and organizational actions. Decisions are made to achieve goals through suitable follow-up actions. Page | 1 .INTRODUCTION The word 'decision' is derived from the Latin words de ciso which means 'a cutting away or a cutting off or in a practical sense' to come to a conclusion. It is rightly said that the first important function of management is to take decisions on problems and situations. It is a part of every managerial function. Decision-making is an indispensable component of the management process itself. "Decision-making involves the selection of a course of action from among two or more possible alternatives in order to arrive at a solution for a given problem". Decision-making lies embedded in the process of management. This is because action is not possible unless a firm decision is taken about a business problem or situation. According to Trewatha & Newport. A decision may be defined as "a course of action which is consciously chosen from among a set of alternatives to achieve a desired result. he does through decision-making". Decision-making is an essential aspect of modern management. Moreover. It is a continuous process. Decision-making pervades all managerial actions. "Whatever a manager does." It represents a well-balanced judgment and a commitment to action. coordinating. capital expenditure decisions as well as such operating decisions as training of manpower and so on. The managerial decisions should be correct to the maximum extent possible. it is the top management which is responsible for all strategic decisions such as the objectives of the business. no action can take place and naturally the resources would remain idle and unproductive. directing. "management is a decision-making process. C. Decision-making will be followed by second function of management called planning. According to Peter Drucker. Page | 2 . Without such decisions.According to R. For this. The other elements which follow planning are many such as organising. Decision-making has priority over planning function. scientific decision-making is essential. Davis. controlling and motivating." Decision-making is an intellectual process which involves selection of one course of action out of many alternatives. a basic concept in many models of decision making. it is assumed that people will select the decision or course of action that has the greatest advantage or payoff from among the many alternatives. They believed that man is completely rational in his decisions. Bounded Rationality or Administrative Man Model. The models range from complete rationality to complete irrationality. in particular the degree to which they rational in taking decisions. They do not accurately portray that how decisions are actually made. exists when people attempt to maximise objectively measured advantage. III. There are seven-decision making steps under this model. 1) Econologic Model or Economic Man Model This is the earliest model of man developed by classical economists. Econologic Model or Economic Man Model. Page | 3 . He makes his search foe the best alternative in a planned. Therefore many writers criticise this model and say that it lacks realism. Implicit Favourite or Gamesman Model. That is. II. He always selects the alternative which gives him the greatest advantage.MODELS OF DECISION MAKING PROCESS There are several models that describe the behaviour of decision makers. Economic rationality. This model rests on two assumptions: It assumes people are economically rational. These models explain how practicing managers make decisions. orderly and logical manner. and That people attempt to maximise outcomes in an orderly and sequential process. such as money or units of goods produced. The models of decision making are described as under :- I. and Fourth. i. Act or implement the decision. i. they can accurately recall any information any time they like. Determine the goal to be achieved or define the problem to be solved.e. people can have complete information. 4. it is now possible to achieve economic rationality to some extent. Third. Page | 4 . Discover the symptoms of the problem or difficulty.Seven. To that extent. 2. This prescriptive model makes some assumptions about the capabilities of human beings: First. However. Identify all alternative courses of action. Consider the consequences of each alternatives as well as the likelihood of occurrence of each. Develop a criterion. people can manipulate all this information in a series of complex calculations design to provide expected values. this model is unrealistic. people can mentally store this information in some stable form. people can rank the consequences in a consistent fashion for the purposes of identifying the preferred alternative. Second.. against which alternative solutions can be evaluated. and 7. Choose the best alternative by comparing the consequences of each alternative (step5) with the decision criterion (step3). due to the advent of sophisticated data storage.Steps are :1.. 6. 5. people have the capability to gather all necessary information for a decision.e. As the human mind is simply incapable of executing such transactions at the level and magnitude required for complex decisions. retrieval and processing machines. 3. Econologic Model or Economic Man Model Of Decision Making Process Page | 5 . Use of heuristics: A heuristic is a rule which guides the search for alternatives into areas that have a high probability for yielding satisfactory solutions. They seek a kind of bounded (or limited) rationality in decisions. For instance. According to the bounded rationality model. „Good enough‟ and not necessarily „the best‟) solution is found. If the first solution fails to work it is discarded and the next solution is considered. it assumes that people. The concept of bounded rationality attempts to describe decision processes in terms of three mechanisms: Sequential search for alternative solutions: People examine possible solutions to a problem sequentially. When an acceptable (that is. Instead. They look for obvious solutions or previous solutions that worked in similar situations. Reasonable Satisfaction: This model does not take such decisions which provide the maximum satisfaction. some companies continually select Tourism Management graduates from certain institutions because in the past such graduates have performed well for the company. this model does not assume individual rationality in the decisions process. the search is discontinued.2) Bounded Rationality Model or Administrative Man Model Herbert A. As the name implies. while they may seek the best solution. Instead of identifying all possible solutions and selecting the best (as suggested in the econologic man model). has made an important contribution in the field of decision making. He takes only such decisions which offers reasonable satisfaction. Simon had addressed it by using the word “SATISFYING”. Simon a famous management expert. usually settle for much less because the decisions they confront typically demand greater information processing capabilities than they possess. which means Page | 6 . the various alternatives are identified and evaluated one at a time. decisions makers use heuristics to reduce large problems to manageable proportions so that decisions can be made rapidly. Page | 7 . initiate search for a new alternative solution (repeat steps 3-5) . An alternative is satisfactory if: 1) There exists a set of criteria that describes minimally satisfactory alternatives. Whereas the econologic man model focuses on the decision maker as an optimizer. 7) If the identified alternative is acceptable (a) implement the solution (b). 4) If no feasible alternative is identified (a) lower the aspiration level. An alternative is optimal if: 1) There exists a set of criteria that permits all alternatives to be compared. evaluate the ease with which goal was (or was not) attained (a). and raise or lower level of aspiration accordingly on future decisions of this type. 5) After identifying a feasible alternative (a). 8) Following implementation. 6) If the identified alternative is unacceptable. by these criteria. this model sees him or her as a satisfier. 2) Establish an appropriate level of aspirations or criterion level (that is. The model consists of eight steps: 1) Set the goal to be pursed or define the problem to be solved. to all other alternatives. evaluate it to determine its acceptability (b). it is possible to routine the decision process as seen from the standpoint of the bounded rationality model. and 2) The alternative in question is preferred.taking a decision that is appropriate enough in the given situation. and (b) begin the search for a new alternative solution (repeat steps 2 and 3). and 2) The alternative in question meets or exceeds all these criteria. Based on these three assumptions about decision makers. when do you know that a solution is sufficiently positive to be acceptable even if it is not perfect ?) 3) Employ heuristics to narrow problem space to a single promising alternative. Everybody has its own preferences. it may not be correct. rational decision cannot be taken in the absence of complete and correct information. nothing can be said with any amount of certainty about the result of the decision. Incomplete Information:. it has been seen that all the information is not available and even it become available. rules. its polices. but they cannot be absolute rational. Uncertain Conditions:. Everybody has his own idea about the solution of a problem. Therefore. Personal Preferences:. Therefore. He has to take a decision within the narrow limits of his knowledge.Decisions are taken in connection with the future and the future in uncertain.The amount of knowledge of every manager is limited. Organizational Factors:. while a rational decision is one whose results are almost certain. the decisions taken by the manager can be very good.Every manager is bound to by the limitation of the organization. The bounded rationality model is descriptive. The search behaviour is sequential in nature (evaluating one or two solutions at a time. Therefore. instead.Causes of Bounded Rationality Limited Knowledge:. etc. The element of irrationality is always present in all big and small decisions. That is why when a chief manager is replaced by another person. that is it describes how decision makers actually arrive at the identification of solutions to organisational problems. Page | 8 . In this model we do not seek the best solution. Generally. It can be said that the decisions cannot be taken with absolute rationality. we look for a solution that is acceptable.Much information connected with the problem is needed. It means that while taking decision he has to keep in mind the objectives of the organization. A rational decision cannot be taken in the view of limited knowledge. the major organizational decisions are changed. Page | 9 .Bounded Rationality Model or Administrative Man Model of Decision Making Process (1) Set goal or Define prob. Programmed decisions. through the guise of scientific rigour. Soelberg noted that the implicit favourite was typically superior to the confirmation candidate on only one or to dimensions. The implicit favourite model developed by Soelberg (1967) emerged when he observed the job choice process of graduating business students and noted that. the students attempted to develop decision rules which demonstrated unequivocally that the implicit favourite was superior to the alternative confirmation candidate. Even so. in contrast. the individual becomes convinced that he or she is acting in a rational fashion and making a logical. Next. This was done through weighing systems designed to highlight the positive features of the implicit favourite. By doing so. the decision makers generally characterised their decision rules as being multi-dimensional in nature. the students identified implicit favourites very early in the recruiting and choice process. The entire process is designed to justify to the individual.3) Implicit Favourite Model or Gamesman Model This model deals primarily with non-programmed decisions. Ironically. Finally. in many cases. known as the confirmation candidate. a non-programmed decision that has already been made in intuitive fashion. like seeking one‟s first job. the decision was announced. they continued their search for additional alternatives and quickly selected the best alternative candidate. like the procedures for admitting students to a secondary school. The non-programmed decisions are decisions that are novel or unstructured. are more routine or repetitious in nature. However. reasoned decision on an important topic. after a decision rule was derived that clearly favoured the implicit favourite. Page | 10 . Implicit Favourite or Gamesman Model of Decision Making Process Page | 11 . Though long hours of brainstorming. Then in 1993. Nike previously used rationality model of decision-making model.CASE STUDY of NIKE Nike organisation grew out of an idea Philip Knight expressed. the team arrived at series of ads featuring women a powerful. Nike opened retailed outlets in which apparel shoes and Nike paraphernalia are sold. Nike managers attribute a $100 million increase in gross profits in 1992. which is experiencing must faster growth than the athletic shoe business. named after mythological goddess of victory. capable person. One new venture was Nike Town concept. on what he or she expects the others to do. it attracted 5000 customers a week who spent about $50 each. Many seemed to feat that growing the women‟s business would undermine the company‟s image and decrease it appeal to men. Blue Ribbon sports become Nike. in graduate school paper. which operates 30 Nike owned outlets for factory seconds and the two Nike town stores. When the Chicago Nike town opened. It was a sports museum. Gamesman model is the study of people making interdependent choices. This model highlights the explicit role of human relationships and interactions in decisions. in part. he and Bill Bowerman started an athletic shoe company call Blue Ribbon sports to evoke the image of the winner. The idea here was not discounted. part store and part amusement park and was intended as a celebration of Nike‟s energy and youth vitality. To keep up with the changing market place. to it retail division. Nike managers focussed on range of women‟s product. In 1964. According to David Monfred this is an opportunity to have direct control over how your company is presented to the world. Thereafter Nike adopted the Gamesman Model of decision making rather than using old and traditional rational model. The women‟s marketing and advertising team. In 1972. In 1992. The decision to focus on women was not a quick decision. The stores promote the growth of the Nike Apparel business. A game is a situation involving at least two people in which each person makes choices based. their supervisors and their competitors within Nike‟s organisation ate all decision-making in the context of Page | 12 . Nike managers have already started diversifying. the decision to proceed with dialogue is the joint result of their individual decisions. By using the Gamesman Model.each other‟s making decision. At the same time. Page | 13 . this resulting decision is being played out in a world where forces of turbulence are at work. seventeenth reprint. Study Material provided by Prof. http://ms-01-ignou. http://books. 2001.blogspot.in/books?id=DbC0_McBPgIC&pg=PA273&lpg=PA273&dq= gamesman+model+decision+making&source=bl&ots=y7qxaJwmr2&sig=ME3yCWVptqEcjLPdOl7PghiiK4&hl=en#v=onepage&q=gamesman%20model%20decisio n%20making&f=false 3.co. 3. http://kalyan-city.google. Websites visited :1.google. by R. 2.html 5. by L.org/wiki/Decision_making Page | 14 . Keshav Sharma. Principles and Practice of Management.BIBLIOGRAPHY Books referred : 1.in/books?id=10s0vYQp9UgC&pg=PA145&lpg=PA145&dq=a dministrative+man+model+corporate+example&source=bl&ots=uHlQP7oXfM&sig= kZf07ETZ8w5EGlccV3coKGQvjc&hl=en#v=onepage&q=administrative%20man%2 0model%20corporate%20example&f=false 4. Agarwal.co.blogspot.D. Prasad. Oraganisation and Management.in/2010/06/decision-making-process-in-management.in/2010/09/describe-different-types-and-models-of.wikipedia. http://books. http://en.html. 2.M. reprint 2008.