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Listed here are several examples of bad, or at least questionable, decisions. Evaluate the decision maker’s approach or logic. In which of the six decision steps might the decision maker have gone wrong? Use the 6 decision steps at the bottom of the page.
(c) You are traveling on a highway with two traffic lanes in each direction. Usually traffic flows smoothly, but tonight traffic moving in your direction is backed up for half a mile. After crawling for 15 minutes, you reach the source of the tie-up: a mattress is lying on the road, blocking one lane. Like other motorists before you, you shrug and drive on.
(d) The sedative thalidomide was withdrawn from drug markets in 1962 only after it was found to be the cause of over 8,000 birth defects worldwide. (An exception was the United States, where the use of thalidomide was severely restricted).
Step 1 – Define the Problem: This initial step is identifying the situation and examining the context of the issue and methodically going through the questions related to: who? What? When? Why? and How? Also determine whether soft drink is new, imitation or substitute product inspired by something another beverage already in the market. By defining the problem, management can begin developing a holistic plan inclusive of various conditions and both known and unknown variables that might have an impact on the product demands, production and sales.
Step 2 – Determine the Objective: Figuring out the objective or strategic goal is critical, especially in forecasting future profits. In this step, management need to contend with questions related to building brand equity, value creation and whether or not there are attributes that would differentiate the product from its competitors. Additionally, being able determine if the product will align with the company’s existing product or will it satisfy other strategic goals.
Step 3 – Explore the Alternatives: The third step is generating solutions. Being able to devise a “plan B” or have on hand an alternative solution is equally important to being able to identify the purpose of the product. Management will have to consider the logistic of product distribution and introduction into the marketplace. In addition to that, the company would have to figure which variety or drink flavor to spotlight, and determines geographically when and where to produce and introduce the drinks; and developing and designing strategic marketing campaigns that will produce the biggest impact.
Step 4 – Predict the Consequences: This step aims more on being able to forecast the financial consequences of decisions made or course of actions. In this step of the planning, management is expected to make certain assumptions of their production and profit level and at a determined frequency, i.e. monthly, quarterly, and semi-annual, annually, 3-year plan, 5-year plan, etc. Other assumptions include revisiting and modifying the plan 1, 2, or 3 year after launching the product.
Step 5 – Make a Choice: Once the problem has been identified, the objectives are determined, generating solutions and forecasting the future outcome is done, Step 5 involves selecting one or more of the best solution for the product. In this step, management decides which of the possible solutions, predictions and benefits-cost analysis will maximize their ability to profit.
Step 6 – Perform Sensitivity Analysis: In the final step of the decision making model, management have to revisit their original plans and make modifications as needed. Strategic plans take on-going maintenance. It has to stay fluid and adaptable.