Decision-Making: concept, process and techniques for RAS Mains Exam: Decision making is an essential part of planning. Decision making and problem solving are used in all management functions, although usually they are considered a part of the planning phase. A discussion of the origins of management science leads into one on modeling, the five-step process of management science, and the process of engineering problem solving.
Decision-making is an integral part of modern management. Essentially, Rational or sound decision making is taken as primary function of management. Every manager takes hundreds and hundreds of decisions subconsciously or consciously making it as the key component in the role of a manager. Decisions play important roles as they determine both organizational and managerial activities. A decision can be defined as a course of action purposely chosen from a set of alternatives to achieve organizational or managerial objectives or goals. Decision making process is continuous and indispensable component of managing any organization or business activities. Decisions are made to sustain the activities of all business activities and organizational functioning.
Relation to Planning
Managerial decision making is the process of making a conscious choice between two or more rational alternatives in order to select the one that will produce the most desirable consequences (benefits) relative to unwanted consequences (costs). If there is only one alternative, there is nothing to decide.
If planning is truly “deciding in advance what to do, how to do it, when to do it, and who is to do it” , then decision making is an essential part of planning. Decision making is also required in designing and staffing an organization, developing methods of motivating subordinates, and identifying corrective actions in the control process. However, it is conventionally studied as part of the planning function, and it is discussed here.
Occasions for Decision
The occasions for decision originate in three distinct fields:
(a) From authoritative communications from superiors
(b) From cases referred for decision by subordinates; and
(c) From cases originating in the initiative of the executive concerned.
TYPES OF DECISIONS
- PROGRAMMED DECISIONS:
Programmed decisions are routine and repetitive, and the organization typically develops specific ways to handle them. A programmed decision might involve determining how products will be arranged on the shelves of a supermarket. For this kind of routine, repetitive problem, standard arrangement decisions are typically made according to established management guidelines.
- NON PROGRAMMED DECISIONS:
Non programmed decisions are typically one shot decisions that are usually less structured than programmed decision.
- Decision Making under Certainty
Decision making under certainty implies that we are certain of the future state of nature (or we assume that we are). (In our model, this means that the probability p of future N is 1.0, and all other futures have zero probability.) The solution, naturally, is to choose the alternative A that gives us the most favorable outcome O. Although this may seem like a trivial exercise, there are many problems that are so complex that sophisticated mathematical techniques are needed to find the best solution.
Marketing Management is a social and managerial process by which individuals or firms obtain what they need or want through creating, offering, exchanging products of value with each others.
- CORE CONCEPTS OF MARKETING
NEED/ WANT/ DEMAND:
Need: It is state of deprivation of some basic satisfaction.
Want: Desire for specific satisfier of need.
Demand: Want for a specific product backed up by ability and willingness to buy.
Marketers cannot create needs. Needs pre exists. Marketers can influence wants. This is done in combination with societal influencers.
PRODUCTS- GOODS/ SERVICES/PLACE
Product is anything that can satisfy need/ want.
Product component- 1.Physical Good Service Idea
Hence, products are really a via- media for services.
Hence, in marketing, focus is on providing/ satisfying service rather than providing products.
Marketing Myopia: Focus on products rather than on customer needs.
VALUE/ COST/ SATISFACTION
Decision for purchase made based on value/ cost satisfaction delivered by product/ offering.
Product fulfills/ satisfies Need/ Want.
Value is products capacity to satisfy needs/ wants as per consumer’s perception or estimation.
Each product would have a cost/ price elements attached to it.
VALUE–Products capacity to satisfy
COST– Price of each Product
EXCHANGE: – The act/ process of obtaining a desired product from someone by offering something in return. For exchange potential to exist, the following conditions must be fulfilled.
There must be at least two parties.
Each party has something of value for other party.
Each party is capable of communication & delivery
Each party is free to accept/ reject the exchange offer.
Each party believes it is appropriate to deal with the other party.
TRANSACTION: – Event that happens at the end of an exchange. Exchange is a process towards an agreement. When agreement is reached, we say a transaction has taken place.
Proof of transaction is BILL/ INVOICE.
TRANSFER: – It is one way. Hence, differ from Transaction.
NEGOTIATION: – Process of trying to arrive at mutually agreeable terms.
Negotiation may lead to – Transaction– Decision not to Transaction
Relationship marketing: – It’s a pattern of building long term satisfying relationship with customers, suppliers, distributors in order to retain their long term performances and business.
Outcome of Relationship Marketing is a MARKETING NETWORK.
MARKETING NETWORK: It is made up of the company and its customers, employees, suppliers, distributors, advertisement agencies, retailers, research & development with whom it has built mutually profitable business relationship.
Competition is between whole network for market share and NOT between companies alone.
A market consists of all potential customers sharing particular need/ want who may be willing and able to engage in exchange to satisfy need/ want.
Types of Markets:
- Resource Market
- Manufacturing Market
- Intermediary Market
- Consumer Market
- Government market.
Working with markets to actualize potential exchanges for the purpose of satisfying needs and wants one party seeks the exchange more actively, called as “Marketer”, and the other party is called “Prospect. Prospect is someone whom marketer identifies as potentially willing and able to engage in exchange. Marketer may be seller or buyer. Most of time, marketer is seller.
A marketer is a company serving a market in the face of competition.
Marketing Management takes place when at least one party to a potential exchange thinks about the means of achieving desired responses from other parties.
AMA- American Marketing Association:-It defines marketing management as the process of planning & executing the conception of pricing, promotion, distribution of goods, services, ideas to create exchanges that satisfy individual and organizational goals. Can be practiced in any market. Task of marketing management is to influence the level, timing, composition of demand in a way that will help the organization to achieve its objective. Hence, marketing management is essentially demand management.
Traditional Concept of Marketing
According to this concept, marketing consists of those activities which are concerned with the transfer of ownership of goods from producers to consumers. Thus marketing means selling of goods and services. In other words, it is the process by which goods are made available to ultimate consumers from their place of origin. The traditional concept of marketing corresponds to the general notion of marketing, which means selling goods and services after they have been produced. The emphasis of marketing corresponds is on the sale of goods and services. Consumer satisfaction is not given adequate emphasis. Viewed in this way, marketing is regarded as Production/Sales oriented.
Modern concept of Marketing
According to the modern concept, Marketing is the concerned with creation of customer. Creation of Customers means identification of Consumer needs and organizing business to satisfy needs. Marketing in the modern sense involves decision regarding the following matters.
- Products to be produced
- Prices to be charged from Customers
- Promotional techniques to be adapted to contact and influence existing and potential customers.
- Selection of middlemen to be used to distribute goods and service.
Modern concept of marketing requires all the above decisions to be taken after due consideration of consumer needs and their satisfaction.
The business objective of earning profit is sought to be achieved through provision of consumer satisfaction. This concept of marketing is regarded as consumer oriented as the emphasis of business is laid on consumer needs and their satisfaction.
Five fundamental concept of marketing are –
- Exchange concept
- Production concept
- Product concept
- Sales concept
- Marketing concept
Exchange Concept: The exchange concept holds that the exchange of a product between seller & buyer is the central idea of marketing Exchange is an important part of marketing, but marketing is much wider concept.
Production Concept: The production concept is one of the oldest concepts in business. It holds that consumers will prefer products that are widely available and expensive. Manager of Production oriented business concentrate on achieving high production efficiency low cost & mass distribution.
Product Concept: This concept holds that consumers will prefer those products that are high in quality, performance or innovative features. Managers in these organization focus on making superior products and improving them. Sometimes, this concept leads to marketing myopia; marketing myopia is a short-sightedness about business. Excessive attention to production or the product or selling aspects at the cost of customers & his actual needs creates this myopia.
Selling Concepts: This concept focuses on aggressively promoting & pushing its products, it cannot accept its product to get picked up automatically by the customer. The purpose is basically to sell more stuff to more people, in order to make profits.
Marketing Concept: The marketing concept emerged in the mid 1950’s. The business generally shifted from a product – cantered, make & sell philosophy, to a customer centered, sense & respond philosophy. The job is not to find the right customers for your product, but to find right products for your customers. The Marketing concept holds that the key to achieving organizational goals consist of the company being more effective than competitors in creating, delivering & communicating superior customers value. This concept puts the customers at both the beginning & the end of the business cycle. Every department & every worker should think customer & act customer.