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‘Chance favours only the prepared mind’. Louis Pasteur

‘Chance favours only the prepared mind’. Louis Pasteur 1) Explain what you understand by this statement. TOPIC: Topic 1: Business Organization and Environment LESSON TITLE: Decision-making Tools. COMPETENCY FOCUS:

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‘Chance favours only the prepared mind’. Louis Pasteur

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  1. ‘Chance favours only the prepared mind’. Louis Pasteur 1) Explain what you understand by this statement.

  2. TOPIC:Topic 1: Business Organization and Environment LESSON TITLE: Decision-making Tools COMPETENCY FOCUS: Entrepreneurship (S4): To develop your entrepreneurial skills in preparing a realistic proposal for a new business start-up.You will understand the process a business will have to go through when starting up, including the underlying principles of starting a business. [IB Learner Profile Development: Thinker] Learning Objectives By the end of the lesson, you should be able to… LO1) To identify two different models available to businesses when making decisions LO2) Apply a formal decision-making framework to a given situation LO3) Analyse the extent that the decision tree business technique supports a businesses decision making. SMSC: You will assess the organisational culture of businesses in terms of fundamental structure, purpose and strategy development. CRITICAL THINKING KEY: Knowledge ApplicationAnalysis Evaluation

  3. Decision-making Framework Effective decision-making is one of the key roles of management at all levels of seniority within an organisation. There are 2 different approaches to decision-making: • Intuitive decision-making (gut-feeling) • Scientific decision-making (based on fact/data)

  4. Decision-making Businesses of all sizes have to make many decisions each day - some are fairly simple and routine, whilst others are more complex and require significant management time and effort. Some examples of decisions that all businesses need to make are: • Where should we locate the business? • What goods should we produce? • What price should we charge? • What should we do if a supplier fails to deliver on time? • Which job agency should we use to provide us with some temporary workers? • Which employee appraisal system should we use?

  5. Types of Decision • A strategic decision is one which is very high-risk and is likely to influence the overall long-term policy and direction of the business. As such, it is likely to be dealt with by senior management (e.g. what new products to develop). • A tactical decision is a fairly routine, predictable, short-term decision, which is normally handled by middle management (e.g. what price to charge for products). Other decisions which are repetitive, day-to-day and fairly risk-free are handled by lower-level management, and are generally referred to as operational decisions (e.g. how long should tea-breaks be?).

  6. Decision-making Framework

  7. Internal and External Constraints on Decision-making

  8. Help…! Which theoretical frameworks/models can help a business with making an important decision that affects the business?

  9. Decision Trees (HL) Decision Tree= a diagram that sets out all the options connected with a decision and the outcomes and economic returns that you might expect.

  10. Decision Trees (HL) Constructing Decision Trees: • Constructed from left to right • Each branch represents an option together with a range of outcomes and the chances of these occurring • Decision points are represented by a these are called decision nodes. - Chance Node (represents several outcomes)

  11. Using Decision Trees What are the advantages and disadvantages for a business using decision trees?

  12. Decision Tree (HL) Work your way through pages 61-63, making notes and constructing your own decision tree.

  13. Decision Tree (HL) Exam question/case study Pg. 63 ‘Which Market?’

  14. Decision Tree (HL) Exam Practice: ‘Decision trees assess different possible outcomes from a variety of alternatives.’ Explain this statement.

  15. Reflection Reflect on what you have learnt this lesson. What do you need to know more about?

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