Levels of DSS models - Strategic, Tactical, Operational page 105

http://www.smallbusinesshq.com.au/factsheet/20305-Tips-on-Strategic-Tactical-and-Operational-Decision-Making.htm

Strategic Decisions - 'What?'

Strategic decisions deal with the big picture of your business. The focus of strategic decisions is typically external to the business and usually future oriented. Strategic decision-making creates the forward thrust in the business.

It includes decisions about:

• What business are you in?
• What is your vision for the business?
• What's your business' identity?
• What do you stand for?
• Which direction is the business headed?
• How will the business compete?

Corporations often capture their overall business strategy in a "Statement of Intent" and it's an excellent term for describing what strategic decision-making is. Too often people confuse strategic decisions with tactical decisions and fail to really examine the big picture. It can lead to stagnation in the business and an inability to move forward.

Top managers

Tactical Decisions - 'How?'

Tactical decisions involve the establishment of key initiatives to achieve the overall strategy. For example, if you have decided to be the Number 1 provider in your market (a strategic decision) then you will develop tactics (e.g. implement a marketing system, increase number of therapists) to achieve that outcome. In a small business you may have 4 or 5 key tactics that you are going to use to achieve your overall strategy.

Again this layer of decision-making can sometimes be overlooked yet it is the glue that creates a strong connection between your long-term vision and your day-to-day activities. Tactical decision-making is the domain of 'mission' statements.

Think in terms of the battlefields from which the term has emerged. The overall strategy, that is, what the army is there to do, is to win the war. Then you have a number of 'missions' you send troops on, preferably diplomatic ones, the cumulative effect of which is intended to win the war.

Operational Decisions - 'How will we deploy resources?'

Operational decisions determine how activities actually get done. They are the 'grass roots' decisions about who is going to do what and when. It includes:

• How will we spend our money this month?
• How will we service that client?
• What is our procedure for delivering an order?
• Who will be doing quality control?

If you are making decisions involving processes and procedures they are usually operational decisions. Operational decisions are often made in 'real time' and are the result of needing to make quick adjustments or change to achieve the desired outcome.

http://www.enotes.com/business-finance-encyclopedia/decision-making

STRATEGIC, TACTICAL, AND OPERATIONAL DECISIONS

People at different levels in a company have different types of decision-making responsibilities.

Strategic decisions, which affect the long-term direction of the entire company, are typically made by top managers. Examples of strategic decisions might be to focus efforts on a newproduct or to increase production output. These types of decisions are often complex and the outcomes uncertain, because available information is often limited. Managers at this level must often depend on past experiences and their instincts when making strategic decisions.

Tactical decisions, which focus on more intermediate-term issues, are typically made by middle managers. The purpose of decisions made at this level is to help move the company closer to reaching the strategic goal. Examples of tactical decisions might be to pick an advertising agency to promote a newproduct or to provide an incentive plan to employees to encourage increased production.

Operational decisions focus on day-to-day activities within the company and are typically made by lower-level managers. Decisions made at this level help to ensure that daily activities proceed smoothly and therefore help to move the company toward reaching the strategic goal. Examples of operational decisions include scheduling employees, handling employee conflicts, and purchasing rawmaterials needed for production.

It should be noted that in many "flatter" organizations, where the middle management level has been eliminated, both tactical and operational decisions are made by lower-level management and/or teams of employees.

The components of DSS Mathematical problems page 151

All models are made up of four basic components. Mathematical relationships links these components together.

Result (outcome) variables

• Reflect the level of effectiveness of a system, ho well the system attains its goals. These variables are outputs.
• Considered dependant

Decision variable (pg 58, 152)

• Describes alternative courses of action. The decision mkaer controls the decision variables.

uncontrollable variables (or parameters)

• Factors that affect result varibales but are not under the control of the decision maker.
• Some of these variables limit the decion maker and therefore form what are called constraints of the problem.

intermediate result variables

• Reflect intermediate outcomes in mathematical models. eg. determining machine maintenance scheduling, spoilage, total profit, employee satisfaction

Decision making under risk page 144

Probabilistic

• From wiki: is a way of expressing knowledge or belief that an event will occur or has occurred. More...

Stochastic

• from wiki: A stochastic process is one whose behavior is non-deterministic in that a system's subsequent state is determined both by the process's predictable actions and by a random element. More...

Decision maker must consider several possible outcomes for each alternative, each with a given probability of occurance.

Decision making under uncertainty

the decision maker considers situations in which several outcomes are possible for ech course of action.

does not know, cannot estimate the probability of occurance of the possible outcomes.

Insufficient information

involves assessment of the decision maker's attitude towards risk.

Decision making under certainty

It is assumed that complete knowledge is available so that the decision maker knows the outcome of each course of action will be (deterministic environment).

The decision maker is viewed as being a perfect predictor of the future because it is assumed that there is only one outcome for each alternative.

Occurs most often with structured problems.

Decision-making

Optimum outcome

• The absolute best of all possible outcomes.
• Is the most desirable solution to a problem.
• May be difficult or impossible to discover.
• What are the criteria for judging the quality of the outcome?

Satisfactory outcome – satisfycing.

• The best of all determinable outcomes.
• Is an ‘at least satisfactory’ solution to a problem.
• May be easier to discover than the optimum.
• What is a determinable outcome?
• What are the criteria for judging the quality of the outcome?
• When is a satisfactory solution acceptable?

Reliability of a decision?
How sure can we be that a chosen outcome is the correct / best one?

Choosing to do nothing!

One option that is always present, but often overlooked, is the choice to do nothing.

It should be placed on the list of ‘what-if’ scenarios, and evaluated along with the intentional alternatives as one possible choice.

The Knowledge-Based approach to decision-making

Is an extension of the classic approach, and may be:

• Descriptive knowledge (e.g. spreadsheet, balance sheet, etc.)
• Procedural Knowledge ( a series of steps, for example)

Decision-making

A problem-solving process that has been preceded by a problem-finding process

The means through which a manager seeks to achieve a desired result.

Finding and choosing between alternatives.

Alternatives
Where do they come from?
How many are sufficient?
How many are too many?

How much effort should be expended in finding more alternatives?
How to control them?
How to analyse them effectively?

How to select the optimum alternative?

Decision-Making versus Problem Solving?

It is tempting to regard only Simon’s ‘choice’ stage as decision-making, with the other stages being classified as problem solving.

Essentially, all four of Simon’s phases are incorporated within both decision-making and problem solving.

• Decision-making requires problem solving.
• Problem-solving requires decision-making.

In this unit of study we use the terms synonymously.

Decision making and problem solving are intimately integrated into each other.