Corporate Strategy & Decision Making
Corporate Strategy and Decision Making
Lecture 3: Rational and Administrative Models of Decision
The rational decision model
Under the rational model of decision making, the assumption is made that participants have agreed in advance that making a decision is the right process to follow and that the rules and language of decision making are understood by all. The rational model aims at making optimal decisions on the basis of a careful evaluation of alternative courses of action. Depending on the complexity of the problem, computational or quantitative techniques may be used to assist this process. The model is claimed to be the basis of much decision making in private and commercial life and is effective under the conditions it assumes: a finite choice situation, relevant and unproblematic data, and clear and uncontroversial choice criteria. The model views the decision-making process as a sequential series of activities leading from an initial recognition of a problem, through the delineation and evaluation of alternative courses of action, and the selection of the preferred alternative, to the implementation of action (Dawson 1986: 182; Minkes 1987: 37–8). This sequential process is depicted below (figure 14.2 in the text). Consider the decision processes involved in the choice about which of two new products should be launched. If the agreed objective was profitability, rationalists would say that it is a relatively straightforward procedure to estimate incomes and expenditures associated with both proposed products and to determine the preferred alternative. In these circumstances, decision making becomes largely a matter of technical expertise. Where there are adequate information, clear choice criteria and agreed goals, then the rational model is said to work well. However, not all decision situations are as clear cut as the example suggests, and the assumptions indicated above cannot always be presumed.
One major assumption is that the rational
Lecture 3: Rational and Administrative Models of Decision
The rational decision model
Under the rational model of decision making, the assumption is made that participants have agreed in advance that making a decision is the right process to follow and that the rules and language of decision making are understood by all. The rational model aims at making optimal decisions on the basis of a careful evaluation of alternative courses of action. Depending on the complexity of the problem, computational or quantitative techniques may be used to assist this process. The model is claimed to be the basis of much decision making in private and commercial life and is effective under the conditions it assumes: a finite choice situation, relevant and unproblematic data, and clear and uncontroversial choice criteria. The model views the decision-making process as a sequential series of activities leading from an initial recognition of a problem, through the delineation and evaluation of alternative courses of action, and the selection of the preferred alternative, to the implementation of action (Dawson 1986: 182; Minkes 1987: 37–8). This sequential process is depicted below (figure 14.2 in the text). Consider the decision processes involved in the choice about which of two new products should be launched. If the agreed objective was profitability, rationalists would say that it is a relatively straightforward procedure to estimate incomes and expenditures associated with both proposed products and to determine the preferred alternative. In these circumstances, decision making becomes largely a matter of technical expertise. Where there are adequate information, clear choice criteria and agreed goals, then the rational model is said to work well. However, not all decision situations are as clear cut as the example suggests, and the assumptions indicated above cannot always be presumed.
One major assumption is that the rational
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