TECHNOLOGICAL INNOVATION

MANAGEMENT AND ENTREPRENEURSHIP

18ES51
Text Books

● Principles of Management – P.C Tripathi, P.N Reddy,

McGraw Hill Education, 6th Edition,
2017.ISBN-13:978-93-5260-535-4.
● Entrepreneurship Development Small Business
Enterprises- Poornima M Charantimath,
PearsonEducation 2008, ISBN 978-81-7758-260-4.
● Dynamics of Entrepreneurial Development and
Management by Vasant Desai. HPH 2007, ISBN:
978-81-8488-801-2.
● Robert D. Hisrich, Mathew J. Manimala, Michael P Peters
and Dean A. Shepherd, “Entrepreneurship”,8th Edition,
Tata Mc- graw Hill Publishing Co.ltd.-new Delhi, 2012
● Module 1: Management: Nature and Functions of Management
– Importance, Definition, Management Functions, Levels of
Management, Roles of Manager, Managerial Skills,
Management & Administration, Management as a Science, Art
&Profession Planning: Planning-Nature, Importance, Types,
Steps and Limitations of Planning; Decision Making –
Meaning, Types and Steps in Decision Making
IMPORTANCE OF MANAGEMENT
• Management is a critical element in the economic growth of
the country.
• Management is essential in all organised sections, be it a
business activity or any other activity.
• Principles of management is not only used in managing
business organisations but also applied in other organisation
like educational, social, military and government.
• It is the dynamic, life giving element in every organisation.
•In the words of Claude S George, management is the central
core of our national as well as personal activities, and the way
we manage ourselves and our institutions reflects with alarming
clarity what we and our society will become.
 Definition of management
● Management is ‘the art of getting things done through
people”.

● A manager is one who contributes to organizations goals

indirectly by directing effort of other-not by performing the
task himself.
Definition of management
● George r terry: “consisting of planning, organizing,
actuating and controlling, performed to determine and
accomplish the objective by the use of people and
resources”
● Planning means that managers think of there actions in
advance.
● Organization means that Managers coordinate the
human and material resources of organization.
● Actuating means that motivate and direct subordinates.
● Controlling means manager attempt to no deviation
from norm plan.
 Meaning of Management
● Management is a process - Systematic method of
handling activities.

● Management is a discipline - Field of study having

well defined concepts and principles.

● Management is a human activity - Refers to the

people who engage in the process of

● management.
Management is a career - Ca ree r f

oc u s e d on Specialization.
Nature and characteristics of management
● Production process involves land, labour, capital, organization
and entrepreneurship.
● If these factors remain separated, there is no possibility for
production.
● Success of production depends on their effective combination
and cooperation.
● This calls for a special skill, knowledge and characteristic to
seek their fullest cooperation to achieve the objectives set by
an enterprise.

● Such skills and knowledge is the management.

 Nature of Management

Ø Nature Of Management
1. Multidisciplinary

2. Dynamic nature of principles.

3. Relative not absolute

principles.
4. Management – science or art.

5. Universality of management.
Management Functions or the Process of management

• Koontz and O’Donnell divide these functions into planning,

organising, staffing, directing and controlling.
• Further Innovation and representation are the 2 managerial
functions considered by Ernest Dale.
Functions of management
● Well accepted functions of management
are
1) Planning
2) Organizing
3) Staffing
4) Directing
5) Controlling
6) Innovating
7) Representing
Planning
● Planning is the function that determines in advances
what should be done.
● It is a process of deciding the business objectives and
charting out the methods of attaining objectives.
● Planning is done for every division, department or sub-
unit of the organization.
● Performed by managers at all levels-top, middle and
supervisory.
● Plans made by top management may cover periods as
long as five or ten year.
● Plans made by middle or first line manger, cover much
shorter period.
Organizing
● To organize a business is to provide it with everything
useful to its functioning: Personnel, raw materials,
tools, capital.

● Divided into two main 1)Human Organization

sections 2)Material
Organization
● Once Managers have established objectives and
developed plans to achieve them, they must design and
develop a human organization that will be able to carry
out those plans successfully.
Staffing
● Function involved in building the human organization.
● In staffing, the manager attempts to find right person for

each job.

● Staffing fixes a manager’s responsibility to recruit and

make certain that there is enough manpower available to

fill all positions of organization.

● It involves training of future manager and suitable

system of compensation.
Directing
● Manager explains to his people what they have to do and
helps them do it to the best of their ability.
● Three sub functions- Communication, leadership
and motivation.
● Communication is the process of passing information
and understanding from one person to another.
● Leadership is the process by which a manger guides and
influences the work of his subordinates.
● Motivation is the act of stimulating or inspiring workers.
● Two types of motivation-Financial and non financial.
Controlling
● The manager must ensure that everything in conformity
with plans adopted, the instructions issued and the
principles established.
● Controlling function of management involves three
elements
1)Establishing standards of performance.
2)Measuring current performance and comparing it
against the established standards.
3)Taking action to correct any performance that does not
meet those standard
Innovating
● It is not necessary for the organisation to grow bigger. But
it is necessary that it constantly grows better.
● Innovation is important function of manager.
● Innovation means creating new ideas which may
improve a product, process or practice.
Representing
● A manager is also required to spend a part of his time in
representing his organisation before various outside
groups which have some stake in the organisation.
● These stake-holders can be government officials, labour
unions, financial institutions, suppliers, customers etc.
Levels of Management
 Levels of management
● The levels of management consisting of various managerial positions
in the structure of an organization, differ from one organization to
another, depending on the size of business activity.
● Levels of management 1)Top management
are 2)Middle management
3)First line or
● The top management consists of chairman, Directors,
supervisors.
Company president, vice president, CEO’s. These are the
people who make policies for the organization, set goals and
targets.
● The Middle management includes finance manager, sales
manger, marketing manager, personnel manager, department
heads etc.
● The lower level managers are the supervisors and foremen. They
are basically one step above the workers.
Roles of Manager
Interpersonal Roles
a) Figurehead: In this role every manager has to perform
duties of a ceremonial nature, such as greeting visiting
dignitaries, attending the wedding of an employee,
taking an important customer to lunch and so on.

a) Leader: As a leader, every manger motivate and

encourage his employees. He must also try to reconcile
their individual needs with the goals of the
organization.

a) Liaison: In this role of liaison, every manager must

cultivate contacts outside his vertical chain of
Informational Roles
a)Monitor: As monitor, the manager has to scan his
environment for information, interrogate his liaison
contact and his employs.
b)Disseminator: In the role of disseminator, the manager
passes some of his privileged information directly to his
key subordinates who would otherwise have no access
to it.
c)spokesman: As a spokesman, he communicates the
information/goals of organization to his staff, and
progress of work to his superiors.
He also communicates performance of company to
shareholder and the rules and responsibilities to his
subordinates.
Decisional Roles
a) Entrepreneur: In this role, manager proactively
looks out for innovation to improve his organization.
b) Disturbance Handler: In this role, manager must
seek solutions for various unanticipated problems like a
strike may loom large, a major customer may go bankrupt,
a supplier may renege on his contract, and so on.
c) Resource allocator: in this role, the manager must
divide work and delegate authority among his subordinates.
he must decide who will get what.
d) Negotiator: The manager at all levels has to spend
considerable time in negotiation. Manager negotiates with
the employees and tries to resolve any internal problems
like trade agreements, strikes and grievances of employees.
Managerial Skills
● Management is a challenging job.
● It requires certain skills to accomplish such a challenge.
● Thus, essential skills which every manager needs for
doing a better management are called as Managerial
Skills.
1. Conceptual Skills
2. Human Relations Skills
3. Technical Skills
● All managers require above three managerial skills.
However, the degree (amount) of these skills required
varies (changes) from levels of management and from
an organization to organization.
1. Conceptual Skills
● Conceptual skill is the ability to visualize (see) the
organization as a whole.
● It includes Analytical, Creative and Initiative skills.
● It helps the manager to identify the causes of the
problems and not the symptoms.
● It helps him to solve the problems for the benefit of the
entire organization.
● It helps the manager to fix goals for the whole
organization and to plan for every situation.
● Conceptual skills are mostly required by the top-level
management because they spend more time in planning,
organizing and problem solving .
2. Human Relations Skills
● Human relations skills are also called Interpersonal skills.
● It is an ability to work with people.
● It helps the managers to understand, communicate and
work with others.
● It also helps the managers to lead, motivate and
develop team spirit. Human relations skills are required
by all managers at all levels of management.
● All managers have to interact and work with people.
3.Technical Skills
● Technical skill is knowledge and ability in a specialized
area of business, e.g. electrical engineering or
accountancy.
● These skills require specialized knowledge and
proficiency in the mechanics of particular job.
● Technical skills help the managers to use different
machines and tools.
● It also helps them to use various procedures and
techniques.
● The low-level managers require more technical skills.
This is because they are incharge of the actual
operations.
Managerial Skills

● The above diagram shows the managerial skills which are

required by managers working at different levels of management.
● The top-level managers require more conceptual skills and less
technical skills.
● The lower-level managers require more technical skills and
fewer conceptual skills.
● Human relations skills are required equally by all three
levels of management.
Management and administration
● It is a top level function which centers around
determination of plans, policies and objectives of
business enterprise.
● Management involves “doing". It is a lower level
function which is concerned with execution and
direction of policies and operation.
● No two separate sets of personnel are required to
discharge administrative and managerial functions.
● Each manager performs both activities and spends part
of time administering and part of his time managing.
Management and administration
● At the top level more time is spent in
administrative activity and as one moves down
in
the organisation more time is spent
in
management activity.
Management and administration
● According second view management is a comprehensive
generic term which includes administration.
● E.F.L. Brech regards management as a comprehensive generic
function embracing the entire process of planning, organising,
directing and controlling.
● According to him administration is only a branch of
management which encompasses two of its functions-planning
and control.
● According to this view, the functions of management can be
divided into two categories: a) administrative management b)
operative management.
● Upper level of management is usually called administrative
management.
● Lower level is known as operative management.
Management and administration
 Management as a Science, Art or
Profession
● It is an art in the sense of possessing of managing skill by a person. It is

a science also because of developing principles or laws which are

applicable in a place where a group of activities are coordinated.

● Management as science : Science is a systematized body of knowledge.

● Management is an art : Management is the art of getting things done

through others in dynamic situations.

Management as Art and Science
● The stream of management reveal characteristics of art
and science.
● Every discipline of science is complete only when it is
applied for solving various kinds of problems faced by
human beings in an organisation or in other fields.
● Management is the art of making people work more
effectively to maximize their output.
● By the use of effective management skills people in an
organisation work more efficiently as they are guided by
the scientific principles and practices laid down by
various researchers of management.
Management as a science
● We can call discipline as science if its
● 1)methods of inquiry are systematic and empirical
● 2)information can be ordered and analysed.
● 3) results are cumulative and communicable.

● All scientific information collected first as raw data is finally ordered

and analysed with help of statistical tools.
● Communication of result also permits repetition of study.
● When study is replicated and second try provides results similar to
the original, one derives much for confidence in result.
 Management as an art.
● Under science one normally learns the “ why” of a
phenomenon, under art one learns the “how” of it.
● Art is thus concerned with the understanding of how a
particular work can be accomplished.
● It is art of getting things done through others in dynamic
and non repetitive situation.
● The manager has to constantly analyze the existing
situation, determine the objectives, seek alternatives,
implement, coordinate, control and evaluate information
and make decisions.
Management as an art.
● Knowledge of management theory and principles is
indeed a valuable aid and kit of manager but it can
not replace his other managerial skills and qualities.
● This knowledge has to be applied and practiced by
manger.
● In this sense management is an art.
● It is like the art of musician or the art of painter who
seeks to achieve the desired effect with color or
instruments, mainly with his own skill.
Management –A profession?
● Characteristic of profession
1. Existence of an organised and systematic knowledge.
2. Formalised methods of acquiring training and experience.
3. Existence of an association with professionalization as its
goal.
4. Existence of an ethical code to regulate the behavioral of the
members of the profession.
5. Charging of fees based on service, but with due regard for
priority of service over the desire for monetary rewards.

Management does not possess all above characteristic of a

profession.
Management –A profession?
● There is no uniform code of conduct or licencing of
mangers.
● The entry to managerial jobs is not restricted to
individual with a special academic degree only.
● In the light of this we can conclude that management can
not be called a profession.
● However , the present trend is towards
professionalisation of management.
Management –A profession?
● Nowadays it is required to acquire management degree
or training in management to be called good manager.
● There is increased demand for qualified managers with
M.B.A degree.
● Peter drucker-”A degree in management does not by
itself make an individual a professional a manager any
more than does a degree in philosophy make an
individual a philosopher”.
● This leads to loosing of good and skilled managers who
do not have required degree.
 MODULE
1

Planning
 PLANNING
● Planning is the first and foremost function of
management.
● According to Koontz and O’Donnel “Planning is deciding
in advance what to do, how to do it, when to do it and
who is to do it. It bridges the gap from where we are and
to where we want to go. It is in essence the exercise of
foresight”.

● According to M.S. Hardly “Planning is deciding in

advance what is to be done. It involves the selection of
objectives, policies, procedures and programmes from
among alternatives.”
● Planning is thus deciding in advance the future state of
business of an enterprise, and the means of attaining it.
Its elements are :

● 1. What will be done – What are the objectives of

business in the short and in the long run.

● 2. What resources will be required – This involves

estimation of the available and potential resources,
estimation of resources required for the achievement
of objectives, and filling the gap between the two, if
any.
● 3. How it will be done – This involves two things :
(i) Determination of tasks, activities, projects,
programmes, etc., required for the attainment of
objectives, and
(ii) Formulation of strategies, policies, procedures,
methods, standard and budgets for the above purpose.

● 4. Who will do it – It involves assignment of

responsibilities to various managers relating to
contributions they are expected to make for the
attainment of enterprise objectives. This is preceded by
the breaking down of the total enterprise objectives into
segmental objectives, resulting into divisional,
departmental, sectional and individual objectives.
● 5. When it will be done – It involves determination of the
timing and sequence, if any, for the performance of
various activities and execution of various projects and
their parts.
NATURE OF PLANNING
● Planning is a continuous process.
● The nature of planning may be understood in terms
of it being a rational approach, open system,
flexibility and pervasiveness.
NATURE OF PLANNING
1. Planning is an intellectual process:
● It requires managers to think before acting.
● It is thinking in advance.
● It is by planning, managers of organization decides what
is to be done, when it is to be done, how it is to be done
and who is to do it
NATURE OF PLANNING
NATURE OF PLANNING
NATURE OF PLANNING
NATURE OF PLANNING
Planning at various levels
IMPORTANCE OF PLANNING
● Planning is of great importance in all types
of organization .
● Without planning, business decisions would
become random, ad hoc choices.
IMPORTANCE OF PLANNING
● Minimises the risk and uncertainty
● Leads to success
● Focus attention on organization
goals
● Facilitate control
● Trains executives
IMPORTANCE OF PLANNING
● To minimize risk and uncertainty:
● The organization continuously interacts with the
external dynamic environment where there is great
amount of risk and uncertainty.
● In this changing dynamic environment where social
and economic conditions alter rapidly, planning
helps the manager to cope up with and prepare for
changing environment.
● By using rational and fact based procedure for
making decisions, manager can reduce the risk
and uncertainty.
IMPORTANCE OF PLANNING
● To focus attention on objectives:
● Planning focuses on organizational objectives and
direction of action for achieving these objectives.
● It helps managers to apply and coordinate all
resources of the organization effectively in achieving
the objectives.
● The whole organization is forced to embrace
identical goals and collaborate in achieving them
and to avoid a needless overlapping of activities.
IMPORTANCE OF PLANNING
● To facilitate control:
● Planning sets the goals and develops plans to
achieve them.
● These goals and plans become the standards or
benchmarks against which the actual performance
can be measured.
● Control involves the measurement of actual
performance, comparing it with the standards and
initiating corrective action if there is deviation.
● Control ensures that the activity confirm to plans.
● Hence control can be exercised if there are plans.
IMPORTANCE OF PLANNING

Planning helps in the process of decision making:

● Planning specifies the actions and steps to be taken
in order to accomplish organizational objectives.
● It serves as a basis for decision-making about
future activities.
● It also helps managers to make routine decisions
about current activities.
IMPORTANCE OF PLANNING

● Economic operation and leads to success:

● Planning does not ensure success, but planning leads
to success.
● If work is planned in advance, there will not be no
confusion arising and things will happen as per plan.
● This results in economical operation and reduces
uncoated expenditure.
IMPORTANCE OF PLANNING

Planning affects performance

● A number of empirical studies provide evidence of

organizational success being a function of formal
planning, the success being measured by such factors
as return on investment, sales volume, growth in
earnings per share and so on.
● An investigation of firms in various industrial
products as machinery, steel, oil, chemicals and
drugs revealed that companies that engaged in
formal planning consistently performed better than
those with no formal planning.
TYPES OF PLANNING
● Vision
● Mission
● Objectives
Chracteristics Of Objectives:
● Objectives are multiple in number
● Objectives have change over time
● Objectives are either tangible or intangible
● Objectives have a priority
● Objectives are generally arranged in a
hierarchy
● Objectives may clash with each other
Requirements of sound
Objectives:
● Objectives Must be both clear and
acceptable
● Objectives must support one another
● Objectives Must be Precise and
measurable
● Objectives should always remain value
Advantages of Objectives:
● Provide basis for planing
● Act as motivators
● Eliminate Haphazard action
● Facilitate coordinated behaviour of various
groups
● Basis for managerial control
● Facilitate better management
● Lessen misunderstanding and conflicts
● Provide legitimacy to organization's activities.
Strategies:

● Two Important Activities involved in strategy

formulation
● Environmental appraisal
● Corporate appraisal
 Strategies:
● Components of External Environment
1. Political and legal components
2. Economic Component
3. Competitive components
4. Social and cultural components
● Attributes of External environment
1. Turbulance
2. Hostile
3. Diverse
4. Restrictive
5. Technically complex
Strategies:
Corporate Appraisal

● Involves an analysis of the company's strength

and weakness.
● Core competency
Modes of Strategy formulation
● The planning mode
● Entrepreneurial mode
● Adaptive mode
Strategic and Tactical planning
Operational PLANS

Business Plans
Operational PLANS
● Plans are classified into standing plans and single use
plans.
● Standing plans provide guidelines for further course of
action and are used over a period of time.
● Standing plans are designed for situations that recur
often enough to justify a standardize approach.
● Examples of such plans are organizational mission, long
term objective, strategies, policies, procedures and rules.
● single use plans are designed for specific end; when that
end is reached, the plan is dissolved or formulated again
for next end.
● Examples of such plans are project, budgets, quotas,
targets etc.
Standing PLANS
● Policies
● Methods
● Rules
Single use PLANS
● Programmes
● Budgets
 DECISION-MAKING
● Decision-making is an essential part of modern management.
● Decisions are made by the managers and actions are taken by others.
● Major decisions are taken carefully and consciously by the application
of human judgment and experience where as minor decisions are
made almost subconsciously using rules.
● Decision-making permeates through all managerial functions namely
planning, organizing, staffing, directing and control.
● In planning it is through objectives and policies laid down and
manager decides many things such as what to produce, what to sell,
where , when and how so on.
● Decision making is commitment to something, a point of view, a
principle or course of action.
● It is selecting the best among alternative courses of action.
The decision-making has the
(1) The decision making implies that there are various
alternatives and the most desirable alternative is chosen to
solve the problem.

(2) Existence of alternatives suggests that the decision-maker

has freedom to choose an alternative of his liking.

(3) Decision-making like any other managerial process is goal

oriented. It implies that the decision maker attempts to achieve
some results through decision making.
Types of Decisions
1. Programmed and non-programmed decisions:

1. Major and minor decisions:

1. Simple and complex decisions

1. Strategic and tactical decisions:

1. Individual and group decisions:

 1)Programmed and non-
programmed decisions:
● Programmed decisions are those that are made in accordance to
policy, procedure and rules.
● These decisions are routine and repetitive and programmed
decision are relatively easy to make.
● For example determining salary payment to the workers who have
been ill, offering discounts for regular customers etc. are
programmed decision.

● Non-programmed decisions are novel and non-repetitive.

● If a problem has not arisen before or if there is no clear cut method
for handling it, it must be handled by non-programmed decision.
● For example what to do about a failing product line is a no
programmed decision because no definite procedure exists for it.
 1)Programmed and non-
programmed decisions:
● For programmed decision clear cut rules exists and hence
it is not possible for two persons to reach different
solutions to the some problem.

● In case of non-programmed decision there are no clear

cut rules for handling the problem, each manager may
bring his own judgments to bear on the decision, it is
possible for two managers to arrive at distinctly different
solutions to the same problem.
2) Major and minor decisions:

● The decisions which have their impact for long-

period or which have impact on other departments
are known as major decision.
● On the other hand decisions which does not have
long term effect or affecting one department are
known as minor decisions.
● Major decisions are made at higher level and minor
decisions are taken at lower level in the
organizational hierarchy.
3) Simple and complex decisions

● If very few variables are to be considered for

solving a problem the decision is simple.

● If the variables are many, then it is a complex

decision.
4) Strategic and tactical/routine decisions:
● Strategic decision is a major choice of actions concerning
allocation of resources and contribution to the achievement of
organizational objectives.
● Strategic decisions are major and non-programmed decisions
having long term impact.
● For example lowering product price, installation of automatic
plant etc.
● Strategic decisions are made by the higher level managers.
● Tactical or routine decision is which are supportive of, rather
than central to the company’s operation.
● Decisions relating to provisions of air conditioning, parking
facilities are tactical decisions.
● These decisions are made at the lower level of the organization.
5) Individual and group decisions:
● Decision may be taken either by an individual or group.
● Decisions which are routine in nature, with few variables and
definite procedures exists to deal with them are taken by
individuals.
● On the other hand decisions which have their impact on other
departments, which may result into some changes in the
organization, are generally taken by groups.
● It has some drawback like delay in arriving at decision,
group may be indicisive, group may compromise
Individual and group decisions:
● To utilize advantage of group decision and avoid its
disadvantage , two new techniques are proposed
known as Nominal group technique and Delphi
technique.
 Individual and group decisions:
Nominal group technique
● The members independently generate their idea and give in writing.
● The idea are summarized and discussed for clarity and evaluation.
● Finally each members slightly gives his rating and opinion about each
idea through voting system.
● The one with maximum vote is selected as group decision

Delphi technique.
● Persons who are physically dispersed and anonymous to one another
are asked to send their opinion on a through mail.
● A carefully designed questionnaire is circulated for this purpose.
● The response is summarized into feedback report and sent back to
them with second questionnaire.
● A final summary is developed on the basis of replies received second
time.
Steps in Rational Decision
Making
● Recognizing the problem.
● Deciding priorities among the problems.
● Diagnosing the problem.
● Developing alternative solutions or courses of activities.
● Evaluating alternatives.
● Converting the decision into effective action and follow up of
action.
Steps in Rational Decision Making
(1) Recognizing the problem:
● When a manager makes a decision it is in effect the
organization’s response to a problem.
● Hence it is necessary to search the environment for the
existence of a problem. A problem is said to exist;

● (a) When there is deviation from past experience. For

example the present year’s sales are lower than previous
year, the expenses are more than previous years etc.,
● (b) When there is deviation from plan. For example sales
are lower than anticipated, expenses are more than
expected etc.,
Steps in Rational Decision
Making
(1) Recognizing the problem:

● (c) When competitors outperform. For example other

companies manufacture the goods of same quality at
lower costs.
● (d) When people bring problems to the manager, For
example workers may complain about poor
ventilation.
Steps in Rational Decision Making
(2) Deciding priorities among problems:
● A manager might have identified a number of problems.
● All these problems vary in their importance.
● He may find that some of the problems are such that they
can be solved by their subordinates because they are
closest to them.
● All such problems should be passed on to them.
● Some problems may need information available only at
higher level or affecting other departments.
● Such problems are referred to higher level managers.
● Those problems which can be best solved by him are to
be focused.
Steps in Rational Decision Making
(3) Diagnosing the problems:
● Symptoms of the problem that are observed by the manager
may some times mislead him.
● The symptom may lead manager to suspect one part when
the defect may lie hidden in another part.
● For example if there is decline in sales, the management
may think that the problem is one of poor selling procedure
or the saturation of the old market.
● But the real problem may be inability to move quickly to
meet changing needs of the customers.
● For diagnosing the problem a manager should follow the
systems approach.
● He should study all the sub-parts of his organization which
to be
are connected with the sub-part in which the problem
Steps in Rational Decision Making
(4) Developing alternative solutions or courses of action:
● A problem can be solved in several ways; however all the ways
cannot be equally satisfying.
● If there is only one way of solving a problem, then no question of
decision arises.
● Therefore decision maker must identify various alternatives
available in order to get most satisfactory result of a decision.
● while developing alternatives; the concept of limiting factor should
be applied.
● Limiting factor which can make the accomplishment of alternatives
difficult or impossible.
● For example, if an organization has limitation in raising finance, it
cannot consider projects involving high investment.
Steps in Rational Decision Making
(4) Developing alternative solutions or courses of action:
● A decision maker can identify alternatives using his own
experience, practices followed by others and using
creative technique.
● A decision maker using past experience takes into
account the action taken by the decision maker in the
past .
● The successful action of the past may become an
alternative for the future.
● The limitation of this is, what was successful in the past
may not be so in the present context because of change in
context under which decision was made.
Steps in Rational Decision Making
(4) Developing alternative solutions or courses of action:
● Copying from experience of others is another way of
generating alternatives.
● Alternatives used by successful decision makers can be
thought of alternatives of decision making.
● The third method of generating alternatives is through
creative process where various exercises are taken to
generate entirely new ideas.
● Creative ideas of individuals or groups help in
developing alternatives.
Steps in Rational Decision Making
(5) Measuring and comparing consequences of the alternative
solution:
● Once various alternatives are developed, the next step is to measure
and compare their consequences of alternatives using quality and
acceptability.
● The quality of a decision must be determined considering both
tangible and intangible consequences.
● Tangible consequences are those which can be quantitatively
measured or mathematically demonstrated.
● Intangible consequences cannot be measured quantitatively.
● A decision though good in quality may be poor in acceptability or
decision though acceptable may not be good in quality.
● In such cases managers must find the relative importance of these
two.
Steps in Rational Decision Making
(5)Measuring and comparing consequences of the alternative
solution:

● In production, finance, purchase etc. the solution’s

quality is important than acceptability,
● where as in all human maters such as lighting condition,
layout of office etc., the acceptability is more important.

● If sufficient information about quality or acceptability of

a solution is not available, it is suggested to experiment
it on a small scale known as pilot testing.
● For example a company may test a new product in a
certain market before expanding its sale nationwide.
Steps in Rational Decision Making
(6) Converting the decision into effective action and follow up
of action:
● This step involves communication of decisions to the employees.
● Decision must be communicated in clear and unambiguous terms.
● All necessary efforts should be made to secure employees acceptance
in decision.
● Association of employees in decision making not only enhance the
acceptability, but also improves the quality of decision.

● Sometimes due to non-availability of data, a manager may not take

correct decision.
● As a safeguard against incorrect decision, the manager while
converting a decision into effective action should institute a system
of follow-up so that he can modify or alter his decision at the earliest
opportunity.
ENVIRONMENT OF DECISION-
MAKING
● A decision- maker may not have the complete
knowledge about decision alternatives or about the
outcome of a chosen alternative.
● This problem may be highly complex and uncertain.
● These conditions of knowledge are referred to as the
‘environment of decision making’.
● The environment may be of three types; certainty,
risks and uncertainty.
ENVIRONMENT OF DECISION-
MAKING
ENVIRONMENT OF DECISION-MAKING
1) Decision-making under certainty:

● The term certainty refers to accurate knowledge of the outcome

of each alternative.
● All relevant data are available for making decision.
● For example a company wants to transport goods from five
warehouses to a number of customers.
● It is possible to obtain the relevant facts for the problem like
type of transport available, the cost of transporting a unit from
each warehouse to each customer.
● With this it is possible to design least cost distribution pattern.
ENVIRONMENT OF DECISION-MAKING
2) Decision-making under risk:
● In decision making under risk, the consequences of a
particular decision cannot be specified with certainty but
can be specified with known probability values.
● The value of probability is a measure of likelihood of the
occurrence of that event.
● In such cases, alternatives are evaluated by computing
the expected value of the payoff associated with each
alternative.
● For example, while estimating the demand of a
product for future where there is great amount of
uncertainty, a manager can make three estimates of
demand associated with the probability of occurrence as
show in table
ENVIRONMENT OF DECISION-MAKING
2) Decision-making under risk:
ENVIRONMENT OF DECISION-MAKING
3) Decision making under uncertainty:

● Uncertainty is said to exist when the decision maker does

not know the probabilities associated with the possible
outcomes..
● They can use MaxiMin criterion , MaxiMaxi criterion or
Minimax regret criterion.

● MaxiMin : If a manufacturer is pessimistic or cautions in

his approach, he can choose that decision act which
maximizes the minimum pay-off, which is called as
MaxiMin criterion.
ENVIRONMENT OF DECISION-MAKING
3) Decision making under uncertainty:
● MaxiMax : If a manufacturer is optimistic he may
choose that decision act which maximizes the
maximum pay-off. This is called as max-max criterion.

● Minimax regret: A manager using minimax regrets

criterion look at the decision problem neither as
pessimistic nor as optimistic.
As the name implies the minimax regret criterion is
the one by which the decision maker minimizes the
maximum regret can occur, no matter what the
outcome.
Hierarchy of plans
● The plans are generally arranged in a hierarchy
within any organization.
● Top level- Goals and objectives
● Second level-Strategies(Single use plans &
Standing plans)
● Third level-Action plan
Hierarchy of plans
THANK YOU