INFO HW
CHAPTER TWO
DECISIONS AND PROCESSES
VALUE DRIVEN BUSINESS
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SECTION 2.1
DECISION SUPPORT SYSTEMS
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MAKING ORGANIZATIONAL BUSINESS DECISIONS
Managerial decision-making challenges
Analyze large amounts of information
Apply sophisticated analysis techniques
Make decisions quickly
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The Decision-Making Process
The six-step decision-making process
Problem identification
Data collection
Solution generation
Solution test
Solution selection
Solution implementation
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The Decision-Making Process
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Decision-Making Essentials
Decision-making and problem-solving occur at each level in an organization
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Decision-Making Essentials
Operational decision making - Employees develop, control, and maintain core business activities required to run the day-to-day operations
Structured decisions - Situations where established processes offer potential solutions
OPERATIONAL
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Decision-Making Essentials
Managerial decision making – Employees evaluate company operations to identify, adapt to, and leverage change
Semistructured decisions – Occur in situations in which a few established processes help to evaluate potential solutions, but not enough to lead to a definite recommended decision
MANAGERIAL
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Decision-Making Essentials
Strategic decision making – Managers develop overall strategies, goals, and objectives
Unstructured decisions – Occurs in situations in which no procedures or rules exist to guide decision makers toward the correct choice
STRATEGIC
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MEASURING ORGANIZATIONAL BUSINESS DECISIONS
Project – A temporary activity a company undertakes to create a unique product, service, or result
Metrics – Measurements that evaluate results to determine whether a project is meeting its goals
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MEASURING ORGANIZATIONAL BUSINESS DECISIONS
Critical success factors (CSFs) – The crucial steps companies make to perform to achieve their goals and objectives and implement strategies
Create high-quality products
Retain competitive advantages
Reduce product costs
Increase customer satisfaction
Hire and retain the best professionals
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MEASURING ORGANIZATIONAL BUSINESS DECISIONS
Key performance indicators (KPIs) – The quantifiable metrics a company uses to evaluate progress toward critical success factors
Turnover rates of employees
Number of product returns
Number of new customers
Average customer spending
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MEASURING ORGANIZATIONAL BUSINESS DECISIONS
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MEASURING ORGANIZATIONAL BUSINESS DECISIONS
External KPI
Market share – The portion of the market that a firm captures (external)
Internal KPI
Return on investment (ROI) – Indicates the earning power of a project
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Efficiency and Effectiveness Metrics
Efficiency MIS metrics – Measure the performance of MIS itself, such as throughput, transaction speed, and system availability
Effectiveness MIS metrics – Measures the impact MIS has on business processes and activities, including customer satisfaction and customer conversation rates
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The Interrelationship Between Efficiency and Effectiveness Metrics
Ideal operation occurs in the upper right corner
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USING MIS TO MAKE BUSINESS DECISIONS
Model – A simplified representation or abstraction of reality
Models help managers to
Calculate risks
Understand uncertainty
Change variables
Manipulate time to make decisions
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USING MIS TO MAKE BUSINESS DECISIONS
Types of Decision Making MIS Systems
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Operational Support Systems
Transaction processing system (TPS) – Basic business system that serves the operational level and assists in making structured decisions
Online transaction processing (OLTP) - Capturing of transaction and event information using technology to process, store, and update
Source document – The original transaction record
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Operational Support Systems
Systems Thinking View of a TPS
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Managerial Support Systems
Online analytical processing (OLAP) – Manipulation of information to create business intelligence in support of strategic decision making
Decision support system (DSS) – Models information to support managers and business professionals during the decision-making process
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Managerial Support Systems
Four quantitative models used by DSSs include
What-if analysis
Sensitivity analysis
Goal-seeking analysis
Optimization analysis
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Managerial Support Systems
Systems Thinking View of a DSS
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Managerial Support Systems
Interaction Between a TPS and DSS
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Strategic Support Systems
Information Levels Throughout An Organization
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Strategic Support Systems
Executive information system (EIS) – A specialized DSS that supports senior level executives within the organization
Granularity
Visualization
Digital dashboard
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Strategic Support Systems
Most EISs offering the following capabilities
Consolidation
Drill-down
Slice-and-dice
Pivot
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Artificial intelligence (AI) – Simulates human intelligence such as the ability to reason and learn
Intelligent system – Various commercial applications of artificial intelligence
USING AI TO MAKE BUSINESS DECISIONS
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