Decision Making

Topics: Decision making, Economics, Decision theory Pages: 1 (302 words) Published: November 26, 2008
What is tactical decision? Long term decision?

Tactical decisions are made after the strategic decisions and should support them. These are the decisions that provide a moderate amount of details and occur in the near future. They usually have consequences. For example, the selecting of product lines for a new farm store. Before making tactical decisions, the board should analyze the information needed to make an informed decision. This is also the stage in which questions should be asked before carrying out the plans. Once it is agreed that the project should be move forward, the top management should make a timely decision and move on to other items of the business. The model for making tactical decisions is to •Recognize and define the problem

Identify the alternatives
Identify the costs and benefits for each alternative
Total the relevant costs and benefits for each alternatives •Access the qualitative factors
Select the alternative that has the most net benefits

Decision-making needs to be based on long-term strategy and decisions need to be made base on uncertainty like natural disasters, economic slowdown, war or terrorism. To facilitate decision-making, it is needed to spend time defining a clear and concise strategy that is detailed enough to provide guidance on implementing the strategy internally and externally.

For example, capital budgeting decisions involve long term commitments, or the expenditures for plant and equipment to reduce costs or increase output. These expenditures are often the largest cost items in a company's capital budget. Research and development is another example of long term spending for later returns. Long term decision require considering the time value of money because of the lag between spending cash and receiving cash. The analytical techniques under this decision process help managers to decide whether to undertake long term project.
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