Strategic decisions which involve evolving unique ways
to do unique things so as to beat competition and retain
customers are crucial contributions which managers make
for the growth and survival of their organizations. Most
of these decisions (e.g., new product introduction, organizational
restructuring, globalization, outsourcing, hiring key personnel,
mergers and acquisitions etc.), involve making choices based
on available data - the quality of such decisions, which
have a significant impact on the organizations, depends
on the quality of data available, the managerial tools/techniques
used and finally on the quality of thinking that the decision-making
managers impute into the decision-making process.
Managers as decision makers are expected to be rational
in their decisions - rationality in simple terms means taking
consistent decisions which maximize value within the specified
constraints. The rational decision-making model assumes
that managers follow the decision-making sequence which
involves - defining the problem, identifying decision criteria,
developing and analyzing alternatives, evaluating the alternatives
with reference to the decision criteria and finally selecting
the optimal solution.Research studies have revealed time and again that in practice
most decisions do not follow the rational decision-making
model. Managers should realize that the quality of thinking
they use to make strategic choices and decisions are often
clouded by certain hidden traps.
Managers involved in strategic negotiations beware - Good
negotiators exploit the anchoring trap to their advantage
by dragging the counterparty's expectations to the extreme
direction by moving first to offer the terms of the deal
- the terms offered are often at the extreme end of the
`deal range' (low offer when you are the buyer and high
when you are a seller). Anchors which are based on the first
information/first offers tend to establish the range within
which the decisions will be made and reduce the aggressiveness
of counter offers. For example, real estate brokers often
quote rentals for the property under negotiation on the
higher end of the spectrum and the prospective tenant's
thinking is anchored around this initial quote while negotiating
the final rent - the net result is that the real estate
broker wins by getting a good deal in his benefit.
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