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Types of Decisions

Watch this to unpack decision-making for Higher Business (it should be an easy decision to watch this…)

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Decisions, decisions, decisions…..

Do you ever find yourself stuck for what to do? My tough decisions tend to centre around what to eat – pasta? Pizza? something healthy? – or what to wear – old school? new school? Something different?

Occasionally, I have to make a longer-term decision – which new car to buy, which job to apply for, which house to buy. These are harder because the implications of getting them wrong are not so small.

In the world of business, the decision makers are mainly those in management positions.

So make the decision to stay tuned in for the next 4 minutes and we’ll explore the types of decisions that are being made by managers in companies every day – the types of decisions you need to understand for Higher business.

You never know, the implications could be big for you! Let's find out.

This is thinkfour.

Let’s start with long term, high impact decisions; these are known as strategic decisions. These will be made by the most senior level managers in the business and will set the overall purpose and direction of the company. Because these are high value decisions, they’re also likely to involve some level of risk and substantial financial investment.

As an example, let’s take the supermarket, Aldi which you’ll likely be familiar with in the highly competitive market for groceries. The German retailer opened its first UK store in 1990 and since then has grown to acquire an approximate 8% market share nationally. Let’s say senior managers at Aldi make the decision to target 10% growth in market share within the next 5 years. This would be a long term, high impact decision which would demand investment and determine the direction of the business in the UK market over a number of years.

When we consider ‘the big four’ competitors in terms of UK supermarkets, achieving 10% growth in market share won’t come easy! So, what steps might Aldi take to realise this? Now we’re talking tactics; tactical decisions will need to be made by mid-level managers at Aldi to set out ways to accomplish the longer-term strategic goal.

These tactical decisions will be medium-term timescale, likely still measured in years, mid-level risk and will involve some financial outlay. In the context of our example, for Aldi this could mean deciding to invest in the high profile aggressive TV adverts they’ve become known for in order to keep the brand in the public eye.

There could also be a decision to continue to invest in the development of more Aldi own brand alterna omers. Another option may be to open more stores in locations where Aldi currently don’t have a presence; therefore making the shops more accessible to more customers.

Ultimately, the possible tactical decisions here are all geared towards achieving the longer term strategic goal.

That leaves one more type of decision to be aware of, what we call -an operational decision. These are short term, low impact, low risk decisions commonly made by junior managers or shift supervisors.

Operational decisions are often based on day-to-day circumstances. For example, in Aldi a store manager will make everyday decisions on things like when to schedule staff breaks for those working that day, managing staff holiday requests so they don’t all happen at the same time, discounting perishable products that may have a short shelf life, or even deciding how to handle a customer complaint scenario.

Decisions like these won’t impact the business in the long run but they will be essential for day-to-day operations and maintaining good customer service in stores.

Exam questions on this topic of decision-making usually focuses on the features of one type of decision or require you to compare two different types of decision. Either way, the question will look for answers on the common areas we’ve just mentioned – who makes the decision, what’s the timescale, what’s the impact on the business, and what is the level of financial implication.

The most common mistake on these questions is simple confusion between which is which, so when it comes to exam revision, sometimes the old methods are the best; why not make yourself some flashcards that cover the bases mentioned here.

So whether you are making a decision about your next pizza or your next career move, be clear on the differences between long-term strategic decisions, tactical ones and the short-term operational stuff. Getting it wrong can be bad, but some will definitely be worse than others.

Getting this stuff right, on the other hand, is going to make life a lot easier.

It might also be the decision you need to make to do a little better at Higher Business.

This was thinkfour; thanks for watching.