Crucial Elements For Rational Decision Making

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Introduction

Decision making is the first and foremost task for any kind of business enterprise whether small scale or large scale business. It is an important part of the management because the correct and accurate decision-making technique lays the foundations for the growth and survival of the business in the future. It also involves making reliable decisions from various alternative courses of action. Sound and rational decision making is considered as primary task for every business enterprise. Hence, decision making is a continuous process in a business enterprise. Therefore, the management and Board of Directors in business enterprises use information collected from various mechanisms to make decisions from a wide range of activities. The aim of this study focuses on highlighting and describing the six elements which are necessary for taking decisions at the lower, middle and upper level of management. The industrial scenario identified in this context based on which decisions shall be taken is Kitchen Delight Restaurant which is a Food and Beverage industry.

Steps involved in rational decision making

The decision-making process in business enterprises like Kitchen Delight Restaurant is an important issue. The decision-maker must obtain sufficient information to expedite the accurate decision-making process. He must have a perfect conscience which will enable him to predict future outcomes with some certainty and precision (Hee and Yen, 2018). There are an umpteen number of situations from which decisions can be made and therefore the decision-maker must be potent enough in choosing the best alternative out of the situations available. For example, there are 2 projects available to a company which it can use for investment purpose. Project A shall yield a return of 5% in three years and Project B which shall yield a return of 6% in three years. There is sufficient information available to the company regarding the investment purpose. The investment type along with their rate of return is also known to the company. From the information available, the company can estimate the amount of revenue it can generate during three years and a competent and rational decision-maker will always choose an alternative project for the investment purpose as it gives the highest amount of returns that is 6%. Therefore, the rational decision-making process is concerned about analyzing the following 6 steps (Diana-Rose et al. 2016). The above scenario is applicable for a Food and Beverage industry and the decision making is made regarding promotional strategies of newly developed food and beverage products. The name of the company is Kitchen Delight Restaurant. The 6 steps which would determine the structure of rational decision making are as follows:

  • Step 1: Defining the basic problem
  • Step 2: Identifying the decision criteria
  • Step 3: Allocation of weights to each criterion
  • Step 4: Generating Alternative courses of action
  • Step 5: Evaluating the Alternative courses of action
  • Step 6: Selecting the Optimal Decision

The above steps are based on facts, figures and interpretations from various sources of data which helps a decision-maker of Kitchen Delight Restaurant to take proper decisions (Zulariff et al. 2018). Systematic evaluations must be followed at all aspects to cover various areas of decision-making criterion. Therefore, rational decision making refers to the process of clearly defining the selected problem, making a proper evaluation of the problem and choosing the best alternative which is available. Hence, the above steps are briefly described below.

Step 1: Defining the basic problem

The first step involved in making rational decision making for Kitchen Delight Restaurant is related to defining the problem for which the decision is required to be made. It is probably the most difficult and most important stage as it seeks to diagnose the main problem and simply not its symptoms (Raof et al. 2017). In a Food and Beverage industry like Kitchen Delight Restaurant, some of the major problems range from a rise in the level of unhygienic and inorganic products, failure to adapt to new technological methods, inadequate methods adopted which reduces value in a product and so on. Therefore it is the objective of the decision-maker to identify the actual problem which creates hindrance in the development strategy the business is trying to follow. It is often witnessed than identifying the problem is more important than finding a solution to it (Basri et al. 2016).

Step 2: Identifying the decision criteria

After the problem has been identified, the next important step for the decision makers of Kitchen Delight Restaurant is the establishment of a perfect decision criterion. The decision criterion is dependent on the fact that different standards as well as features from various sources are to be considered to make a perfect decision. Identifying such a decision is considered important which will enable the business enterprise to arrive at a particular statement (Yusuf et al. 2016). They will also assist to evaluate different kinds of alternatives in which a decision-maker chooses. In the case of the Food and Beverage industry, one of the major decision criteria which can be adopted relates to gaining knowledge about customer’s needs and wants which is extremely vital for profitability and judging the revenue pattern of the business enterprise. Various kinds of organizations employ several resources to identify the needs and wants of the consumers to stay ahead of their competitors.

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Step 3: Allocation of weights to each criterion

After analyzing the decision criteria in judging those factors for the decision makers of Kitchen Delight Restaurant which are needed to be ascertained to make a decision, the next step is the allocation of weights to each criterion (Radzi et al. 2016). The method which is applicable for this purpose is making a relative comparison between different factors. The given factors will be compared directly with that of others. The criterion will make it easy for decision-makers to identify those criteria which are very much important and also identifying those criteria which are less important (Mohd Shariff et al. 2016). It is noted that the best weight is being assigned to those factors whose change will affect the working and functioning of various employees. In the case of the Food and Beverage industry, the maximum profitability is established with those criteria which are related to the Government regulations comprising of manufacturers of food, net contents of the package and so on.

Step 4: Generating Alternative courses of action

As soon as weights are allocated to different kinds of criteria, the next step is to provide various kinds of alternative courses of action. Generating a huge amount of alternatives will result in more enhancement of the existing process. It basically proposes to bring a change in current production process or it looks at changing the entire supply chain management because of inadequacy, lack of competency, employees who are not willing to work despite providing them with various amenities like proper working conditions, efficiency in wage structure and so on (Akanmu et al. 2017). In the case of the Food and Beverage industry, choosing the best alternative does not mean choosing a different stream of products altogether. For example, a restaurant specializing in continental dishes does not necessarily have to shift in producing Chinese dishes just because it has been incurring losses. Rather, it can modify its current production process in the form of bringing efficiency in the production process, reducing staff and transportation expenses. It can also adopt various measures that can reduce the cost of producing the product by adopting mechanisms like Activity Based Costing (ABC) method, Value Chain Analysis, Total Quality Management, Balanced Scorecard, proper inventory disposing mechanism and so on (Bahari et al. 2018). If an industry is successful in generating appropriate mechanisms in choosing the alternative course of action, then it can make rational decisions.

Step 5: Evaluating the Alternative courses of action

After ascertaining various alternative courses of action, the next step involves comparing various alternatives with each kind of decision which may seem necessary. It is undertaken to determine to what extent the alternatives have been set to fulfil various decision-making principles and decision-making criteria that were imposed earlier. It is observed that this step is probably the only step that consumes a lot of time as it deals with large chunks of information gathered from different sources right before comparing those (Iberahim et al. 2016). It is a time-consuming process that involves a lot of money. In the case of the selected company namely Kitchen Delight, a Food and Beverage industry the alternatives which can create a tremendous impact on the functioning are DANONE S.A., Amy’s Kitchen, Daiya Foods, Lightlife Foods and so on. The alternatives derived from the above courses will then be evaluated from different points of view like quality constraint, compatibility position, pricing strategy, advertising policy, sales and administration expenses (Noor et al. 2018). If there is more number of decision criteria are accomplished by the alternative, the alternative is more likely to succeed.

Step 6: Selecting the Optimal Decision

The ultimate step towards rational decision making involves selecting and making the best use of the chosen alternative available. An alternative will be treated as best only if it can fulfil all kinds of decision criteria based on their nature of importance in which they are managed according to their nature for instance from Step 3 (Fernando, 2019). It should also be noted that if the number of selected alternatives cannot fulfil the actual decision-making criteria based on the set in which they were arranged, then those alternatives will be selected which satisfies most of the decision criteria. An optimal decision is said to be that kind of decision-based on which the business enterprise is successful in generating a positive outcome in the form of an increase in sales and revenue structure, reduction in cost structure and outperforming various competitors. In the case of the Food and Beverage Industry, optimal decision structure arises from making a perfect quality analysis in terms of making a proper evaluation of the structure of the product. It examines the nature of aroma, colour, and taste of the ready-made product and so on.

The decisions can be rectified by using techniques such as

  • a) Making use of specific tests and rules towards the process of decision-making. Two types of rules can be used to remove any kind of problem and helps in bringing clarity decision making. The first rule is the Rule of Priority which involves arranging decisions based on the nature of their priorities. The alternative source will be selected by assessing them step by step. The best alternative must be able to fulfil all kinds of decision criteria. The second rule is the Rule of Minimum Condition which is based on Accept and Reject principle. The decision-maker sets up a few of the basic conditions for a project which must be fulfilled for the project to be accepted. The alternatives which cannot fulfil those basic conditions will automatically be rejected. As mentioned above, a project is worth investment and it is accepted only when full information is available about the project and the returns which it offers will benefit the company in the long run.
  • b) Taking various types of decisions based on group analysis- In an organization like Food and Beverage industry, it is often seen that decisions are made based on group dynamics and group behaviour (Kele et al. 2017). One such method applied is Brainstorming. It is a technique that creates unique ideas without the fear of criticism. It is a type of group-decision making system in which negative outcomes on any kind of alternative courses are not taken into account before studying every alternative. Brainstorming focuses on extracting ideas from members of each group in an open environment. The group which constitutes brainstorming activities normally consists of five to eight people. Every member of the group is required to produce their activity as per their turns.

Conclusion

Decision making normally involves making decisions based on two or more alternatives. The decision-maker should be competent enough to make sound decisions because the survival of a business entity depends on the decision making process of the entire management and Board of Directors. There are several kinds of problems that affect the functioning of business and therefore the decision-maker must identify the possible perils which can distort the functioning of the entire business enterprise. It should also be noted that decisions that are taken by the management should be free from bias and should also be directed towards the achievement of goals and objectives of the business. Management should also aim to increase the productivity of employees by offering them with proper working conditions; sound and transparent wage structure, offering various allowances and bonuses.

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Crucial Elements For Rational Decision Making. (2021, August 25). Edubirdie. Retrieved May 27, 2022, from https://edubirdie.com/examples/crucial-elements-for-rational-decision-making/
“Crucial Elements For Rational Decision Making.” Edubirdie, 25 Aug. 2021, edubirdie.com/examples/crucial-elements-for-rational-decision-making/
Crucial Elements For Rational Decision Making. [online]. Available at: <https://edubirdie.com/examples/crucial-elements-for-rational-decision-making/> [Accessed 27 May 2022].
Crucial Elements For Rational Decision Making [Internet]. Edubirdie. 2021 Aug 25 [cited 2022 May 27]. Available from: https://edubirdie.com/examples/crucial-elements-for-rational-decision-making/
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