CMA Foundation · Fundamentals of Business Economics and Management · Decision-making - Types and Process
A marketing head at a Pune firm picks the first supplier whose quote meets her minimum quality and price needs, instead of comparing every possible supplier. This behaviour reflects which limitation on decision-making described by Herbert Simon?
The behaviour reflects bounded rationality, which leads to satisficing. Because managers have limited time, information and processing ability, they accept the first alternative that meets minimum criteria rather than searching for the best one. Optimising would require comparing all suppliers, which the head did not do.
- ABounded rationality, leading to satisficingCorrect
- BPerfect rationality, leading to optimising
- CEscalation of commitment
- DGroupthink
Explanation
Simon argued that managers have limited information, time and cognitive ability, so they accept a solution that is good enough rather than the best. Choosing the first acceptable supplier is satisficing. Optimising would need a full comparison of all suppliers, which she did not make.
Did you get it right without looking?
One question tells you little. A timed set on Decision-making - Types and Process shows your real accuracy, how long you take and where you lose marks.
More Decision-making - Types and Process questions
- In the rational decision-making process, which step comes immediately after the manager has identified and defined the problem?
- A firm lists several alternatives, assigns each a probability for every possible state of nature, and picks the alternative with the highest…
- Which technique is most suitable when a manager wants to allocate limited machine hours and labour among products to maximise total profit, …
- A manager in Ahmedabad, reviewing sales reports, notices only the figures that support her belief that a product is doing well and overlooks…
- After Meera Pharma implements a decision to launch a new pack size, the manager compares actual sales with the targets and corrects deviatio…
- A firm's sales fell 12% this quarter. The manager at once decides to cut the advertising budget, without checking whether the fall came from…