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CMA Foundation · Fundamentals of Business Economics and Management · Decision-making - Types and Process

A packaged-foods company in Pune must choose between launching a new snack in two cities. The probability of each possible outcome is known only roughly and cannot be reliably estimated by the manager. Under which decision-making condition is the manager operating?

The manager is operating under uncertainty. The possible outcomes may be identifiable, but their probabilities cannot be reliably estimated. Risk would need known or estimable probabilities, and certainty would need complete information about the outcome of every alternative, so uncertainty is the correct condition.

  1. ACertainty
  2. BRisk
  3. CUncertaintyCorrect
  4. DProgrammed routine

Explanation

When the manager knows the possible outcomes but cannot assign reliable probabilities to them, the situation is one of uncertainty. Under risk, probabilities are known or estimable. Certainty would require known outcomes with complete information.

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