An Overview Of The Decision-Making Process In Organizations

An Overview Of The Decision-Making Process In Organizations

Tamio Shimizu (Universidad de Sao Paulo, Brazil), Marley Monteiro de Carvalho (Universidad de Sao Paulo, Brazil) and Fernando Jose Barbin (Universidad de Sao Paulo, Brazil)
DOI: 10.4018/978-1-59140-976-2.ch008
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Organizations frequently find themselves faced with serious decision-making problems. An individual can analyze the problem and choose the better alternative in an entirely informal manner. In an organization, the problems are much broader and more complex, involving risk and uncertainty. They require the opinion and participation of many people at different levels of hierarchy. The decision-making process in a business or organization should be structured and resolved in a formal, detailed, consistent, and transparent manner. Political events such as the end of the Soviet Empire and the consequent fall of the Berlin Wall, the Petroleum War, the invasion of Iraq, conflicts in various countries, terrorism, etc., immediately affect the destiny and behavior of nations or organizations. As everyone knows, Japan, which had been demolished by the Second World War, became a world economic power in just a few decades, thanks to massive economic aid from the West in the postwar period, social reconstruction, and the joint efforts of its government and people. Nevertheless, beginning in 1989, the year called the “turning point” of the Japanese economy, there were abrupt changes in politics and the economy that resulted in the fall of the Japanese economic index (Dow Nikkey) from 39,000 yen to 14,000 yen. The Japanese economy underwent a contraction that included the phenomenon known as the bursting of the “bubble”, and the country’s economy still has not fully recovered from its devastating effects. Countries and organizations constantly have to face problems due to changes in governmental regimes (communist, socialist or capitalist) and economic stability. World financial crises provoked by financial speculators have made it clear that the practical and theoretical knowledge in economy or finance are only the starting background to confront the market of financial speculation. What has proved necessary has been the experience and level of expertise of someone familiar with the financial trading tables in order to make choices in dealing with the alternatives in day-to-day or moment-to-moment financial operations, and many other factors (see the Case Study - LTCM, presented at the end of this chapter). Other problems such as the globalization of the world economy, the need to manage the environment, combat poverty, etc., affect an organization’s choice of strategy.

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