Simons Model of Decision-Making

Category: Decision Making

Decision-making, in organizations, is regarded as a rational process Herbert A. Simon has given a model to describe the decisionmaking process. The model comprises of three major phases, namely.

i) ii)

Intelligence Design, and

iii) Choice IntelligePhase: In this phase, the decision maker scans the environment & identifies the problem or opportunity. The scanning of environment may be continuous or non-continuous. Intelligence a. . phase of decision-making process involves:

ProblemSearching ProblemFormulation

Problem Searching: For searching the problem, the reality or actual is compared to some standards. Differences are measured & the differences are evaluated to determine whether there is any problem or not.

Problem Formulation: When the problem is identified, there is always a risk of solving the wrong problem. In problem formulation, establishing relations with some problem solved earlier or an analogy proves quite useful.

DesignPhase: In this phase, the decision maker identifies alternative courses of action to solve the problem. Inventing or developing of various alternatives is time consuming and

crucial activity, as the decision maker has to explore all the possible alternatives. ChoicePhase: At this stage, one of the alternatives developed in design phase is selected & is called a decision. For selecting an alternative, detailed analysis of each and every alternative is made. Having made the decision, it is implemented. The decision maker in choice phase may reject all the alternatives and return to the design phase for developing more alternatives

objectives of e business
The Internet has been a door to a myriad new business opportunities. Business owners of e-businesses and their customers find advantages in Internet transactions as opposed to brick-and-mortar operations. If you’re thinking about starting an e-business or adding an online component to your existing business, discover some of the advantages an e-business offers.

Cost-Effective Marketing
With an e-business, all of your marketing efforts end with one goal—to drive target traffic to your business website. With one central place to send customers—your e-business website—it allows you to use many online marketing tactics including email marketing, article marketing, social media networking and e-newsletters. Most of these online marketing efforts are very low cost or free, so an e-business allows for highly cost-effective marketing strategies.

Flexible Business Hours

E-business breaks down the time barriers that location-based businesses encounter, according to eCommerce Education. Because the Internet is available 24 hours a day, seven days a week, your business never closes. An e-business can literally be making money while you are fast asleep.

Eliminates Geographic Boundaries

An e-business also allows you to broaden your reach. An online business can reach customers in the four corners of the Earth. As long as someone has an Internet connection, you may be able to reach and sell your product or service to these visitors to your business website.

Reduces Transaction Cost

Running an online business reduces the cost per transaction because it takes less manpower to complete an online transaction. Once you get your website up and running, the customer places the order online, which removes the need for a salesperson. The customer payment goes through your online payment processing software or system—again eliminating the need for a store clerk. Someone has to download the order and ship it, which is probably you, but an e-business transaction has less burden of cost on the business, making each transaction more cost effective than a brick-and-mortar business.

Low Overhead Costs

Running an e-business cut back or out most of the costs involved in running a physical location. Ebusinesses have less expensive phone, rent and utility bills than businesses with physical locations. An ebusiness also reduces the cost of paying employees because you do not need someone to “man” your website during business hours. Some e-businesses do not require any additional space and can be run out of your home, which you are already paying rent for or your mortgage payment. Even housing inventory may not be an issue because you may be able to establish a dropshipping situation, where your wholesaler ships orders for you on behalf of your business.

There are many different benefits of E-commerce and E-business. Some of the benefits of E-commerce include purchases can be made 24 hours a day and 7 days a week, making it available to every place in the world, at any time. Other benefits of E-commerce include a larger marketplace, more secure then using cheques, can increase you sales potential, leads to increased productivity. Benefits of E-business include improved speed of response, cost savings, reduced in inventory, better transfer of best practices, and improved customer service. These are all benefits and advantages of E-commerce and E-Business. Advantages With the use of e-commerce you can promote your product globally. Reduces Time and money spent Gives a competitive advantages Removes Location and availability restrictions Heightens customer service Elderly and disabled people do not have to leave their home. Disadvantages Security - there are still some people who don't think it is safe to buy on-line therefore as their isn't a high-street shop will loss their custom. You may not receive what you believe you have purchased. Things such as viruses could mean losing the site or affecting your customers computers while on your website. If you book a holiday, the 'company' also knows when you are out.
Electronic commerce, commonly known as ecommerce, is a type of industry where buying and selling of product or service is conducted over electronic systems such as the Internet and other computer networks. Electronic commerce draws on technologies such as mobile commerce,electronic funds transfer, supply chain management, Internet marketing, online

transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web at least at one point in the transaction's life-cycle, although it may encompass a wider range of technologies such as e-mail, mobile devices social media, and telephones as well. Electronic commerce is generally considered to be the sales aspect of e-business. It also consists of the exchange of data to facilitate the financing and payment aspects of business transactions. E-commerce can be divided into:

E-tailing or "virtual storefronts" on websites with online catalogs, sometimes gathered into a "virtual mall" The gathering and use of demographic data through Web contacts and social media Electronic Data Interchange (EDI), the business-to-business exchange of data E-mail and fax and their use as media for reaching prospective and established customers (for example, with newsletters) Business-to-business buying and selling The security of business transactions

E-commerce disadvantages
Some disadvantages and constraints of e-commerce include the following.

Time for delivery of physical products It is possible to visit a local music store and walk out with a compact disc or a bookstore and leave with a book. E-commerce is often used to buy goods that are not available locally from businesses all over the world, meaning that physical goods need to be delivered, which takes time and costs money. In some cases there are ways around this, for example, with electronic files of the music or books being accessed across the Internet, but then these are not physical goods.

Physical product & delivery uncertainty

When you walk out of a shop with an item, it's yours. You have it; you know what it is, where it is and how it looks. In some respects e-commerce purchases are made on trust. This is because, firstly, not having had physical access to the product, a purchase is made on an expectation of what that product is and its condition. Secondly, because supplying businesses can be conducted across the world, it can be uncertain whether or

not they are legitimate businesses and are not just going to take your money. It's pretty hard to knock on their door to complain or seek legal recourse! Thirdly, even if the item is sent, it is easy to start wondering whether or not it will ever arrive.

Perishable goods

Forget about ordering a single gelato ice cream from a shop in Rome! Though specialized or refrigerated transport can be used, goods bought and sold via the Internet tend to be durable and non-perishable: they need to survive the trip from the supplier to the purchasing business or consumer. This shifts the bias for perishable and/or non-durable goods back towards traditional supply chain arrangements, or towards relatively more local e-commerce-based purchases, sales and distribution. In contrast, durable goods can be traded from almost anyone to almost anyone else, sparking competition for lower prices. In some cases this leads to disintermediation in which intermediary people and businesses are bypassed by consumers and by other businesses that are seeking to purchase more directly from manufacturers.

Limited sensory information

The Internet is an effective conduit for visual and auditory information: seeing pictures, hearing sounds and reading text. However it does not allow full scope for our senses: we can see pictures of the flowers, but not smell their fragrance; we can see pictures of a hammer, but not feel its weight or balance. Further, when we pick up and inspect something, we choose what we look at and how we look at it. This is not the case on the Internet. If we were looking at buying a car on the Internet, we would see the pictures the seller had chosen for us to see but not the things we might look for if we were able to see it in person. And, taking into account our other senses, we can't test the car to hear the sound of the engine as it changes gears or sense the smell and feel of the leather seats. There are many ways in which the Internet does not convey the richness of experiences of the world. This lack of sensory information means that people are often much more comfortable buying via the Internet generic goods - things that they have seen or experienced before and aboutwhich there is little ambiguity, rather than unique or complex things.

Returning goods

Returning goods online can be an area of difficulty. The uncertainties surrounding the initial payment and delivery of goods can be exacerbated in this process. Will the goods

get back to their source? Who pays for the return postage? Will the refund be paid? Will I be left with nothing? How long will it take? Contrast this with the offline experience of returning goods to a shop.

Privacy, security, payment, identity, contract

Many issues arise - privacy of information, security of that information and payment details, whether or not payment details (e.g. credit card details) will be misused, identity theft, contract, and, whether we have one or not, what laws and legal jurisdiction apply.

Defined services & the unexpected

E-commerce is an effective means for managing the transaction of known and established services, that is, things that are everyday. It is not suitable for dealing with the new or unexpected. For example, a transport company used to dealing with simple packages being asked if it can transport a hippopotamus, or a customer asking for a book order to be wrapped in blue and white polka dot paper with a bow. Such requests need human intervention to investigate and resolve.

Personal service Although some human interaction can be facilitated via the web, e-commerce can not provide the richness of interaction provided by personal service. For most businesses, ecommerce methods provide the equivalent of an information-rich counter attendant rather than a salesperson. This also means that feedback about how people react to product and service offerings also tends to be more granular or perhaps lost using ecommerce approaches. If your only feedback is that people are (or are not) buying your products or services online, this is inadequate for evaluating how to change or improve your e-commerce strategies and/or product and service offerings. Successful business use of e-commerce typically involves strategies for gaining and applying customer feedback. This helps businesses to understand, anticipate and meet changing online customer needs and preferences, which is critical because of the comparatively rapid rate of ongoing Internet-based change.

Size and number of transactions

E-commerce is most often conducted using credit card facilities for payments, and as a result very small and very large transactions tend not to be conducted online. The size of transactions is also impacted by the economics of transporting physical goods. For example, any benefits or conveniences of buying a box of pens online from a US-based business tend to be eclipsed by the cost of having to pay for them to be delivered to you in Australia. The delivery costs also mean that buying individual items from a range of different overseas businesses is significantly more expensive than buying all of the goods from one overseas business because the goods can be packaged and shipped together. Reflecting some of the comments above, the following chart (Figure 1.6) shows some of the complaints made by Australian e-consumers.

Model driven
User interacts primarily with a (mathematical) model and its results

Data-driven DSS
User interacts primarily with the data

Helps to solve well-defined and structured problem (what-if-analysis)

Helps to solve mainly unstructured problems

Contains in general various and complex models

Contains in general simple models

Large amounts of data are not necessary

Large amounts of data are crucial

Helps to understand the impact of decisions on organizations

Helps to prepare decisions by showing develo

Page 9 of 32

Improve this chart

Quality Assurance
QA aims to prevent defects with a focus on the process used to make the product. It is a proactive quality process. The goal of QA is to improve development and test processes so that defects do not arise when theproduct is being developed. Statistical Tools & Techniques can be applied in both QA & QC. When they

Quality Control
QC aims to identify defects in the finished product. Quality control, therefore, is a reactive process.

Focus on:

Goal:

The goal of QC is to identify defects after a product is developed and before it's released.

Statistical Techniques:

When statistical tools & techniques are applied to finished products

Improve this chart

Quality Assurance
are applied to processes (process inputs & operational parameters), they are calledStatistical Process Control (SPC); & it becomes the part of QA.

Quality Control
(process outputs), they are called as Statistical Quality Control (SQC) & comes under QC.

E-Business Concept The e-business concept describes the rationale of the business, its goals and vision, and products or offerings from which it will earn revenue. A successful concept is based on a market analysis that identifies customers likely to purchase the product and how much they are willing to pay for it. Goals And Objectives The e-Business concept should be based, in part, on goals such as "become a major car seller, bank, or other commercial enterprise", and "to become a competitor to some of the well-known firms in each of these industries." Objectives are more specific and measurable, such as "capture 10% of the market", or "have $100 million in revenues in five years." Whether these goals and objectives are realistic or not, and whether the company is prepared to achieve these goals is addressed in the business plan process for startup firms and in the implementation plan for an existing firm that is considering a significant change. In looking at the business model it is sufficient to know what the goals and objectives are, and whether they are being pursued. Corporate Strategies Embedded in the e-Business concept are strategies that describe how the business concept will be implemented. These are known as corporate strategiesbecause they establish how the business is intended to function. These strategies can be modified to improve the performance of the business. Environmental strategies, discussed in a following section, describe how the company will address external environmental factors, over which it has no control. The E-Business Concept And Market Research The selection and refinement of the business concept should be integrally tied into knowledge of the market it serves. In performing market research care must be taken to account for the global reach of the Internet for both customers and competitors. It is also important to remember that markets shift, and can shift rapidly under certain conditions. But most important is to truly understand what the market is, who comprises it, and what do they want.
Figure: The E-Business Concept