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Welcome back. In our last video we covered steps one through three of the rational decision
making model. If you missed that video you can find a like to it at the top of your screen.
Lets get into step four of the rational decision making model.
Since we've developed a thorough list of criteria and determined the importance of that criteria,
we can now generate a list of alternatives. Our goal here is to generate as many alternatives
as possible. The more possible options that we generate, the greater the likelihood is
that we'll come up with an effective solution to our problem. At this stage, we want to
be careful not to begin evaluating our alternatives just yet. Looking at our particular problem
we can generate a few alternatives, including moving into a bigger house, placing possessions
in storage, building another room, or even placing a few kids up for adoption. Remember,
I didn't say that the ideas had to be good. We'll worry about that in the next stage.
The next step in the process is to evaluate each of the alternatives that we've identified.
This is where we get the opportunity to use the criteria that we established. Depending
on the number of criteria that you select and the number of alternatives chosen this
may be a lengthy step. In our example, we're going to use a simple rank-order method and
rank each alternative in the criteria that we've established. We're also establishing
weights to each criteria based on our findings from step 3 . Which takes us to our final
step. Computing the optimal decision. In order to determine the optimal decision, we're going
to multiply the rank that we've assigned for each alternative by that criteria's respective
weight. Since each criteria possesses a different level of significance, we use these weights
to assign more influence to the results in categories that are deemed more important.
And since we already weighed our criteria in step 3, we know exactly which criteria
to give more importance to as we compute our optimal decision. As you can see, buying a
larger home appears to be the best solution based upon our evaluation.
As we end I want to leave you with a word of caution. Models, by the very nature, are
organized, clear, and logical. Everything that the real world is not. So trying to apply
a model to an environment that isn't perfect is a difficult task. It is true that statistically
those who use such a model will make more rationale decisions, whether in their personal
lives or in business. But time, money, and other constraints can affect a managers ability
to use such a model as it was intended. So maybe you can't test every alternative and
consider every possible option. But if our goal as managers is to make more rational
decisions, this is certainly a start.
So what do you think about the rational decision making model? Go ahead and leave your thoughts
or even questions below and I'll do my best to get to them in a timely fashion. After
you've posted that question, go ahead and click the like button as well, assuming of
course that you enjoyed this video. Lastly, remember to subscribe to Alanis Business Academy
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Thanks for watching.