Decision making is the study of identifying and choosing alternatives based on the values and preferences of the decision maker. Making a decision implies that there are alternative choices to be considered, and in such a case we want not only to identify as many of these alternatives as possible, but to choose the one that best fits with our goals, objectives, desires, values, and so on. (Harris 1980). There are two types of decision making, individual and organizational. This article will give a thorough explanation of theories, models and processes of decision making, examine decision making Apple vs Google, and present groupthink phenomenon.
Decision Making Theories
Classical decision making theory based on the orientation of the decision makers, such as, economics or market condition values. According to (March, 1994), a “rational choice” is one which is based on relatively fixed preferences and follows a logic of consequence, by which current actions are dictated by anticipation of the value associated with future outcomes. After finding and gathering info and fact, decision makers are assumed to choose among alternatives by some values (minimizing bad consequence and regret, maximazing profits). However, some critics said individual's rationality is limited by the information they have. Meanwhile, human abilities to absorbed every stimuli that received by empirical experience also limited. So, impossible to implement fully rational process of finding an optimal choice based on information. This classical theory also impossible to implement in organizations, either managers or company executives only have limited time to consider every available information. Besides, this theory presupposes that there is one best outcome. Rational theory thinks that important to consider every option, and its consequences. Meanwhile, due to limited time to make decisions, others several factors such as, company culture. Decision makers shape their decision based on their preferences, not own preferences. Sometimes decision makers ignored their preference and following other advice or tradition.
Contrast with classical decision making theory, administrative or also known as behavioral decision making theory assumed humans as limited formation processes, with neither the inclination nor the ability to make the sort of “consequential” calculations described by a rational choice perspective (Anderson, 1983; Hastie, 1986; Simon, 1979). Behavioral decision theories are much more likely to be concerned with the dynamic processes of how decisions are made, with information search and with strategies for making choices.
There are several assumptions in behavioral decision theories. Firstly, the decision makers need to make the problem simpler and reduce its complexity due to their limited individual abilities, and organizational conditions. The decision makers are bounded by their rationality, so the model of the problems have to be simplified w...