Q.No.1
Managers would be more likely to make rational decision making or in some cases the bounded rationality in case of specific goals. It is because specific goals are clearly defined and they leave no room for interpretation. So a manager would be knowing all or most of the alternatives for decision making and would be knowing the outcomes, thus will be qualifying for the rational decision making.
Q.No.2
Certainty: Rational Decision making would work under certainty. Also programmed decisions will work e.g the opening of 755 new stores in United States and 381 new stores overseas (Stephen P. Robbins & Mary Coulter).
Risk: Bounded rationality would work under risk it is because the probability of certain outcomes is known but not all
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Robbins & Mary Coulter)
Related Diversification: Starbucks has grown beyond coffee into related businesses like coffee flavored ice cream and ready to drink beverages. It has launched ready to drink chilled coffee called Starbucks Discoveries (Stephen P. Robbins & Mary Coulter).
Unrelated Diversification:
• Starbucks Prepaid Card, which act as gift cards as well as the basis for customer loyalty.
• Selling music at Starbucks Stores. Hear Music café in Santa Monica, where customers can burn their own CDs and can listen to music
• It has selectively linked the brand with certain kinds of movies like “Akeelah and the Bee” (Stephen P. Robbins & Mary Coulter)
Q.No.5
Evaluation:
The growth strategies which Starbucks is pursuing are marvelous. It is because the current globalization trend has forced many companies including Starbucks to expand to new geographic areas and to target different customer levels. It will help in expanding of business scale activities.
The prepaid cards will help in building up of long term relationships with customers and will also help in generation of stable revenues. This will also help in setting up of budgets and new financial goals.
The acquisition of Tazo will bring the experience and skills of two managements i.e. of Starbucks and Tazo together to bring new horizons of the success for company. The experience in tea business of Tazo will help in extension of product line of the
Within the coffee industry Starbucks Corporations has grown from a small shop to a leading coffee distributor, proving to have financial strength and determination to continue growth. With the weakening economy the continued success of Starbucks
17. Environments exist when decision makers lack complete certainty regarding the outcomes of various courses of action, but they are aware of the probabilities associated with their occurrence
* Starbucks as part of its product line expansion acquired Tao Tea, Seattle’s Best Coffee and Ethos Water. Seattle's Best continues to operate as a separate subsidiary while Starbucks and its partners handled Tazo Tea and Ethos Water. For Tazo Tea, its line of superpremium Tazo teas were marketed and distributed by Kraft while the ready to drink beverages were managed by PepsiCo and Unilever. For Ethos Water, PepsiCo handled its products as part of its joint venture with Starbucks.
Starbucks also sells pastries, sandwiches, yogurts parfaits, salads, fruit cups, and oatmeal. Of course they also make (which is what they are known for) the infamous Frappuccino.
Bounded rationality is defined as a major revision to the theory of rational decision making. It incorporated assumptions that accounted for imperfect information, decisions under uncertainty and perceived probability. It offered two new ways to attack decision problems using science and mathematics.
In the next section the book presents two types of theories: game theory and behavioral theory. Game theory was created over 2,500 years ago by the Chinese military (Ho & Weigelt, 1997). It has only entered the business environment recently but still uses the same concepts and is a tool for doing strategic analysis. Game theory is essentially a way to make decisions. How will it affect your company? How will it affect your competitor? It takes into account cause and effect, considering all possibilities and what resources will be needed. The second theory offered is behavioral theory. This theory investigates why it is that managers often make irrational decisions that may negatively affect the future of the organization. Often, managers make decisions based on their own biases and not necessarily rational like the game theory.
In chapter 12, the book offered 7 strategies to improve decision making efforts. These strategies were broken in to two separate groups, the first three are broad sweeping changes, and the last four are techniques to improve decisions we are making. Managers are measured on the decisions that they are making. A good manager will know what it takes to make sound, and reasonable decisions. Decisions define who we are, and they can have profound effects on others, so we must choose wisely when it comes to the final result.
Starbucks should have a growth strategy to focus in increasing their sales and market share even more. Since, Starbucks is in the maturity stage in the business life cycle implementing growth strategy will make sure to keep Starbucks company in this phase a longer time. Moreover, Starbucks should maintain an efficient fast supply chain and continue employing well trained and skilled people. Because it is easy for the rivals to copy Starbucks strategies but
Starbucks sells hot and cold drinks, coffee beans, salads, hot and cold sandwiches, sweet pastries, snacks, and items such as mugs and tumblers. Through the Starbucks Entertainment division and Hear Music brand, the company also markets books, music, and film. Many of the company's products are seasonal
Starbucks has always taken exceptional care in keeping its brand value. In fact, Starbucks prides itself in its brand, particularly the power it has to keep its customer base strong. Before analyzing this loyal customer base it is best to consider the particular characteristics of the brand that has led to Starbucks having such devoted patrons.
Inadequate information, data, and knowledge. For rational decision-making to be accurate, reliable, and complete, information about various aspects of the problem under investigation is necessary. Possible future trends can be estimated with the help of such information. This facilitates rational decision-making. However, adequate and reliable information may not be available at the time of decision-making. As a result, the decisions may become defective or irrational or may prove faulty in the course of time. This is how decisions become irrational.
The difficulties that were accompanied with this approach led to deviation from the rational model. Complexity of modern organizations and the limited cognitive ability of decision makers were most influencing factors in the deviation . The decision makers were unable to operate under perfect rationality conditions. The information about a decision was mostly unavailable or unclear, and open to different interpretations. Also, the criteria of evaluating alternative solutions were not agreed upon. It also required very long time and a lot of energy of the decision makers to pursue a maximizing outcome. These constrains led to a conclusion that the absolute rational model is unreachable.
There are many theories about decision-making, and how these affect organizations. Herbert A. Simon expressed the idea that human decision making was based on “bounded rationality”, which was that decisions were made on the available information, available time, and one’s cognitive information-processing ability (Simon, 1997). He made a distinction between “maximizing” and “satisficing” when making decisions. While maximization, or “optimizing” was the preferred rational method of making decisions, people often lacked the environmental or cognitive resources and information to do so. Simon postulated that “satisficing” was an adaptive approach, when necessary, and when information was limited and time was short. Satisficing, he said, was part of the human condition. Maximization was studied by other researchers, who identified three characteristics of maximization (Schwartz et al., 2002):
Parker’s budgeting decision is a good example of an individual acting with bounded rationality. This term was introduced by Simon in 1957 (as cited in Tolbert & Hall, 2008) to argue that normative models of decision making, which assume fully rational and objective judgement (Teale, Dispenza, Flynn & Currie, 2003), are unrealistic because human rationality is limited. Parker’s judgement may have seemed rational to him, but it was not rational for the organisation, a subtle distinction about rationality made by Storing (as cited in Tolbert & Hall, 2008). Parker’s judgement was also not rational in that he did not have all available knowledge and awareness of risk, which are the conditions of normative models (Teale et al, 2003) and the “official theory” of management (Anthony, as cited in Teale et al, 2003, p. 14). For example, Parker did not know about the variations in the terrain when he made his decision, and he also assumed that the assistant workers could work at the same physical rate that he could. Both of these limitations were factors resulting in a risk to on-time task completion.
The company has a focus on innovation through an emphasis of introducing new products and coffees such as “instant coffee” Via which generated a large sales growth of over 200 million. These new products consistently help Starbucks evolve as a