Qantas Airline Environment Problems - Case Study Example

Simon's Model of Decision Making and Business Problems Name Professor Institution Course Date Simon's Model of Decision Making and Business Problems Introduction This report is prepared to discuss Simon's Model of Decision Making and give a summary of their findings. The report will also relate these findings to one of the business problems, particularly Qantas Airline environment problems. Decision-making is an aspect of life is done on a daily basis. In business, managers are made to make decisions on the next move such as to enter or exit a particular market, to reduce the cost of operation, to embrace change, to hire or fire among others. With competition increasing in both domestic and international markets, Qantas Airline managers have had to make decision on a daily basis to give direction to their employees and also to strategize to gain market advantage. Qantas is the Australian national carrier that was established in 1920 (Qantas 2014). IBISWorld (2014) claims that Qantas is the largest airline company in Australia with a market share of 35%. The company serves 20 destinations locally and 21 destinations internationally in 14 nations across America, Asia, Africa, Oceania and Europe (Qantas 2014). Qantas group together with its subsidiaries, the company serves 65 local destinations and 27 global destinations. Simon's Model of Decision Making Parker & Fischhoff (2005, p.2) defines decision making as the process of selecting amongst two or several alternative lines of action so as to attain particular goal. Decision-making has been an important factor of human existing because it determines the success or failure of one’s plans. Its importance has attracted a lot of research by a number of scholars. One of such scholars is Herbert Simon who developed Simon’s Model of Decision Making to help individuals interested in behavioral studies to understand the process and importance of decision-making. This model composed of four phases including intelligence, design, choice and implementation (Kerr 2007, p.256). The intelligence phase comprises on assessing the atmosphere for a condition which needs decisions to be made (Augier & March 2004). In this stage, the researcher, marketer or manager identifies the problems or opportunities, collects information, establish goals and define an evaluative criteria. For instance, when a marketer finds out that his competitor has left the market; that forms an opportunity for him to sell more products. Martinsons & Davison (2007, p.286) in this stage, the company may send his marketing team or manager to conduct market research to identify the problem or the opportunities which can be used to develop strategy for the market. After the research, the marketer is able to understand the company’s strengths, weaknesses, opportunities and threats (SWOT). It also involves environmental scanning to derive political, economic, social, technological and legal problems that may hinder the normal operation of the business. Here, many problems and opportunities are normally identified, but the executives normally decide to deal with key opportunities first. In the design phase, solutions are designed which outlines the problem or opportunity (Augier & March 2004). Alternative resolutions are also created that can be used to solve similar problem. While at it, advantages and disadvantages of each solution are outlined. In the choice potential solutions are weighed against each other to obtain the most appropriate solution. The outstanding solution can be recognized using various quantitative tools such as the decision tree for analysis or even the qualitative tools such as the force field analysis (Augier & March 2004). For example, if the Qantas managers want to buy an aircraft from several choices, the best choice would be one which is fuel-efficient to be able to reduce cost of operations. Williamson (2004, p.281) states that implementation is the last phase where the choice is properly executed to give results. However, in most cases decisions are process on change in an organization and they are bound to be met with a lot of resistance (McGuire et al. 2006, p.252). Employees normally want to be involved in decision making. It is important to note that managers do not involve employees in all decisions because some are strategic and involve top level management only. Though if it is about implementing a new policy or system, managers prefer training employees so that to adapt quickly (McGuire et al. 2006, p.254). In his decision approach, Simon argued that the survival of human being relies on his capability to make better decisions in the uncertain and ever-changing environment (Williamson 2004, p.284). Martinsons & Davison (2007, p.291) claim that the level that they adapt in that form of environment majorly relies on the type and quality of their decision‐making knowledge skills. For a firm to make rational (best) decisions which can realize multitude objectives, alternative solutions must be synthesized. However, Simon contended that human decision making is usually based on bounded rationality. In this concept, he argued that rationality is restrained by environmental and individual factors and forces, consisting of the constraints of human minds, and time pressures and uncertainty and complexity of the problems (Tsang 2008, p.64). These are the challenges contemporary managers face today in their operations. Competition has gone a notch higher and managers need to make decisions as fast as possible. This leaves the managers with inadequate information concerning problems and their potential solutions and instantaneous influence of the time pressures, (Parker, Bruine de Bruin & Fischhoff, p.343). So people satisfy, to be precise, they look for solutions which are acceptable and satisfactory to themselves. They develop simplified models which extract the necessary attributes from problems or opportunities, without looking at all their complication. In place of looking for the ideal or perfect decision, top managers often decide on one which will effectively serve their intention. Findings The model provides important lessons for contemporary managers for theory daily operations. The model highlights what goes on in daily life of successful and unsuccessful organizations today. The report established that decision making follow four phase including intelligence, design, choice and implementation. It is in these processes that a manager can get it right or wrong. When the environment problem or opportunity is defined well, it means the solution will obviously be wrong. However, when theproblem is clearly defined better solution will be able to be realized and even alternatives will be available should the first solution fails (Williamson 2004, p.286). Parker & Fischhoff (2005, p.12) argues that managers are facing tough times and pressures of routine decision making as a result of the change that is rapidly taking place in the business arena. As such, their decisions are made out bounded ration, i.e., limited information. Business Problems: Qantas With the increase of business and leisure activities has seen the growth of Qantas Airline a great deal over the years (IBISWorld 2014). Billions of people travel each year through means of airline to different destinations using this company’s aircrafts. Nonetheless, many airline companies have joined the industry, making it very competitive. IBISWorld (2014) contends that the situation has prompted to rethink, make quick decisions so as that they can sustain change. In the process, the company has made good and also bad decisions. The company decision making followed Simon’s Model of Decision Making. They had actually identified problems that befallen the company. The managers established that the company had started to struggle in the international markets. Massola, Kenny & Aston (2014) posit that the company lost both the profit and market share due to economic difficulties. The company also realized that government had reviewed overseas ownership constraints through laws. The Government has imposed 49% of local-ownership on Qantas Airline to make sure it remains a government carrier and enjoys incentives and the bilateral agreements (IBISWorld 2014). This prevented investors who were interested in the company stake. In the design phase, the company created a solution which they considered could solve the identified problems. The company laid-off up to 5000 people and reduced its flights in unprofitable travel routes so as to reduce the cost of operations (ABC News 2014). According to the Australian (2014) Qantas also resolved to stop operating in no fly zone such as Iraq which was deemed as a terrorist zone which put life of its customers on risk. From the impacts of such decisions it evident that they were arrived at out of bounded rationality. The company witnessed employee’s strikes which depict lack of proper information to engage them. Passengers were stranded at the airports because of rerouting of aircrafts. Also consumers’ confidence was reduced due to flying over dangerous zones and as a result the company lost customers and profit margins. Conclusion The research offers an insightful impacts of decision making not only Qantas Airline but also any other modern organization. It holds that the success of every company depends on the quality of decisions its managers make. Managers who have made decisions out bounded rationality have plunged the organization into profit loss or failure. Therefore, this report concludes that managers must surround themselves with experts and consult widely in making day to day decisions. References ABC News 2014, Qantas sacks 167 staff, engineers' union warns of flight delays, viewed on 22nd August 2014 from http://www.abc.net.au/news/2014-07-08/qantas-lays-off-167-staff-as-part-of-cost-cutting-program/5582404 Augier, M & March, J 2004, Models of a Man: Essays in Memory of Herbert A. Simon, MIT Press, Cambridge, MA IBISWorld 2014, IBISWorld Industry Report I4902: Domestic Airlines in Australia, Viewed on Viewed on 22nd August 2014 from http://clients1.ibisworld.com.au.ezproxy.lib.uts.edu.au/reports/au/industry/default.aspx?e ntid=472 Kerr, G. 2007, The development history and philosophical sources of Herbert Simon's ‘Administrative Behavior, Journal of Management History, 13, p. 255‐68 Martinsons, M. G & Davison, R. 2007, Strategic decision-making and support systems: Comparing American, Japanese and Chinese management, Decision Support Systems, 43, p. 284–300 McGuire, D, Thomas, N., Garavan, S. K, Saha, A & O'Donnell, D 2006, The impact of individual values on human resource decision-making by line managers, International Journal of Manpower, 27(3), p. 251 – 273. Parker, A. M, Bruine de Bruin, W, & Fischhoff, B 2007, Maximizers versus satisficers: Decision making styles, competence and outcomes, Judgment & Decision Making, 2, p. 342-350. Parker, A. M & Fischhoff, B 2005, Decision-making competence: External validation through an individual-differences approach, Journal of Behavioral Decision Making, 18, p. 1-27. Massola, J, Kenny, M & Aston, H 2014, High costs and wages key to Qantas' problems, says Deputy PM Warren Truss, Viewed on 22nd August 2014 from http://www.smh.com.au/federal-politics/political-news/high-costs-and-wages-key-to-qantas-problems-says-deputy-pm-warren-truss-20140227-33jlw.html Qantas 2014, Qantas Official Website, Viewed on 22nd August 2014 from http://www.qantas.com.au/travel/airlines/home/za/en Tsang, E.P.K 2008, Computational intelligence determines effective rationality, International Journal on Automation and Control, 5(1), p. 63–6. The Australian 2014, Flying over Iraq is safe: Qantas, Viewed on 22nd August 2014 from http://www.theaustralian.com.au/in-depth/mh17/flying-over-iraq-is-safe-qantas/story-fno88it0-1227004928642?nk=a9d75acd1c8088747233b0825635cf82# Williamson, O 2004, Herbert Simon and organizational theory: lessons for the theory of the firm”, in Augier, M. and March, J. (Eds), Models of a Man, The MIT Press, Cambridge, MA, p. 279‐95. Read More