Decision-Making Process in AppleCo - Case Study Example

OBSERVATION REVIEW Name: Institute: The Decision In AppleCo business enterprise, Tom Crook the Chief Information Officer (CIO) has decided to adopt of Enterprise resource planning (ERP) system so as to improve the overall productivity of the organisation. Apparently, Crook desire to use ERP system as a tool to assist in enhancing the supply chain network and performance level so as to reduce the cycle times plus he understands that that ERP systems can be used to integrate core business functions like finance, logistics, and human resource. With the drastic development in the commercial setting, AppleCo continues to endure diverse challenges, and so Crook believes that integration of ERP with business practices will improve the situation. Virtually, Crook makes hundreds of decisions per day; these decisions vary from inconsequential to the important, but most importantly the decision to adopt ERP means that the organisation will be knowledgeable about the information, from which it can base their choices among alternatives. The need to improve decision-making process in AppleCo prompted the need for adopting information system. Notably, ERP systems can assist Crook and workers assess situations by applying diverse paradigms types, while it stockpile proficiency and make it present to him when he need them. Presently, e-business technologies are changing business cooperation, and similar technologies has changed and enhanced decision activities. ERP systems provide latest, convenient information and assessment that are precise, reliable, and complete. Additionally, ERP systems according to Crook present information in a suitable format that is easy to comprehend and operate. It is worth claiming that AppleCo decision making environment is decentralized and complicated with the support offered to the decision makers such as Crook by the top management being more deprived. However, Crook believes that adopting ERP system will upgrade and expand AppleCo through integration of novel technologies, processes and ultimately the overall performance. (299 words) Analysis of the Decision Crook’s ERP adoption decision is an epitome of a person acting with bounded rationality. Basically, bounded rationality is the decision making concept, whereby individuals’ rationality is restricted by the information they contain, of their minds’ the cognitive restrictions, as well as the limited amount of duration they have to decide (Spiegler, 2011). Bounded rationality was proposed by Herbert Simon as an optional source for the decision making rooted from mathematical modeling, as utilized in economics as well as other related disciplines (Simon, 1955). Importantly, rationality is complemented as optimization, which according to Spiegler (2011), views the process of decision making as an entirely rational method of looking for an optimal alternative given the data accessible. Differently, bounded rationality can be seen when decision-makers such as Crook lack the resources and capability to attain the optimal result, they rather make use of their rationality just subsequent to having cut down the alternatives accessible (Jones, 1999). Therefore, in this regard Crook is a satisfier, because he is the one looking for a satisfactory resolution instead of the optimal solution. According to Simon (1982), a number of human behavior models in the social sciences presume that individuals can be rationally estimated or illustrated as "rational" creatures. Besides that, scores of economics models presume that entities are generally rational, as well as can in big quantities be estimated to take action with regards to their tastes (Anderlini & Canning, 2001). For this reason, the bounded rationality concept modifies this presumption to justify the fact that flawlessly cogent decisions are over and over again not viable in practice owing to the limited computational wherewithal accessible for making such decisions. In this regard, Simon recommends that economic managers such as Crook make use of heuristics to decide instead of a stringent stiff rule of optimization (Provasi, 1995). Crook for this reason did this owing to the intricacy of the state of affairs, and his incapacity to compute and process the anticipated value of all alternative acts. Bounded rationality is proposed by Baak (1999) as a paradigm to prevail over various constraints of the rational-agent paradigms in trade and industry literature. Crook had to make decisions concerning when and how to decide, and for this reason, Crook must model bounded rationality by clearly identifying decision-making processes. Essentially, Simon (1955) specifies that entity decision making is not rational as presumed by several theories, in particular those theories handling economics matters. Instead, entity decision making is restricted by several boundary conditions, for example, the entity's non ideal information, time, and rational traits (Aumann, 1997). Bounded rationality is an especially appropriate framework for ERP system adoption decisions as it recognizes both external and internal limitations which are vital in comprehending multifaceted organisational decision making. Crook makes use of satisficing model, which is part of the bounded rationality to decide on adopting ERP systems. Wall (1993) defines satisficing as a strategy in decision-making that aspires for a tolerable or satisfactory outcome, instead of the optimal solution, and it is for the reason that desiring the optimal solution could call for unnecessary spending of resources, energy, and time. Crook utilizes this approach because it uses a set of decision requirements or rules that are employed one after the other to successively reduce the alternatives list. Explicitly, Crook began with the foremost rule as well as got rid of all alternatives that could not meet that rule. Crook after that continued using the subsequent rule to the alternatives that were remaining. This procedure went on until just one alternative remained, but Crook failed to realize that satisficing does not reflect on the comparative principles of all the rules. As a consequence, an alternative could be eradicated on account of what is fundamentally an insignificant decisive factor. According to Simon (1982), an entity who just looks for a satisfactory outcome may fail to realize the level of resources needed to get that satisfactory outcome, on the expense of the ambiguity concerning the future charges. In this instance, the Crook can just weigh up outcomes on account of the ERP system likelihood of being satisfactory. In case, crook had chosen that outcome which contains the utmost possibility of being satisfactory, then Crook’s actions are theoretically impossible to differentiate from that of an optimizing entity in certain environment. (712 words) Reflection In case I was the AppleCo’ CIO I could have rooted my ERP system adoption decision on a rational evaluation of accessible facts. I believe in an economic theory that presume that entities for all time make cautious and rational decisions that offer them with the utmost satisfaction and benefits that are in their uppermost egotism. I think that because Crook lacked the resources and capability to attain optimal solutions, he opted to use bounded rationality subsequent to seriously abridging the alternatives, and this indicate that he was actually looking for a satisfactory solution instead of the optimal solution. In my case, I could have opted for heuristics model, which I can define as a resourceful cognitive process, cognizant or comatose, that pay no attention to part of the information. I believe if Crook could have used heuristics, he could have saved effort; however, Anderlini and Canning (2001) see heuristic decisions having superior flaws as compared to rational decisions, which are described by statistical or rational paradigms. Still, for scores of decisions, I have realized that the rational models’ assumptions are not satisfied, and it is a practical issue as opposed to a theoretical issue how well heuristics decisions work in an indecisive world (Jones, 1999). The conventional enlightenment is that heuristics help entities save effort, but at the price of precision. In view of this, I deem that Crook should have depended on heuristics for the reason that information computation and search cost effort as well as time. On the other hand, Crook could have utilized heuristics tradeoff for a number of precision losses for more rapidly and economical cognition. According to Koumakhov (2009), there are two explanations of this tradeoff: firstly, rational trade-offs, whereby not all decisions are adequately vital to demand usage of more time to locate the most excellent guiding principle; therefore, entities selects shortcuts that save energy. I understand that depending on heuristics can be rational if the cost of effort is immense as compared to the precision gain. Without doubt I can say that ability limitations stopped Crook from deciding rationally plus it compelled him to depend on satisficing model, which are deemed as a basis of hypercritical inaccuracies. Recognized heuristics models signify advancement over labels, but accuracy unaccompanied is inadequate to develop a heuristics science (Provasi, 1995). Whereas maximizers attempt to make decisions that are optimal, satisficers like Crook systematize their decisions around the satisfactory concept. Besides, when Crook was considering every alternative out there plus every detail concerning those alternatives, he gave up believing that he did not have enough time to consider all alternatives, and so ended up making a reasonable decision with regards of adopting ERP systems. Owing to the growing popularity of ERP systems, I think Crook might must have opted for it because of their popularity, rather than taking into account the potential negative impact the system will bring to the organisation. Crook made his purchase decisions promptly, devoid of comprehending more than essential details about the ERP systems he desired to procure, and with no understanding much in any way about the choices they do without. (512 words) References Anderlini, L., & Canning, D. (2001). Structural Stability Implies Robustness to Bounded Rationality. Journal of Economic Theory, 101(2), 395-422. Aumann, R. J. (1997). Rationality and Bounded Rationality. GAMES AND ECONOMIC BEHAVIOR, 21, 2-14. Baak, S. J. (1999). Tests for Bounded Rationality with a Linear Dynamic Model Distorted by Heterogeneous Expectations. Journal of Economic Dynamics and Control, 23(9-10), 1517-1543. Jones, B. D. (1999). Bounded Rationality. Annual Review of Political Science, 2, 297–321. Koumakhov, R. (2009). Conventions in Herbert Simon’s theory of bounded rationality. Journal of Economic Psychology, 30(3), 293–306. Provasi, G. (1995). Beyond the Model of "Bounded Rationality": The Contribution of Cognitivism. Rassegna Italiana di Sociologia, 36(2), 251-278. Simon, H. A. (1955). A Behavioral Model of Rational Choice. The Quarterly Journal of Economics, 69(1), 99-118. Simon, H. A. (1982). Models of Bounded Rationality: Empirically grounded economic reason. Cambridge, Massachusetts: MIT Press. Spiegler, R. (2011). 'But Can't We Get the Same Thing with a Standard Model?' Rationalizing Bounded-Rationality Models. Economics and Philosophy, 27(1), 23-43. Wall, K. D. (1993). A Model of Decision Making under Bounded Rationality. Journal of Economic Behavior and Organization, 20(3), 331-352. Read More