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Managerial Decision Making in Balfour Wimpey Builders

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MANAGERIAL DECISION MAKING TABLE OF CONTENTS PAGE Part 1 2 Part 2 4 Sources of Data 6 APPENDICES (at the end) APPENDICES A -Option 1 decision Three APPENDICES B- Option 2 Decision Three APPENDICES C- Option 3 Decision Three Part 1 The traditional neo-classical model of the firm assumes that all firms regardless of their size have one sole objective, to maximise profit. Since the creation of this theory many new theories have come out trying to shed light on how firms behave. These latter theories consider the firms as complex organisations, with having more variety in their decisions, that the separation of owners (shareholder) from the decision maker (managers) can cause the firm to behave differently i.e. not only to maximise profits. Balfour Wimpey Builders (BWB) is a medium sized firm with a management team of 5 people and 200 of other personnel. Assuming it is very likely that it will have some regional market power, BWB is an ideal firm for many firm behaviour theories. In this assignment BWB will also be assumed to have a "U" form management structure, which can be imagined to suit its size and the nature of its business best. Neo-classical model has been challenged many of newer theories which came out during the 1950s and 1960s. ...read more.


usually looks at sales volumes and share value), the firm might also have to change its location in the short run for many different reasons therefore profit maximisation might have to be sacrificed. These theories were made in the 1950s and 1960's and are considered old fashioned and out of date, the firms nowadays might be facing different environments or managers might have different gains from different places. The firm are now also facing much fierce competition due to globalisation therefore they might need other strategies in order to survive i.e building niche market. Part 2 Balfour Wimpey Builders have three options that they need to choose between, where each one of them are mutually exclusive (they cannot only chose one of them), this part of the assignment will try and help BWB make up their decision on what they should do and also advise them on what other information if any they need (both quantitative and qualitative) in order to make the best decision. The characteristics of the decisions made by the company a long term strategic decisions, Option 1 is highly risky in it nature because you have a chance to make a loss, but the chances for making high profits are also high (ideal for risk lovers and risk neutral people). ...read more.


The analysis shows that it is more likely to have profit less than �388000 (60%), this analysis shows that Option 2 is more suitable for a risk averse decision making firm like BWB. SEE DIAGRAM Additional Information the company needs The firm needs to be profitable in the next 9 months in order to stay alive. Therefore the company needs the amount of credit that needs to be give back, this information will tell show them the amount of profit they need to have in the short run (first year), therefore they can reassess which options the would consider. (if the credit is very high then option 1 might be more desirable then option 2). This is a quantitative data How did the managing director asses the probabilities of each option? If the assessments were subjective then the company might need more objective research in order to find the accuracy of the assessments. This is both qualitative and quantitative data They might also need information on their local bank, and the risks they are facing from a bid to take over, this is a qualitative data, see part 1 for more details. Sources of Data http://cbdd.wsu.edu/kewlcontent/cdoutput/TR505r/page6.htm -Date 23/11/04 Managerial Economics (second edition) Publisher: The Dryden Press Writer: William F. Samuelson, Stephen G. Marks Year Published: 1995 MDM Student Guide (Course Handbook) ?? ?? ?? ?? 0 ...read more.

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