MGT 422 Module 2 Case GCU
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MGT 422 Module 2 Case GCU
Case
Assignment
Even the most intelligent manager is prone to personal
biases and pitfalls that can lead to bad decisions. We all carry biases based
on our personal experiences. And we can all fall into various traps that lead
to decisions that seem perfectly logical at the time but in retrospect, we see
that we should have known better.
In the
background materials, including Bolland and Fletcher (2012); Kourdi (2003); and
Hammond, Keeney, and Raiffa (2008); several specific decision-making biases and
pitfalls are discussed. Collectively these are known as cognitive biases.
Some of the common pitfalls and biases discussed in these readings include
overconfidence bias, confirmation (self-confirming) bias, sunk-cost bias,
framing bias, and hindsight bias.
Carefully review all three of these readings and make
sure you understand the different types of biases. Then read through the
scenarios below and think about what kind of biases are demonstrated in each
scenario. For each scenario, carefully explain which specific bias or biases is
demonstrated by the decision and what can be done to avoid this bias in the
future. Make sure to pick at least one specific bias that you read about for
each scenario, and explain your reasoning. Use references to at least one of
the three required readings from the background materials in your discussion of
each scenario below. Your paper should be 4–5 pages in length:
- The Chief Financial Officer (CFO) of a corporation is of the strong
belief that marketing is not a good use of the company’s money. Someone
shows her data from several years ago showing that during a period of high
spending on marketing, sales did not go up. She says, “See, I told you
marketing is not a good use of our budget!” and cuts the marketing budget
to almost zero. Following the cut in the marketing budget, sales also
start to drop dramatically. When asked by an employee if the drop in sales
is due to the cut in the marketing budget, she says, “No!” and insists
there must be a different explanation. What kind of decision-making bias
do you think this represents, and why? What steps would you recommend to
this CEO to reduce this kind of bias? Support your answer with references
to at least one of the three background readings.
- A CEO decides that he wants to greatly expand the company’s market
by purchasing a major rival. This acquisition would double the company’s
market share. However, several of his top managers warn him that such a
purchase would require the company to take out a huge amount of debt to
finance this merger, and that many of these large mergers have failed.
They also point out that the organizational culture of the other company
is very different and that managing this merger would be very difficult.
Nonetheless, the CEO insists that he can overcome the odds and plans to go
through with the merger. What kind of decision-making bias do you think
this represents, and why? What steps should this leader take to avoid this
bias? Support your answer with references to at least one of the three
background readings.
- A CEO wants to purchase a new factory. He is currently deciding
between two factories. The owner of Factory A brags that 94% of products
produced at the factory are free of defects. The owner of Factory B
cautions that his factory has a 5% defect rate but management and staff
are working very hard to reduce the rate. The CEO decides to purchase
Factory A citing its strong 94% rate of success in producing defect-free
products even though Factory B actually has a 95% rate of success. What
kind of decision-making bias do you think this represents, and why? What
steps should this leader take to avoid this bias?
- A CEO of an automobile company decides to introduce a new hybrid
vehicle using cutting-edge technology. A huge amount of money is spent in
research and development as well as advertising. But when the car is
completed sales are very slow and the price has to be cut so low that the
company is losing money on every hybrid vehicle sold. She is advised to
simply abandon the car to avoid further losses in profits, and focus her
energy on selling profitable vehicles. However, she insists it is unwise
to abandon the hybrid vehicle given that so much money has already been
put into the project. What kind of decision-making bias do you think this
represents, and why? What steps should this leader take to avoid this
bias? Support your answer with references to at least one of the three
background readings.
- Conclude the paper with a discussion about which one
of the decision-making biases you think is the most dangerous to a leader,
and explain your reasoning.
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