How to Manage under Uncertainty - Assignment Example

Managing Under Uncertainty Name Institution Managing Under Uncertainty Quest. 1 Rational decision Over the years, McDonald’s have been known to sell fast foods, particularly hamburgers, French fries, chicken, desert pies, cheeseburgers, breakfast items, milkshakes and soft drinks (McDonald's, 2015). The company has grown over the years and spread fast food culture across the world (McDonald's, 2015). Their sales have also been boosted by tight schedules that business people face today. Fast food has become affordable and expedient for people who always travel. However, in the recent years, Lee (n.d) opined that public health activists and the media have created pressure and condemned McDonald’s due to its marketing and sell of fast foods claiming that they are unhealthy. According to Robbins (2010), McDonald’s products contain low nutritional value, high calorie, sodium and fat content and can result into a number of health problems. Healthcare practitioners have often claimed the regular use of fast foods from McDonald’s can cause obesity, cardiovascular conditions, all-cause mortality, hypertension and diabetes (Lee, n.d). In 2006, McDonald’s management was forced to make a decision to react to the growing concern of customer about their foods which were high in calories and fats (McDonald's, 2015). A rational decision was to be made to ensure the fast food restaurant retains its loyal customers for many years. Several years, McDonald’s favored the taste and the price as opposed to healthiness. However, times have changed where majority requires health fast-foods. The CEO Steve Easterbrook summoned other 11 board of directors, and top level managers at the company headquarters in Oak Brook, U.S to look for the way forward (McDonald's, 2015). Several meetings was conducted to allow the decision-making process go through various recommended process so that a common ground can be achieved. After several meetings, the company decided to introduce healthier foods in all categories of foods it was selling. Healthier hamburgers, French fries, chicken, desert pies and cheeseburgers made from vegetable ingredients have enabled the company to increase its number of customers by 8.5% in the last five years (McDonald's, 2015). However, before this decision, the CEO faced a great dilemma of either retaining its original product or embracing healthier ones. On one spectrum, the management thought that since customers have recognize it for high fat content foods, venturing into a new thing would drive away its customers. On the other, the management thought that refusing to change or venturing into a new product portfolio would have seen the company lose its customers. Quest. 2 Rational decision making process models We can look at the rational decision making process at McDonald’s in a move to adopt healthier fast- food culture. CEO Steve Easterbrook as a CEO faced pressure from the customers to offer healthier fast- food. Steve Easterbrook was not sure of what decision to make, though had the idea of healthier foods in mind. He then decided to employ the rational decision-making model which has been an effective method in other companies. McDonald’s success is a true reflection that rational decision often creates success and competitive advantage. The process portrays smart and strategic managers. According to (Jones, 1999, p.302), the model comprise of four phases consisting of intelligence, design, choice and implementation. The intelligence phase entails reviewing the atmosphere for a state of affairs that needs decision to be put in place (Monahan, 2000). In this step, the marketer or manager determines the problems and opportunities, gathers information, set up a goal and define evaluative criteria. For example, McDonald’s hired market and outsource market research Company to conduct a market find out the views of the customers so that the company could develop products which will satisfy them. Monahan (2000) argued that the external marketing research companies normally have the strength and experience to understand the market atmosphere and dynamics compared to McDonald’s internal marketing department. The phase also entailed environmental scanning to deduce political, socio-economic technological and legal problems that may hinder the normal operation of the business (Hastie, 2010). In this process, numerous problems and opportunities are normally identified, but the executives normally decide to deal with major opportunities first. After the study, the CEO was able to know the company’s strengths, weaknesses, opportunities, and threats. In the design phase, solutions are designed which outlines the problems or opportunities (Parker, Bruine de Bruin & Fischhoff, 2007, p.346). Alternative resolutions are also created that can be used to solve similar problems. On the same note, advantages and disadvantages of each solution are outlined. In rational choice, potential answers are gauged against one another to get the most suitable solution. The exceptional solution can be determined using various quantitative tools like the decision tree for analysis or even the qualitative tools (Simon, 1995). For example, if the McDonald’s managers wanted to introduce healthier foods from several choices, the best choice was to develop what they already have to be able to reduce the cost of operations. McGuire and Radner (1972, p.166) stated that implementation is the last phase where the choice is properly executed to give results. Quest. 3 Analysis of the Decision and the theory of bounded rationality According to Nielsen (2011), bounded rationality is defined as a school of thought that holds that when people make decisions, their reasonableness are often restrained by information they posses, the time, and cognitive restrictions of their minds. People who make decisions in this perspective operate as satisfiers seeking a satisfactory resolution, but without the resources and capability to reach the most effective one (Parker, Bruine de Bruin & Fischhoff, 2007, p.348). Herbert Simon claimed that bounded rationality acts an option for making a decision which can be used in other disciplines. The rational decision to introduce healthier fast-foods had been thought by the CEO way back when customers had started complaining. Nonetheless, the CEO did not take it seriously until 2006 when the public outcry became loud (Lee, n.d). This means the CEO was acting with limited knowledge about the situation. He thought that it is only a few customers who had issues with high fat and calorie content foods. In a nutshell, the CEO acted with bounded rationality. In an honest case, Chief executive officer Steve Easterbrook and McDonald have failed to understand the entire concept of company’s image and brand management, and its repercussions on the organization (Robbins, 2010). The company also acted with bounded rationality when they retained unhealthy fast foods. The fear was that it would lose customers to their competitors such as Wendy’s, Subway and King Burger. Similar to broad rationality, the concept of bounded rationality supposes that people are goal-focused, but bounded rationality considers the cognitive restrictions of the managers in trying to attain such goals (Simon, 1995, p.103). In this view, McDonald’s management had a goal of retaining some customers whom they thought had no issues with unhealthy fast foods, yet they had limited information on the consequence of retaining unhealthy foods. This proves that rational and objective judgment is unrealistic since human rationality is limited (Jones, 1999). Simon (1995, p.107) also argued that marketing managers normally employ heuristics in arriving at conclusion rather than using strict, inflexible aspects of optimization. Heuristics are efficient and simple rules and methodology people use to make judgments which focuses on complex challenges while ignoring others. It is for the same reason why McDonald’s made decisions just not to retain old menu, but develop it to incorporate healthier foods. Lee (n.d) argued that the managers may have considered the high cost of changing the entire menu to healthier and held that it could have been costly to the company. Steve Easterbrook’s judgment might have looked rational to him and managers who considered him as a role model. However, it cannot be said to be rational for their organization since people still had the opinion that McDonald’s continued to offer unhealthy fast foods (Hastie, 2010). For the CEO to ratify the decision which could have cost the restaurants its customers and revenues, it meant that he had sought adequate knowledge from experts who advised him accordingly. For example, Steve Easterbrook took it upon himself to assure customers of launching healthier foods on time. This move depicts some fear and rush to adopt the change to prevent customers shifting to shop at the competitors’ businesses. McGuire & Radner (1972, p.167) stated that taking time to adopt change exposes an organization as one which lacks proper communication and information. As a result, it satisfies the bounded rationality equation that managers sometimes make decision with limited information. It can be argued that lack of information and communication might have resulted to delay. In the present business world, there is a need to always make fast and efficient decision based on Herbert Simon decision making model to embrace change. Such change work hand in hand with strong and continuous communication. Monahan (2000, p.35) claimed that communication forms the critical element of change for it to succeed. References Hastie, R. (2010). Rational choice in an uncertain world: The psychology of judgment and decision making. Thousand Oaks, CA: Sage. Jones, B.D. (1999). Bounded Rationality. Annu. Rev. Polit. Sci, 2, 297–321. Lee, M. (n.d). Statistics of Health Risks From Eating Fast Food. SFGat. Monahan, G. (2000). Management Decision Making. Cambridge: Cambridge University Press. McGuire, C.B., & Radner, R. (1972). Decision and Organization. North-Holland Publishing Company, 161-176. McDonald's. (2015). McDonald's Official Website. Retrieved 13th June 2015 Nielsen, H. (2011). Bounded rationality in decision making. Dobbs Ferry, NY: Manchester University Press. Parker, A. M., Bruine de Bruin, W., & Fischhoff, B. (2007). Maximizers versus satisficers: Decision making styles, competence and outcomes. Judgment & Decision Making, 2, 342-350. Simon, H.A. (1995).A Behavioral Model of Rational Choice. The Quarterly Journal of Economics, 69(1), 99-118. Robbins, J. (2010). How Bad Is McDonald's Food? Huffington Post. Read More