Judgement in managerial decision making bazerman pdf

Discussion Article

HBR, The Overcommitted Organization, Mortensen M at al, Sep-Oct 2017

HBR, Control the negotiation before it begins, Malhotra D., December 2015, pp. 67-72

HBR, Emotion and the art of negotiation, Brooks A, December 2015, pp. 57-64

EJIM, Competitive Advantage Through Innovation: The Case of Nespresso, Alexander B at al, 2016 Vol. 19 Iss.
1, pp.133-148 https://www.emeraldinsight.com/doi/pdfplus/10.1108/EJIM-05-2014-0055

Management Decision, Does VRIO Help Managers Evaluate a Firm’s Resources?, Knott, P at al, 2015 Vol. 53,
Iss. 8, pp. 1806-1822

Preparation for Class 2 (Summary & Targeted Outcomes)

Lecture 2: Improving Individual Judgement in Managerial Decision-Making

Individual Exercise: Working with the Tutorial BU Library Search & e-Research

Preparation for Assignment 1 (Due W4, by Monday 10/01 at 11:59pm)

AD 715: Quantitative and Qualitative Decision-Making

Week 2, Class 2 (09/11/2018)

Boston University MET AD715 © Dr. Zlatev, 2018

B

C

D

1

A

AGENDA

A

Boston University MET AD715 © Dr. Zlatev, 2018 2

Preparation for Week 2, Class 2

A

Boston University MET AD715 © Dr. Zlatev, 2018 3

Preparation for Class 2

Week

Date Modules & Topics Readings Discussion Topics Assignments & Quizzes

Class 2

9/11

Lecture 2 - Improving

Individual Judgment in

Managerial Decision Making

Bazerman,

Ch. 2, 3, 4, 12

Bb Discussion Forum

W1&W2:

Judgement in

Managerial Decision

Making

In preparation for Assignment 1 , (i) review the e-

Resources of BU Perdee Management Library and (ii)

perform a research in the area of corporate

managerial decision making (business, management,

and related subjects)

Quiz 2 is open on Sunday 9/16 at 9am till Monday

9/17 at 11:59pm

D

The Managerial Decision Making Process

4Boston University MET AD715 © Dr. Zlatev, 2018

Step 1: Recognize the Need of a Decision

Step 2: Generate Alternative

Step 3: Assess Alternative

Step 4: Choose Among Alternatives

Step 5: Implement the Chosen Alternative

Step 6: Learn from Feedback

Decision

Making

Process

A

Week 1, Class 1

FOUNDATIONS OF MDM

DECISION ANALYSIS & SUPPORT IN BUSINESS

APPLICATIONS OF MANAGERIAL DECISION MAKING

LECTURE 2: Improving Individual Judgment in Managerial Decision Making

Introduction to Judgmental Heuristics • Availability Heuristic • Representativeness Heuristic • Confirmation Heuristic • Affect Heuristic

Review of Common Biases in Managerial Decision Making • Overconfidence – The Mother of All Biases • Biases Emanating from the Availability Heuristic • Biases Emanating from the Representativeness Heuristic • Biases Emanating from the Confirmation Heuristic • Biases Emanating from the Affect Heuristic

Bounds of Human Judgment • Bounded Rationality • Bounded Willpower • Bounded Self-Interest • Bounded Awareness • Bounded Ethicality

Improving Decision Making: Strategies for Making Better Decisions

Boston University MET AD715 © Dr. Zlatev, 2018 5

B

Importance of Lecture 2 (and Bazerman & Moore Book) (memo from a former student of mine)

……

I wanted you to know that I found this course the most valuable course I’ve ever taken.

Personally, the lessons learned about biases, heuristics and effective decision making techniques were

enlightening to me.

As a professional who feels he is never biased, I was awakened to those unconscious traps we are all subject to

and I’m sure some of my decisions were adversely affected by them. That really bothers me. As a result, I

have immediately changed my decision and information gathering techniques to minimize and avoid

those traps.

I’ve read the book twice and I am encouraging my fellow managers to read it as well.

I must admit, I’m surprised I never learned about effective decision making previously. I feel this course should

be required in undergraduate programs and as a refresher to all business professionals. With one child in

college and 3 soon-to-be, I’ve discussed the lesson from the text with them in hopes they can learn this

knowledge before they enter the workforce. Or at least, before they have 25 years “experience” as I do!

……

Boston University MET AD715 © Dr. Zlatev, 2018 6

B

Boston University MET AD715 © Dr. Zlatev, 2018 7

B L2-1: Introduction to Judgmental Heuristics

What Are Heuristics? • When making decisions, people rely on a number of simplifying strategies (or rules of

thumb), also called heuristics. • Heuristics serve as a mechanism for coping with the complex environment surrounding

our decisions. • Heuristics reduce the effort people must put into making decisions by allowing them to

examine fewer pieces of information, simplify the weights of different information, process less information, and consider fewer alternatives.

• Heuristics are generally helpful, but their use sometimes leads to severe errors.

Examples (different types of heuristics): • The student-admission committee at one of the world's top 100 universities follows the heuristic "to

admit graduate students with a minimum GPA of 3.3." • Mortgage brokers follow the heuristic "to spend only 35% of one’s income on housing." • One of the world's top 10 consulting companies is "hiring entry-level employees only with master's

degrees from the world's top 20 universities."

We will discuss four general heuristics that can be applied across the population.

Boston University MET AD715 © Dr. Zlatev, 2018 8

B L2-1: Introduction to Judgmental Heuristics The Availability Heuristic

Human minds generally recall instances of more frequent events more easily than rare events. The availability of information will often lead to accurate judgments; thus, this heuristic can be a very useful managerial decision-making strategy. On the other hand, the availability of information is also affected by factors unrelated to the judged event's objective frequency.

Example: One mutual fund manager (Peter Lynch, Fidelity's Magellan Fund) was buying stock in firms that were unavailable in the minds of most investors; the more available the stock was, he noted, the more overvalued it would be.

Other Examples:

 Bazerman, Ch. 3 ???

 Other sources???

9

B L2-1: Introduction to Judgmental Heuristics The Representativeness Heuristic

Managers may predict a person's performance based on an established category of people that the individual represents for them. In some cases, the use of the representativeness heuristic offers a good first-cut approximation, drawing our attention to the best options. At other times, this heuristic can lead to serious errors, causing the person to engage in inappropriate behavior that he/she would consider reprehensible if he/she were consciously aware of it.

Example: Bankers and venture capitalists will predict the success of a new business based on the similarity of that venture to past successful and unsuccessful ventures.

Other Examples:

 Bazerman, Ch. 3 ???

 Other sources???

Boston University MET AD715 © Dr. Zlatev, 2018

10

B L2-1: Introduction to Judgmental Heuristics The Confirmation Heuristic

Focusing on selective data or a single possible cause of an effect may lead people to neglect alternative causes and conclude that the association between the single cause and effect they are considering is stronger than it is in reality.

Example question: "Are those who marry under the age of 25 more likely to have large families than those who marry later?"

The typical response is based on a limited number of examples, and the usual conclusion is that early marriage has a stronger association with large families.

Accurate response: There are at least four separate situations to consider when assessing the association between two events, assuming each one has just two possible outcomes: couples who married young and have large families,

couples who married young and have small families, couples who married older and have large families, and couples who married older and have small families.

Other Examples:

 Bazerman, Ch. 3 ???

 Other sources???

Boston University MET AD715 © Dr. Zlatev, 2018

11

B L2-1: Introduction to Judgmental Heuristics The Affect Heuristic

Most of our judgments follow an affective, or emotional, evaluation that occurs even before any higher-level reasoning take place. While these affective evaluations are often unconscious, people nonetheless use them as the basis of their decisions instead of engaging in a more complete analysis and reasoning process.

Example: Evidence suggests that juries decide penalties and awards based in large part on their feelings of outrage, rather than on a logical assessment of the harm created by the defendant.

Other Examples:

 Bazerman, Ch. 3 ???

 Other sources???

Boston University MET AD715 © Dr. Zlatev, 2018

12

B L2-2: Introduction to the Common Biases in Managerial Decision Making Process

Overconfidence – The Mother of All Biases

Overconfidence may be the mother of all biases in two different ways:

• Overconfidence has some of the most potent, pervasive, and pernicious effects of any of the biases; it has been blamed for wars, stock market bubbles, strikes, unnecessary lawsuits, and failure of corporate mergers and acquisitions.

• Overconfidence facilitates many of the other biases discussed below. If we were all appropriately humble about the quality of our judgments, we could more easily double- check our opinions and correct our flaws. Instead, we continue to believe that our views and judgments are correct, despite the considerable evidence of our own fallibility.

Overconfidence has been studied in three basic ways:

OverplacementOverestimationOverprecision1 2 3

Boston University MET AD715 © Dr. Zlatev, 2018

13

B L2-2: Introduction to the Common Biases in Managerial Decision Making Process

Overconfidence – The Mother of All Biases

Overprecision1 The tendency to be too sure our judgments and decisions are accurate, uninterested in testing our assumptions, and dismissive of evidence suggesting we might be wrong. It leads us to draw overly narrow confidence intervals and to be too certain that we know the truth.

Causes: (i) When we get advice from others, we prefer to hear perspectives that are similar to our own, despite the fact that hearing different perspectives is more helpful and informative (based on our desire to relieve internal dissonance, or a state of tension regarding the right decision or course of action).

(ii) In addition to helping us feel sure of ourselves, our outward expressions of confidence help others feel sure about us.

(iii) Bolstered by supportive evidence that is easy available, we overestimate the accuracy of our knowledge and the truth of our tentative hypotheses (this process tend to occur automatically, without conscious awareness).

Consequences: Overprecision makes us too sure of our judgments, so that we are often in error yet rarely in doubt. Our assurance makes us too reluctant to take advice from others, suspicious of those whose views differ from our own, too quick to act on our opinions, and too slow to update our erroneous beliefs.

Examples: ????

Boston University MET AD715 © Dr. Zlatev, 2018

14

B L2-2: Introduction to the Common Biases in Managerial Decision Making Process

Overconfidence – The Mother of All Biases

Overestimation2

 Self-enhancement: People are motivated to view themselves positively, as opposed to accurately. We also tend to overestimate our own performance, abilities, or talents.

 The illusion of control: Sometimes peoples think they have more control over circumstances than they actually do. We also cling to superstitious beliefs about performance and competitive success.

By contrast, when people have a great deal of control, they tend to underestimate it (for example, by neglecting their health or not getting screened for cancer).

 The planning fallacy: A common tendency to overestimate the speed at which we all complete projects and tasks, and to underestimate the cost and duration of the project and tasks.

 Optimistic biases: The tendency to overestimate the rosiness of our future (not typical believes).

Examples [Bazerman; Other Sources] ???

The tendency to think we're better, smarter, faster, more capable, more attractive, or more popular (and so on) than we actually are. As a consequence, we overestimate how much we will accomplish in a limited amount of time or believe we have more control than we actually do.

Boston University MET AD715 © Dr. Zlatev, 2018

15

B L2-2: Introduction to the Common Biases in Managerial Decision Making Process

Overconfidence – The Mother of All Biases

Overplacement3

Causes: We regularly neglect the reference group and fail to appreciate that we will be among a select group of others who, like us, thought they were better than others.

Consequences: By focusing on themselves, people exaggerate their own abilities and limitations, failing to consider the fact that, quite often, others face similar opportunities and challenges.

Example: Businesses that fail to invest in understanding their markets, competitors, and potential market entrants can pay a high price for such omissions.

Examples [Bazerman; Other Sources] ???

The tendency to think falsely that we rank higher than others in certain dimensions, particularly in competitive contexts. Overplacement can lead people to be too interested in competing with others in negotiations, in markets, in the courts, or on the battlefield

Boston University MET AD715 © Dr. Zlatev, 2018

16

B L2-2: Introduction to the Common Biases in Managerial Decision Making Process

Biases Emanating from the Confirmation Heuristic

Biases Emanating from the Representativeness Heuristic

Biases Emanating from the Availability Heuristic

 Ease to recall  Retrievability

 Insensitivity to base rate  Insensitivity to sample size  Misconception of chance  Regression of the mean  The conjunction fallacy

 The confirmation trap  Anchoring  Conjunctive and disjunctive events bias  Hindsight and the curse of knowledge

Examples [Bazerman; Other Sources] ???

Examples [Bazerman; Other Sources] ???

Examples [Bazerman; Other Sources] ???

Boston University MET AD715 © Dr. Zlatev, 2018

17

B L2-3: Bounds of Human Judgement

Bounded Rationality

Bounded Willpower

Bounded Self-Interest

Bounded Awareness

Bounded Ethicality

1

2

3

4

5

Boston University MET AD715 © Dr. Zlatev, 2018

18

B L2-3: Bounds of Human Judgement Bounded Rationality1

Individual judgment is bounded in its rationality—we can better understand decision making by describing and explaining actual decisions than by focusing solely on prescriptive ("what would be rationally be done") decision analysis [Herbert Simon]. As Simon's work implies, the field of decision making can be roughly divided into several parts: • The rational model is based on a set of assumptions that prescribe how a decision should be made, rather than how a decision is

made. • The prescriptive decision model is based on methods for making optimal decisions. • The descriptive model is used to consider how decisions are actually made.

Simon's bounded rationality framework views individuals as attempting to make rational decisions, and acknowledges that individuals often lack important information that would help define the problem, the relevant criteria, and so on: • Time and cost constrains limit the quantity and quality of available information. • Decision makers retain only a relatively small amount of information in their usable memory. • Intelligence limitations and perceptual errors constrain the ability of decision makers to accurately "calculate" the optimal choice

from the universe of available alternatives.

Together, these limitations prevent us from making the optimal decisions assumed by the rational model. The decisions that result typically overlook the full range of possible consequences. We tend to ‘to satisfice’: rather than examining all possible alternatives, we simply search until we find a satisfactory solution that will suffice because it is good enough.

Examples [Bazerman; Other Sources] ???

Boston University MET AD715 © Dr. Zlatev, 2018

19

B L2-3: Bounds of Human Judgement Bounded Willpower2

When Emotion and Cognition Collide • Multiple selves • The impact of temporal differences • Reconciling internal conflicts

Self-Serving Reasoning Perceptions and expectations are often biased in a self-serving manner. When presented with identical information, individuals perceive a situation in dramatically different ways, depending on their roles in the situation. While people frequently share the goal of reaching a fair solution, their assumptions of what is fair are often biased by self-interest. The problem lies not in a desire to be unfair, but in our failure to interpret information in an unbiased manner.

Emotional Influences on Decision Making • Specific emotions • Mood-congruent recall • Regret avoidance

Examples [Bazerman; Other Sources] ???

Examples [Bazerman; Other Sources] ???

Examples [Bazerman; Other Sources] ???

Boston University MET AD715 © Dr. Zlatev, 2018

20

B L2-3: Bounds of Human Judgement Bounded Self-Interest3

People care passionately about fairness. Judgments of fairness permeate organizational life. Comparisons of pay raises, the distribution of scarce budgets, promotions, grades, and prices are just a few of the many situations in which we make fairness judgments that affect our emotions and behavior.

The perceptions of fairness can be focused on either of the following: • The distribution of scarce resources • The fairness of distribution procedures

Fairness considerations may lead our decisions to deviate from a rational model in three possible systematic ways: 1. Individual judgment deviates from the expectations of supply-and-demand considerations.

2. Ultimatum-bargaining problem and what it reveals about why we make choices inconsistent with our own economic self-interest.

3. Social-comparison processes lead to decisions that may clash with our underlying preferences.

Examples [Bazerman; Other Sources] ???

Examples [Bazerman; Other Sources] ???

Examples [Bazerman; Other Sources] ???

Boston University MET AD715 © Dr. Zlatev, 2018

21

B L2-3: Bounds of Human Judgement Bounded Awareness4

Inattentional blindness

Change blindness

Focalism in the focusing illusion

Bounded awareness in groups

Examples [Bazerman; Other Sources] ???

Examples [Bazerman; Other Sources] ???

Examples [Bazerman; Other Sources] ???

Examples [Bazerman; Other Sources] ???

People tend to demonstrate systematic and predictable failures to notice critical information that is available to them. We often limit our search for information to simplify complex decisions. To avoid the problems associated with information overload, people constantly engage in information filtering. Much of it is carried out unconsciously, automatically, and inefficiently. We end up ignoring or neglecting useful information while paying attention to irrelevant information.

Boston University MET AD715 © Dr. Zlatev, 2018

22

B L2-3: Bounds of Human Judgement Bounded Ethicality5

The central argument regarding bounded ethicality is that understanding and changing the ethicality of human action requires going beyond the common assumption that ethically challenged behavior results from people choosing self-rewarding behavior over what is right. Thus, the term bounded ethicality refers to the psychological processes that lead people to engage in ethically questionable behaviors that are inconsistent with their own preferred ethics. Below is a list with six examples of bounded ethicality:

1. Overclaiming credit

2. In-group favoritism

3. Implicit attitudes

4. Indirectly unethical behavior

5. When values seem sacred

6. The psychology of conflicts of interest

Examples [Bazerman; Other Sources] ???

Examples [Bazerman; Other Sources] ???

Examples [Bazerman; Other Sources] ???

Examples [Bazerman; Other Sources] ???

Examples [Bazerman; Other Sources] ???

Examples [Bazerman; Other Sources] ???

Boston University MET AD715 © Dr. Zlatev, 2018

23

B L2-4: Improving Decision Making Strategies for Making Better Decisions

Strategy 1: Use Decision-Analysis Tools

Strategy 2: Acquire Expertise

Strategy 3: De-bias Your Judgment

Strategy 4: Reason Analogically

Strategy 5: Take an Outsider's View

Strategy 6: Understand Biases in Others

Strategy 7: Nudge Wiser and More Ethical Decisions

Boston University MET AD715 © Dr. Zlatev, 2018

24

B L2-4: Improving Decision Making Strategies for Making Better Decisions

Strategy 1: Use Decision-Analysis Tools

The field of study that specializes in giving prescriptive decision advice (which is based on procedures that can help direct us toward optimal decisions) is generally called decision analysis. The nature and possible applications of decision analysis will be covered mainly In Module 5 of this course, but also in Modules 6 to 12.

Often businesses need to make a series of similar decisions over and over. For example, corporations need to decide which applicants to hire, bank officers need to decide whether to extend credit to loan applicants, and procuring managers need to decide which suppliers to select. These complex decisions can be guided by the use of a linear model. A linear model is a formula that weights and adds the relevant predictor variables in order to make a quantitative prediction.

While evidence amply supports the power of linear models, resistance to them is strong and they have not being widely used. • The common concern is that linear models rule out the inclusion of intuition or gut feelings. • Another common argument is that the use of linear models will require difficult changes within the

organizations—a reflection of the fear that people are not necessary for linear models to make decisions.

Overcoming a bias against expertise-based, computer-formulated judgments is another step managers can take toward improving their decision-making abilities.

Boston University MET AD715 © Dr. Zlatev, 2018

25

B L2-4: Improving Decision Making Strategies for Making Better Decisions

Strategy 2: Acquire Expertise

"By three methods we may learn wisdom: First, by reflection, which is noblest; Second, by imitation, which is easiest; Third, by experience, which is the bitterest" Confucius

Basic judgmental biases are unlikely to correct themselves over time. • Responsive learning requires accurate and immediate feedback, which is rarely available in the real

world. • In addition, decision makers often anchor to current states and fail to recall their prior predictions

accurately.

Simply defined, experience is repeated feedback (which explain why experienced decision makers can sometimes be very biased).

By contrast, expertise results when individuals develop a "strategic conceptualization" of what constitutes a rational decision-making process and learn to recognize the biases that limit rationality (Neile & Northcraft, 1989).

Experience without expertise can be quite dangerous when it is transferred to a different context or when the environment changes.

Boston University MET AD715 © Dr. Zlatev, 2018

26

B L2-4: Improving Decision Making Strategies for Making Better Decisions

Strategy 3: De-bias Your Judgment

Debiasing refers to a procedure for reducing and eliminating biases from the cognitive strategies of the decision maker. Specific suggestions for debiasing judgment include the following:

1. Unfreezing: Factors that inhibit individuals from changing their behavior include satisfaction with the status quo, risk aversion, and a preference for the certain outcomes of known behavior to the uncertain outcomes of innovative behavior.

2. Change: Once you have unfrozen past behaviors, you will become willing to consider alternatives, or changes. There are three critical steps to changing your decision-making process:  Clarification of the existence of specific judgmental deficiencies  Explanation of the roots of these deficiencies  Reassurance that these deficiencies should not be taken as a threat to your self-esteem

3. Refreezing: After we make a positive change, it is tempting to revert to past practices and bad habits. The old biases still exist and can be easily and even accidentally used. For refreezing to occur, you must continue to examine your decisions for bias (by scheduling routine "checkups" to evaluate your recent important decisions).

Boston University MET AD715 © Dr. Zlatev, 2018

27

B L2-4: Improving Decision Making Strategies for Making Better Decisions

Strategy 4: Reason Analogically

Analogical reasoning or the process of abstracting common biases from two or more situations is a remarkably simple debiasing approach.

What is the optimal level of abstraction that should occur to help people form analogies across problems?

Teaching people more general negotiation principles (discussed in greater detail in Module 3) enables the successful transfer to a broader range of new negotiation tasks.

Learning general principles will improve not only one’s ability to positively transfer specifically learned principles, but also one’s ability to discriminate those principles' appropriateness (to determine when a principle should and should not be applied).

Boston University MET AD715 © Dr. Zlatev, 2018

28

B L2-4: Improving Decision Making Strategies for Making Better Decisions

Strategy 5: Take an Outsider's View

We all have two perspectives on decision making—an insider view and an outsider view:

The insider is the biased decision maker who looks at each situation as unique.

The outsider is more capable of generalizing across situations and identifying similarities.

The outsider view incorporates more relevant data from previous decisions and makes better estimates and decisions than the insider.

Thus, in order to reduce biases, when making an important decision, invite an outsider to share his/her insight. Alternatively, ask yourself what your outsider self thinks of the situation.

Boston University MET AD715 © Dr. Zlatev, 2018

29

B L2-4: Improving Decision Making Strategies for Making Better Decisions

Strategy 6: Understand Biases in Others

The task of evaluating the decisions of others is fundamentally different from the task of auditing your own decisions.

A systematic detection of biases in the decisions of those around you is formalized as a five-step procedure:

1. Select a comparison group.

2. Assess the distribution of the comparison group.

3. Incorporate intuitive estimation.

4. Assess the predicted results of the decision.

5. Adjust the intuitive estimate.

Boston University MET AD715 © Dr. Zlatev, 2018

30

B L2-4: Improving Decision Making Strategies for Making Better Decisions

Strategy 7: Nudge Wiser and More Ethical Decisions

We can anticipate the mistakes humans make on a regular basis and then create systems that correct for these mistakes in a way that will nudge them toward better and more ethical decisions (‘libertarian paternalism’ [Thaler, R., & Sunstein, C. (2008). Nudge. New Haven, CT: Yale University Press]):

• People have control over maintaining or expanding the options available to them • The system's architects attempt to guide people toward wiser decisions

Examples [Bazerman; Other Sources] ???

Boston University MET AD715 © Dr. Zlatev, 2018

31

1

2

3 4

Tutorial for AD 715: BU Library Search & e-Research

Individual Exercise 01.1: Knowledge How to Use e-ResourcesC

5

LIVE DEMONSTRATION

Boston University MET AD715 © Dr. Zlatev, 2018

STEP 1: Familiarity

with the Business

Case

STEP 2: Additional

research

STEP 3: Prepare an

outline and a first

draft of your

Assignment 1

STEP 4: Writing the

managerial report

Prefatory Part

• Title Page

• Table of Content

• Executive

Summary

Main Body

1. Describe the business model of Amazon.com as of the end of the case (spring 2017)

2. What is Amazon's core competency? 3. Which of its competitors does Bezos need to pay most attention

to, and why? 4. Where to Next?

Appended

Part

References

Appendices

(if any)

Case Problem:

"Amazon.com Inc.” Selection of academic

articles with topics/ideas

directly linked to selected

task(s) from Assignment 1

32

REPORT TITLE

"Amazon.com Inc.: Where to Next?"

Task 1.3

Task 1.2

Task 1.1

Task 1.4

Task 1.1 1 grading's pts

Task 1.2 2 grading's pts

Task 1.3 2 grading's pts

Task 1.4 3 grading's pts

TOTAL A1: 10 grading pts

GRADING POINTS A1

EXAMPLE 1

Boston University MET AD715 © Dr. Zlatev, 2018

Preparation for Assignment 1 (Due W4, Monday 10/01 by 11:59pm)

D

Task 1.5 2 grading's pts

Task 1.5

EXAMPLE 2

Prefatory Part

• Title Page • Table of Content • Executive

Summary

33

Preparation for Assignment #1 (Due W4, Monday 10/01 by 11:59pm)

Suggested Structure of the Executive Summary

The executive summary is the part of the report that will be read by the largest number of people.

It should be written after the rest of the report has been completed.

Preamble

Major findings

Conclusions

Recommendations

In the starting paragraph (the preamble), the researcher is describing the problem, the approach, the research design that was adapted, and other important for the project starting points.

The content for the next three paragraphs (major findings, conclusions, and recommendations) shall be ‘extracted’ from the main body of the report (an abridged version of the whole report).

Boston University MET AD715 © Dr. Zlatev, 2018

REPORT TITLE

"Amazon.com Inc.: Where to Next?"

D

34

See the reference table, Tutorial for AD715: BU Library Search & e-Research1EXAMPLE

Boston University MET AD715 © Dr. Zlatev, 2018

D

35Boston University MET AD715 © Dr. Zlatev, 2018

STEP 1: Familiarity

with the Business

Case Amazon.com

Amazon history: 1995 - 2005 Amazon history: 2006 - 2016 State of Amazon.com: Spring 2017

1995: online book store (one-click shopping, customer reviews, order verification via e-mail)

2000: launch of Marketplace (a platform on which independent third-party sellers can access Amazon customers globally)

2005: launch of Prime membership service ($99 annual fee for free two- day shipping and free access to Amazon’s video and music streaming services); Amazons start selling its own line of consumer electronic

Amazon starts selling its own line of consumer electronics such as tablets, e- readers, and voice-enabled wireless speaker such as Echo.

2006: start of Amazon Web Services (AWS) - a cloud-based computing service (incl. software applications, data storage, content delivery, payment and billing systems, and business other applications.

2007: launch of Kindle e-reader which has transformed the publishing industry – in 2017 Amazon holds two-thirds market share in eBooks and sells more eBooks than print books.

2014: launch of Echo (powered by the intelligent personal digital assistant Alexa)

Amazon is becoming “the everything store” and is the largest online retailer in the US, with some 400M items available (50 times the number sold by Walmart, the world’s larges traditional retailer).

1998: start of country-specific sites in UK and Germany

2000: new country specific sites in France and Japan

Operates country-specific sites in China, India, and more than a dozen countries.

AWS becomes the world largest cloud- computing provider with $12B revenue and $1B profit in 2016 (= 9% of Amazon’s revenues and 74% of its profit contribution)

New services: - same-day delivery of groceries - Drones-based distribution - AmazonCampus (student-centered

program for textbooks and more)

D

36Boston University MET AD715 © Dr. Zlatev, 2018

Who are the stakeholders for Amazon: sellers & customers

What activities need to be performed to create and deliver the offerings to the customers?

How are the offerings to the customers created?

Why does the business model create values?

Task 1.2: STEP 4: Writing the

managerial report

Guide: How to Write a Managerial Report 2EXAMPLE

Jeff Bezos’ Sketch of Amazon’s “Flywheel Business Model”

Describe the business model of Amazon.com as of the end of the case (spring 2017)

In-Class Team Exercise (Class 3)

D

37

2EXAMPLE

STEP 4: Writing the

managerial report

Task 1.3:

Amazon Core Competence-Market Matrix

Source: Rothaermel, F.T. (2018) Strategic Management, 4e, McGraw-Hill (based on Hamel Y Prahalad, 1994)

Building new core competences to protect and extend current market

position

Building new core competences to protect and extend current market

position

Leveraging core competences to improve current market position

Redeveloping and recombining core competences to compete in

markets of the future

Existing New N

ew Ex

is ti

n g

C o

re C

o m

p et

e n

ce

Market

1 2

34

Using specific examples, contribute to a discussion of different ways that Amazon is diversifying for each one of the categories

1 2 3 4

Boston University MET AD715 © Dr. Zlatev, 2018

What is Amazon's core competency?

In-Class Team Exercise (Class 3) 1. Build teams (ca. 5 members per team) 2. Each team member: select one example per category 3. Internal team discussion: Amazon “Flywheel Business

Model” - examples 4. Internal team discussion: which example per category

to present and why? 5. In-Class presentation by two of the team members

Question 1 (first team member): Task 1.2 Question 2 (second team member): Task 1.3

 2 min/team

 15 min/team

 total time 30 min.D

38

2EXAMPLE

STEP 4: Writing the

managerial report

D

Task 1.4:

Boston University MET AD715 © Dr. Zlatev, 2018

Which of its competitors does Bezos need to pay most attention to, and why?

E-Commerce

Amazon

Business

Model

Competitors

Business

Model

Ebay (USA)

Alibaba (China)

Flipkart (India)

Walmart (USA)

In-Class Team Exercise (Class 4) 1. Build teams (ca. 5 members per team) 2. Select one of the competitors 3. Internal team discussion: paying attention on the