DECISION MAKING

BY GROUP 7
D4 -7A

1. I Made Ade Chandra (1415644004)

2. Luh Putu Tustyanti Dewi (1415644050)

D4 MANAGERIAL ACCOUNTING
BALI STATE POLYTECHNIC
BADUNG
2017
 PREFACE

Thank to Almighty God who has given Hes bless to the authors for finishing
the Organizational Behavior paper assignment entitled Decision Making timely.
This paper made to fulfill the task of Organizational Behavior Subject. In this
paper the authors experience any difficulties. But thanks to the guidance and
direction of the various parties ultimately this paper can be resolved properly.
Therefore, the authors would like to say thank you to :
1. Mr. Drs. I Wayan Purwanta Suta, MAIB as an Organizational Behavior
lecturer who always taught us and gave a lot of knowledge about
organizational behavior.
2. All the parties who have provided support, which cannot be mentioned one
by one.
The author realizes that this paper still many shortcomings. Critics and
suggestion is needed here to make this paper be better. At the last, the authors
hope that this paper can be useful for the reader.

Jimbaran, November30th 2017

Authors

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 TABLE OF CONTENT

PREFACE................................................................................................................i

TABLE OF CONTENT.........................................................................................ii

CHAPTER I INTRODUCTION..........................................................................1

A. Background...................................................................................................1

B. Formulate of Problems..................................................................................2

C. Aim of Paper.................................................................................................2

CHAPTER II LITERATURE REVIEW............................................................3

A. Definition of Decision Making.....................................................................3

B. Typologies of Decision Making....................................................................3

C. Types of Decision Making Process...............................................................4

D. Types of Consumer Involvement..................................................................5

E. Complex Decision Making...........................................................................6

F. Stages of Consumer Involvement in Complex Decision Making.................7

G. Consumer Learning, Habits, and Faithfulness............................................10

H. Decision by the Low Involvement..............................................................11

I. Comparison between Low Level and High Level Involvement.................12

CHAPTER III CLOSING..................................................................................13

A. Conclusion..................................................................................................13

B. Suggestion...................................................................................................13

BIBLIOGRAPHY................................................................................................14

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 CHAPTER I
INTRODUCTION

A. Background
Every organization, whether large or small scale, occur changes in
conditions that are influenced by factors external and internal environment of
the organization. In the face of developments and changes that occur will
require quick decisions and precise. Rapid decision-making process and
appropriate to do so along with the administration of the organization can
continue smoothly.
Decision-making is done by a manager or administrator. The activities
include identification decision-making problems, the search for problem
solving alternatives, evaluation rather than alternatives, and alternative
selection of the best decisions. The ability of a leader to make decisions can be
improved if he know and master the theory and techniques of decision making.
With the improvement of leadership capabilities in decision making it is
expected to improve the quality of decisions made, thereby increasing the
efficiency and effectiveness of the organization work.
The decision making is needed at all stages of organization and
management activities. For example, in the planning stages required a lot of
activities making throughout the planning process. The decisions made in the
planning process aimed at the selection of alternative programs and priorities.
In the decision-making activities include the identification of problems,
formulation of the problem, and alternative selection decisions based on the
calculation and the various impacts that may arise. So also in the operational
implementation phase or in an organization, managers must make many routine
decisions in order to control the business in accordance with the plan and the
prevailing conditions. While under surveillance includes monitoring,
inspection and assessment of the results of the implementation is done to
evaluate the implementation of the decisions that have been made.
An essentially administrative activity within an organization is decision
making. Activities undertaken include the entire decision-making process from

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 start to identify the problem until the evaluation of the decision-making that
involves all elements within the administration as a system of organization.
This means that in making a decision to solve the problems arising from the
changes occurring in the organization needed enough information both from
internal and external to the organization in order to take the right decisions and
quickly.
Ultimately, the decision-making activities quickly and precisely is part of
the administration meant that the problems that will hinder the organization can
be solved and resolved so that an organization can run efficiently and
effectively in order to achieve an organizational goal.

B. Formulate of Problems
Based on the background, we conclude that formulate of problem of this
paper as follows:
1. What is the definition of decision making?
2. What are the typologies of decision making?
3. What are the types of decision making process?
4. What are the types of consumer involvement?
5. What is the complex decision making?
6. What is decision by the low involvement?
7. What are the differences between low level and high level involvement?

C. Aim of Paper
Based on formulate of problem, we conclude that the aim of this paper as
follows:
1. To know about definition of decision making
2. To know about the typologies of decision making
3. To know about the types of decision making process
4. To know about the types of consumer involvement
5. To know about the complex decision making
6. To know about decision by the low involvement
7. To know the differences between low level and high level involvement
CHAPTER II
LITERATURE REVIEW

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A. Definition of Decision Making
According to Stephen P. Robbins, decision-making is the core of
management within the organization, the things done by the chairman in an
activity carried out within the organization to take an action or choice that must
be made that will result in a decision for the common good.
According to Terry, the decision making is the alternative choice of the
behavior of two or more alternatives (led action to resolve the problems
encountered in the organizations under through the selection of one among the
possible alternatives).
According to Siagian, decision-making is an approach to the nature of a
problem, gathering facts and data, the determination of what the alternative
mature and taking action according to the calculation is the most appropriate
action.
Based on the expert opinions above, can be deduced that decision-making
is the selection of alternative actions or choices to be made that will result in a
decision for the common good.

B. Typologies of Decision Making

There are several commonly used decision-making typologies. In this
paper will be explained about the typology of decision-making related to the
consumer, namely:
1. The Extent of Decision Making
This type describes the continuous process of decision making toward the
habit. Decisions are made based on the cognitive processes of information
investigation and brand choice evaluation. On the other hand, there is little
or no decision that may occur when the consumer is satisfied with a special
brand and a settled purchase.

2. An Uninterrupted Dimension or Process of Engaging High-Interest to Low

Interest Engagements
The high involvement of purchasing interests is important to the consumer.
Purchasing related to the interests and image of the consumer itself. Some of
the risks faced by consumers are financial, social, and psychological risks.
In some cases, careful consideration of product choices requires specific
time and energy from consumers. The involvement of low purchasing

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 interests is not so important to the consumer. Financial, social, and
psychological risks are not so great. Thus, the involvement of low
purchasing interests generally requires a limited decision process.

C. Types of Decision Making Process

The four types of consumer purchase decision processes are divided into
two parts: high interest involvement and low interest engagement.
1. High Interest Involvement
a. Complex Decision Making Process
In this process, consumers are actively seeking information to evaluate
and consider multiple brand selections by setting specific criteria. The
subject of complex decision-making is very important. Concepts of key
behaviors such as perceptions, attitudes, and the search for relevant
information are important for the development of marketing strategies.
b. Brand Loyalty Process
This process occurs when recurring choices occur, where consumers
learn from past experiences and buy brands that provide satisfaction with
little or no consideration in decision making. In each case here purchases
are important to the consumer. Brand loyalty arises from past purchase
satisfaction. Thus, the search for information and brand evaluation is
limited or unimportant to its existence in the consumer deciding to buy
the same brand.
2. Low Interest Involvement
a. Limited Decision Making Process
Consumers sometimes make decisions even if they do not have high
interest engagements. They have little past experience of the product.
Consumers try to buy goods to compare them with commonly used
items. Information search and evaluation of brand choices is more limited
than in complex decision-making processes. Limited decision making
also occurs when consumers seek variation. The decision is not planned,
usually done instantly while in store. In low interest involvement,
consumers tend to change brands when they are bored and look for other
variations if the risk is minimal.
b. Inertia Process
Inertia means consumers buy the same brand not because of loyal to the
brand, but because there is not enough time and there are barriers to find

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 alternatives. Robertson argues that under conditions of low interest
engagement, brand loyalty only describes the convenience inherent in
repetitive behavior rather than an agreement to purchase the brand.

D. Types of Consumer Involvement

Types of consumer involvement that often occur can be grouped into two
groups, namely:
1. Situational Involvement
This involvement occurs only in special and temporary situations and
generally when purchases are required. For example the decision on taking
an MBA education is due to the need for work.
2. Enduring Involvement
This involvement happens continuously and more permanently. Generally
occurs because of an ongoing interest in the product category, even if the
purchase is needed or not. For example interest in clothes.

Image 2.1 Model of Consumer Involvement

Both enduring involvement and situational involvement are the result of
complex decision-making processes. Badge value is a condition that includes
situational involvement and persistent involvement.

E. Complex Decision Making

To understand complex decisions it is necessary to understand the nature
of consumer involvement with a product. Conditions of consumer involvement
of a product if the product is:

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 1. Important for consumers because of the consumer's own image, such as the
purchase of a car as a status symbol.
2. Providing a continuous appeal to consumers, for example in the fashion
world of consumer interest in clothing models.
3. Contain a certain risk, for example financial risk to buy house and
technology risk for purchasing computer
4. Have an emotional interest, for example music lovers buy a new stereo
system
5. Known in the group or "badge" value of the goods concerned, for example
Mercedes Bens or scarf from Gucci
Complex decision-making is often used to make decisions on goods that
are categorized specifically, such as:
1. Goods with high price
2. Goods that have an appearance risk such as cars and medical products
3. Complex goods such as computers
4. Special items such as sports equipment and furniture

F. Stages of Consumer Involvement in Complex Decision Making

Research in decision making consists of five stages: problem-fixing,
information searching, evaluation of choices, selection, and results of choice.
These steps can be transformed into the stages of consumer involvement in
complex decision-making:

Image 2.2 Complex Decision Making Model

1. Need Arousal

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 Need is the most important factor which leads to buying of products
and services. Need in fact is the catalyst which triggers the buying decision
of individuals. Most decision making starts with some sort of problem. The
consumer develops a need or a want that they want to be satisfied. The
consumer feel like something is missing and needs to address it to get back
to feeling normal. If you can determine when your target demographic
develops these needs or wants, it would be an ideal time to advertise to
them. For example, they ran out of toothpaste and now they need to go to
the store and get more.
Consumer decision making comes about as an attempt to solve
consumer problems. A problem refers to a discrepancy between a desired
state and an ideal state, which is sufficient to arouse and activate a decision
making process (Duhaime et al., 1996).Finally, needs can be relatively
generic, as in the need for enjoyment (which can be satisfied in many
different ways), or specific, as in the need to eat a chocolate ice-cream
(Bettman and Park, 1980).
2. Consumer Information Processing
When the consumer recognizes a need or problem, he or she starts to
search for information about the items or services that can be used in order
to satisfy that need. There are two principal approaches to searching:
internal and external. Internal searches (via the memorization search
process) are based upon what consumers already know (what is in his or her
memory). A problem is that some items or services that can satisfy the need
or solve the problem, are not remembered, or have never been heard of, and
are therefore, not considered.
In this case, the consumer can use external searches (via the perception
process) that get people to either speak to others (getting information by
word of mouth) or use other sources (such as advertisements or yellow-page
listings) (Bettman. 1979: Punj. 1987).
3. Brand Evaluation
An individual after gathering relevant information tries to choose the
best option available as per his need, taste and pocket. When evaluating

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 alternatives, consumers choose from a list of acceptable alternatives (evoked
set) based upon the criteria they have selected as being important. For a
product to be considered by a consumer, he must know that it exists and
perceive to be able to satisfy his needs. The criteria a consumer uses to
choose between alternative items/services are the attributes the consumer
considers to be important.Consumers may make the purchase decision using
compensatory or non-compensatory decision rules. Using a compensatory
decision rule, the consumer identifies the important attributes, rates the
alternative products on each attribute, and selects the product with the
highest score. With a simple additive rule, the consumer selects the product
that is judged to have the largest number of positive attributes. This is a
relatively simple rule, used most often when motivation or ability is limited
(Alba and Mannorstein. 1987).
4. Purchase
After going through all the above stages, customer finally purchases the
product. Through the evaluation process discussed above, consumers will
reach their final purchasing decision, for example they go to the shop to buy
the product/service. Purchase of the product/service can either be through
the store, the web, or over the phone.
To actually implement the purchase decision, however, a consumer
needs to select both specific items (brands) and specific outlets (where to
buy) to resolve the problems. There are, in fact, three ways these decisions
can be made: 1) simultaneously: 2) item first, outlet second: or 3) outlet
first, item second. Under many conditions, consumers are busy in a
simultaneous selection process of stores and brands.
After tallying tip all the criteria for the decision the customers now
decide on what they will purchase and where. They have already taking risk
into account and are definite onwhat they want to purchase. They may have
had prior experience with this exact decision or maybe they succumbed to
advertising about this product or service and want to give it a try.
5. Post Purchase Evaluation

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 After the purchase, the buyer will likely feel either satisfied or
dissatisfied. If the buyer believes that she or he received more in the
exchange than what was paid, she or he might feel satisfied. If she or he
believes that she or he received less in the exchange than what was paid,
then she or he might feel dissatisfied. Dissatisfied buyers are not likely to
return as customers, and are notlikely to send friends, relatives, and
acquaintances.
If the buyer is satisfied, then she or he will become a committed
consumer, repeat purchase, or increase the use of the goods or services. But
if the buyer is not satisfied, she or he will switch the brand or not continue
the use of goods or services.

G. Consumer Learning, Habits, and Faithfulness

This material discusses the opposite of complex decision-making habits.
Satisfaction with a brand tends to lead consumers to repeat their decision to
buy the same brand so it becomes a habit. The habit of ensuring satisfaction
based on past experience and simplifying the process of information retrieval
and evaluation of a brand. Consumer learning, habits and loyalty are three
interconnected concepts. Buying habitual behavior is the result of consumer
learning from reinforcement. Reinforcement is a process whereby consumers
will repeatedly buy what has given them a full satisfaction. Those behaviors
lead to brand loyalty.
1. Learning Consumers (Consumer Learning)
Learning concepts needed to understand the habits, learning can be
defined as the change in behavior that come and resulted from past
experience. There are two schools of thoughts of consumer understanding of
the learning process (1) learning behavior. Focuses on the influence of
behavioral or impulse the behavior itself, (2) cognitive learning focuses on
problem solving and emphasis on consumer thinking variables that affect
learning
In the two groups developed behavioral learning theory, the differences
occur in "Classical conditioning" and "Instrumental conditioning". In the
"classical conditioning "explain the behavior based on the establishment of a

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 close connection between primary and secondary
encouragement.Instrumental conditioning" looks behavior as a function
and actions of consumers. Satisfaction leads to the possibility of making a
purchase.
Learning leads to repeat purchases and customs. In a model that
describes the behavior of purchasing habits, direction needs lead directly to
the attention of purchase, purchase and evaluation after purchase. Search
and evaluation process brand information very minimum.
2. Habits (Habit)
Habits illustrate two important functions, namely the reduction of risk
for purchases with a high level of involvement and savings in time and
energy for products with a low level of involvement. Habits often leads to
brand loyalty is the repeat purchase based the suitability of the brand.
Different learning theories describe two views differently to brand loyalty.
Operant conditioning approaches indicates that the purchase is consistent
with a brand reflect commitment to a brand. But some loyalty reflects
purchases. Repeated is not because of the commitment to the brand but it is
a process inertia. Cognitive behavioral groups believe that alone is not
sufficient as a measure loyalty, commitment necessary attitudes toward a
brand.

H. Decision by the Low Involvement

This material discusses consumer choice in a situation of low involvement.
The low involvement purchases where the consumer does not consider the
identification of a product.
Marketers are trying to create consumer engagement with the product due
to the involvement of consumers will tend to brand loyalty and prevent
consumers searching for rival products. Marketers are trying to create brand
differentiation through involvement with search advertising that can meet the
needs of the buyer. An example of types of cereal for adults in the beginning is
a product with low involvement, after Kellogg started nutritional and health
benefits of increasing the level of involvement.
Three Basic Theories Understanding the Low Level Decision Making:

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 1. Theory of passive learning (Krugman)
This theory states that if the consumer is not involved, the consumer does
not perform cognitive evaluations of the advertising message. Advertising
exposure can occur without recall and spacious.
2. Theory of social judgment (Sherif)
This theory stated that the low involvement condition, consumers consider
the brand, and to evaluate brands using fewer attributes.
3. The Elaboration likelihood models (Petty & Cacioppo's)
This theory stated that consumer involvement is a reaction to a boost
without the communication message rather than the message itself.

Image 2.3 Low Involvement Decision Making Model

I. Comparison between Low Level and High Level Involvement

Low Level Involvement High Level Involvement
1. First established brand of trust 1. First established brand of trust of
from passive learning active learning
2. The decision to buy 2. Evaluation brand
3. Evaluation brand after purchase 3. The decision to buy
may be implemented
Table 2.1 Comparison between Low Level and High Level Involvement

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 CHAPTER III
CLOSING

A. Conclusion
Decision making is the selection of alternative actions or choices to be
made that will result in a decision for the common good. Every organization,
whether large or small scale, occur changes in conditions that are influenced by
factors external and internal environment of the organization. In the face of
developments and changes that occur will require quick decisions and precise.
The decision making is needed at all stages of organization and management
activities. For example, in the planning stages required a lot of activities
making throughout the planning process.
There are several commonly used decision-making typologies, those are
The Extent of Decision Making and An Uninterrupted Dimension or Process of
Engaging High-Interest to Low Interest Engagements. The types of decision
making are consisting of two things, High Interest Involvement and Low
Interest Involvement. The high interest involvements consist of Complex
Decision Making Process and Brand Loyalty Process while the low interest
involvements consist of Limited Decision Making Process and Inertia Process.
We can find the difference between the high interest involvement and low
interest involvement by comparing the establishment of brand of trust, the time
where the customers decide to buy, and the brand evaluation. The
establishment of brand of trust will come first, but the establishment of brand
of trust in the low interest involvement is coming from a passive learning,

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 while the high interest involvement is coming from an active learning. A
consumer that has a low interest involvement will directly make a decision to
buy something and they dont evaluate the product before they decide to buy
something but they might do it after they make a decision. Its different with a
consumer that has a high interest involvement, which they would like to
evaluate the product that they want to buy before making a decision.

B. Suggestion
Its essential for us to put a serious attention to this material because
decision making will be used in every part of our life, especially in an
organization. By understanding the material, we will learn about so many
things related with decision making and hopefully we can implement the
theories and we can be better in making a decision.

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 BIBLIOGRAPHY

Robbins, Stephen P. 2006. Perilaku Organisasi. Jakarta: PT INDEKS

Kelompok GRAMEDIA.
Syamsi, Ibnu. 1989. Pengambilan Keputusan (Decision Making). Jakarta :
Bina Aksara.

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