Decision-Making in Uncertainty

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Director's Daughter

The issue is that the purchasing manager is uncertain about what to do. There is an intimation that the purchasing manager should purchase from Tabitha's, regardless of whether the bid is competitive, but that has not been made clear.

There are two reasons why this is an issue. The first is that the CEO has not been 100% clear on this issue. If he is ordering the purchasing manager to do a deal with Tabitha's, then he has not stated that explicitly. As a result, there is ambiguity here. The second reason this is an issue is because there is uncertainty as to whether Tabitha's can handle the order. If that was not in doubt, then there would be little reason to worry -- the purchasing manager is free to switch suppliers for any reason at the end of a contract. Only the ambiguity with respect to the instructions and the lack of clarity with respect to whether or not Tabitha's can handle the order has made this an issue.

There are definitely some value assumptions here. The underlying assumption, because the CEO brought Tabitha's business card to the purchasing manager, is that Mr. Foster would like MMI to help his daughter get a leg up. For some, this would be seen as nepotism; for others, the world is all about who you know, and Tabitha happens to be well-connected. The conflict arises because the purchasing manager does not know if she is supposed to give Tabitha a chance in the bidding, or if Tabitha is to be handed the contract.

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So it is hard to read the assumptions here -- it is never a good idea to make decisions based assumptions anyway.

4. There is definitely information omitted. First, what are the consequences of not doing business with Tabitha? If the purchasing manager is employed at will, this is rather important. Second, can Tabitha's handle the company's four restaurants. There is some doubt about that -- a conversation with Tabitha needs to happen here, to gather than information. Are there any consequences to dropping the current suppliers -- that is another issue that would need to be clarified before a decision can be made.

The information that has been omitted is precisely the information that would need to be in place in order to make the decision. Business decisions are made on the basis of weighing costs and benefits and in this case there are still too many unknowns with regards to both of these things for a good decision to be made.

5. There are a number of conclusions possible. First, the company should entertain a number of bids. The possibilities with respect to those include going with Loretta's again, going with Tabitha's, splitting the next contract, and using some third party. The splitting option itself can be done different ways, where maybe the contact is split evenly, or maybe Tabitha's is given a contract that aligns with its current capabilities, with the remaining restaurants….....

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