Unit 1.5 — Decision-making

Learning outcomes (from the 9587 syllabus). This note is complete when every bullet below is covered.

Learning outcomes

The decision-making process: identify the decision situation → gather information and generate options → analyse options → decide on the best option → implement the decision → monitor and evaluate results
External factors affecting decision-making (PESTLE): political, economic, socio-cultural, technological, legal, ecological
Information for decision-making: sources, characteristics of useful information, methods of presenting data

Big picture

In plain English: a business decision is just a choice between options. What makes it a good choice is the process you use to make it — and whether you checked the outside world before choosing.

Analogy: decision-making is like planning a trip. First you decide where you are and where you want to go (identify), then you look at maps and routes (gather info and options), compare them (analyse), pick the best route (decide), start driving (implement), and check you’re still on track (monitor and evaluate). Skipping any step is how you get lost.

Two ideas to remember for the whole subject:

Decision-making is a process, not a moment. A decision is only as good as the steps that produced it.
Value creation is the test. A good decision creates value for stakeholders; a bad one destroys it.

Running example used throughout this note: Kopi & Toast, a small café in Tampines deciding whether to open a second outlet in Jurong.

Core content

1. The six-step decision-making process

Step 1 — Identify the decision situation. Recognise that a decision is needed and define the problem precisely. A vague problem produces a vague solution.

Kopi & Toast’s problem is not “we want to grow” but precisely “should we open a second outlet in Jurong, and can we afford it?”

Step 2 — Gather information and generate options. Collect relevant data and list feasible alternatives. Never settle for the first idea.

Kopi & Toast collects rent figures for Jurong shops, counts nearby foot traffic, and surveys Jurong residents’ coffee habits. Its options: (a) open in Jurong East, (b) open in Jurong Point mall, (c) stay with one outlet for now.

Step 3 — Analyse options. Weigh each option’s costs, benefits and risks, and its effect on stakeholders.

Option (b) Jurong Point has more shoppers but much higher rent; option (a) is cheaper but has less traffic; option (c) is safest but earns no growth.

Step 4 — Decide on the best option. Choose the option that best meets the business’s objectives and constraints.

Kopi & Toast decides on option (a) — Jurong East — because the lower rent fits its tight budget while still giving growth.

Step 5 — Implement the decision. Allocate resources, assign responsibility, and communicate the decision to the people affected.

The owner signs the lease, buys equipment, hires and trains two new staff, and tells the Tampines team about the new outlet.

Step 6 — Monitor and evaluate results. Compare actual results against objectives; correct course if needed.

After three months, Kopi & Toast checks sales against its target. If sales are below target, it may adjust prices, add promotions, or rethink the menu.

2. External factors — the PESTLE framework

Businesses do not decide in a vacuum. PESTLE is the checklist of outside forces that help or block any decision. (The book uses “PEST” — for 9587, always use all six.)

Factor	What it covers	Singapore example
Political	Government policies and international agreements	Free-trade agreements (e.g. USSFTA, CECA) that help exporters; US–China tensions that affect trade
Economic	Market climate and the economic cycle	Inflation, interest rates, GST hike, high rental costs, a strong Singapore dollar
Socio-cultural	Society’s culture, norms and values	Ageing population, health-conscious eating (less sugar), hawker culture, preference for cashless payment
Technological	New processes and products from technology	PayNow / SGQR cashless payments, food delivery apps, AI chatbots, automation
Legal	Laws and regulations	PDPA (data protection), Employment Act, food-hygiene rules from SFA
Ecological	Environmental issues	Carbon tax, plastic-bag charge, push for sustainability and green packaging

All six in one decision: if Kopi & Toast expands to Jurong it faces — Economic: high rent and GST; Socio-cultural: Jurong workers wanting quick, healthier breakfasts; Technological: must accept PayNow and be on GrabFood; Legal: must follow SFA hygiene rules and PDPA for its loyalty app; Ecological: customers expect less plastic packaging; Political: SME digitalisation grants would lower its costs.

3. Information for decision-making

Sources (examples): government statistics (e.g. SingStat), trade figures, the Consumer Price Index (CPI), official websites, market-research reports.

Kopi & Toast checks SingStat data on Jurong’s population and income levels, and the CPI to see if ingredient costs are rising.

Characteristics of useful information: accurate, timely (current), relevant (fits the decision), complete, understandable, cost-effective (worth more than it costs to get).

A 2019 foot-traffic survey is not timely; a guess from the owner’s friend is not accurate — both would mislead the decision.

Methods of presenting data: tables, bar charts, line graphs, pie charts, infographics, dashboards — chosen so the reader can spot trends and compare options quickly.

Analysis & evaluation points (AO3/AO4)

Use these to push answers from “describe” to “analyse and judge”.

Decision-making is bounded. Managers rarely have perfect information — limited time, money and knowledge. So many decisions are “satisficing” (good enough) rather than optimal.
The process is only as good as the information. Garbage in, garbage out.
Stakeholder trade-offs. A decision that helps shareholders (e.g. automation to cut costs) may hurt employees. Say who gains and who loses.
Short run vs long run. Cutting R&D raises profit now but weakens the business later.
PESTLE factors interact. A new carbon tax (Legal/Ecological) raises costs (Economic). Don’t treat the six factors as separate boxes.
Context decides. Raising prices works in a boom, fails in a recession. “It depends” — then say on what.

Language bank: however · on balance · this is more significant because · it depends on · in the short run … whereas in the long run ·

Worked examples (PEEL)

PEEL = Point → Explain → Example → Link. Use this structure for every written answer.

Worked example 1 — “Explain” (6 marks)

Question: Explain how one economic factor could affect Kopi & Toast’s decision to open a second outlet.

P (Point): A rise in interest rates would make Kopi & Toast less likely to expand.
E (Explain): Opening a second outlet needs a bank loan. Higher interest rates make the loan more expensive, raising monthly repayments and cutting the expected profit from the new outlet.
E (Example): When Singapore interest rates rose in 2022–2023, many small food businesses delayed opening new outlets because borrowing became too costly.
L (Link): Therefore, in a high-interest-rate environment, the café is likely to postpone expansion because the higher cost threatens its profit objective.

Worked example 2 — “Evaluate” (12 marks)

Question: Evaluate the usefulness of PESTLE analysis when a business makes a major decision.

P (Point — one side): PESTLE is useful because it forces the business to check the outside environment systematically.
E (Explain): By going through all six factors, the business is less likely to miss a major threat or opportunity, which reduces risk and improves the decision.
E (Example): A café using PESTLE would notice the Legal factor (SFA hygiene rules) and the Socio-cultural factor (health-conscious trend), so it can design a menu that fits both.
L (Link): This shows PESTLE directly supports the “gather information” and “analyse options” steps of the decision-making process.
Then evaluate (AO4): However, PESTLE has limits — it takes time, needs accurate information, and does not make the decision for the manager; judgement is still needed. On balance, PESTLE is a valuable checklist but not enough on its own.

Application bank (Singapore quick reference)

PESTLE factor	Singapore example to quote
Political	FTAs (USSFTA, CECA); US–China trade tensions; SME digitalisation grants
Economic	GST 7%→9%; inflation; interest rates; strong SGD; high rents
Socio-cultural	Ageing population; health-consciousness; hawker culture; cashless habits
Technological	PayNow/SGQR; GrabFood/Deliveroo; automation; AI
Legal	PDPA; Employment Act; SFA food-hygiene rules
Ecological	Carbon tax; plastic-bag charge; sustainability push

Exam technique

How it appears: decision-making is rarely a standalone question — it is the structure you use to answer “Evaluate whether…”, “Recommend…”, “To what extent…”.
Model skeleton for a “recommend” question:
1. State the decision situation and objective (AO1).
2. Generate and analyse 2–3 options, each applied to the data (AO2+AO3).
3. Weigh using PESTLE + stakeholder effects (AO3).
4. Make one clear, justified decision and note its risks (AO4).
Common pitfalls: listing options without choosing; ignoring the data; no PESTLE awareness; “on one hand / on the other hand” with no verdict.
Cross-unit links: this process + PESTLE recur in every later unit’s decision questions, and reappear in Unit 6 as strategic analysis.

Self-test checklist

Can I list the six steps of the decision-making process in order, using the café example?
Can I name all six PESTLE factors and give one Singapore example of each?
Can I state four characteristics of useful information?
Can I write a PEEL paragraph for an “Explain” question?
Can I write a PEEL answer plus a judgement for an “Evaluate” question?

Essay practice: “Evaluate the view that the quality of a business decision depends more on the information gathered than on any other factor.” (25 marks) — write it using PEEL for each paragraph.