Introduction to Management
The Meeting of ‘Gut’ and ‘Head’
‘Decisions involving huge outlays of capital are almost always classic gut decisions: they involve risky, inherently ambiguous judgements between unclear alternatives.’ Do you agree? Justify your answer using decision-making theory and relevant examples from at least two industries.
Some might ask how people such as Bill Gates and Warren Buffett are separated from other people. Disregarding the obvious capital those individuals are in control of, it can be said that their entrepreneurial intuition regarding business decisions is what allowed them to succeed the way they have. With that being said, decisions cannot always and purely be based on intuition – …show more content…
Examples of this theory can be found in recent decision making in various industries.
According to a leading Internet media and market research company, within the year of 2007, Yahoo! spent approximately USD$1.5 billion in acquisitions of other companies (Nielsen n.d.). If the past decade is to be considered, the amount of capital invested in the acquisitions of other companies would reach billions. The computer software and web search engine company was founded in 1995 and successfully became one of the most visited websites on the Internet (Yahoo! 2008) (Alexa n.d.). Merely two years after the company established, it made its first acquisition for USD$92 million. From there on, acquisitions amounting to millions of dollars has been a regular occurrence. The acquisition of a company named BlueLithium will be used to examine the decision-making process leading to vast amounts of money being invested into acquisitions. BlueLithium was the second largest ad network in the UK and was purchased by Yahoo! for nearly USD$300 million cash in 2007 (Yahoo! 2007).
It can be assumed that the acquisition of companies goes through both processes of intuitive and rational decision making. According to the research of economists, the intuitive process regarding acquisitions of companies