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Guidelines for submissions: You are expected to apply theories you have learned in class to discuss and provide answers to case study questions. Write-ups should be within 2 pages and single spaced (12 times new roman) and submitted in Word or PDF. Case Study 2: Bounded Awareness: What you fail to see 家得宝 You can do it. We can help. CLOSED Home Depot, a Fortune 500 company serving do-it-yourselfers (DIYs)' has thrived in markets around the world, so executives figured it would be successful in China. In 2006 the company bought 12 stores and stocked them with tools and materials, and waited for profits to roll in. It didn't happen. After six years of effort, Home Depot shut its seven remaining stores, fired 850 Chinese workers, and reported an expected $160 million loss. The company failed in China because it overlooked a simple fact- China isn't a DIY market. Given how cheap labor is, most middle-class Chinese consumers contract out heir repairs. How could the company have missed this? Home Depot's experience in China is far from unusual. There are many examples of project disasters where critical information that in retrospect seems obvious was overlooked. An example of a case where information was known, but not acted upon, is the drug company Merck's delayed decision to withdraw its pain relief drug Vioxx from the market. Evidence of the drug's risks was reported in a medical journal in the year 2000, but Vioxx was still being sold in 2004. It's been estimated that by the time the drug was recalled it may have been associated with as many as 25,000 heart attacks and strokes. The delay in taking action cost Merck dearly-over $200 million has been awarded in claims. Why didn't Merck withdraw the drug sooner? The warning was available, but it was ignored Research shows there are significant bounds on people's ability to access information and successfully use it to make reasoned decisions. Max Bazerman and Dolly Chugh describe this phenomenon "bounded awareness". Bounded awareness is distinct from cognitive bias. Cognitive biases cause people to make irrational choices that produce undesired results. Bounded awareness, on the other hand, can cause even people using completely rational decision processes to make choices that produce undesired results. Bounded awareness is different from bounded rationality in that bounded awareness is about individual and organizations that do not 'see' readily accessible and perceivable information during the decision making process, while 'seeing' other equally-accessible and perceivable information and as a result, useful information remains out-of-focus for the decision-maker. Bounded awareness is a serious problem. Rather than make use of all information necessary to make an informed decision, people attend to only the limited set of data that is most directly in front of them and fail to seek out other data that is clearly needed. People, especially when overly focused, fail to recognize and detect changes to what should be obvious visual, auditory and other sensory data and routinely overlook information that can be crucial for decision making. If not countered, the various manifestations of bounded awareness described here can seriously degrade one's ability to make the right choices. Questions 1. How does bounded awareness affect decision making? 2. Why do you think bounded awareness occurs? You can discuss this in terms of individual, team or organizational levels. 3. What are or organizational design elements that you could recommend to help minimize dangers of bounded awareness? Guidelines for submissions: You are expected to apply theories you have learned in class to discuss and provide answers to case study questions. Write-ups should be within 2 pages and single spaced (12 times new roman) and submitted in Word or PDF. Case Study 2: Bounded Awareness: What you fail to see 家得宝 You can do it. We can help. CLOSED Home Depot, a Fortune 500 company serving do-it-yourselfers (DIYs)' has thrived in markets around the world, so executives figured it would be successful in China. In 2006 the company bought 12 stores and stocked them with tools and materials, and waited for profits to roll in. It didn't happen. After six years of effort, Home Depot shut its seven remaining stores, fired 850 Chinese workers, and reported an expected $160 million loss. The company failed in China because it overlooked a simple fact- China isn't a DIY market. Given how cheap labor is, most middle-class Chinese consumers contract out heir repairs. How could the company have missed this? Home Depot's experience in China is far from unusual. There are many examples of project disasters where critical information that in retrospect seems obvious was overlooked. An example of a case where information was known, but not acted upon, is the drug company Merck's delayed decision to withdraw its pain relief drug Vioxx from the market. Evidence of the drug's risks was reported in a medical journal in the year 2000, but Vioxx was still being sold in 2004. It's been estimated that by the time the drug was recalled it may have been associated with as many as 25,000 heart attacks and strokes. The delay in taking action cost Merck dearly-over $200 million has been awarded in claims. Why didn't Merck withdraw the drug sooner? The warning was available, but it was ignored Research shows there are significant bounds on people's ability to access information and successfully use it to make reasoned decisions. Max Bazerman and Dolly Chugh describe this phenomenon "bounded awareness". Bounded awareness is distinct from cognitive bias. Cognitive biases cause people to make irrational choices that produce undesired results. Bounded awareness, on the other hand, can cause even people using completely rational decision processes to make choices that produce undesired results. Bounded awareness is different from bounded rationality in that bounded awareness is about individual and organizations that do not 'see' readily accessible and perceivable information during the decision making process, while 'seeing' other equally-accessible and perceivable information and as a result, useful information remains out-of-focus for the decision-maker. Bounded awareness is a serious problem. Rather than make use of all information necessary to make an informed decision, people attend to only the limited set of data that is most directly in front of them and fail to seek out other data that is clearly needed. People, especially when overly focused, fail to recognize and detect changes to what should be obvious visual, auditory and other sensory data and routinely overlook information that can be crucial for decision making. If not countered, the various manifestations of bounded awareness described here can seriously degrade one's ability to make the right choices. Questions 1. How does bounded awareness affect decision making? 2. Why do you think bounded awareness occurs? You can discuss this in terms of individual, team or organizational levels. 3. What are or organizational design elements that you could recommend to help minimize dangers of bounded awareness?
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1 How does bounded awareness affect decisionmaking Bounded awareness is the inability to locate the need for the required information while considering other pieces of information which are not helpfu... View the full answer
Related Book For
Financial accounting
ISBN: 978-0136108863
8th Edition
Authors: Walter T. Harrison, Charles T. Horngren, William Bill Thomas
Posted Date:
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