What is "bounded rationality"? Arthur suggests that decision
makers conceive and nurture an "ecology of focal predictors" to deal
with complexity of the unknown. Explain Arthur's ideas using the following
scenario: Forecast the Dow Jones Average for the close of market trading on
this day in one year from the current date. Would you put your entire life
savings on your forecast? Allow a 5% margin of error to your forecast. Do you
feel more confident in your forecast? Why? What if you do put your life savings
on this and you are wrong?.
2. The Competitive Environment at the Industry
You have a large sum of money to invest in an entrepreneurial venture.
You are investigating possible alternatives on a systematic basis. Using
Porter's Five Competitiveness factors, analyze and draw a conclusion about the
relative attractiveness of each of the following industries:
Computer software design and manufacturing
for office applications
Gasoline service stations
Franchised boutique coffee shops
Civilian aircraft design and manufacturing
Travel planning and booking (agencies)
Which one seems most attractive? Would your answer change if you
represented a consortium of investors with serious funding and only two
objectives: create a professionally fulfilling challenge for managers of the
enterprise and a stable work environment for the employees? What do you think
are the three most critical success factors for each alternative?