\'A Behavioral Theory of the Firm\' is a seminal work in the field of organizational behavior and management theory, marking a significant shift from classical theories of business management. Developed by Richard Cyert and James G. March, this theory emerged during a period when Herbert Simon and James March, notable figures in this field, were exploring different paths in their research.The book challenges the traditional notion of absolute rationality in business decision-making, a concept central to earlier economic theories. Instead, it proposes that decisions in firms are often influenced by bounded rationality, where decision-makers do not have perfect information and cannot foresee all future outcomes. Thus, decisions are based on satisfying criteria rather than optimizing results.Cyert and March's theory also delves into the dynamics of organizational goals. Contrary to the classical view that organizations have clear, consistent objectives, they suggest that goals are often ambiguous, conflicting, and subject to change. This perspective acknowledges the complex nature of human behavior in organizational settings, where individual and group interests, power dynamics, and environmental factors play a crucial role.The book further explores how organizations learn and adapt over time. It examines the processes of problem-solving, decision-making, and goal-setting within firms, highlighting the importance of routines, rules, and standard procedures in shaping organizational behavior.\'A Behavioral Theory of the Firm\' has had a profound impact on the study of organizations. It laid the groundwork for future research in areas such as organizational learning, strategy, and decision-making. The theory is not just a cornerstone in academic circles but also offers practical insights for managers and leaders in understanding and navigating the complexities of organizational life.
The estimation of sales. The store operates on a six-month planning period. The individual department estimates dollar sales expected during the next six months. At the same time, sales are estimated on a monthly basis for each product class over the six-month period. Since the accuracy of the estimate is not especially critical (at least within rather broad limits) for the total output decision, we consider the organizational setting in which the estimate is made in order to understand the decision rules. A low forecast, within limits, carries no penalties. The forecast cannot, 133-
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Limits on the high side are specified by two penalties for making a forecast that is not achieved. First, achievement of forecasts is one of the secondary criteria for judging the performance of the department. Although the department cannot significantly affect the sales goal by underestimation, it can to a limited extent soften criticism (for failure) by anticipating it. Second, an overestimate will result in overallocation of funds. If the department is unable to use the funds, it is subject to criticism. As a result, the sales estimate tends to be biased downward. The primary data used in estimating sales are the dollar sales (at retail prices) for the corresponding period in the preceding year. Although the data are commonly adjusted slightly for "unique" events, the adjustments are not significant. The following naive rule predicts the estimates with substantial accuracy: 3
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RULE 1. The estimate for the next six months is equal to the total of the corresponding six months of the previous year minus one-half of the sales achieved during the last month of the previous six-month period. From the point of view of output decisions, the more critical estimates are those for the individual months. The monthly figures are used directly in determining advance orders for the individual seasons. The estimation procedure for a specific product class is as follows: RULE 2. For the months of February, March, and April. Use the weekly sales of the seven weeks before Easter of the previous year as the estimate of the seven weeks before Easter of this year. In the same way, extend the sales of last year for the weeks before and after the season to the corresponding weeks of this year.
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RULE 3. For the months of August and September. The same basic procedure as in Rule 2 is followed, with the date of the public schools' opening replacing the position of Easter. The opening dates of county and parochial schools also are significant. If these dates are far enough apart, the peak will be reduced, but the estimate for the two months will still represent the total sales of the corresponding two months of the previous year. RULE 4. For the months of May, June, October, November, and December. Estimated sales for this year equal last year's actual sales. RULE 5. For the months of January and July. Estimated sales for this year equal onehalf of last year's actual sales rounded to the nearest $100. This set of simple rules provides an estimate of sales that is tightly linked
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