1.2 Flashcards
Two types of criteria that affect business decision making
Internal criteria
External criteria
Examples of internal criteria
Financial considerations
Attitude to risk
Opportunity cost
Time
Talk about financial costs
Every organisation has limited funds therefore business decisions will be dependent upon their financial budget such as the cost of the decision upfront and on going costs and if finance can be sourced
Talk about attitude to risks
Risks are everywhere in business therefore attitude to risk is whether a business is willing to take risk for a particular decision some risks can be high level however result in a higher level of reward if successful however some businesses may chose to be risk averse which essentially means taking the safer option and not take risk
Talk about opportunity costs
Choosing one decision may rule out another decision for example if a business was to chose Option A it would rule out Option B therefore businesses need to think carefully which decision is more important and will drive more success towards the business
Talk about Time
When business decisions are made the business will need to deal with time availability in order to ensure that sufficient time allocated to the decision, there is enough time for planning and time to reap rewards
Examples of external criteria
Impact of external stakeholders
Changes in market
Changes in external environment
Talk about impact of external stakeholders
Business decisions that do not fit in with external stakeholders may lead to Increased conflict therefore businesses should consider impact on external stakeholders to help reduce conflict
List of external stakeholders
Financial institutions Customers Government Local community Pressure groups Media Suppliers
Talk about changes in market
Business need to make decisions that meet the requirements and needs of the market they operate in such as customer wants/needs
For example if a business was to launch a new product the factors they would need to consider would be price of competitors and price of raw materials and if the product is trending or a potential to be trending
Talk about changes In external environment
All changes in the present or future in the external environment need to be considered as some changes may have large impacts on a business An example of environmental external changes would be STEEPLE
What is STEEPLE
Social Technology Environment Economic Political Legal Ethical
Talk about social
Changes in social attitude and culture can change consumer buying habits
Talk about technology
Advances in technology can lead to a business/ staff becoming irrelevant unless they are able to keep up with technological changes
What is economic
Changes in the economy such as exchange rate, interest levels can affect consumer spending levels which can impact the business
