3.4-corporate influences Flashcards
What is a corporate time scale?
when a business expects to gain a return on investments, and how far into the future they see strategies for.
What is short termism?
where firms make decisions over short time periods, rather than long term.
Signs of short termism?
-maximising short term profits
-investing less in research and development- may create poor quality products so competitors gain a competitive advantage
-more short term employment-
cheaper in short term, but employees may get demotivated and leave which increases recruitment and selection costs.
-invest less in training-makes employees less productive.
-High dividend pay outs to satisfy shareholders- less retained profit
-excessive focus on acquisitions rather than organic growth
causes of short termism
-stock markets- growing use of earnings per share used as a performance measure- boosts share buy backs so businesses buy shares in their own company to attract investors and encourage the sale of shares, by boosting the share price.
-threat of takeover-need to increase short term profit to make business look more successful, and harder to takeover.
-a hostile takeover is where the business doesn’t want to be taken over, so need to persuade shareholders to remain loyal.
effects of short termism
-long term profits threatened
-lose competitive advantage in overseas markets
-increased costs due to short term contracts
-businesses reluctant to invest in training and development to try reduce costs
What is subjective decision making
Make decisions based on intuition
What is evidence based decision making
Make decisions based on pervious data
What is corporate culture
The way that people do things or expect things to be done within a firm.
Incorporates the firms values and shapes behaviours of staff
How corporate culture is formed
1-leadership style- the leader will derive the culture of the business
2-types of ownership
-PLC- focused on profit to pay dividends
-LTD- focused on long term survival
3-recruitment policies- the attitudes of staff that a firm hires can affect the corporate culture eg. being all white, not many females
4-working conditions and rewards- affects employee motivation
-employees who feel valued more likely to have a strong culture
5-history of the business- if its a small firm that gradually grew, likely to have a strong culture
What is strong corporate culture
where the employees agree with the firms values and their behaviours are likely to fit in
they will be more satisfies and motivated, meaning they are more loyal which reduces turnover and increases productivity
what is weak corporate culture
where employees dont agree with the values of a business, and are likely to go else=where
what is classification of business culture
created by a philosopher called Charles Handy
he believed that an organisations culture is unique and shapes the values of a business
what is power culture
in a centralised structure power is limited to a few individuals
employees may be resistant to change if their opinion isnt taken into account
what is role culture
where authority is defines by your job title
highly defined structure
communication can be poor and slow
what is person culture
common in loose organisations of individual workers
individuals believe that they are superior to the business
businesses objectives come from the objectives of the individuals
customers come for the individuals not the business name
what is task culture
where teams of employees form that have the same level of expertise to take on problem solving and challenges
can be seen through a matrix structure
each team may set their own objectives
Why does corporate culture change
1- a new leader coming in and changing the culture to their preferences
2- business may need to change culture in order to become more competitive- adapt to changing customer needs and market trends quicker
difficulties of changing culture
-employees may resist
-can be hard to change the attitudes of staff who have been there a long time
-can be difficult to change a strong culture
-can be expensive- may require training
-needs effective communication
Stakeholders
anyone who has an interest or is affected by a business
internal stakeholders:
-employees, managers, owners, directors
-owners are the most important stakeholder as they want to maximise profit and they make decisions
external stakeholders:
-shareholders, customers, local community, pressure group, governments, suppliers
shareholders vs stakeholders
a shareholder is a type of stakeholder
-PLCs want businesses to maximise profit to pay shareholder dividends and satisfy them
other types of businesses can focus on other stakeholder groups
Stakeholder objectives
-employees:
-good pay and job satisfaction
-owners:
business growth and profit
-shareholders
want businesses to maximise profits so they gain higher dividends
want a high share price
-customers:
good quality product for a good price
-local community:
more jobs
less traffic and pollution
-Government
want businesses to pay tax and obey legislation
want more jobs created
-suppliers:
want businesses to make bigger orders
business ethics
-provides moral guidelines for whats right and wrong
an ethical decision is one thats morally right
Ethical decisions businesses may think about:
-Location- although it may be cheaper somewhere else, conditions may be poor
-suppliers- that dont exploit workers
-selling tactics-convince customers to sign up to a programme without telling them hidden costs
-pay- people are becoming increasingly concearned about the different levels of pay between different levels of staff
Trade off between acting ethically and profit
acting ethically means that a business will lose out on some profits due to higher costs- wagers, raw materials
this can lead to a trade off between acting ethically and profit
However, may not always be a trade off as customers are willing to pay more for ethically sourced products
Employees are more likely to remain within the business- lowers recruitment costs and turnover
Corporate social reponsibility
The voluntary act of protecting society and the environment
-Public are more aware about it so businesses now publicise it
Can do this by:
-Giving back to charity
-fair pay
-good working conditions
-sustainable sourcing
-looking after the environment
Benefits:
-can be profitable
-improve brand image
-attract investors and staff
-differentiate the business
-reduce costs
Drawbacks:
-can be expensive
-can reduce profits
-may conflict with business objectives
-can be window dressing- say they are doing it but arent actually
Why businesses should be concerned:
-customers more likely to remain loyal
-customers want to know what businesses are doing to support
