3.4-corporate influences

Question 1

What is a corporate time scale?

Answer 1

when a business expects to gain a return on investments, and how far into the future they see strategies for.

Question 2

What is short termism?

Answer 2

where firms make decisions over short time periods, rather than long term.

Question 3

Signs of short termism?

Answer 3

-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

Question 4

causes of short termism

Answer 4

-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.

Question 5

effects of short termism

Answer 5

-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

Question 6

What is subjective decision making

Answer 6

Make decisions based on intuition

Question 7

What is evidence based decision making

Answer 7

Make decisions based on pervious data

Question 8

What is corporate culture

Answer 8

The way that people do things or expect things to be done within a firm.
Incorporates the firms values and shapes behaviours of staff

Question 9

How corporate culture is formed

Answer 9

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

Question 10

What is strong corporate culture

Answer 10

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

Question 11

what is weak corporate culture

Answer 11

where employees dont agree with the values of a business, and are likely to go else=where

Question 12

what is classification of business culture

Answer 12

created by a philosopher called Charles Handy
he believed that an organisations culture is unique and shapes the values of a business

Question 13

what is power culture

Answer 13

in a centralised structure power is limited to a few individuals
employees may be resistant to change if their opinion isnt taken into account

Question 14

what is role culture

Answer 14

where authority is defines by your job title
highly defined structure
communication can be poor and slow

Question 15

what is person culture

Answer 15

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

Question 16

what is task culture

Answer 16

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

Question 17

Why does corporate culture change

Answer 17

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

Question 18

difficulties of changing culture

Answer 18

-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

Question 19

Stakeholders

Answer 19

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

Question 20

shareholders vs stakeholders

Answer 20

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

Question 21

Stakeholder objectives

Answer 21

-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

Question 22

business ethics

Answer 22

-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

Question 23

Trade off between acting ethically and profit

Answer 23

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

Question 24

Corporate social reponsibility

Answer 24

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