3.4 Influence on business decisions

Question 1

Short Termism

Answer 1

Short Termism- Where firms make decisions to increase financial performance over short time periods, often at the expense of long term performance.

Question 2

Characteristics of a short term approach

Answer 2

• Reduce prices to entice customers
• Seek cheaper raw materials to widen profit margins
• Freezing employees pay when in financial trouble
• Paying extra dividends to shareholders

Question 3

Long Termism

Answer 3

Long Termism- When a firm concentrates on the overall performance of the business, rather than just its short term financial state.

Question 4

Characteristics of a long termist approach

Answer 4

• Differentiate your product
• Build and develop a distinctive brand
• Investment in market research
• Invest in R+D
• Reinvest profits to expand capacity

Question 5

Evidence based decision making

Answer 5

Evidence based decision making- an approach to decision making that involves gathering information and using a systematic and rational approach to reach a conclusion

Question 6

PRO of Evidence based

Answer 6

Reduces risk of poor decisions

Based on evidence such as financial forecasts or business reports and tools

Question 7

CON of Evidence based decision making

Answer 7

• Data can be expensive to collect
• Is slower and maybe too slow
• Relies on future being similar to the past

Question 8

Subjective decision making

Answer 8

Subjective decision making- An approach to decision making where the personal opinions of the key decision maker strongly influence the course of action chosen.

Question 9

PRO of Subjective based decision making

Answer 9

• Fast

Question 10

CONS of subjective based decision making

Answer 10

• Based on thoughts and no data so is very risky
• Unsuitable for business with high degree of risk
  Cn lead to avoidable failure

Question 11

Corporate Culture

Answer 11

Corporate culture= sums up the spirits, attitudes, behaviours and ethos of an organisation

Question 12

Strong Culture

Answer 12

Strong culture = a culture where the values, beliefs and ways of working are deeply embedded within the business and its employees

Question 13

Characteristics of strong culture

Answer 13

• a clear sense of shared beliefs and behaviours exist
• A united view among staff that the organisation is a force for good
• Staff will stick together and be more motivated
• Employees are more productive
• Staff are more loyal, preventing labour turnover and industrial action

Question 14

Weak culture

Answer 14

Weak Culture= When the core values are not clearly defined, communicated or widely accepted by those working for the organisation

Question 15

Characteristics of a weak culture

Answer 15

• There is likely to be a feeling of them and us
• A cynical view among staff doubting the company’s principles and ethos
• Built on rigid procedures which is resented by staff
• High chance of conflict
• Lack of pride from staff
• departments work independently
• Low staff retention
• Poor reputation