3.4 - Influences on Business Decisions Flashcards
long-term decisions
Affect the long-term mission and vision of the business over a period of up to 10 years.
Short-term decisions
Impact on objectives and tactics over the next few years, at most.
6 parts of the Short-termism approach
Maximise short-term profits
Minimise research and development investment
Maximise returns to shareholders
Pursue rapid external growth rather than organic growth
Invest less in HR, e.g. training
Prioritise short-term supply contracts.
Evidence based decision making
Involves taking a systematic and facts based approach when determining objectives, strategy and tactics.
Subjective decision making
Guided principally by the personal opinions and experiences of key decision-makers.
higher risk than evidence based.
Company culture
The character of the business, commonly referred to as ‘the way things are done here’.
Made up of shared beliefs and values.
Strong culture
Have a ‘can do’ attitude and are enthused by their work.
Strong belief that the business is a force for good.
Weak culture
A ‘them and us’ attitude between workers and management.
Employees may doubt the sincerity of the corporate mission.
High levels of staff turnover and low commitment amongst staff.
Handy’s 4 types of organisational culture.
Power Culture
Role Culture
Person Culture
Task Culture
Power Culture
Decision-making carried out by a small number of powerful individuals, usually top of hierarchy.
Role Culture
Key decisions are made by those with specific job roles.
Power lies with those with job titles, rather than desirable skills.
Employees expected to understand their hierarchical place.
Task Culture
Decisions made by teams made up of employees with specific skills.
Power lies with those with task-related skills.
Teams created and dissolved as projects are started and completed.
Emphasis on adaptability and teamwork.
Person Culture
Individuals with extensive experience and skills are loosely brought together to make a decision.
Individuals have high power to make their own decisions and able to work autonomously (by yourself).
Very common in accounting and law.
Corporate culture
Forms over time as a business grows
3 factors causing difficulties of changing existing organisational culture.
Identifying contributing factors, takes time to fully understand.
The existence of sub-cultures.
Overcoming resistance to change
Stakeholders
Individuals or groups that affect or are affected by the actions of a business.
Internal and external stakeholders.
Internal stakeholders
Individuals or groups inside the business.
e.g. employees, managers and directors, business owners.
External stakeholders
Individuals or groups outside of a business.
e.g. customers, shareholders, suppliers.
Stakeholder Approach
focuses on interdependencies between stakeholder groups and take steps to ensure that benefits are shared equally amongst them.
Likely increase costs, e.g. meeting employee needs by better working conditions/higher wages.
Shareholder Approach
Focuses on meeting the needs of shareholders.
Maximising profits in order to increase dividends and improve the share price.
4 sections business ethics will feature heavily in
Recruitment documentation and HR procedures.
Induction and training programmes.
Performance management cycles and reward systems.
Promotional literature and other communications.
Ethical businesses
Attract long-term loyalty from employees and customers, a useful competitive advantage.
Ethics in pay
Gender pay gap and Minimum wages.
Ethics in socially responsible activities.
Sustainable sourcing of raw materials and components.
Responsible marketing
Protecting the environment, e.g. Pret bring own cup.
Responsible customer service.
Benefits of CSR (Corporate Social Responsibility)
Enhance business image and reputation.
Attractive to many stakeholders.
Very profitable as it adds value for many stakeholders.
May improve employee motivation and productivity.
Help recruit strong candidates for jobs advertised.
