3.4- Influences on business decisions Flashcards
Define corporate timescales
Refer to strategies and the expectation of when a return will be achieved
Explain corporate influences as a influence on large corporation business decisions
A business will base it’s strategy on short and long term objectives
Explain corporate culture as a influence on large corporation business decisions
The culture of a firm can influence decision making. If a business culture is more resistant to change, decisions are likely to be more cautious and involve less risk.
Explain stakeholder perspective as a influence on large corporation business decisions.
Some corporations take a shareholder approach to decision making, where the views of shareholders influence decisions and other stakeholders are marginalised
Explain business ethics as a influence on large corporation business decision
Corporations with a strong ethical stance are likely to make different decisions from those that have little regard for ethics, are less likely to make decisions that threaten the environment or local community
Define Short termism
Is an approach used by a business only interested in a quick financial reward.
What does a business with short termism thinking include (7)
Maximise short term profits- aim to increase shareholder value by minimising costs and maximising revenue.
Invest less in research and development- is a high expense and financial returns may take years to occur
Invest less in training- is expensive and returns are not immediate
Return cash to shareholders- dividends are given to shareholders instead of being reinvested for the long term
Engage in asset stripping- acquire other businesses and will sell profitable parts to generate cash for the shareholder of the predator
Arrange more short term contracts- employ more temporary staff, favour short term leases and use short term supplier contracts.
Pursue external rather than organic growth- organic growth is considered too slow and growth through mergers and takeovers is desired
Explain the drawbacks of short termism (4)
The long term profitability of a firm is threatened and potential long term opportunities are overlooked
Firms will lose it’s competitiveness, failure to invest will lead to a fall in market share
Making quarterly reports, to assess short term financial performance, is time consuming
Over reliance on short term contracts will increase costs
Define Long termism
Is an approach used by a business that looks to be sustainable, growing and making profits in the long term
Define Evidence based decision making
What does it include
Requires a systematic and rational approach to researching and analysing all the available information before a conclusion is reached.
Identifying objectives, collecting and analysing information, making a decision, outcome, evaluating the results
Define Subjective based decision making
When is it appropriate (4)
Is where the personal opinions of the key decision makers strongly influences the decision.
There is a lack of current and accurate information
Some corporations are dominated by powerful and persuasive leaders which is acceptable if the leader is experienced
Industries where it is appropriate (fashion)
When decisions have to be made quickly
Define the organisational culture
Is the values, attitudes, beliefs and norms that are shared by people and a business
Define a strong culture
Is a culture where the values, beliefs and ways of working are deeply embedded within the business and it’s employees
Define a weak culture
Is a culture where the values, beliefs and ways of working are not widely shared within the business, employees rely more on personal norms and values.
Explain the advantages of a strong corporate culture (4)
Provides a sense of identity for employees
Workers identify with other employees, helping with teamwork
Motivates workers, leading to increased productivity
Prevents misleading values between businesses and employees
Explain a power culture as a corporate cultures
Is one where there is a central source of power responsible for decision making. There is a competitive atmosphere between employees, where they compete to gain power to allow them to achieve their own objectives.
Explain a role culture as a corporate cultures
Decisions are made through well established rules and procedures, power is associated with the role that individuals have rather than with the individuals themselves
Explain a task culture as a corporate culture
Power is given to those who can accomplish tasks , power lies with those with expertise.
Explain a person culture as a corporate culture.
One where there are a number of individuals in the business who have expertise, the purpose of the organisation is to support those individuals with people with a similar skill set and training. E.g. a doctor or lawyer
Explain the effects of organisational culture (4)
Motivation- has a direct effect in the way in which staff treat each other, motivation is likely to be greater in a culture that respects its workers
Organisational structure- in a personal culture the hierarchy is likely to be fairly flat as a number of key workers share the senior management roles
New management – in order for a change in the corporate culture of a firm, new management is needed to confront the existing culture and cause change
Mergers and takeovers – each business is likely to have a different culture, went to organisations process the creation of a single business it will require the changing of corporate culture
Define a stakeholder
Is a person, group or organisation who have a interest in the business and their actions
Define an internal stakeholder
Explain the different internal stakeholders (3)
Are groups of people within the business who have an interest in its survival and well-being
Shareholders - stand to gain or lose financially from the performance of the business
Employees - work for the business and depend on it for income
Managers - have the responsibility to organise, make decisions, plan and ensure work is carried out by employees
Define an external stakeholder
Explain the different external stakeholders (7)
Are groups of people outside the business who have an interest its activities
Shareholders - most shareholders in large firms are not involved in its day-to-day running but have a financial interest in the firm
Customers- Buy the goods and services that the business sells, providing the revenue the firm needs to survive
Creditors – lend money to the business and expect the money to be paid back so want the firm to do well
Suppliers - provide materials and utilities to the firm and require prompt payment and regular orders
Local community – have a positive impact, employing people locally, and a negative impact, environmental consequences
Government - want the firm to do well to provide employment and generate taxes
Environment - activity can cause toxic waste, water and air pollution opposed by pressure groups
Explain the conflicts that can occur between stakeholders (5)
Shareholders and employees – meeting employees objectives of higher wages is a cost that shareholders do not want to pay
Shareholders and customers – conflict arises if the firms charges higher prices to customers
Shareholders and managers – managers may look to profit satisfice whilst shareholders will want to profit maximise
Shareholders and environment - putting more environmentally friendly practices into place is costly for a firm
Shareholders and the government – conflict is likely if firms break the law, by not complying to legislation or avoiding taxes
