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Business > 3.4 influences on business decisions > Flashcards

3.4 influences on business decisions Flashcards

1
Q

What’s a corporate timescale

A

Refers to strategy and the expectation of when a return will be achieved

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2
Q

What is short termism

A

A quick financial reward

E.g. the business may be focused on monthly profit figures or quarterly sales figures, productivity and the cash position

Investing less in r&d and training

Return profits to shareholders

Pursue external growth

Focus on short term returns on investment

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3
Q

What should businesses with a short term perspective do

A

Look to invest in research producers that will give the business a competitive advantage

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4
Q

What does short termism do

A

Makes businesses fail to innovate and stagnate

Eg Kodak and blockbuster

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5
Q

What’s long termism

A

A business approach that incorporates CSR ( corporate social responsibility)

Considers ethical behaviour of the business in decision making

Investing in R&D and training

Staff development is seen as a long term objective of the business to regain and develop staff

Long term technology investments secure data for the future

Pursue the interests of stakeholders

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6
Q

What are the long term measures of success

A

R&D investment

Profit quality

Employee engagement

Sustainability

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7
Q

What are the short term measures of success

A

Cash position

Revenue

Profit

Productivity

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8
Q

What’s evidence based decision making

A

Decisions based on evidence or data which is trusted and valid or using tools like break even analysis

Evidence can be financial forecasts, the outcome of scientific research, organisational facts and figures, benchmarking with competitors

Decisions should be based on a combination of critical thinking and evidence

Decisions are made using evidence from multiple sources to increase the probability of a favourable outcome

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9
Q

What are the 5 steps of evidence based decision making

A
  1. Ask- translate a problem into a question
  2. Get evidence
  3. Appraise the evidence
  4. Apply evidence to problem
  5. Assess outcome of decision
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10
Q

benefits of evidence based decision making

A

Data can help reduce the risk in decision making

Data can help identify the likely outcome

Data can help compare alternative options

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11
Q

Drawbacks of evidence based decision making

A

Data can be hard or expensive to collect, especially for small businesses

Sometimes data is unavailable, out of date or unreliable

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12
Q

What’s subjective decision making

A

Decisions based on experience, personal perspectives, feelings and opinions without having supporting data

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13
Q

Benefits of subjective decision making

A

Intuition might come from experienced managers which is useful when making qualitative decisions like the character of a new employee or the potential success of a new marketing campaign

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14
Q

Drawbacks of subjective decision making

A

Without evidence in the form of data decisions based on intuition will always be risky

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15
Q

Why are large corporations more likely to use an evidence based approach to decision making

A

Due to the level of financial risk involved in corporate decision making, they’re more likely to use an evidence based approach to reinforce the opinions of senior managers

They may also have specialist functions and business analysts to produce and analyse evidence whereas smaller businesses do not

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16
Q

What’s a corporate culture

A

The culture of an organisation includes the traditions, rituals, attitudes and values that make up the way the business is run and the way employees interact with each other

Charles handy described it as ‘the way we do things round here’

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17
Q

What are the features of a strong culture

A

Good communication with employees -> they understand what needs to be done -> more confident and motivated

Focus on core values which should stem from mission statement

The recruitment team try to find individuals who beat fit the culture of the business. Links to Maslow

The culture is usually based around the history,tradition and founders of the business

A sense of identity, belonging, togetherness

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18
Q

What are the features of a weak culture

A

Often leads to business failure

It will exhibit a demotivated workforce

There will be inconsistent customer service

It may be poorly managed

It will be very bureaucratic and lack flexibility to respond to a dynamic market

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19
Q

Examples of businesses with strong cultures and weak cultures

A

Strong- IKEA, Google

Weak- Amazon, Ryanair

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20
Q

How is a corporate culture formed

A

The role of the founders and owners- are key decisions still based around their ethos or influence?
Mottos
The nature of the business and what it sells
Language
The degree to which products sold have changed over time
Company song
The business environment when it started
Artefacts (uniform, badges)
Recruitment process of key staff
Rewards
Physical environment
Key personalities of leaders and employees
Ways of doing things
Symbols

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21
Q

What are the four organisational culture types according to handy

A

Power culture

Role culture

Person culture

Task culture

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22
Q

What is power culture (the spider web)

A

Very strong owner or manager at heart of the business who makes decisions eg Richard Branson, Duncan bannatyne

Few rules and procedures

Competitive attitude amongst employees to gain power

Tend to find it with small startup business but can also be found in bigger businesses

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23
Q

Benefits and drawbacks of a power culture

A

+ quick decision making

  • employees might not feel empowered
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24
Q

What’s role culture (temple)

A

Decisions are made through well established rules and procedures

The power to make decisions ples from the job title

Very bureaucratic and may involve lots of paperwork

Links to a tall structure

Eg the civil service

25
Q

Benefits and drawbacks of role culture

A

+ all employees have clear guidance on what they should do

  • lacks flexibility
26
Q

What’s task culture (grid)

A

The focus is a project that needs to be completed

The power comes from those who can accomplish the tasks and have the expertise eg car designer or oil rig engineer

Involves teamwork on a project, a team of experts working together

Eg scientific projects like cancer research or a car design

27
Q

Benefits and drawbacks of task culture

A

+ empowering and motivational -> links to Mayo for team work. Allows workers to be more creative -> gives them responsibility

  • may cause for-ordination problems -> workers coming from different departments might have different viewpoints/ objectives
28
Q

What’s person culture (Petri dish)

A

Groups of similar skilled people to share expertise and knowledge

They all work of a client by client basis rather than on a project by project basis such as in task culture

Eg lawyers, accountants, vets, architects and doctors

29
Q

What are the problems of changing an established culture

A 
Strong cultures are hard to change because a culture consists of interlocking factors:
Set of goals
Roles
Processes
Values
Communications practices
Attitudes
Assumptions

Changing culture is also a long process and it may require significant training of the workforce

Large organisations may have more than one culture

Culture is deep set and is not easy to change

30
Q

What can a strong culture lead to

A

Can lead to a competitive advantage as it can lead to a creative, innovative, cohesive or highly motivated organisation

31
Q

What’s an internal stakeholder

A

Those inside a business who may be affected by corporate decision making

Eg:
Employees
Managers
Owners

32
Q

What’s an external stakeholder

A

Those outside the organisation who are affected by decisions made by the business

Eg:
Customers
Competitors
Suppliers
Community groups
Unions
33
Q

What are stakeholders

A

Anyone with an interest in the business or who may be affected by the activities of the business

34
Q

What are the internal stakeholders interested in and what is their level of interest?

A

Employees- (high) want to know about job security

Managers- (high) want to know about budgets, targets and profit

Owners- (high) interested in major decisions as they want to know about strategic objectives and profit

35
Q

What are the external stakeholders interested in and what is their level of interest?

A

Customers- (medium) want good value for money and reliable products but not interested in profits ect

Competitors- (low) more interested in whole market and their own customers

Suppliers- (high) want their products to sell

Community- (medium) want employment, investment in local area and no pollution

Unions- (high) want to make sure employees are being treated correctly

36
Q

How much power do internal stakeholders have over decision making

A

Employees- (medium) some power as to stay motivated their ideas need to be heard and considered

Managers- (high) have more power over day to day decision making

Owners- (high) lots of power as they’re at the top of the hierarchy.

37
Q

How much power do external stakeholders have over decision making

A

Customers- (high) their actions determine the decisions businesses make

Competitors- (low) aren’t really involved with other businesses’ decisions

Suppliers- (low) the business usually has control over them and can go elsewhere

Community- (low) can voice their opinions but they don’t usually have a lot of say in the decisions

Unions- (high) they’re representatives of the employees

38
Q

How does the customers objective of product availability, low prices, promotions and quality conflict with owners’ objective of higher profit

A

Owners can’t make a higher profit if customers want good prices, promotions and good quality

39
Q

How does suppliers objective of good credit terms, contract and profit margins conflict with owners objective of higher profit?

A

If owners give suppliers higher profit margins by paying them more, they owners profit will decrease

40
Q

How does the governments objective of all businesses following all the rules and paying taxes conflict with the owners objective of high profit

A

Following the rules and paying tax costs the business more which lowers profit and they want to open more stores to gain market dominance but the CMA won’t allow it

41
Q

How does the unions objective of good pay rates and rights for workers conflict with owners objective of high profit

A

It costs the business more which will reduce profits

42
Q

How does employees objective of job security and wanting the business to make a profit conflict with owners objective of high profit

A

Both want profit but job security increases costs for the owner which will reduce profit

43
Q

How does managers objective of wanting to know about budgets, targets, promotion, profit and bonuses conflict with owners objective of high profit

A

Both want a profit but if managers want promotions and bonuses it will lower profits and owners may externally recruit

44
Q

How does competitors objective of market share, profit, promotions and customer loyalty conflict with owners objective of high profit

A

Both want higher profits and more market share but for different businesses

45
Q

What are business ethics

A

The principles and standards that determine socially acceptable conduct in business

46
Q

What’s social responsibility

A

The obligation a business has to maximise its positive impact and minimise its negative impact on employees, customers, society and the environment

47
Q

What are pressure groups

A

Organisations that try to make business change their behaviour.

Many pressure groups argue a business should pursue other socially responsible goals alongside its drive for profit.

48
Q

What’s ethical decision making

A

Following codes of practice that embody moral values. The objective is to do the right thing, acting with honesty, integrity, and taking into consideration the interests of everyone affected by the decision

Ethical decisions woukd recognise that the law may not necessarily protect the interests of all stakeholders and therefore the business must set its own standards

Business that follow this approach must be rigorous and consistent in their decision making

49
Q

What 4 things are involved in ethical decision making

A

Environment- businesses will ensure they’re sustainable and don’t sam anger the environment

Workers- ensure employees have good working conditions, fair pay and care for their well-being and health

Corruption- will do business in a fair, honest and open way

Technology- ethical debates around the development of some new technologies

50
Q

How is there a trade off between profit and ethics

A

Adopting an ethical stance and being socially responsible increases business costs and reduces profitability

Implementing and monitoring this behaviour can be time consuming and expensive

Often cheaper to cut corners and behave unethically

Unsustainable resources are often cheaper

BUT…

Some ethical companies are highly profitable
Ethical behaviour can increase motivation and enhance leadership

51
Q

What are the advantages of behaving ethically

A

Favourable media attention

Improved public image-> increased sales + brand loyalty

Ethically produced products can carry a premium price without damaging sales

More motivated workforce and possible increases in productivity

Improved relationships with suppliers leading to better quality service

Can be profitable

52
Q

Disadvantages of behaving ethically

A

Labour costs are increased as fair wages and conditions are implemented

Supplies and materials which are ethically sourced may be more expensive

Can increase costs

Changing an existing method of production and the corporate culture can be expensive

Competitors may be less ethical so have lower costs/ prices

53
Q

Explain about pay and rewards

A

Many top managers get large salaries and also huge bonuses

Bonuses are usually associated with good performance and act as an incentive to managers to work hard but often these bonuses are paid despite poor performance due to the argument that without them, the managers would move elsewhere

Shareholders are unhappy because excessive pay reduce their return on investment

54
Q

What’s corporate social responsibility

A

Taking decisions in a way that takes into account all stakeholder’s interests

Treating employees, customers and suppliers fairly, avoiding polluting activities and contributing positively to lives in the local community might be a part of this

55
Q

What are the reasons for implementing a CSR policy

A

A genuine desire to behave responsibly (altruism)

A wish to show a positive public image

A positive marketing ploy

A smokescreen to hide behind

Wanting to fit in

56
Q

What are some positive spin-offs from implementing a CSR policy

A

Can help foster a good public image and reputation

Can increase sales

It improves stakeholder relationships and reduces potential conflicts

57
Q

Does a CSR policy mean a business is ethical

A

No

58
Q

Why is behaving ethically expensive

A

Pay employees higher wages

Often better working conditions

Ethical sourcing is more expensive

Monitoring and taking responsibility for supply chain can be expensive -> additional staffing costs

59
Q

What can behaving ethically do for motivation

A

Can increase motivation and brand image -> better quality employees want to work there and less staff turnover -> lower costs in long term

Business (18 decks)

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