3.4 Influences on business descisions Flashcards
what are corporative objectives?
specific targets set for the whole firm to reach in a given time period to achieve the corporate aims, they are SMART
corporate to functional to team to individual objectives
what are corporate aims?
a generalised statement of where a business is heading, it is a long term plan from which business objectives are derived.
What is short-termism
when actions of managers over-prioritise immediate issues, ignoring long-term ones
Name 4 main causes of short-termism
-relationship between plcs & financial markets; city investors have more shares in plcs than private investors
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Name 5 effects of short-termism
-inadequate expenditure on research & development
-accounting adjustments that inflate current earnings
-willingness to cut workforce quickly -> high labour turnover
-focus on takeovers to grow rather than organic growth
-minimal training budgets
Name 3 effects of long-term thinking
-companies willing to show more patience will often find themselves in a better position competitively in the long term
-however, to do this requires the removal of many of the pressures that lead to short-termism
-a great example of long-term thinking can be found in Germany. Major plcs play a far smaller role in the German economy, which is dominated,
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Name 3 effects of long-term thinking
-companies willing to show more patience will often find themselves in a better position competitively in the long term
-however, to do this requires the removal of many of the pressures that lead to short-termism
-a great example of long-term thinking can be found in Germany. Major plcs play a far smaller role in the German economy, which is dominated,
-
Name 3 effects of long-term thinking
-companies willing to show more patience will often find themselves in a better position competitively in the long term
-however, to do this requires the removal of many of the pressures that lead to short-termism
-a great example of long-term thinking can be found in Germany. Major plcs play a far smaller role in the German economy, which is dominated,
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What is product differentiation
a businesses attempts to make its product stand out from those of rivals -> through marketing, design or quality
Explain Ansoff’s Matrix
Products
Existing New
Existing Market Product
Penetration development
Mrket
New Market Diversification
development
What is market penetration
the commonest and lowest risk strategy -> involves boosting market share through selling more of the same product to the same target market
-methods for this:
+finding new customers within the target market
+taking new customers
+increasing usage of the product among existing customers
risks
What is market development
-selling existing products in a new market
What is a major risk of market development
-company may not understand consumer behaviours in the new market
What is product development
-selling a new product to an existing market
-likely to have a good understanding of customer wants and needs
What is a risk of product development
-new product in an existing market -> must ensure the new product meets customers exact wants and needs
What is diversification
selling new products to new markets
-selling new products to customers whose tastes you have no experience -> tough
-can bring very high rewards
Why is diversification risky
-selling new products to customers whose tastes you have no experience -> tough
Name 2 risks and rewards of market penetration
risks
-potential declines in product life cycle
-lack of ambition from staff
rewards
-know the customers & competitors
-returns on extra investment will be predictable
Name 2 risks and rewards of market development
risks
-subtle cultural differences add hugely to risk
-practical differences matter
rewards
-huge potential economies of scale
-potential for glocalisation
Name 2 risks and rewards of product development
risks
-most new products fail -> risk level is high
Name 2 risks and rewards of diversification
rewards
-can transform size and opportunities for the business
-exciting for workforce -> motivates
What is a SWOT analysis
-identifies businesses:
strengths, weaknesses, opportunities, threats,
What is a top-down approach in terms of SWOT analysis
uses external management consultants working directly with the boss of the business
Benefits and drawbacks of a top-down approach
+detachment from company culture may allow aspects of the business to be seen in new lights
-managers may fail to share all info with those conducting SWOT analysis to present business in a more favourable light
What is a consultative approach in terms of SWOT analysis
when a boss travels around the business
-allows for more thorough analysis about what works well and what doesnt
-can do this by engaging with workforce, diff employees
Benefits and drawbacks of a consultative approach
+greater insight from wider range of contributors
+chance for boss to gain first hand understanding
-staff may feel less willing to point out issues
What are key performance indicators
quantifiable measures of aspects of a business’s performance that the business considers to be the main determinants of its commercial
Name 6 examples of commonly used KPIs
-staff turnover
-brand recognition
-unit
What is evidence-based decision making
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What is subjective decision making
What is corporate culture
sums up the spirit, attitudes, behaviours and the ethos of an organisation
What is a strong culture
What is a weak culture
Name 4 signs of a strong culture
-focusing on customers real needs -> allowing staff to make decisions
-staff show a real feeling for the organisation as ‘us’ as a long-term commitment
-a united view among staff that the organisation is force for good
-sticking together and working together at a time of crisis
Name 4 signs of a weak culture
-staff follow a script when dealing with customers (untrusted)
-‘us’ tends to be a department, not the business
-cynical view among many staff -> doubting company’s supposed principles and ethos
-when things look bad -> better qualified staff look to find another job
Name Handy’s 4 classifications of cultures
-power culture
-role culture
-task culture
-person culture
What is a power culture
occurs when there is one/ a small group of extremely powerful ppl leading an organisation
Name 3 characteristics within a power culture
-everything goes through boss
-communication is through personal contact
-autocratic leadership style
What is role culture
is when power is based on position in hierarchy
-dominated by rules and procedures
Name 4 characteristics of role culture
-power depends on position within organisational structure
-culture is bureaucratic
-organisation will struggle to cope with rapid change
-leadership style is likely to be autocratic
What is a bureaucratic organisation
initiation stifled by paperwork and checking and re-checking of actions
What is task culture
when the project is the central focus
-senior managers allocate projects to teams of employees
Name 3 characteristics of task culture
-each project team is formed for a single project
-individuals power depends on their expertise rather than status within the organisation
-employees become used to working with staff from other departments -> understand diff perspectives
What is person culture
-indivudals have become more important than organisation
-individuals form groups where they share knowledge and expertise
-operating outside restrictions of hierarchy
-empowered
-autonomous
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Name 3 characteristics of person culture
-staff are well paid
-leadership style is democratic
-staff feel sense of personal development
Name 3 factors affecting corporate culture
-leadership style -> organisations formed by an entrepreneur with a strong character who is still in charge may reflect that leaders personality
-type of ownership -> plcs are likely to place the need to satisfy stock markets above all else -> can create a culture where short-term returns are encouraged, unlike privately owne family firms
-recruitment policies ->
Name 4 reasons why people will resist attempts to changed culture
-self-interest
-low tolerance to change
-misunderstanding of the proposed change
-different assessments of theneed to change
Name 4 factors needed for successful cultural change
-clear purpose
-education and training
-consistency of communication methods and messages
-effective communication that change is going to happen
What are stakeholders
groups influenced by and influence operations of a business
What are shareholders
owners of a limited company
