3.4.1 Corporate Influences Flashcards
Short termism
Where a business priorities it’s short term reward rather than long term rewards such as investment in research and development, staff or technology
Long termism
Where a business is focused on sustained growth through building long term relationships with suppliers and external shareholders, significant investment in research and development
Short termist performance measures
Share price, revenue growth, gross and operating profit, unit costs and productivity, return on capital employed
Long termist business performance
Market share, quality, innovation, reputation, development of employee skills, sustainability
Indicators of short termism
Financial incentives, failing investment in r and d, high dividend payments
Indicators of long termism
Family like corporate culture, long term investment into r and d, focus on innovation and customer service
Evidence based decision making
Where a business makes strategic decisions after analysing and evaluating relevant evidence. Businesses use quantaitive sales forecasting, decision trees, investment appraisals…
Subjective decision making
Is less structured and more about the experience and intuition of the business owners and managers. Decision from this perspective may require a more entrepreneurial and risk taking managerial approach
Advantages of subjective decision making
Based on intuition and gut feeling, quicker decisions can be made, necessary in fast moving environment to stop preventing kissing opportunities
Disadvantages of subjective decision making
Dominant leader may push unwanted decisions forward, hard to justify these decisions especially when they involve lots of risk
Advantages of evidence based decision making
Based on evidence and data, outcomes can be tested in advance
Disadvantages of evidence based decision making
Decisions are objective, only reduced risk, may not eliminate, time consuming and costly with no guarantee of the right decision being made
