3.4.1 Corporate influences

Question 1

corporate influences

Answer 1

internal factors affecting business decisions

• short term vs long terms
• scientific vs intuitive

Question 2

short and long termism

Answer 2

-corporate timescales refer to strategy (medium/long term action plan to achieve objectives) and expectation of when a return (profit) on investment will be achieved

Question 3

short-termism

Answer 3

-where a business prioritises short term rather than long term performance
-quick return
-minimise costs = sales weekly (quick financial reward), profit monthly growth quickly
-ensure share value/price is high - investment plcs
-aims/objs = profit and sales maximisation == benefits of meeting short term goals (daily sales target)
-PLCs under pressure to produce divdends for shareholders
-short term gains at expense of long term gains
-short term profit at expense of long term investment in R&D)
e.g.
share price, revenue/turnover growth, operating and gross profit, unit costs and productivity, return on capital employed

Question 4

why concerned with short term performance

Answer 4

• stock market (investor) focus on latest financial performance == SHs sells, value decrease = hostile takeover
• reliance on bonuses based on short term performance
• frequent changes in leadership and strategy (through takeover)

Question 5

long-termism

Answer 5

whole business approach

• ability of a business to invest in projects over a longterm
• meet as many stakeholders as possible
• focus on R&D long term investment
• organisational culture and socially response
• GP/OP low
• invest in staff development (invest in workforce)

Question 6

focuses of long-termism approach

Answer 6

• invest in CSR (corporate social responsibility
• consider ethical behaviour on decision making
• R&D = long term goals and tech investment
• staff development = long term development of business

e. g.s of long termism
- market share, quality, innovation/customer service, brand/business reputation, employee skills and experience, social responsibility, sustainability

• family ownership or family like corporate culture
• generational continuity, lean organisational hierarchies
• independant, flexible
• take CSR seriously

Question 7

pros of short and long termism

Answer 7

short termism

• shareholders/investors see if reliable and satisfys them
• forces business to perform better sooner

long termism

• satisfy as many stakeholders
• improve brand image & efficiency gains

-if dont have finances to support approach =longer to gain

Question 8

evidence based decisions

Answer 8

• based on evidence and objective, numerical data which is valid and trusted information
• based on availability and reliability of data
• managers experience = use evidence if no expertise
• risk willing to accept = evidence is less risky
  e. g decision by Tesco about whether to start up new chain of tesco car supermarkets
• uses decision trees = allows to compare 2 or more options, examines probability of outcome for decision
• probability x outcome = estimated value

Question 9

tools for evidence based decisions

Answer 9

break even 
ration analysis 
investment appraisal 
sales forecasting techniques (correlation) 
decision trees

Question 10

scientific model

Answer 10

used for evidence/data based decisions 
O- objectives (Set) 
D- data (gather, qualitative and quantitative) 
A- analyse (Data)
D- develop (strategy/coherent plan) 
I- implement (strategy/plan) 
R- review (control results) 

look at:
exchange and interest rates, government restraints, competition, marker characteristics, state of economy

Question 11

instinct/subjective based decisions

Answer 11

• relating to a business which are based on personal perspectives, feelings, opinions
• decision based on gut feeling/intuition
• hunch
• if data unavailable inaccurate
• relys on experience& managers need to make decision
  e. g. decision by Cadbury on whether to launch new orange dairy milk bar

Question 12

benefits and drawbacks of evidence based

Answer 12

benefits:
- objective = throughly asses all possibilities/trade offs
- quantifies risk and reduce bias
- allows decisions to be monitored and reviewed
- data = guidance for managers with limited intuition through lack of experience

drawbacks:
- depends on quality of data (out of date/unreliable) and on quality of manager analysing the data
- doesnt guarantee correct decision
- time consuming
- experience/expertise of staff not considered

Question 13

benefits and drawbacks of subjective decision making/intuition based

Answer 13

benefits:
- useful in stable markets
- enable quick response (1st mover advantage) & enable fast decisions in complex/unfamiliar decisions
- useful for small business

drawbacks:
- ineffective - lack of experience
- risky dont consider all possibilities
- emotions could cloud judgements
- may not have appraised all alternatives

Question 14

corporate objective

Answer 14

overall business obj designed to steer a business towards achieving its overall mission

• influenced by..
• business ownership (private sector = profit maximisation, public sector = providing for societal need)
• internal and external business environment

Question 15

7 factors affecting decision making

Answer 15

1. reward for manager
2. risk and uncertainty
3. opportunity costs
4. business missions and obj
5. ethical position
6. external environment
7. resources

Question 16

external environmental factors

Answer 16

political 
economic  
social 
technological 
legal
ethical & environmental 
competition