Business Decisions

Question 1

Define Strategic Decisions

Answer 1

These decisions will affect the entire business and will be made by the owners or senior management.

Are long term and will affect the direction the business

Question 2

Define Tactical Decisions

Answer 2

Tactical decisions are less complex than strategic decisions and are usually carried out by middle management.

Medium term

Question 3

Define Operational Decisions

Answer 3

Are the day-to-day decisions made in a business.

These are lower-level decisions that tend to be short term and have little risk.

Question 4

Why is decision making a critical aspect of business

Answer 4

Decision-making is a critical aspect of business management, influencing the overall success, sustainability, and growth of an organisation.

Question 5

Define Scientific Decision Making

Answer 5

Scientific decision-making involves the use of facts and data in a systematic way in order to arrive at a logical and evidence-based decision.

Question 6

Define Intuitive Decision making

Answer 6

Intuitive decision-making uses experience and intuition (gut feeling) to make decisions.

Question 7

Define Decision Trees

Answer 7

A method of tracing the alternative outcomes of any decision

Question 8

What are the advantages of Decision Trees

Answer 8

• Clearly lay out the problem so that all options can be considered.
• Allow managers to analyse fully the possible consequences and risks of a decision.
• Help secure investments

Question 9

What are the disadvantages of Decision Trees

Answer 9

• Can oversimplify a decision and focus too much on the financial outcome and so they forget about the external factors
• Probabilities are difficult to predict and may reflect bias.
• There may be other options that are not included in the decision tree.

Question 10

What are the parts of a decision Tree

Answer 10

Decision trees have three main parts: a root node, leaf nodes and branches.

Question 11

Define CPA

Answer 11

Critical path analysis is a method of planning and controlling large projects and is used to make decisions on the management of resources and time.

Question 12

What is the process of a CPA diagram

Answer 12

• Identify and prioritise the activities
• Identify which activities MUST be done before others
• EST – identify earliest start time
• LFT – identify latest finish time
• Identify the FLOAT – tasks which can be completed outside the critical path
• Identify the critical path – points connecting ESTs and LFTs (where these are the same)
• An activity without spare time is CRITICAL
• Spare time is referred to as the FLOAT

Question 13

What are the advantages of a CPA diagram

Answer 13

• Can be used to give a business competitive advantage by being more efficient
• Allows effective management of resources. Allocating factors, such as labour, to where they are needed and can be most effective.
• Improves overall management of projects

Question 14

What are the disadvantages of a CPA diagram

Answer 14

• CPA can give the wrong results or fail to allow for external factors that will influence the total time taken.
• Sub-contractors, who may be completing some of the activities on a project, can be outside the control of the project manager.
• Just estimates may not be accurate

Question 15

Define CBA

Answer 15

Cost benefit analysis is a method for measuring, in financial terms, the costs and benefits of an investment project.

It considers external costs and benefits to society as well as the costs and benefits to just the business.

Question 16

What are the two types of costs and benefits

Answer 16

• Private Costs and Benefits
• Public Costs and Benefits.

Question 17

Define Private costs

Answer 17

These are costs that the business making the investment must accept.

For example, they include training and recruitment costs, the purchase of new capital equipment, marketing costs etc.

Question 18

Define private Benefits

Answer 18

These are benefits that the business gains from because of making the investment.

For example, benefits will include things such as increased productivity, increased sales, brand values and increased profits.

Question 19

Define Public Costs

Answer 19

• These are costs external to the business making the investment.
• A building company will have an environmental impact as it builds houses – increased traffic, noise etc.

Question 20

Define Public Benefits

Answer 20

• These are benefits external to the business that result from making the investment.
• In areas where unemployment is high, crime and social problems might be reduced.

Question 21

Define Social Costs and Benefits

Answer 21

Social Benefit (private benefit + public benefits)

Social Cost (private costs + public costs)

• If the social benefits are greater than social costs, then go ahead with proposal.
• If the social costs are greater than social benefits, then do not go ahead with proposal.

Question 22

What are the advantages of CBA

Answer 22

• Considers a wide range of benefits and costs.
• Impacts on society and the community are included.
• Puts a value to external benefits and costs that would normally be ignored by private sector businesses.

Question 23

What are the disadvantages of CBA

Answer 23

• Hard to measure values of intangable costs and benefits
• Will all stakeholders be included in the calculation of social costs and benefits?
• Can include Bias to monetary values

Question 24

Define Stock Inventory

Answer 24

• Stock Inventory – Decisions on when to order new stock, how to manage deliveries, or on staffing levels can be calculated and implemented by IT systems

Question 25

Explain Information systems

Answer 25

• Information systems can collect inputs from several sources, organise the data then distribute the data to make the most efficient decisions.

Question 26

How do you draw CPA

Answer 26

Label the circle on the left with a number, put the hours and Letter of activity in between

start with the EST (at the top of the circle), make sure when deciding the EST between a point which join up put the highest time

then go back and do the LST

Question 27

Why are scientific based decisions good

Answer 27

Reduces the risk of failure

Especially good when used with corporate decisions (high risk)