Chapter 2

Question 1

3 differences between managers and leaders

Answer 1

• Managers organise and co-ordinate whereas leaders inspire and motivate
• Managers maintain the status-quo whereas leaders actively seek change
• Managers tend to have short-term goals whereas leaders have more long-term goals

Question 2

3 influences on decision making

Answer 2

• Type of decision that is being made
• Type of workforce
• History or tradition of the business

Question 3

3 examples of stakeholder

Answer 3

• Suppliers
• Employees
• Government

Question 4

What is the 4 sections of Tannenbaum Schmidt continuum and what do they mean

Answer 4

• Tells, Managers makes decisions and tell staff about it
• Sells, Manager sells decisions to staff
• Consults, Manager presents ideas that are subject to change
• Joins, Manager allows team to develop options and decide on actions defined by the manager

Question 5

One key feature of Autocratic leadership

Answer 5

Focus is on power with the manager with little/no consultation

Question 6

One key feature of Paternalistic leadership

Answer 6

Akin to a parent/child relationship – where the leader is seen as a “father-figure”

Question 7

One key feature of Democratic leadership

Answer 7

Focus of power is more with the group as a whole

Question 8

One key feature of Laissez-faire leadership

Answer 8

Leader has little input into day-to-day decision-making

Question 9

2 influences on management and leadership style

Answer 9

• The culture within the business
• The skills and ability of the workforce

Question 10

One benefit and drawback of Autocratic leadership

Answer 10

• Useful for times when quick decisions need to be made, such as in a crisis situation
• May lead to a lack of motivation amongst the workforce due to little or no consultation

Question 11

One benefit and drawback of Paternalistic leadership

Answer 11

• A softer form of authoritarian leadership, which often results in better employee motivation and lower staff turnover
• Employees may become dependent on the leader which could stifle creativity and innovation

Question 12

One benefit and drawback of Democratic leadership

Answer 12

• May lead to increased motivation as workers are consulted on key decisions within the business and may feel as though they are trusted
• Can slow down decision making due to the need to consult with employees

Question 13

One benefit and drawback of Laissez-faire leadership

Answer 13

• Employees are far more independent which can relieve stress on the manager
• Lack of structure and guidance can lead to a lack of direction and purpose

Question 14

Define decision tree

Answer 14

A decision tree is a mathematical model used to help managers make decisions. It uses estimates and probabilities to calculate likely outcomes. A decision tree helps to decide whether the net gain from a decision is worthwhile.

Question 15

Define risk

Answer 15

The possibility that events will not occur as planned, such as a negative outcome to a business decision

Question 16

Define reward

Answer 16

Something of value that is returned, for example, a potential benefit or gain from a particular business decision or investment

Question 17

Define uncertainty

Answer 17

A situation where there is a lack of knowledge in a particular situation i.e. the order of things is unknown, probabilities to possible outcomes are unknown and the impact of events/circumstances is unpredictable.

Question 18

Define opportunity cost

Answer 18

The next best alternative is foregone when a particular option is chosen.

Question 19

Formula for decision trees: expected value

Answer 19

Expected value of a decision with two possible outcomes - A & B = Pay-off of A × probability of A + Pay-off of B × probability of B

N.B. Probability of A + Probability of B = 1.0

Question 20

Formula for decision trees: net gain

Answer 20

Net gain = Expected value - initial cost of decision

Question 21

2 benefits and drawbacks of Scientific decision making

Answer 21

• Logical approach to decision-making based on information
• Encourages careful consideration of alternatives
• Collection of required data may be expensive and time consuming
• Decisions may be based on unreliable/historical data

Question 22

2 benefits and drawbacks of making decisions using intuition

Answer 22

• Decisions can be made quickly
• Encourages creativity and innovation
• Unsuitable for decisions that involve a higher degree of risk
• Could be more prone to bias due to a lack of data

Question 23

2 benefits and drawbacks of decisions trees

Answer 23

• Use of probabilities enables the “risk” of the options to be addressed
• Choices are set out in a logical way
• Probabilities are just estimates – always prone to error
• Uses quantitative data only – ignores qualitative aspects of decisions

Question 24

2 stakeholder needs for employees

Answer 24

• Job security
• Competitive pay and benefits

Question 25

2 stakeholder needs for customers

Answer 25

• Value for money
• After sales service

Question 26

2 stakeholder needs for local community

Answer 26

• Job creation
• Less pollution

Question 27

2 stakeholder needs for suppliers

Answer 27

• Regular and reliable orders
• Timely payment

Question 28

3 reasons why business should consider stakeholder needs to making decisions

Answer 28

• Decisions are likely to be accepted and implemented more easily
• Due to the growing public interest in business activities, firms will gain a more favourable reputation if they are seen to be actively trying to satisfy different stakeholder needs
• Productivity levels increase, due to a rise in employee motivation, which can lead to an increase in competitiveness

Question 29

2 different stakeholder needs that overlap

Answer 29

• Local community and pressure groups want business activity to impact favourably on the environment, for example in regards to pollution
• Banks & shareholders want a business that is performing financially well; banks can receive loan repayments on time & shareholders can receive a satisfactory level of dividend payment

Question 30

2 different stakeholder needs that conflict

Answer 30

• Shareholders & employees: shareholders may want short-term profits for a higher dividend payment; employees want higher pay levels which increases costs and may reduce profit
• Customers & suppliers. Customers may want low prices which may impact on the price a business pays to its suppliers

Question 31

What should you do for high shareholder power and high stakeholder interest

Answer 31

Manage closely

Question 32

What should you do for low shareholder power and high stakeholder interest

Answer 32

Keep informed

Question 33

What should you do for high shareholder power and low stakeholder interest

Answer 33

Keep satisfied

Question 34

What should you do for low shareholder power and low stakeholder interest

Answer 34

Monitor (Minimum effort)

Question 35

One situation where managing the stakeholder relationship would require communication

Answer 35

A local school senior leadership team may embark on one-way communication to inform the local community of its intention to open up more places to its Year 7 intake; this decision may be communicated through its website or via a newsletter

Question 36

One situation where managing the stakeholder relationship would not require communication

Answer 36

The business has decided to increase its selling prices by 5%, managers would not need to inform customers or suppliers of this decision