Corporate influences 3.4.1

Question 1

What is short-termism?

Answer 1

Short-termism is where a business prioritises short-term rather than long-term performance.

Question 2

What are examples of short-termism measures?

Answer 2

• Share price.
• Revenue growth.
• Gross and operating profit.
• Unit cost and productivity.
• Return on capital employed.

Question 3

Why might a business be concerned with short- term business?

Answer 3

• Stock market focus on the latest financial performance.
• Reliance on bonuses based on short-term performance.
• Frequent changes in leadership and strategy e.g through a takeover

Question 4

What is long-termism?

Answer 4

Where a business is focused on sustained growth through building long-term relationships with suppliers and other external stakeholders, significant investment in research and development, perhaps at the expense of shareholder returns/dividends in the short term, and meeting customer needs despite short-term needs.

Question 5

What are examples of long-termism measures?

Answer 5

• Market share
• Quality
• Innovation
• Brand reputation
• Development of employee skills & experience
• Social responsibility & sustainability

Question 6

What are indicators of short-termism?

Answer 6

• Bonuses based on short-term objectives.
• Low investment in R&D.
• High dividend payments rather than reinvesting in profits.
• Overuse of takeovers rather than internal growth.

Question 7

What are the features of long-termism companies?

Answer 7

• Family-like corporate culture
• Long-term investment in R&D in spite of paying dividends to shareholders and instead reinvesting retained profits back into the business.
• Soft HR strategy in order to recruit and retain top talent
• Focus on innovation and customer service

Question 8

What is evidence-based (scientific-based) decision-making?

Answer 8

Where a business makes strategic decisions after analysing and evaluating relevant evidence. Businesses will make full use of quantitative sales forecasting, decision trees, investment appraisals and other methods that help quantify any decision being made.

Question 9

What is subjective decision making?

Answer 9

Is less structured and more about the experience and intuition of the business’s owners and managers. Decisions from this perspective may require a more entrepreneurial, risk-taking managerial approach.

Question 10

What are the components of subjective decision-making?

Answer 10

• Based on intuition, hunch, gut feeling and experience
• Quicker decisions can be made
• May be necessary for a fast-moving environment or to avoid missing opportunities
• Dominant leaders may push decisions forward, leading to a democratic environment
• Hard to justify this type of decision-making for business decisions that involve high risk

Question 11

What are the components of evidence-based decision-making?

Answer 11

• Based on evidence and data
• Outcomes can be simulated or tested in advance
• Decisions are objective
• Only reduces risk, and will not eliminate it
• Time-consuming and costly; no guarantee of the right decision

Question 12

What are key influences on business decisions?

Answer 12

• Business objectives/budgets
• Organisational structure attitude to risk
• Availability and reliability of data
• External environment

Question 13

How does data play an increasingly important role in evidence-based decision making?

Answer 13

• Real-time data capture of transactions and customer preference
• Responding to real-time changes in market conditions
• Market research
• Capacity management
• Inventory controlled

Question 14

What is big data?

Answer 14

Big date is the process of collecting and analysing large data sets from traditional and digital sources to identify trends and patterns that can be used in decision-making.

Question 15

What are the reasons for the exponential growth of big data?

Answer 15

• Retail e-commerce databases
• User interactions with website mobile apps
• Usage of logistics, transportation systems, finances and healthcare
• Social media data
• Location data
• Internet of things data generated
• New forms of scientific data

Question 16

What are the key business applications of big data?

Answer 16

• Tracking and monitoring the performance, safety and reliability of operational equipment.
• Generating marketing insights into the needs and wanted customers, based on the transactions, feedback, and comments. Big data is revolutionising traditional market research.
• Improve decision-making – for example analysing the real-time impact of pricing changes what are the elements of the marketing mix.
• Better security and business systems: big data can be analysed to identify unusual activity, for example on secure access systems.
• More official management of capacity: The increasing use of big data to inform decision-making about capacity management it’s a great example of how big data can help businesses operate more efficiently.

Question 17

What is data mining?

Answer 17

Data mining is the process of analysing data from different perspectives and summarising it into useful information, including discoveries previously unknown interesting patterns, unusual records or dependencies.

Question 18

What are the potential business benefits of effective data mining?

Answer 18

• Identify previously unseen relationships between business data sets.
• Better predict future trends and behaviours.
• Extract value e.g. performance insights from big data sets.
• Generate business actions built on data insights

Question 19

How can data mining help a business improve competitiveness?

Answer 19

• Sales forecasting: Analysing when customers bought to predict when they will buy again.
• Database marketing: Examining customer purchasing patterns and looking at the demographics and psychographics of customers to build predictive profiles.
• Market segmentation: a classic use of data mining using data to break down the market into meaningful segments like age, income come occupation or gender.
• E-commerce basket analysis: Using mine data to predict future customer behaviour by past performance, including purchases and preferences.