Corporate influences 3.4.1 Flashcards
What is short-termism?
When a business prioritises short-term performance so decisions that are made impact objectives and tactics over the next few years.
Short-term approach
- maximise short-term profits
- minimise research and development
- maximise return to shareholders
- pursue rapid external growth rather than organic growth
Effects of short-termism
- reluctant to invest in R&D, training and capacity - loss of profitability and competitive edge as long-term opportunities ignored
- a drive for short-term profits could cause a loss in market share
- reliance on short-term contracts with suppliers and workers is likely to lead to higher than necessary costs
What is long-termism?
Where businesses concentrate on reaching long-term goals rather than prioritising short-term financial gains.
What does long-termism involve?
-investment in R&D, innovation and new products
- investing significant resources into the recruitment, training and retention of staff
- establishing lasting relationships with suppliers
What is evidence-based decision making?
Taking a systematic and facts-based approach when determining objectives, strategy and tactics
Advantages and disadvantages of evidence-based decision making
+ based on facts so can be justified more easily
+ well structured and there is a record of how the decision was made
- can take a long time to reach a decision
- different interpretations are possible from the evidence - best decision might not be clear
- may overlook other aspects
What is subjective decision-making?
Decision-making guided by personal opinion, experience and gut instinct
Advantages and disadvantages of subjective decision-making
+ Decisions can be made quickly
+ used when there is a lack of evidence
+ Instincts may be wrong or biased so poor decisions made
- difficult to justify
- can lead to snap decisions without full consideration
