Management Decision Making Flashcards
What is Demand?
Amount of a product that customers are prepared to buy.
Example sentence: The demand for smartphones has been increasing steadily.
How is Demand measured?
Measured in terms of volume (quantity brought) and/or value (£ value of sales).
Demand will vary depending on several factors.
What factors affect Demand?
Prices, competitor actions, incomes, tastes and fashion, season and demographic, changing technology, government decisions.
Understanding these factors is crucial in predicting demand fluctuations.
What is Revenues?
Amount (value) of a product that customers actually buy from a firm.
Revenues are a key indicator of a company’s financial health.
What is the key related concept to Demand?
Elasticity of demand.
Elasticity of demand measures how demand changes in response to price or income fluctuations.
What is cost?
amount that a business incurs in order to make good and/ or provide services
Drains away profits made by business.
What are variable costs?
costs which change as output varies.
lower risk for a start-up: no sales = no Variable cost
What are fixed costs?
Costs which do not change when output varies.
fixed costs increase the risk of a start-up → Raw materials. —> Bought in stocks. → Wages based on hours worked / amount produced → Marketing soles (eg. to commission)
Give examples of fixed costs.
Rent + rates → Advertising → Softwer → Salaries —> Insurance banking + legal → Consult adviser costs. Fees.
Examples of fixed costs:
What are semi-fixed costs?
Short term but then changes once a certain level of output is reached.
Example: Admin salaries, Rent.
How do you calculate total costs?
Total costs = fixed costs + variable costs.
Two ways of measuring profit
Profit in absolute terms: £ value of profit earned.
Two ways of measuring profit
Profit in relative terms: profit earned as a proportion of sales achieved / investment made
Example: If a company made a profit of £10,000 on sales of £100,000, the profit in relative terms would be 10%.
What are some factors to consider in decision-making?
Organisational structure, risk + reward, business objectives, leadership styles, corporate culture, technology in operations.
Decision-making involves considering various factors such as organisational structure, risk + reward, business objectives, leadership styles, corporate culture, and technology in operations.
What is the difference between tactical and strategic decisions?
Tactical decisions are short-term, more regular, and involve fewer resources, while strategic decisions are long-term, involve major commitment of resources, and are difficult to reverse.
Tactical decisions are short-term and involve fewer resources, whereas strategic decisions are long-term and involve a major commitment of resources.
