THEME 3 : SECTION 4 (INFLUENCES ON BUSINESS DECISIONS) Flashcards
What is short-termism and long-termism in terms of corporate decision making?
- part of a corporate timescale ( refers to the strategy and the expectation of when a return will be achieved)
- Short-termism is when businesses prioritise short term finance and outcomes over long-term profits and goals
- Long-termism is when businesses concentrate on long term goals rather than prioritising short term financial gains
What are the two types of decision making approaches?
- evidence-based = a structured approach, using research gathered and verified facts to make decisions
- Subjective = using previous data or experience to make decisions
What are the 4 main types of corporate culture that a business might have?
- Power = a centralised structure where decision making is done by a small number of people, employees are resistant to change sd they aren’t involved
- Role = decisions are made by senior managers, there is poor communication , and the business tends to avoid risk
- Task = employees get specific tasks done in small teams and change them around often, employees would be used to changes (mainly group working)
- People = Mainly independent jobs, decisions are more joint but there may still be resistance as people will prefer to follow personal interests
What forms corporate culture?
- founders beliefs / ethos
- nature of the products/ markets
- HR
Who are the internal stakeholders?
- Employees
- Managers/Leaders
- investors (in limited companies )
Who are the external stakeholder
- Customers
- Suppliers
- Members of the community
- Governments (in some cases)
What will a business that considers stakeholders before shareholders be doing?
- Taking a long- term approach. Focusing on ethics as well as not maximizing profit but maximizing the scope of consumers.
What will a business that considers shareholders before stakeholders be doing?
-Taking a short-term approach and will most likely have mainly profit maximization objectives
What is it called when you make decisions for stakeholders best interest or shareholders best interest?
- Stakeholders = wider objective
- Shareholders = profit-based
What is a trade-off in terms of ethics?
-Trade-off = when a business has to make sacrifices in terms of profit in order to be more ethical
Define Corporate Social Responsibility
- Going above and beyond in order to be ethical, not just following basic laws put in place
Pros and Cons of Evidence based decision making
Pros
- based on facts
- validated decision making
- A record of how the decision was reached
Cons
- can take a long time to reach a decision in which circumstances could change
- Different interpretations are possible , unclear answers
- Focusing too heavily on evidence, an overlook on decisions
Pros and Cons of Subjective decision making
Pros
- quick and easy
- More opportunities
- helpful when there is a lack of data
Cons
- instincts could be wrong
- possible bias of managers
- snap decisions could be costly and bad in the long term but beneficial in the short term
What is stakeholder mapping?
- Stake holder mapping = a tool to help decide how best to manage its stakeholders. Each group is mapped to determine how much communication is needed and how much attention is paid to them when making decisions
Define Ethics
Ethics are the moral principals that govern the behaviours which are morally acceptable to particular people (ie stakeholders, investors)
