Unit 2

Question 1

2 approaches to decision making

Answer 1

Scientific and hunch

Question 2

Scientific pros and cons (3,4)

Answer 2

+removes bias and subjectivity
+logical and structured, based on facts
+reduces risk
-expensive, time consuming
-lacks creativity as takes away human element
-can be bias/out of date
-previous data doesn’t mean it will repeat/follow in future

Question 3

Intuitive pros cons (2,2) and when is it used?

Answer 3

+fast, cheap
+human element-creative
-risky
-managers may not have good intuition/lack experience

In small firms

Question 4

Things that influence decision making (7)

Answer 4

Risk, reward, uncertainty
Speed
Objectives
PESTLE
Resources
Culture
Size of firm (small can use intuitive)

Question 5

Decision trees pros and cons (3,2)

Answer 5

Highlights potential outcomes to inform decisions

• estimates
• only quantitative
• time consuming
• too simple for complex decisions
• doesn’t necessarily reduce risk

Question 6

Internal and external stakeholders and what they want (7)

Answer 6

Owners/shareholders if a limited
Employees-job security, wage, promotion, W.C
Managers-bonuses etc

Customers-high quality low prices
Gov-tax
Local community-jobs, no externalities etc
Suppliers-fair price and paid on time
Creditors-paid quickly e.g loans on time

Question 7

Examples of conflict of stakeholders (3)

Answer 7

Cutting costs on quality to increase profit-conflicts customers and shareholders

Cutting labour costs to increase profit disatisfies workers

Relocation may impact employees and suppliers and local community, and maybe brand image for customers

Question 8

4 parts of stakeholder mapping, ranked by interest and power

Answer 8

Minimal effort (low low)
Keep informed (high interest, low power)
Keep satisfied (high power, low interest)
Manage closely (high interest, high power)

Question 9

Recession on stakeholders

Answer 9

Business may focus on not going bankrupt, may prioritise cutting costs e.g wages and no dividends

Question 10

Risk of disatisfying workers

Answer 10

Go on strike or leave

Question 11

How to manage relationship between shareholders

Answer 11

Consult key stakeholders before major decisions, so they feel more valued if opinions considered, and may have expertise too