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business > Unit 2 > Flashcards

Unit 2 Flashcards

1
Q

Traditional Levels of Management in Business

A

Senior Management

Middle Management

Junior Management

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2
Q

Senior Management

A

• E.g. Board of Directors

• Set corporate objectives & strategic direction

• Board is responsible to shareholders; led by the CEO

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3
Q

Middle Management

A

• Accountable to senior management
• Run business functions and departments

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4
Q

Junior Management

A

• Supervisory role, accountable to middle management

• Monitor & control day-to-day tasks, and manage teams of workers

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5
Q

The role of managers should include:

A
  • Setting objectives
  • analysing
  • leading
  • making decisions
  • reviewing
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6
Q

Role of managers examples

A
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7
Q

Role of managers examples

A
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8
Q

Tannenbaum and Schmidt Continuum

A

• 1958: “Contingency theorists” Robert Tannenbaum and Warren Schmidt

• Suggested a “continuum” of leadership behaviour

• Continuum represents a range of action related to the:

  • Degree of authority used by the manager
  • Area of freedom available to non-managers
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9
Q

What is the Tannenbaum
Schmidt continuum?

A

The continuum puts leadership styles on a scale from autocratic management through increasing levels of participation in decision-making by the workforce

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10
Q

What are the 4 main types of management style that are in the Tannenbaum Schmidt continuum?

A
  • Tells
  • sells
  • consults
  • joins
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11
Q

What type of management style is similar to a tells style?

A

Autocratic or authoritarian

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12
Q

What type of management style is similar to a sell style?

A

Paternalistic

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13
Q

What type of management style is similar to a consults style?

A

Democratic

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14
Q

What type of management style is similar to a joins style?

A

Laissez-faire

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15
Q

What is an autocratic leadership style?

A

Autocratic managers are authoritarian; they make decisions without reference to anyone else. They tend to use one way, top-down communication. They give orders to employees and do not want feedback.

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16
Q

What is a democratic leadership style?

A

Democratic managers encourage decision-making from different perspectives. They tend to listen to the employees ideas and ensure people contribute to the discussion;
communication is the way. Bosses put the idea forward and listen to feedback. This helps motivation of employees.

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17
Q

What is a laissez-faire leadership style?

A

This occurs when leaders are too busy or just lazy, that they let everyone take responsibility for decisions. This can make decision-making time-consuming and can lack direction of what the business needs to do. However, it is useful for when creative ideas are needed and can be very motivational for employees.

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18
Q

What is a paternalistic leadership style?

A

Paternalistic leader thinks and acts like a father. They try to do what is best for their staff. Employees are consulted when decisions are made. They are closely supervised to supply direction. Paternalists are interested in the security and social needs of staff

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19
Q

Tells

A

Leader identifies problems, makes decision and announces to subordinates; expects implementation

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20
Q

Sells

A

Leader still makes decision, but attempts to overcome resistance through discussion & persuasion

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21
Q

Consults

A

Leader identifies problem and presents it to the group. Listens to advice and suggestions before making a decision

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22
Q

Joins

A

Leader defines the problem and passes on the solving & decision-making to the group (which manager is part of)

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23
Q

Tannenbaum and Schmidt Continuum of Leadership
Picture

A
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24
Q

Tannenbaum and Schmidt Continuum of Leadership
Picture

A
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25
Q

Two Approaches to Decision-Making in Business

A

-INTUITION (HUNCH)

-SCIENTIFIC

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26
Q

INTUITION (HUNCH)

A

Based on intuition, gut feel and experience

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27
Q

SCIENTIFIC

A

Based on data and analysis

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28
Q

Scientific Decision-Making

A

Scientific decision-making involves making decisions based on evidence and adopting a systematic approach, rather than intuition, hunch or ‘gut reaction’

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29
Q

Examples of Scientific Decision-Making

A

-Decision Trees

-Investment Appraisal

-Dynamic Pricing

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30
Q

Benefits of scientific decision making

A

Data driven = evidence-
based

Removes some (but not all) subjective judgement from decisions

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31
Q

Drawbacks of scientific decision making

A

May still rely on assumptions (judgement)

Doesn’t guarantee the correct decision

May ignore the crucial aspect of business experience

32
Q

What is Opportunity Cost?

A

The cost of missing out on the next best alternative
The benefits that could have been gained by taking a different decision

33
Q

Why Opportunity Cost is Important

A

• For most businesses resources are limited (particularly new businesses)

• When resources are limited, decisions have to be made about what to spend / invest and where to focus

• Entrepreneurs and business management take calculated risks and weigh-up the potential implications of decisions (opportunity costs) before choosing the options they believe are best for their business

34
Q

Why Opportunity Cost is Important

A

• For most businesses resources are limited (particularly new businesses)

• When resources are limited, decisions have to be made about what to spend / invest and where to focus

• Entrepreneurs and business management take calculated risks and weigh-up the potential implications of decisions (opportunity costs) before choosing the options they believe are best for their business

35
Q

What is a Decision Tree?

A

A mathematical model used to help managers make decisions when faced with choices

36
Q

How Does a Decision Tree Work?

A

• A decision tree uses estimates and probabilities to calculate likely outcomes

• Calculating these estimates helps to decide whether the net gain from a decision is worthwhile

37
Q

The 4 Step Approach to Decision Trees

A
38
Q

The 4 Step Approach to Decision Trees

A
39
Q

What are the 6 stages in scientific decision making?

A

1) set objectives
2) collect data
3) analyse data
4) make decision
5) implement decision
6) review decision

40
Q

What are the 6 stages in scientific decision making?

A

1) set objectives
2) collect data
3) analyse data
4) make decision
5) implement decision
6) review decision

41
Q

What does a square represent in a decision tree?

A

Decision point

42
Q

What does a circle represent on a decision tree?

A

Alternative outcomes

43
Q

What do decision trees help set out?

A

Decision trees show which course of action is probably best from a financial point of view

44
Q

Give 2 advantages of decision trees

A

• visual representation of outcomes

  • allow managers to quantify options
45
Q

Give 2 disadvantages of decision trees

A

-they are only quantitative

  • probabilities are hard to accurately predict
46
Q

What is Probability?

A

• The percentage chance or possibility that an event will occur

• Ranges between 1 (100%) and 0

• If all the outcomes of an event are considered, the total probability must add up to 1

47
Q

Calculations Involved in the Decision Tree

A

-Expected value

-Net gain

48
Q

Expected value

A

The financial value of an outcome calculated by multiplying the financial result by its probability

49
Q

Net gain

A

The value to be gained from taking a decision. Calculated by adding together the expected value of each outcome and deducting the costs associated with the decision

50
Q

Final Thoughts on Decision Trees

A

• Like investment appraisal, decision trees are a popular tool for management decision making

• Output from decision trees very sensitive to the probabilities assigned

• Important not to use them to justify a decision, but to aid decision making

51
Q

What is a Stakeholder?

A

A stakeholder is any individual or
organisation who has a vested interest in the activities and decision making of a business

52
Q

Difference Between Stakeholders and Shareholders

STAKEHOLDERS

A

Stakeholders

• Have an interest in the business - but do not own it

• May work for (employees) or otherwise transact with the business

53
Q

Shareholders

A

• Own the business

• May also work in the business

• Benefit directly from increases in the value of the business

54
Q

Difference Between Stakeholders and Shareholders

Shareholders

A

• Own the business

• May also work in the business

• Benefit directly from increases in the value of the business

55
Q

Stakeholders Have Different Interests in a Business

Shareholders/owners

A

Return on investment + profits and dividends

Success and growth of the business

Proper running of the business

56
Q

Stakeholders Have Different Interests in a Business

Managers & Employees

A

Rewards, including basic pay and other financial incentives

Job security & working conditions

Promotion opportunities + job satisfaction & status - motivation, roles and responsibilities

57
Q

Stakeholders Have Different Interests in a Business

Customers

A

Value for money
Product quality & customer service

58
Q

Stakeholders Have Different Interests in a Business
PART 2

A
59
Q

Stakeholders Have Different Interests in a Business
PART 2

A
60
Q

Potential Conflicts between Stakeholders

A
61
Q

Potential Conflicts between Stakeholders

A
62
Q

Managing Stakeholder Influence and Power

A
63
Q

Define leadership

A

Leadership means taking the initiative to set clear objectives and the motivate or guide staff towards their achievement

64
Q

Define leadership

A

Leadership means taking the initiative to set clear objectives and the motivate or guide staff towards their achievement

65
Q

Define management

A

Management means organising and galvanising staff to implement the strategy is needed to achieve the objectives

66
Q

Define management

A

Management means organising and galvanising staff to implement the strategy is needed to achieve the objectives

67
Q

Give examples of leadership qualities

A
  • Brave
  • passionate
  • willing to take risks
  • driven
  • organised
  • confident
68
Q

What are the three main things that influence decisions? (Hint: think RRU)

A

Risk, reward and uncertainty

69
Q

Give 2 internal stakeholders

A

• owners/ managers
- employees

70
Q

Give 2 internal stakeholders

A

• owners/ managers
- employees

71
Q

Give 5 examples of external stakeholders

A

• customers
• suppliers
• local community
• government
• creditors - people the business owes money to

72
Q

What analysis technique takes into account the power and interest of stakeholders?

A

Stakeholder mapping

73
Q

What are the axis variables on a stakeholder map?

A

Power/ influence (y) and interest (x)

74
Q

What are the axis variables on a stakeholder map?

A

Power/ influence (y) and interest (x)

75
Q

Relationships with stakeholders are important.
How can a business keep them satisfied?

A

1) Adapt to external influences

2) Don’t just focus on one stakeholder at the expense of another

3) Consult all stakeholders before major decisions

4) Keep good communication between the business and their stakeholders

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