influences on business decisions

• short-termism

  when actions of managers over-prioritise immediate issues, ignoring long-term

  causes:financial markets,short-term performance measuresegearnings per share,threat of takeover-boost short term profits to push share price higher

  effects: inadequate expenditure on research and development, accounting adjustments that inflate current earnings, a willingness to cut workforce quickly- high labour turnover and a loss of skills that may be needed in future, ignoring long term risks such as shifts in consumer habits, focus on takeovers to grow rather than organic, low training budgets
• long-term thinking

  companies willing to show more patience will often find themselves in a better position competitively in the long term.

  example: mittelstand- family owned+run, people-centered management, focus on doing well in one thing, long-term thinking.

  allows firms to specialise in one thing: example of porter's focused differentiation strategy.
• evidence- based decision making

  large businesses,access sophisticated computer systems, make many routine decisions automatically.

  • a sales forecast based on recent trends+figures from same time last year-how much stock to order/staff at work
  • taylor: time and motion study, identify best way to do a task, generate desire to measure performance+use data
  • weakness: basis in extrapolation, the expectation the future will be similar to the past can prevent revolutionary thinking and decisions. as a result, less effective when facing strategic decions, for which limited data may be available.
• subjective decision making

  the use of intuition by managers- allows human judgment to take precedence over data.

  some make wrong judgment

  allows great business decisions to be made
• corporate culture

  sums up the spirit, attitudes, behaviours and the ethos of an organisation 'the way we do thing around here'

  culture will be determined by several key factors, including:

  • aims or missions
  • behaviour of senior staff
  • recruitment and training procedures
• signs of strong culture

  • focusing on customers' needs, allowing staff to make decisions
  • staff show a real feeling for the organisation as 'us', as a long term commitment
  • sticking and working together in times of crisis
  • a united view among staff that the organisation is a force for good
• signs of weak culture

  • staff follow a script when dealing with customers (not trusted)
  • feeling of 'them' and 'us'
  • when things look bad, better qualified staff look to find another job
  • a cynical view, doubting company's principles and ethos
• handy's classification of cultures: power culture

  • one/small group of extremely powerful people
  • everything goes through boss
  • few rules
  • decision-making likely to be governed by the desire to please the boss
  • autocratic leadership style

  power cultures can work effectively under great leaders, but often can lead to unethical behaviour as the desire to please the boss drives staff to make poor decisions
• handy's classification of cultures: role culture

  • likely to exist in an established organisation dominated by rules and procedures
  • power depends on position held within the organisational structure
  • all employees expected to follow rules
  • career progress will be predictable and based on who follow procedure best
  • bureaucratic, focused on avoiding mistakes
  • struggle to cope with rapid change
  • autocratic or paternalistic

  can be effective culture for maintaining a company's current position by struggles in dynamic environment
• bureaucratic organisation

  innovative is stifled by paperwork and checking and re-checking of actions
• handy's classification of cultures: task culture

  the project being worked on is the central focus. senior mangers allocate projects to teams of employees from different functional areas. project teams become the normal working environment for staff.

  • an individuals power depends on expertise not status within organisational structure
  • employees become used toworking with staff from other departments- helping employees to understand the different perspectives of each functional area

  works well when dealing with rapid change.however, teams may develop their own objectives rather than corporate
• handy's classification of cultures: person culture

  highly skilled, professional staff, individuals form groups in which they share their knowledge and expertise. in this way individuals can learn knowledge and skills

  • staff well paid and treated
  • democratic leadership style
  • staff feel a sense of personal development, which is likely to be highly motivating
• how corporate culture is formed

  • leadership style
  • type of ownership
  • recruitment policies
• changing corporate culture

  why people resist attempts to change culture:

  • self-interest
  • low tolerance to change
  • misunderstandings
  • different assessments of the need to change

  if cultural change is successful, it need these factors:

  • clear purpose
  • education and training
  • consistency of communication methods and messages
  • effective communication
• stakeholders


  groups that are influenced by and influence the operations of a business
• shareholders

  the owners of a limited company
• internal and external stakeholders

  internal

  • employees
  • managers
  • owners

  external

  • suppliers
  • society
  • government
  • creditors
  • shareholders
  • customers
• business ethics

  the moral principles that underpin decision making
• corporate social responsibility (CSR)

  describes the desire to run a business in a morally correct way, attempting to balance the needs of all stakeholder groups
• reasons for corporate social responsibility (CSR)

  • companies that behave, or seem to behave, in a responsible way towards their stakeholders can gain from doing so:
  • marketing advantages: consumers who have enough disposable income will often pay premium so they can buy with a clear conscious from businesses that behave in a socially responsible way, can be a point of differentiation for some businesses
  • positive effects on the workforce: they feel happier working for a socially responsible business with a clear sense of moral purpose