Unit 2

• Roles of a manager


  • Setting objectives
  • Making decisions
  • Reviewing
• Influences on decision making

  • Type of decision that is being made
  • Type of workforce
  • History or tradition of the business
• Examples of stakeholders


  • Employees
  • Suppliers
  • Government
• Influences on stakeholder relationships


  • Business objectives
  • Market conditions
  • Power of different stakeholder groups
• Decision tree


  A mathematical model used to help managers make decisions. It uses estimates and probabilities to calculate likely outcomes. A decision tree helps to decide whether the net gain from a decision is worthwhile.
• Uncertainty


  A situation where there is a lack of knowledge in a particular situation i.e. the order of things is unknown, probabilities to possible outcomes are unknown and the impact of events/circumstances is unpredictable.
• Opportunity cost


  The next best alternative is foregone when a particular option is chosen.
• Decision trees: Expected value

  Pay-off of A × probability of A + Pay-off of B × probability of B
• Decision trees: Net gain


  Expected value - initial cost of decision
• Data (scientific decision-making)


  • Logical approach to decision-making based on information
  • Encourages careful consideration of alternatives
  • Risk and uncertainty can be reduced when making decisions
  • Decisions are more likely to be successful
• Data (scientific decision-making) - Drawbacks

  • Collection of required data may be expensive and time consuming
  • Decisions may be based on unreliable/historical data
  • Decision-making is likely to be slower than making decisions based on hunches
• Intuition (hunch)


  • Decisions can be made quickly rather than waiting for the production of data
  • Gut feeling has a place when making decisions; managers can make decisions based on their qualitative understanding of the market
  • Appropriate when data is likely to be biased or unavailable
  • Encourages creativity and innovation
• Intuition (hunch) - Drawbacks

  • Unsuitable for decisions that involve a higher degree of risk
  • Insufficient consideration of alternatives
  • Biased opinions
  • Outcomes may not be as expected
• Stakeholder needs - Employees

  • Job security
  • Competitive pay and benefits
• Stakeholder needs - Customers

  • Value for money
  • After sales service
• Stakeholder needs - Local community

  • Job creation
  • Less pollution
• Stakeholder needs - Suppliers

  • Regular orders
  • Payment on time
• Reasons why businesses should consider stakeholder needs when making decisions

  • Decisions are likely to be accepted and implemented more easily
  • Due to the growing public interest in business activities, firms will gain a more favourable reputation if they are seen to be actively trying to satisfy different stakeholder needs
  • Productivity levels increase, due to a rise in employee motivation, which can lead to an increase in competitiveness
• Local community and pressure groups


  Want business activity to impact favourably on the environment, for example in regards to pollution
• Banks and shareholders

  Want a business that is performing financially well; banks can then receive loan repayments on time and shareholders can receive a satisfactory level of dividend payment
• Shareholders and employees


  Many shareholders demand high short-term profits in the hope of receiving a higher dividend payment; employees want higher pay levels which increases costs and therefore reduces profits
• Customers and suppliers

  Customers may prefer to pay lower prices for products, however, this may impact on the cost prices managers are prepared to pay suppliers for their goods/services, so as to avoid any price reduction impacting negatively on the business's own profit margin
• Situation where managing the stakeholder relationship would require communication

  When directors/management announce a series of involuntary redundancies to employees; a period of consultation or two-way communication via face-to-face meetings may follow, to ensure that employees are clear of the reasons why the redundancies will be made and the impact it will have on remaining staff/the workers that will be made redundant
• Situation where managing the stakeholder relationship would not require communication

  1. When management decide to launch a new product range, it would not need to inform the local community or pressure groups of such action

  2. The business has decided to increase its selling prices by 5%, managers would not need to inform customers or suppliers of this decision