introduction to business decision making

Question 1

first business decision

Answer 1

what business to be in and why (what need is there in the market)

Question 2

agency

Answer 2

ability to make choices depending on constrains and rights

Question 3

options

Answer 3

multiple choices

Question 4

outcomes

Answer 4

range of potential situations arising from each option

Question 5

context

Answer 5

certain circumstances that determine options, outcomes, and thus decisions

Question 6

stakeholders

Answer 6

entities that have influence ON decisions and are influenced BY decisions

Question 7

organisational stakeholders

Answer 7

managers, employees, investors

Question 8

market stakeholders

Answer 8

customers, suppliers, competitors

Question 9

societal stakeholders

Answer 9

community, government, physical environment

Question 10

stake

Answer 10

claim on or investment in an organisation with exposure to risk

Question 11

normative considerations

Answer 11

what a business ought to do as a a reputable company

Question 12

instrumental considerations

Answer 12

how a business needs to behave and what it is able to implement for best business outcomes

Question 13

economics

Answer 13

social science concerned with unlimited wants/limited needs (how society allocates scarce resources)

Question 14

economic tools

Answer 14

• mathematical models that highlight features relevant to questions
• empirical tools generated by human behaviour that estimate causal relationships

Question 15

cost-benefit principle

Answer 15

businesses evaluate full cost and benefit of choices, and only pursue those where benefits outweigh costs

Question 16

opportunity costs

Answer 16

costs associated with not being able to choose other options; next best alternative

Question 17

sunk costs

Answer 17

incurred cost that cannot be reserved, and is not included when making decisions applying the cost-benefit principle

Question 18

law

Answer 18

expression of collective political, philosophical and value judgments of society that are currently dominant

Question 19

legal tools

Answer 19

laws and policies

Question 20

legal constraints

Answer 20

eg zoning laws, trademarks, IP, WHS etc

Question 21

four core legal concepts

Answer 21

control, liability, ownership, agreement

Question 22

control

Answer 22

law informs what firms can and cannot do when operating

Question 23

liability

Answer 23

consequences when law is not adhered to, which comes at a cost to business

Question 24

ownership

Answer 24

law of property over aspects of business eg IP

Question 25

agreement

Answer 25

can be contracts (not all agreements legally binding), or mutual understandings made when selling, buying, recruiting etc

Question 26

CSR

Answer 26

company’s commitment to operating sustainably, going beyond legal compliance and profit maximisation

Question 27

4 responsibilities

Answer 27

economic, legal, ethical, philanthropic

Question 28

shareholder view

Answer 28

purpose to maximise return on investment/managers work on behalf of shareholders

Question 29

stakeholder view

Answer 29

create and sustain value and consider all stakeholders’ interests

Question 30

benefits of CSR

Answer 30

• competitive advantage, customer loyalty, repeat sales
• worker satisfaction and reduced turnover
• reduced costs (legal, inputs, boycotts)