Decision making (05) Flashcards
(37 cards)
SUMMARY
In summary, the following are covered in this topic:
1. Decision-making is an integral part of any business activity at all levels of the
business.
2. Businesses can make use of the decision-making process to make decisions.
3. Businesses need to consider external factors during the decision-making
process.
4. The external factors are political, economic, socio-cultural, technological, legal
and ecological.
5. Sources of information for decision-making include government statistics, trade
figures, consumer price index and official websites.
6. Characteristics of useful information for decision-making are timeliness, quality,
completeness, relevance and understandability.
7. Information can be presented in text, charts, pictures or infographics.
What is the Decision Making process?
1) Identify the decision situation
2) Gather information and generate options
3) Analyse options
4) Decide on the best option
5) Implement the decision
6) Monitor and evaluate results
What is the PESTLE framework?
P: Political
E: Economic
S: Socio-cultural
T: Technological
L: Legal
E: Ecological
Why would a government intervene in the economy?
1) Low inflation
2) Low levels of unemployment
3) Economic growth
4) Favourable balance of payment avoiding serious deficits
What are the Economic factors?
1) Economic cycle
-Boom
-Recession
-Slump
-Recovery and growth
2) Economic policy
-Government spending
-Income tax
-Corporate tax
-Indirect taxes
-Monetary policy and interest rates
What is the Slump period?
This is a period of very serious and prolonged downturn where real GDP falls substantially and asset prices decrease
What are the economic policies?
1) Government spending
2) Income tax
3) Corporate tax
4) Indirect tax
5) Monetary policy and interest rates
Why is the Socio-cultural factor important for businesses?
The socio-cultural factors shape consumers’ taste and preferences, and affect behaviour and purchasing decisions.
E.g.
1) How people’s attitude towards
diet and health has changed due to the change in attitude
2) More people are joining fitness clubs.
3) There is also a massive growth
in demand for organic food.
4) Producers often take advantage of these factors.
5) The Wii Fit, for instance, attempt to deal with the society’s concern about children’s lack of exercise.
What are the Socio-cultural trends that are prevalent in many countries?
1) Ageing population
-Changing patterns of demand
e.g.
-> More businesses might venture into elderly-related services such as day-care centres and nursing homes.
->Tour agencies might also come up with elderly-friendly tour packages for them to visit their ancestry homes.
-Age structure of workforce
e.g. As the number of young employees available start to decrease, businesses might have to start making provisions to employ older workers, or keep existing workers employed beyond retirement age.
2) Patterns of employment
-Shift from labour to capital intensiveness
-Increase in flexible, temporary and part-time employment
What are some information technology systems that businesses use in their operations?
1) Computer-aided design (CAD)
2) Computer-aided manufacturing (CAM)
3) Internet
What are the advantages of using CAD?
1) Businesses save on the expensive salaries of designers, and work can be done much quicker
2) There is more flexibility in designing, and the special requirements of customers can be added easily
3) It can be linked to other computer programmes to obtain product costings and to prepare for ordering of required supplies
What are the advantages of using Computer-aided manufacturing (CAM) ?
1) Labour costs are reduced as machines replace many workers
2) Productivity is increased and variable cost per unit is lower than in non-computerised processes
3) Accuracy is improved, as there is less scope for human error
4) Flexibility of production is increased.
-> Modern-computer controlled machinery can usually be adapted to make a number of different variations of the same product, and this helps to make consumers’ needs for some individual features
What are some ways in which the Internet has influenced business decision making?
1) E Commerce
2) Social media
What are the benefits of using E Commerce?
1) Businesses are no longer limited by geographical constraints -> now able to sell beyond their own country, as customers from around the world would be able to access the internet and make purchases
2) There is greater ease of buying and selling, as transactions could be made via the internet
3) The business is essentially operating and selling its products round the clock, without the need for a physical shopfront
What are the advantages of using social media for businesses?
Additional:
1) Businesses tap on the data
analytics abilities of social media to directly advertise content to potential
customers based on their profile and web-surfing preferences.
2) Businesses also engage social influencers, such as bloggers, to promote their products.
Actual:
1) Social media is one of the most cost efficient digital marketing methods to increase the visibility of a business -> implementing a social media strategy effectively would greatly increase brand recognition
2) Using social media is extremely cost-efficient.
-> Signing up and creating a profile is free for almost all social media platforms
-> Any paid promotions are relatively low cost compared to other marketing tactics
3) Social media allows for instant feedback from consumers, both good and bad.
-> Time between knowing if a product or campaign is a success is shorter -> meaning businesses can respond and resolve mishaps in a faster manner
What is E-Commerce?
E-commerce, which stands for electronic commerce, refers to the buying and selling of goods and services online or over the internet.`
What is Social Media?
Social media refers to websites and applications that enable users to create and share content or to participate in social networking.
What are the laws and regulations laid out by the government for businesses?
1) Employment practices
2) Consumer rights
3) Business practices
What are the benefits to businesses meeting, or exceeding laws on employment practices?
1) Employees will feel more secure and highly valued if they are offered a clear and fair employment contract.
-> This will lead to a more satisfied and motivated workforce who will likely work harder to help the business achieve its objectives
2) A safe working environment will reduce risks of accidents and time off work to tend to illnesses and injuries
3) Businesses who fail to adhere to laws on employment practices may be subjected to expensive court cases and heavy fines
4) The culture of the business will be looked upon as one that values employees.
-> Reflect well on the business and generate positive publicity and public image
-> Allow business to attract both high quality employees and retain well-performing ones
What are the cons to adhering such laws?
1)Adhering to the laws on employment practices might result in increased business costs
-> Business would need to buy equipment to ensure workplace
safety.
2) Result in businesses paying higher salaries, due to the need to offer fair employment contracts.
Why are laws enacted to protect consumers from unfair business practices?
1) An individual customer is relatively weak and powerless against a large business with huge financial resource.
2) Products are becoming more scientific and technological, and it is difficult to understand how they operate or to assess the accuracy of claims made by them.
3) Businesses might use pressurising selling techniques, and customers might find it difficult to resist not buying.
4) The increasingly globalised marketplace results in more imported goods, and customers might need protection from overseas sellers who adopt different quality and safety standards.
5) Businesses that seek to maximise profits might try to take advantage of
customers by reducing quality, service, warranty periods etc.
What are the benefits to adhering laws that protect consumers?
1) Treating customers fairly and responding to complaints quickly might reduce the risk of court orders
2) If a business becomes well-known and widely publicised that it offers customers a genuine good deal, or does not make misrepresentations
in advertisements, it is likely to build long-lasting customer loyalty
However, it must be noted that business costs might increase to meet the requirements of consumer protection laws.
-> E.g. Redesigning products to meet health and safety standards, improving quality control and ensuring accuracy of information in advertising can often be expensive.
What are the benefits of free and fair competition for consumers?
1) Wider choice of goods and services for consumers.
2) Most businesses would compete on price -> keeping prices low and competitive
3) Businesses will compete by improving the quality, form and function of the product
4) As businesses compete with each other domestically, they would be strengthened and can compete more effectively against multinational businesses
What are the Ecological factors affecting business decision making?
1) Pollution
2) Climate change
3) Sustainability
