3 4 influences on business decisions

Short-termism is the focus of decision-making on short-term priorities and objectives, often at the expense of long-term opportunities and goals.

True. Evidence-based decision-making involves gathering and analysing data to inform decisions.

Long-termism is the approach of making decisions with a focus on long-term goals and opportunities, even if it may involve sacrificing short-term gains.

True. A short-termist approach to decision-making is likely to prioritise returns to shareholders.

Subjective decision-making is guided principally by the personal opinions and experiences of key decision-makers.

Evidence based decision-making is the process of taking a systematic and fact based approach when determining objectives, strategies, and tactics.

False. Establishing and nurturing meaningful and lasting relationships with suppliers indicates that a business has a long-term approach to decision-making.

Common visual features of a strong company culture include:

False. A 'them and us' attitude between workers and management is more likely to exist in a company with a weak culture.

True. In a power culture, decision-making is carried out by one or a small number of powerful individuals at the top of the business hierarchy.

A role culture is where key decisions are made by those with specific job roles. Power lies with those with particular job titles rather than those with desirable skills.

A task culture is where decisions are made by teams made up of employees with specific skills. Power lies with those with task-related skills.

A person culture is where individuals with extensive experience and skills are loosely brought together. These individuals have significant power to determine their own decision-making procedures and often work autonomously.

True. The ownership type of a business can influence the business culture.

False. Task cultures emphasise flexibility. Teams are often created and dissolved as projects are started and completed.

A shareholder approach focuses on meeting the short-term profit maximisation needs of shareholders which are to provide healthy dividends.

Subcultures refer to unofficial or informal groups within an organisation that may have their own attitudes, values, and behaviours that differ from the overall corporate culture.

A stakeholder is an individual or group that affects, or is affected by, the actions of a business.

True. Employees and managers are both internal stakeholders of a business.

The primary objective of shareholders is to maximise returns on their investments.

External stakeholders are individuals or groups outside of a business, such as customers, suppliers, the local community, and government, that affect or are affected by its actions.

The stakeholder approach is a business strategy that ensures the benefits and drawbacks of its operations are shared among stakeholders, rather than being focused on the needs of shareholders.

False. Suppliers and other creditors are examples of external stakeholders.

The local community

A pressure group is an organisation that seeks to influence the policies and actions of businesses or governments, with the primary objective of promoting a specific cause or agenda.

Customers aim for fair (or low) prices as well as good customer service. However, shareholders demand high profits to achieve maximum dividends.

True. Employees aim for higher wages and better conditions, which is likely to increase costs and reduce profits.

Business ethics relates to the rights or wrongs of making business decisions that are beyond legal requirements.

True. An ethical code of practice informs decision-making and sets out how a business behaves responsibly.The code of practice can include aspects such as environmental protection, fair working practices, and responsible supply chains.

Taking an ethical approach may increase costs and reduce overall profits if prices cannot be raised to compensate. However, businesses that choose to adopt ethical principles usually attract long-term loyalty from employees and customers.

The gender pay gap refers to the difference in average earnings between men and women, with women typically earning less than men for the same work.

Minimum wage refers to the legally required minimum amount that employers must pay their workers per hour.

False. Executive bonuses, particularly when they are disproportionately high, are considered an ethical concern related to pay and rewards.

True. Corporate social responsibility can help a business recruit strong candidates for vacant job posts, as ethical businesses often have a good reputation that is attractive to applicants.

Sustainable sourcing refers to the practice of acquiring raw materials and components from sources that are environmentally and socially responsible.

False. Responsible marketing involves practices such as not actively directing marketing communications to children under the age of 12 or not directly advertising products high in fat, sugar, or salt to children under the age of eighteen.

A corporate responsibility report is an annual report that provides an audit of the steps being taken by a business to meet their commitments to a range of stakeholders. It is usually published alongside financial reports.