What is decision making?
-ultimately a final decision will be influenced by
•mission of a business, its corporate objectives
•If risk it worth the reward
•is opportunity cost worth paying?
•does the probability and financial outcome make it worth it
What other factors need to be taken into account when decision making
- ethics: moral values held by the business that help it make decisions, recyclable material, living wage, child labour?
- external factors: PESTLE, talking decisions in response to factors it cannot control
- resource constraints
What is a stakeholder?
- perhaps most importantly the various stakeholders must be considered when making a decision
- a stakeholder is any individual or group with an interest in the business
What stakeholders should a business listen to?
- stakeholders with low interest and power need minimal effort as they accept what they’re told
- low power and high interest need to be kept informed, might consult them with decisions
- low interest and high power must be kept satisfied, informing them of potential outcomes preventing them gaining more interest
- high power and interest must be managed closely, fully informed and kept happy
How does a business decide their final approach on decision making
Given all their influences on decision making and differing roles of stakeholders a business can then chose from a variety of approaches
What’s the shareholder approach?
- the traditional approach
- business acts in best interest of shareholders/owners
- principal aim is to maximise shareholder returns
- main focus is growth and profit
What’s the stakeholder approach?
- it’s increasingly popular, business takes much more account of wider stakeholder interests
- approach based on consultation/communication
- for example, social and environmental concerns become more important
What’s the win-lose approach?
-a business accepts that for most decisions that it makes some stakeholder groups will benefit more and some will benefit less
What’s the win win approach?
- a business’ actions will benefit some in the short term and the rest will benefit long term
- eg reducing dividends, buying machines then later making more profit bc of the machines
