AQA - Business Unit 2 (Miss L)

Managers

Organise people/things and do a lot of decision making

Leaders

Influence and motivate people

Leadership

The ability to influence and direct people in order to meet the goals of a group

Management

Is the process through which company resources are used and decisions made in order to meet the objectives of the firm

Planning

Including setting objectives and analysing

Directing

Leading and communication with other employees

Organising

Assembling the human and other resources needed

Controlling

Reviewing and reporting on business performance

Autocratic

The leader makes a decision without consultation

E.g in the army when quick decisions are required in battle

Democratic

The leader consults his team but makes final decisions

E.g a skilled workforce can make strong contributions

Laissez-faire

The leader allows his team to make decisions

E.g competent staff given freedom to make decisions themselves

Paternalistic

The leader acts in a fatherly way towards the workforce making decisions based on the needs of the workforce as well as the business

Human Resource Management

Catch all term that concerns the tasks carried out by an HR department

Hard HRM

Considers workers a resource that has to be controlled for an organisation to be profitable and competitive

Soft HRM

Considers workers an important resource for an organisation to achieve growth which is why they need to be looked after and offered skills development

What does effectiveness mean in term of leadership styles?

The ability of a business to achieve its objectives

E.g financial performance and competitive advantage

Opportunity cost

The cost of taking a particular course of action in terms of the next best alternative forgone

Explain why strategic decisions require a heavy investment in resources

- they are long term decisions

- various amount of resources needed to last this amount of time

-investment will also be big

Decisions can be made based on intuition what does this mean ?

It means making choices using personal judgement rather than relying on data

Describe one drawback of decision making based on intuition

It can be unreliable/risky - lack of evidence could lead to poor outcomes of the business

Give 2 influences on the decision making process

Internal factors such as company culture and financial resources and external factors like economic conditions and competitor actions

What is meant by the term expected value?

The average outcome if the decision was made many times

Explain why scientific decision making may be suitable for an entrepreneur

Because it reduces risk as it uses data and evidence which makes choices mire reliable.

It also helps gain investors confidence as financial bankers prefer decisions that are supported by research

Explain how the objectives of a new business ,at influence its approach to decision making

Because, if survival is the main goal ,managers may make low risk cautious choices to protect the cash flow

If objective is growth decisions may be more ambitious such as expansion, even if it carries high risk

Decision making involves risk and uncertainty. Explain the difference between these terms

- risk is when probability of different outcomes can be estimated e.g using past data

- uncertainty is when future events are unpredictable and outcomes cannot be accurately measured e.g sudden changes in government policy

Operational decisions

Short term, small costs, many people have authority, day to day running

Tactical decisions

Medium decisions, suppliers, e.g selling cheap foods in a Tesco next to a university

Strategic decisions

Long term, major investments, CEO, board directors

Give advantages of scientific decision making

Supported by quantifiable evidence

Encourages a logical thought process

Give disadvantages of scientific decision making

May require expensive data

Time consuming

Based on past information

Give advantages of intuition decision making

It allows for quick decision making

It encourages innovation and creativity

Give disadvantages of intuition decision making

Difficult to justify

Reliant on experience and expertise

What are the influences on choosing scientific vs intuition based decision making?

- speed of decision

-information available

- size of the business

Decision trees

A visual way of comparing the alternatives when making a decision.

It is a mathematical model based on logic and probability

What do decision trees identify?

- what decision has to be made

- the choices available

- costs associated with each option

Advantages of decision trees

- clearly show options available

- encourages logical thinking

- takes into account risk

- highlights likelihood of each outcome

Disadvantages of decision trees

- relies heavily on estimates

- estimates may be biased

- non - dynamic may be out of date before a decision is reached

Considerations when deciding between scientific decison making and intuition

Size

Legal structure

Influences on decision making

- risk and uncertainty

- opportunity cost

- ethical considerations

- resource constraints

name the 7 most common stakeholders

- customers

- employees

- suppliers

- shareholders

- government

- community

- financial institutions

Describe the primary category of stakeholders

They are affected by particular business activity such as decision to increase production.

Customers, employees, creditors or anyone with a functional or financial interest in the business

Describe the secondary category of stakeholders

They do not have a direct functional or financial relationships with the business but are affected by or can influence its actions.

For example, the general public, local communities, activist groups and media

Describe the internal category of stakeholders

Part of the organisation, employees, shareholders and managers

Describe the external category of stakeholders

These are outside the business, government and suppliers

State needs of shareholders

- shares of value to constantly rise

- high dividends

- return

- profitable business

State needs of employees

- a good working environment

- paid on time

- job security

State needs of customers

- good quality products

- good value for money

State needs of suppliers

- paid on time

- regular orders

- loyal customers

Creditors

People you owe money to

State needs of the local community

- low noise levels

- social/ ethical business

Power of customers

Low

Power of employees

Lowi

Interest of employees

High

Interest of community

Low

Power of community

Low

Power of government

High

Influences on stakeholder relationships

- leadership style

- mission/objective

- business form/type

- market conditions - competitors