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28 Cards in this Set
- Front
- Back
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What does decision making link closely with? |
Risk and rewards Business objectives Organisational structure Leadership style Corporate culture Technology |
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Risk and rewards |
Performance related pay and decisions based on rewards. |
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Business objectives |
Whatever objectives may influence decision making. |
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Organisation structure |
Flat or tall. Hierarchy. Small businesses are very flat while large companies are very tall. |
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Leadership style |
Autocratic - one person makes the decision. Laissez-faire or democratic - many people make decisions. |
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Corporate culture |
Does the boss decide or others? |
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Technology |
Level of technology used can influence whether people are able to make decisions. Sometimes technology can do it for you. |
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Hunch |
Based on intuition, gut feel and experience. Quick and cheap. Hard to justify for business decisions involving significant risk. |
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Scientific |
Based on data and analysis - primary and secondary. Primary - field research. Secondary - desk research (online, ONS, competitors, etc). Time consuming and costly; no guarantee of the right decision; possibly out of date; inaccurate or untrue. Increasingly common and automated, supported by Big Data and data analytics. |
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Scientific decision making |
Involves making decisions based on evidence and adopting a systematic approach, rather than intuition, hunch or "gut reaction". |
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Real time data capture of customer transactions and customer preferences |
Supermarket loyalty cards. Mobile payment cards and apps. |
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Responding to real time changes in market conditions |
Dynamic pricing. Competitor price comparison. |
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Market research |
Online and mobile customer surveys. Customer feedback (social media, reviews, etc). |
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Capacity management |
Flexible capacity management based on real time fluctuations in demand. |
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Inventory control |
Automated stock ordering and tracking systems. |
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Tesco Clubcard |
Can find out the following about a customer: What items they buy most frequently. How often the customer visits a store, time, days, etc. Use their products to work out their lifestyle - children, pets, etc. If they buy a lot of promoted products, could be regarded as someone who falls for offers in store. Details about size and quantity of items - large milk or pint sizes, etc. Whether they pay with card or cash. They use this information to send vouchers tailored to the customer. |
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Dynamic pricing |
Used by airlines and train companies. Prices change at a live rate - sometimes to the second. |
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Classic example of dynamic pricing |
Bidding on eBay. |
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Objectives / budgets influence on decisions |
Set the scene for how decisions are made. |
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Organisational structure influence on decisions |
Who has authority to make decisions? |
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Attitude to risk influence on decisions |
Closely linked to culture of the business. Is risk taking encouraged? What are the penalties for poor decisions? |
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Availability and reliability of data influence on decisions |
Is the data available to support a scientific approach? |
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External environment influence on decisions |
How fast is the external environment changing? |
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Opportunity cost |
The cost of missing out on the next best alternative. The benefits that could have been gained by taking a different decision. |
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Why opportunity cost is important |
Resources are limited in most businesses - particularly startups. When resources are scarce, significant decisions about what to spend and where become risky. Managers take calculated risks and weigh up potential implications before choosing options they believe are best for the business. |
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What should a business do when making a decision? |
Consider the costs. Is it worth taking the time and effort to make the decision or should you take a hunch? |
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Hunch scenario |
Organising a birthday party. You wouldn't put effort in making surveys and putting it past all people invited just to see what food they'd like at the buffet. You would simply buy a selection and make a spread. |
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Scientific scenario |
When starting a new business. You would conduct lots of research so you are aware of what you're doing and so you're certain you are doing something people will be willing to pay for. |
