A document that withholds all the topic in one sheet of paper. It is made easy to read and with bullet points, it includes information such as what need to be revised therefore making it easier to the reade by not wasting time in lessons and in classes.
Strategic– decisions made by top management that affect the long-term direction of a business.
Long term (Senior Management)
Tactical– decisions made by middle management that aim to meet strategic objectives. Medium
term (Senior or Middle Management)
Operational– day-to-day decisions made by staff at all levels that help the business to run smoothly.
Criteria used when making business decisions
Internal factors
- Attitude to risk
- Organisational objectives
- Core competencies of a business
- Impact on internal stakeholders
- Business ethics
- Financial considerations
- Time
- Opportunity cost
External factors
- Level and nature of risk
- Impacts on external stakeholders
- Degree of uncertainty
- Changes in market
- Changes in external environment
The use of different types of information when making business decisions
- Internal information
o Pro: readily available, cheaper.
o Con: requires keeping accurate data/ doesn’t consider external environment
- External information
o Pro: large amount of info available/ easy to access online
o Con: data can be confusing/ costly
- Qualitative information
o Pro: allows deeper understanding
o Con: difficult to analyse/ time consuming
- Quantitative information
o Pro: easy to analyse/ can deduce trends
o Con: does not tell you why/ can appear more factual than it actually is
- Historic information
o Pro: can be used to predict forecasted data/ does not require skill to collect
o Con: if there has been internal/ external changes historic data is not as useful
- Forecasted information
o Pro: can help prepare contingency plans/ can predict cash flow shortages
, o Con: prediction (might not happen)/ requires skill
- Primary research information
o Pro: can be tailored to a business’s needs
o Con: costly/ time consuming
- Secondary research information
o Pro: Easier/ quicker/ accurate
o Con: Expensive to obtain/ different sources might give conflicting information
How to judge the validity of information used to make decisions
- Reliability
o If a piece of research is to be repeated, will the researchers get the same result?
- Bias
o Has the research influenced the outcome?
- Relevance
o Can the information selected be used to answer the question or solve the problem?
- Complexity
o Is the information too difficult to understand?
- Degree of detail
o Does the level of detail match the type of decision being made?
- Currency
o Is the information up to date?
- Intended use
o Is the information appropriate to what it will be used for?
- Quality
o Is the quality of the information chosen up to standard?
The purposes, benefits and importance of communication
- With internal and external stakeholders
o Effective communication with stakeholders eases the decision-making process
o Customers and the local community also need to be informed of a decision that has
a direct impact on them.
o If the decision involves huge financial commitment they must inform lenders.
- With the media
o Media have to be dealt with sensitively, especially in crisis and they can easily
damage business reputation.
Factors affecting the quality of decision making
- Access to relevant information
- Access to decision-making tools
o E.g. multi voting/ decision tree
- Availability of finance
- Key personnel
- Training of managers
- Power differentials and potential for bias
, o Senior management are more likely to pay attention to information that confirms
their beliefs and favour decisions that appear to benefit only those in power.
- Consultation
Opportunity costs: Opportunity cost measures the cost of any choice in terms of the next best
alternative foregone.
LO2
Profitability Data
Costs
- Fixed costs do not change according to sales, e.g. rent, insurance
- Variable costs change depending on the level of output, e.g. raw materials, direct labour
Total costs = Fixed costs + Variable costs
Revenue = Selling prices x Units sold
Profit = sales revenue – total costs
Gross profit = Revenue – Total variable cost
- The money left over after taking the costs of goods and services (variable costs) from the
sales revenue.
- The greater the difference between revenue and cost of sales, the higher the gross profit.
Net profit/ loss = Gross profit – Expenses
- This calculates the money left over after taking away expenses (fixed costs) from gross profit.
Net profit ratio = (net profit/ revenue) x 100
- This is a comparison of a business’s net profit with its sales revenue, expressed as a
percentage.
Gross profit ratio = (gross profit/ revenue) x 100
- This measures the profitability of the goods and services provided by a business.
Business performance data
- Consumer satisfaction
o Finding out how satisfied the customers of a business are with the quality and price
of goods and services provided.
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