3.4.1 Corporate Influences

Short-termism

🔗 Where the business and management focus on quick financial rewards such as quarterly profits or sales.

• This may come at the expense of R&D, staff training and capital investment.

Symptoms of short-termism

• Inadequate expenditure on R&D
• Maximise short-term profits
• Focus on acquisitions rather than a more natural growth
• Short-term contracts for staff and supplies
• Inadequate focus on longer-term risks facing the business

Drawbacks of short-termism

• Loss of competitive advantage due to lack of investment in R&D
• Reliance on short-term contracts could be more expensive than long-term ones (renewals more expensive each time)

Long-termism

🔗 The practice of making decisions with a view to long-term objectives or consequences. E.G Ethics, corporate social responsibility (CSR)

Symptoms of long-termism

• Long-term approach of staff (E.G Apprenticeship schemes)
• Family business (passes down knowledge and culture that the business is built on)
• Investment in capital machinery
• Specialisation (becoming the best at something to last till the long term)

Drawbacks of long-termism

• Time lag 🔗 A long period of time before changes come into effect -> May have to sacrifice short-term success

• Expensive 🔗 Large financial burden when investing in the future (E.G Technology, R&D, new products)

• Missed opportunities in the short term (E.G Spontaneous consumer trends which can produce quick financial rewards)

Mittelstand

🔗Small to medium-sized enterprises

• Thinking more long-term
• Focus on doing one thing well (specialisation)
• No outsourcing
• Investment in the long-term
• Family-owned (ethics and values)
• Elaborate training of workers

Types of decision-making

Evidence-based

🔗 Gathering information and using a systematic approach to reach a conclusion.

• Won't cause arguments in management as numbers are objective
• Data may be outdated or inaccurate
• May not take freak occurrences/external shocks into account (E.G Sales)

Subjective

🔗 Personal opinions of the decision maker that strongly influence the action taken.

• The decision maker will be passionate and the drive to go through with the idea
• Faster to follow intuition and cheaper due to less money spent on research
• Can't control when intuition will come, spontaneous