Stages of Business Decision Making
Identifying the Problem: The first step involves recognizing a situation that
necessitates a decision. This might be a challenge or an opportunity that the
business faces.
Gathering Information: Once the problem is identified, the next step is to
collect relevant data and information. This involves researching the market,
understanding customer needs, evaluating internal resources, and considering
external factors.
Generating Alternatives: Based on the information gathered, a range of
possible solutions or courses of action is developed. This stage encourages
creative thinking and exploring various options.
Evaluating Alternatives: Each alternative is assessed in terms of its
feasibility, potential risks, benefits, and alignment with business objectives. This
evaluation is critical in narrowing down the options.
Making the Decision: After careful evaluation, the most suitable alternative is
chosen. This decision should align with the overall strategic direction of the
business.
Implementing the Decision: The chosen solution is put into action. This
involves planning, allocating resources, and managing the implementation
process.
Reviewing and Learning: The final stage is to review the outcome of the
decision. This involves assessing whether the decision achieved its intended
objectives and learning from the experience to inform future decisions.
Evolution of Business Objectives
Over time, business objectives undergo changes due to various factors:
Market Changes: Businesses must adapt to shifting consumer preferences,
emerging trends, and competitive dynamics. As the market evolves, so too must
the objectives of a business.
Internal Developments: Growth, new capabilities, and changes within the
organisation can lead to a reevaluation of objectives. For example, acquiring
new technology might lead to objectives focused on innovation.
External Factors: Economic shifts, political changes, and technological
advancements can significantly impact business objectives. For instance, a
change in government policy might necessitate a shift in environmental
objectives.
Translating Objectives into Targets
and Budgets
Setting Targets: This involves creating specific, measurable goals that are
aligned with broader business objectives. Targets provide a clear direction and a
benchmark for performance.
Budgeting: Allocating financial resources effectively is crucial for achieving
targets. This includes estimating costs, forecasting revenues, and managing
cash flow.
Performance Monitoring: Regular monitoring of progress against targets and
budgets is essential. This helps in identifying any deviations and making
necessary adjustments.
Impact of Communication on the
Workforce
Ensuring Clarity: Effective communication is key to ensuring that all members
of the workforce understand the objectives and their role in achieving them. This
clarity helps in aligning individual efforts with organisational goals.
Motivation: When employees understand the objectives and see their
relevance, they are more likely to be motivated and engaged. This can lead to
increased productivity and better overall performance.
Feedback Loop: Encouraging feedback from employees can provide valuable
insights for refining objectives and strategies. This two-way communication
fosters a sense of involvement and commitment among the workforce.
Setting SMART Objectives
The concept of SMART objectives provides a framework for setting effective
goals:
Specific: Objectives should be clear and specific, leaving no room for ambiguity
about what is expected.
Measurable: There should be clear criteria for measuring progress towards the
achievement of the objective.
Achievable: Objectives should be realistic and attainable within the resources
and time available.
Relevant: The objectives should be relevant to the direction and purpose of the
business.
Time-bound: A clear timeframe should be set for achieving the objectives,
providing a sense of urgency and focus.
Ethics and Business Objectives
Ethical considerations are increasingly important in business decision-making:
Ethical Considerations: When setting objectives, businesses must consider
the ethical implications. This includes considering the impact of business
activities on stakeholders, the environment, and society at large.
Balancing Profit and Responsibility: While profitability is a key objective for
most businesses, it should not be pursued at the expense of ethical standards.
Businesses must find a balance between making profits and being responsible
corporate citizens.
Corporate Social Responsibility (CSR): Integrating CSR into business
operations involves taking into account social and environmental concerns in
business decision-making. This can include initiatives like sustainable practices,
community engagement, and ethical labor practices.
By thoroughly understanding these elements, students will be equipped with
critical insights into the complexities of decision making and objective setting in
the business world. This knowledge is not only essential for academic success
but also invaluable for future business leaders in making responsible and
effective decisions.
