Edexcel A Level Business – Business Decisions and Strategy Theme 3

Edexcel A Level Business – Business Decisions and Strategy Theme 3 Average rate of return The total accounting return for a project to see if it meets a target. Or the average amount of profit the project returns per year as a percentage of the initial investment cost. (Net return / Number of years) / Initial Cost)) x 100 Discounted cash flow / Net present value Calculates the monetary value now, of the projects future cash flows. Using discount factors to show that £100 in 3 years is not worth the same as £100 now. Decision tree A mathematical model used to help managers make decisions using estimates of costs and probability to calculate likely outcomes. Expected value The financial value of an outcome calculated by multiplying the estimated financial effect by its probability. Net gain Calculated by taking the expected value of each outcome minus the cost associated with the decision. Critical path analysis A management planning tool to help manage complex and time-critical projects. Shown in a diagram that shows the chronological length of a series of activities required to complete a project / task and durations. Critical path The sequence of stages determining the minimum time needed for an operation (the longest possible path to the final node) Float time The amount of time that a schedule activity can be delayed or extended from its early start date without delaying the project finish date or violating a schedule. Latest Finish Time - Activity Duration - Earliest Start Time Short term view When strategic decisions are made with the immediate future (i.e. less than 12 months) in mind. Long term view When strategic decisions are made with the long term future (i.e. next 5-10 years or more) in mind. Corporate influence A factor that has an impact on the business as a whole. Corporate/organizational culture The actions and behaviors that underpin the "way the business operates". Power cultures A culture where power is held by just a few individuals whose influence spreads throughout the organization Role cultures A culture based on rules. Everyone in the organization knows their role and responsibilities. Power is determined by someone's position in the business. Task cultures A culture where there is the formation of teams within an organization to address specific problems or progress projects. The task is the priority so power shifts depending on the status of the project. Person culture A culture where the business exists mainly to facilitate the operation of individuals. The individuals are perceived as superior to the organization. Stakeholder Any individual or group effected by the activities of an organizations. Shareholder Someone who owns a proportion of the company's share capital. Internal stakeholder Someone who has an interest in a business and is involved directly in the day to day running of the business. External stakeholder Someone who has an interest in a business but has no part of the day to day running of the business, yet is still affected by the decisions made. Business ethics Moral principles that guide the way a business behaves. Ethical behavior Behavior that is about doing what is morally right. Unethical behavior Behavior that falls outside of what is considered morally right