Question

What environmental factors and risks must be considered in the company's decision-making process?

Answer 1

Each decision you make in your business may address a specific problem or need in a department, but any decision can have an impact on the main objective of any company – profitability. When managers make vacuum decisions, they can lead to interdepartmental complications. Understanding the basic considerations that you should consider before making certain decisions allows you and your team to make better plans or adapt to particular circumstances.

One of the obvious factors that affect business decisions is the impact on profitability. You can quantify this in a variety of ways, but it is also the easiest to calculate the return on investment. The return on investment is the amount of money you gain or lose by doing an operation.

Some of the decisions you make, from where you advertise and sell at what rates you charge and the charity you support, have an effect on your profile. Only because you can momentarily boost revenue with a 50 percent off sale doesn't mean you will do so if the sale sends a message that you can't sell your product at a full price. It could be safer to donate this inventory and take a business write-off, even though you end up with less financial gain from the donation, as you can preserve the name.

If assessing your benefit from a potential decision, consider the total effect on your revenue, human resources , accounting, development and information technology staff. When producing a specific product takes your workers away from other jobs, you can lack other opportunities for profit. If you overburden your workers, you can be beginning to lose key employees. In addition to looking at the overall cost of making and selling a product, review the impact it would have on the operations.

When you make one choice, you lose the chance to make another one. For example , if you decide to buy radio ads, you may not have a budget to buy TV spots. If you buy new machinery that will improve your production, you may not be able to give a raise or a bonus this year. Asking your sales staff to develop new customers could result in them providing less customer service to existing customers. Before you make critical business decisions, ask yourself what's going to happen to your money and resources if you don't follow the strategy or idea.