BUSİNESS MANAGEMENT

By trying to figure out what the future is going to look like through a number of highly probable scenarios, we can form alternative plans for each. Besides, if we do not try to guess what is awaiting us and do not decide what we want to do, we can only be on the defensive side and be reactive rather than proactive. Typically, when we just react we do not have a lot of time to think over what to do. Then, it is more likely that we make mistakes and waste resources. If you do not plan for the future, then you lose the chance of shaping the future. The correct answer is E.

The nature of planning changes with the level of management. High-level managers deal with long-term planning, whereas low-level managers plan for the short term. However, this does not necessarily mean that middle-level managers do not deal with long- or short-term planning, or low-level managers do not deal with medium-term planning. In fact, they do. Middle-level managers also plan for the long term and short term, but their planning is dominantly for the medium-term. By the same token, low-level managers also plan with different time horizons, but mainly plan for the short term. The correct answer is A.

By looking at the present through the collection of hourly, daily, monthly data, short-term planning shapes the near future of the organization. This planning addresses short-term concerns like the condition of machinery and equipment used in production. With these quick fixes, short-term planning is in fact assisting the organization in moving gradually toward its longer-term goals. The correct answer is C.

Managerial planning is the process whereby managers assess an organization’s goals and create a plan of action for meeting those goals. The correct answer is E.

Organizational goals should be;
• guided by the mission and vision statements, and organizational strategy,
• written in measurable and quantifiable terms,
• stated in terms of anticipated outcomes rather
than actions,
• clear as to a time frame, and
• challenging yet attainable. 

The correct answer is B.

• Production plans (deal with work methods and technologies)
• Logistics plans (deal with suppliers and acquiring resources)
• Financial plans (deal with money and capital investments)
• Marketing plans (deal with selling and distributing goods or services)
• Human resource plans (deal with building a talented workforce)

The correct answer is A.

Tactical plans translate strategic plans into specific goals for specific parts of the organization. They specify how the organization’s resources can be used to put strategies into action. Tactical plans in business often take the form of functional plans that indicate how different operations within the organization will contribute to the overall strategy. Moreover, operational plans translate tactical plans into specific goals and actions for small units of the organization and focus on the near term (12 months or less). The correct answer is A.

Cash budget presents expected cash inflow and outflow for a designated time period. The correct answer is C.

Making a decision does not necessarily guarantee its implementation. The main reason for that is resistance. Resistance to implement a decision can stem from the fact that the implementer of the decision did not take or was not given any part in making the decision. The more change is involved with the decision, the more resistance will come out. This is a natural human reaction. Moreover, the decision-making process does not end with implementation, because there is the possibility of not realizing expected results. The correct answer is D.

Intuition is knowing or understanding something instinctively or
subconsciously without reasoning or proof. In this model, decisions are taken through five different aspects of intuition. Starting with experience-based decisions, managers use their past experiences. The second aspect of intuition in decisions are
feelings and emotions (affect-initiated decisions). In the third, managers make decisions based on skills, knowledge, and training (cognitive-based decisions). The fourth facet of intuitive decision-making utilizes values or ethics as guides. Lastly, the subconscious mental processing comes into play in executive decision-making. Thus, the correct answer is B.

Planning is the process of determining where to go by doing what. Planning is intertwined with effectiveness, which is defined as the achievement of organizational goals. In fact, the planning process involves determining those goals and how to reach them. Another important concept that planning serves is efficiency, being defined as how good the organization is in its use of resources. As we talk more and more about resource scarcity on our planet, planning gains importance so that businesses can become more sustainable through eco-efficiency (producing by wasting less resources). The correct answer is Choice B.

High-level managers deal with long-term planning, whereas low-level managers plan for the short term. However, this does not necessarily mean that middle-level managers do not deal with long- or short-term planning, or low-level managers do not deal with medium-term planning. In fact, they do. Even though the time horizons for long-term and short-term might change from one sector to the other and from one company to the other, for most business organizations long-term planning has a time horizon that is more than 3 years, whereas short-term planning is done for a period less than a year. For medium-term planning, which is dealt with by the middle management, it is more than a year- 3 years. The correct answer is Choice E.

Since 1990s, the world economy has gone through two major unanticipated financial crises:8 one originating from and contained in Asia and the other originating from the United States but impacting the world. The correct answer is Choice D.

Managerial planning is the process whereby managers assess an organization’s goals and create a plan of action for meeting those goals. Goals are the desired outcomes or results that people intend to achieve. Organizational goals can also be called as overall objectives. As planning is of great importance to an organization, the whole process of planning should be carried out in a systematic manner.

The correct answer is Choice C.

Organizational goals should be

• guided by the mission and vision statements, and organizational strategy,

• written in measurable and quantifiable terms,

• stated in terms of anticipated outcomes rather than actions,

• clear as to a time frame, and

• challenging yet attainable12(not too easy or trivial, nor too difficult).

The correct answer is Choice C.

The most often used classification of organizational plans is strategic, tactical and operational plans.15 Strategic plans focus on the broad future and identify the long-term direction the organization will take as a whole. Tactical plans translate strategic plans into specific goals for specific parts of the organization. They specify how the organization’s resources can be used to put strategies into action. Tactical plans in business often take the form of functional plans that indicate how different operations within the organization will contribute to the overall strategy. Such functional plans might include:

• Production plans (deal with work methods and technologies)

• Logistics plans (deal with suppliers and acquiring resources)

• Financial plans (deal with money and capital investments)

• Marketing plans (deal with selling and distributing goods or services)

• Human resource plans (deal with building a talented workforce)

Standing plans are ongoing plans that provide guidance for activities performed repeatedly, like policies and procedures. The correct answer is Choice B.

Key Differences Between Strategic, Tactical, and Operational Plans are:

Strategic Plans:

Time Horizon: Typically 3–5 years

Scope: Broadest; focus on the entire organization

Complexity: The most complex and general, because of potentially covering different industries and business (for groups of companies)

Impact: Have the potential to dramatically impact, both positively and negatively, the survival and success of the organization

Interdependence: High; must take into account the resources and capabilities of the entire organization and its external environments. 

Tactical Plans: 

Time Horizon: Often focused on 1–2 years in the future

Scope: Typically focused on a strategic business unit

Complexity: Complex but more specific, with a more limited domain of application

Impact: Affect specific business units, but the effect on the entire organization is measured

Interdependence: Moderate; must take into account the resources and capabilities of several units within a business

Operational Plans:

Time Horizon: Usually focused on the next 12 months or less

Scope: Narrowest; usually centered on departments or smaller organizational units

Complexity: The least complex, because of usually focusing on small, homogenous units

Impact: Impact is usually restricted to a specific

department or organization unit

Interdependence: Low; the plans may be linked to higher-level tactical and strategic plans but are less interdependent

The correct answer is Choice D.

Master budget is an overall financial and operating plan for a forthcoming calendar or fiscal year. Operating budget shows income and expenses that are likely to be produced through the current operations of the organization (does not include non-operating items such as income from investments). Cash budget presents expected cash inflow and outflow for a designated time period. Flexible budget allows resources to vary in proportion with various levels of activity (e.g. setting aside extra money to have it available for hiring and paying temporary workers, in case sales increase and so does the need for production). Expense budget includes the money planned to be spent on all the primary activities of a unit together with the amount to be spent on each item during a year. The correct answer is Choice D.

The steps for decision-making process are:

The correct answer is Choice E.

The decision-making process discussed above is also known as the rational model of decision making, but this classical model is not the only model put forward to explain managerial decision making. There is the bounded rationality model which challenges the rational model for not being realistic enough and a third model, namely, intuitive decision making, which will be discussed under the title of decision models. The rational model or approach to decision making27 takes its name from its major premise that the decision makers, typically managers, are fully rational. Also known as the classical model of decision making, this model is built on a number of assumptions that constitute rationality. The bounded rationality model is built on the fact that managers, as human beings, are limited by their ability to process information, therefore, they tend to satisfice rather than optimize. Satisficing means, the decision maker settles for the first satisfactory alternative that comes to his or her attention. Bounded rationality is the idea that in decision making, rationality is limited by (a) the information at hand, (b) the cognitive limitations of the human mind, and (c) the finite amount of time to make a decision. When compared with the rational model, another realistic model or approach would be intuitive decision making. Intuition is knowing or understanding something instinctively or subconsciously without reasoning or proof. In this model, decisions are taken through five different aspects of intuition. Starting with experience-based decisions, managers use their past experiences. The second aspect of intuition in decisions are feelings and emotions (affect-initiated decisions). In the third, managers make decisions based on skills, knowledge, and training (cognitive-based decisions). The fourth facet of intuitive decision-making utilizes values or ethics as guides. Lastly, the subconscious mental processing comes into play in executive decision-making. The main reason for managers’ using intuition is to make decisions fast and this is very important for the business organizations that function in more and more innovative and competitive environments. The correct answer is Choice E.