FAQ: Ethics, Data, and Strategic Planning

Transcription

1 Question 1: What are ethics, morals, and values, and how do they affect business decision making? Answer 1: Ethics refer to a code of conduct for an individual or a group. Morals are habits that people develop according to their cultural development. Values are what an individual deems as important. The extent to which ethics play an important role in an organization depends on the organizational culture. Many firms have a code of ethics to help their employees make better decisions. The influence that organization had in ethical decision-making depends on the following factors: How important are ethics to the company? How does top management view ethics? What are the organizational consequences for unethical behavior? Is there agreement among managers as to what is ethical and what is not? What probability for a harmful outcome causes unethical actions to be monitored? What is the length of time between the decision and the consequences? What number of people must be affected before consequential actions occur? Question 2: What is "satisficing? Answer 2: All people have practiced this element sometime in their life. People examine alternatives to solutions until they find one that barely meets the standards. They implement such alternatives without looking into the possibility of finding better ones. This has disastrous effects in decision-making, and research in general. Question 3: What is the role of "risk" in decision-making? Answer 3: Risk exists when the outcome of a certain alternate choice cannot be accurately predicted by the decision makers. Typically the decision makers have some information that enables them to estimate the probability of the occurrence of certain outcomes. Question 4: What is strategic planning, and how does market research help management with strategic planning? 1

2 Answer 4: One of the most important choices that management makes is where the organization is going, and this involves planning. Planning is the process of defining the path as well as the destination. Planning should start with the creation of vision and mission statements, which define the longterm goals and aspirations of the organization. Senior management then develops a strategic plan to support attainment of the mission and vision. The strategic plan is really just a set of specific, high-level goals to achieve in a stated timeframe, which is typically five years. Examples of strategic goals might be to grow profitability 10% per year, or to generate 10% of annual sales from newly developed products, or to enter new markets. Strategic goals should be challenging but achievable. To choose these goals, top management needs information about opportunities, and this is where marketing research becomes indispensable. At this level, the research will tend to focus on general trending and making predictions about the future. Too much specificity will limit scope, and strategic goals are destinations, not paths. Successful businesses will typically have more potential opportunities than resources to pursue them all and the information developed through thoughtful marketing research allows them to make the best choices. This research also provides a starting point for the second phase of organizational planning, which is tactical planning. Question 5: What is the difference between quantitative and qualitative data? Answer 5: In developing a marketing research plan, the proposed use of qualitative data is sure to lead to a spirited discussion. One side might argue that only hard numbers can yield truly accurate information with a definable confidence level. The other side would counter that knowing a fact does not necessarily explain why it is so. In practice, you often need both: quantitative data to show you specifics and trends, and qualitative data to help explain the reason(s) behind those specifics and trends. This is especially true when you are researching human behavior, because knowing the number of purchased boxes of corn flakes is far different from understanding why people buy corn flakes. The quantitative method is based on the scientific method, which has its roots in the physical sciences. The scientific method requires structure. The researcher defines and frames the data to provide specific focus. A search for truth, this method has three steps: state the objective or hypothesis of an experiment, 2

3 gather the appropriate data, and evaluate the results to ascertain whether the objective was met or the hypothesis proved or disproved. The qualitative method is based more on the social sciences. It is a search for truth as well as for meaning. There is still structure, but emphasis is placed on identifying relationships and symbols as opposed to numbers. Qualitative methods include direct observation and interviews, either individual or group. The researcher endeavors to understand the issue from the subject s perspective. Some studies benefit from using qualitative methods to identify trends, then quantitative methods to measure them. Some, as the example above, start with the numbers and then look for meaning. Both types of methods are valid and very useful tools for the marketing researcher. Question 6: What is an example of the importance of qualitative data? Answer 6: The Customer Service department for a large business-to-business (B2B) manufacturer wanted to improve customer satisfaction. A survey was administered (quantitative) that asked the customers to rank certain servicerelated issues in order of importance. Customers consistently ranked having their calls answered promptly as very important to their satisfaction. The company decided to use the incidence of customer hang-ups (dissatisfied customers) as the key measure of performance in this area. To reduce the hang-ups they shortened the queue, added staff at typically peak demand periods, used scripts calls to shorten call time, and so on. No matter what they did, however, the hang-up rate remained at about the same percentage of total calls. Finally the exasperated manager called a number of key customers to ask them about the hang-ups. The answer astounded him. It seems that this company, from the beginning, was the best in the industry for call pick-up. Customers therefore knew if the service reps were all busy on the first call, one would most likely be available if they called back. The customers found it more efficient to call back later than to wait in a queue because of this confidence, regardless of the waiting time. The original survey served its purpose it ascertained in hard numbers what issues were important. What it failed to do is learn how the company was performing to customer expectations relative to those issues. Question 7: How can bias affect quantitative data analysis? 3

4 Answer 7: Quantitative data in itself is objective. The criteria selection, weights, values, and interpretations, however, are all subjective. Rational, logical, and unbiased thinking must be part of the assignment and interpretation process for the data to be meaningful and effective. Question 8: What is expected value and how is it calculated? Answer 8: The expected value is a way to quantify the various possibilities available for any given decision. All possibilities or alternatives are assigned a weight or a value. Some alternatives may already have weights or values. For example, the return on an investment or the chance of winning and the dollar amount of a prize. Some alternatives must be assigned a weight by the decision-maker. The earned value is then calculated by multiplying this weight with the probability of the event occurring. The earned value rule stipulates that you should always choose the decision with the highest earned value. For instance, perhaps you have the opportunity of receiving 20% of $500 or 30% of $200, which would you choose? The earned value for the first option is 20% of $500 which equates to (.20)*(500) = (100). The earned value for the second option is 30% of $200 which equates to (.30) * (200) = (60). According to the earned value rule, you should choose the decision with the highest earned value when comparing the two earned value amounts, which is the first option: 20% of $500. If there are situations with multiple returns then the calculation just adds up the earned values of all the amounts. For example, the earned value of multiple amounts such as 20% of $500 and 80% of $100 equates to (.20) * (500) + (.80) * (100) = = 180. Question 9: How can market research help companies compete successfully? Answer 9: The only competitive tool available is price when two products are essentially identical in feature set. Price never provides a sustainable strategic advantage, however, because a competitor can always answer price challenges by reducing operational costs or simply accepting reduced profits. Products must compete on the strength of the utility or value they provide to buyers. Price is simply what the buyer is willing to pay for a product based on the perceived value the product provides. For companies to compete successfully, which means profitably, they must provide goods and services that are perceived by the buyer to meet their needs (provide utility) better than other available choices, and at an appropriate price (value). Identifying these differences, known as product differentiation, is a critical responsibility of the marketing researcher. Points of differentiation might 4

5 include product functions, features, size, packaging, availability, status, and selection anything that provides utility. Question 10: How can accumulated data benefit a company? Answer 10: Marketing research data is very much like cheese. Sometimes it gets better with age, but sometimes it begins to go bad almost immediately. Data are facts that are important today but often lose significance quickly. Data accumulated over time, however, can be recycled to plot trends that in turn can be used to make predictions about the future. If past trends can be used to develop predictive models that test well against incoming data going forward, then the researcher has developed a powerful set of strategic tools for the organization. Collecting data for trend analysis consumes scarce resources, however, which often cannot be justified without an approved research program. Luckily, the technology available in most companies today can greatly simplify the task, thereby reducing the cost. Company databases are literally full of relevant facts that can be processed into useful information with very minimal effort and expense, if only someone would take the time to look into them. 5