Introduction

This unit will help you to identify and use information in business and management, whether for your work, study or personal purposes. Experiment with some of the key resources in this subject area, and learn about the skills which will enable you to plan searches for information, so you can find what you are looking for more easily. Discover the meaning of information quality, and learn how to evaluate the information you come across. You will also be introduced to the many different ways of
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2.1 Early beginnings – From magic to medicine

The life sciences sector, and its precursor the pharmaceutical industry, has a long and rich history. Pharmaceuticals, which are defined as compounds manufactured for use as medicinal drugs (remedies), date back to 2735 BC and the Chinese Dynasty of Shen Nung. Their development can be traced through ancient Hindu, Egyptian and Mediterranean civilisations. The word ‘pharmaceutical’ originates from the Greek pharmakon, meaning ‘drug’. In t
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1.6 Equity buybacks, de-listing and reversion to a ‘private’ company

Once its shares have been issued, a company has the option to buy back shares. Buybacks will occur if the company believes that it is overcapitalised and cannot generate a sufficiently high return on capital through its operations. Under these circumstances it is effectively saying to the investor ‘thanks but please now have some of your money back – you can probably make it work harder elsewhere’. A further reason for buybacks arises when a major capital restructuring is undertaken by
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1.5 Cross-listing

For many companies, particularly MNCs, there are attractions in having a share listing on more than one stock exchange. The last decade has witnessed an increase in such cross-listings globally.

Chouinard and D'Souza (2004) noted that the proportion of non-US listings on the New York Stock Exchange (NYSE) doubled from about 8.5 per cent in 1994 to 17 per cent at the start of 2003. This period also saw a rise from 7 per cent to 10 per cent in the non-US listings on NASDAQ. Author(s): The Open University

1.3 ‘Going public’

For many companies a point may be reached, particularly if the company has grown significantly in size and has aspirations for further expansion, to seek equity finance through an initial public offering of shares (IPO).

SAQ 4

In a recent
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7.3 What is an effective decision?

To improve decision making it is first important to have a clear idea of how we should judge an effective decision. While in this unit we have suggested that decisions often stray from formal rationality, this does not always mean those decisions are less effective. Sometimes it is smart to take mental shortcuts: drawing on hunches and intuition can allow us to tap our tacit knowledge and experience and can reduce the costs of decision making. It can be smart to ask what is ‘legitimate’ w
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7.2 Understanding the limits of rationality

An important first step in making more effective decisions is to understand the limits of human rationality. Because of these limits we have developed formal processes for reasoning: statistics; probability theory; modelling methods; and so on. We have also developed technologies such as computers to support us in processing information. These are certainly useful, but it is always important to remember they are used by humans and can be easily subverted. For example:

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6.3 The psychology of risk

Within the psychological paradigm there is a different starting point for understanding risk. In financial economic accounts, risk is generally regarded as a combination of the expected magnitude of loss or gain and the variability of that expected outcome. Human perception of risk works rather differently. There are two other important components of risk that influence our perceptions: the fear factor – how much we dread the potential outcome – and the control factor
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6.2 A rational-economic perspective on risk

A rational-economic perspective generally represents risk as a combination of the expected magnitude of a gain or loss, combined with some probability distribution of anticipated outcomes. Economic ideas of risk behaviour are founded largely on expected utility theory. Expected utility theory predicts that investors will always be risk averse. The shape of the utility curve (utility plotted against increasing wealth) is such that utility increases with wealth, but at a declining rate. This is
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6.1 Introduction

An important aspect of decision making which crosses all three perspectives is making decisions about risks. Risk is all-pervasive in organisational life and many decisions require us to weigh up and choose between different kinds of risk. Thus any account of decision making would be incomplete without examining how our perceptions of risk affect our decisions. In this section we will examine risk from the three different perspectives we have identified: rational-economic, psychological and s
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5.6 A way of dealing with social pressures: decoupling

Organisations often deal with these social pressures by decoupling responses to these different pressures. The need to appear legitimate in the eyes of important constituencies is met by actions and practices which have a purely ceremonial character: they are done for the sake of appearances and not with any real engagement. The example in Author(s): The Open University

5.5.1 Coercive pressures

Coercive pressures come from the social sanctions that can be applied if we do not act in socially legitimate ways. The law is one source of coercive pressure, but so too is the knowledge that you will get promoted only if you act in ways which fit accepted ways of doing things in your organisation.


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5.5 Social pressures which affect our decision making

Broadly, there are three kinds of social pressure which affect how we make decisions:

  • coercive

  • mimetic

  • normative.

We look at these in more detail below.


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4.1 Introduction

A psychological perspective does not start from the assumption that people are fundamentally irrational. Rather, it emphasises a different logic: a logic that meets the challenges we have evolved to face (Calne, 1999). For much of our evolution we have faced an environment with major differences from the modern business world. We have developed a range of cognitive mechanisms to cope with adverse environments in which resources are scarce. These include a range of simplifying and confidence-s
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3.3 Limitations of the rational-economic perspective

As an approach to understanding economic life, the assumption of formal rationality has been very successful. For example, there is great deal of evidence that, on average, prices in financial markets behave as if investors were formally rational. However, there is also a great deal of evidence that individuals do not behave in this way (e.g. de Bondt, 1998). Even within the field of financial economics, there is increasing interest in developing theories of market behaviour which take better
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3.2 Utility theory

Utility theory is based on this assumption of rationality and describes all decision outcomes (financial and otherwise) in terms of the utility (or value) placed on them by individuals. Within this framework, decisions can be understood in terms of rationally ordered levels of utility attached to different outcomes.

Bazerman (2001, pp.3–4), for example, describes a formally rational decision process for arriving at a decision with the greatest expected utility in the following terms:<
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2.2 Different approaches to decision making

Activity 2

Think of a major decision you have recently been involved in making at work. For each of the following statements about your decision-making process make a note of the number which shows your level of agreement with the stat
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Introduction

This unit covers a few key topics that will help you to think in broad ways about how you and others take decisions; we shall also introduce you to some themes in social science which have direct relevance to managerial decision making. The approach of this unit is descriptive: rather than prescribing how you should make decisions we look at frameworks that will help you to understand how decisions are actually made. We aim to help you to develop greater insight into both your own deci
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References

Butterfield, J. (1997) ‘Strategy Development’ in Butterfield, L. (ed.) (1997) Excellence in Advertising, Oxford Institute of Practitioners in Advertising/Butterworth Heinemann pp. 65–90.
Economist, The (2001) ‘Rebirth of a salesman’, 14 April 2001, p. 82.
Fill, C. (2002) Marketing Communications: Contexts, Strategies and Applications, 3rd edition, Har
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4 Summary

This section has examined marketing communications’ claims to strategic credentials. Historically there have been several barriers to this – the fragmented nature of development and execution in the absence of strategic co-ordination, rivalries between different communications disciplines, and short-termism in the marketing communications industry itself which has led to communications being seen as a tactical rather than strategic resource.

The traditional hierarchy of strategy has
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