XY Fashion is a German retailer, specialized in selling clothing, furniture and home accessories as well as food. This work-based assignment seeks to outline how an incorporation of environmental practices has dominated the company's decision making in recent years (Grundy, 2005). Increasingly faced with a competitive and dynamic business environment, characterized by technological turbulence, heightened increased rivalry between companies and unpredictability within the macro environment, XY Fashion are an example of a company who are focused upon the development of intangible, dynamic capabilities in an attempt to sustain competitive advantage (Teece, 2009).
Part 1 - Understand how information and knowledge informs management
One core focus of the company is thus the creation and diffusion of knowledge across the company. As such, processes of sourcing information play an active role in the company's decision-making practices and in turn this places great emphasis on knowledge as a source of competitive advantage (Lenway and Murtha, 2004). Using knowledge as a basis of competitive advantage, XY Fashion place an active focus on the internal and external transfer of knowledge. In particular, in relation to environmental actions and corporate social responsibility within the company, XY Fashion source knowledge from a variety of informal partners including the government, the education sector and wider stakeholders, in an attempt to promote integration and interaction between internal and external partners (Argote and Ingram, 2000). This involvement of those separate to the firm allows a greater support process for top management decision-making (Sutherland and Canwell, 1997).
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Corporate social responsibility is increasingly on the agenda for the 21st century (Godfrey and Hatch, 2007). In a business environment that is increasingly global in nature, societies are focused upon engaging with the environment. Social demands in the Germany alone have resulted in the need for German companies to highlight and operationalize their commitment to sustainable business development. As noted by Hemingway and Maclagan (2004:33) "an underlying assumption is that the commercial imperative is not the sole driver of CSR decision making in private sector companies". Environmental sustainability is thus a core feature of the company's corporate strategy (Sekerka and Stimel, 2012). XY Fashion place an emphasis on environmental decision making which guides their long term and everyday decision-making processes. By actively promoting the transfusion of knowledge into the company through partnerships, active employee involvement and external networking, XY Fashion are able to ensure they are equip with the knowledge to promote effective decisions. This outward looking focus of the company is one, which is often seen as being one of their core strengths (Henry, 2007).
Information needed by management to make an effective decision needs to be gained from a variety of sources in order to ensure a range of perspectives are identified and then considered (Tseng, 2010: Sutherland and Canwell, 1997). Environmental practices in knowledge management capability can be a complex process and can be one, which requires the company to evaluate a range of options. For example, XY Fashion must ensure that any decisions are aligned to the external environment to avoid strategic drift reoccurring (Hayes, 2007). To a certain extent, a promotion towards collaborative decision-making across the company advocates greater support towards decisions. This is particularly important when making decisions related to shifting a focus from sole business objectives i.e. profit alone, to a more social focus. With a history of declining profits in the late 1990s, XY Fashion are committed to adapting to changes in order to ensure their competitive position, as such, moving forward the company actively draw on information and knowledge to facilitate effective decision-making. For example, environmental practices are tied up within the wider organizational culture of the company and all employees are required to follow a code of practice in every day decision-making. Furthermore, during the decision making process, the company place an emphasis on the need to learn from mistakes and, thus inherently the company have learnt from their failure to align their practices to the external environment in the late 1990s (Henry, 2007). The ability to learn from and draw on knowledge is thus highly valuable to the company and is an area, which enables their decision making to be highly informed. Previous internal decision making practices in the 1990s resulted in the firm making decisions, which were not aligned to external conditions in any way, which had detrimental effects (Mullins, 2005).
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Overall, it can be seen that XY Fashion draw widely on information and knowledge within their management decision-making processes. No decision is made in isolation in reflection of the integrated business environment within which the company operates. As highlighted in this part, a commitment to sourcing information from a variety of sources is a process that reduces risk and promotes greater involvement between the company and society. Inextricably tied up with environmental decision-making in particular is the need to promote greater stakeholder integration and involvement and the practices of XY Fashion commend such a focus.
Part 2 - Understand how ICT supports management decision making
This next section will move on to consider how ICT supports management decision-making at XY Fashion. The current trend of improving relationships between the company and wider society places an emphasis on the need to encourage participation (Berry, 2002). As noted by George (2011) one key way of doing this is through the use of ICT to promote engagement. ICT can be used to facilitate participation, which can be used to gain information in relation to decision-making processes within the company. For example, XY Fashion actively seek customer feedback through an online portal. This information is then useful in determining the extent to which the company is meeting consumer needs and expectations which in turn may influence decisions being made within the company.
ICT can be used to gain access to real-time information data, which can be used to improve decision-making within the company (Smith, 1996). Technology and knowledge can be seen to go hand in hand and thus ICT is often used to deal with a variety of challenges within the dynamic environment (Teece, 2009). For example, XY Fashion draw on ICT systems to gain information in relation to operational issues such as supply and demand, strategic issues such as competitor patterns and human resources issues such as the skills and training requirements of its employees. The company therefore uses the information to support human decisions by providing relevant data as a supportive tool. Whilst it is argued that decisions are still inherently a human process, ICT is used to deal with information, which is needed yet too vast for a manager alone to deal with. For example, the obtainment of real time supply and demand data is something, which would ultimately influence the decision to re-invest in certain product range based on sales figures and consumer feedback. Furthermore, ICT can be used to evaluate alternative strategies without them having to be carried out, scenario based modeling thus allows for outcomes to be reviewed which in turn could allow for a response to competitor actions being developed (Wierenga, 2011). However, it must be considered that there are limitations to the data, which can be used by the company due to data protection legislation. As such, this may influence the type of data available to the company, which could restrict the extent to which they are able to make an informed decision. For example, competitor data will be protected which forbids the company from using it. Predictions and estimations are thus often used in line with data available to ensure that decisions are as informed as they can be (Allbright et al, 2010).
Despite there being many benefits to utilizing ICT when making management decisions as discussed above, a study by Hedelin and Allwood (2002) revealed that an inability to organize information gained from ICT could result in an obstacle to effective decision making being created. Problems with accessibility and accuracy could also be seen to impact upon the extent to which ICT can be used as an effective support tool. As such, there is a need to ensure that users have the skills to access information provided by ICT sources (Hayes, 2007: Mullins, 2005).
Overall, ICT contributes greatly to the process of decision making within the company. ICT heightens the extent to which informed decisions can be made and this is seen within XY Fashion who draw on real-time data to inform their decisions. Relying on ICT as a fast and accurate tool to gain data, the company actively integrates ICT and knowledge creation to stimulate more effective decision-making within the company.
Part 3 - Be able to take management decisions
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Managerial decisions and stakeholder needs must be balanced (Reynolds et al, 2006). The need to balance the two needs is considered to be instrumental in ensuring effective, long-term decisions within the company. The decision to move towards a greater environmental focus is one which required the need to draw on and act on stakeholder needs and expectations. Corporate social responsibility values are considered to be internalized by stakeholders and in turn this can result in a greater positive application of social change. For example, through an application of organizational justice theory, it is possible to consider that stakeholders react in a positive way to the company as a result of viewing the company acting in a positive manner to the environment and their overall treatment as stakeholders (Greenwood and Buren, 2010). Through analyzing stakeholder needs and managing their expectations it is possible to facilitate the development of trust between the firm and wider society. It is this focus on trust, which further enables the creation of both environmental and organizational benefits (Greenwood and Buren, 2010).
A proactive decision currently needing to be made within XY Fashion relates to the strategy to continue to ensure sustainable growth within the food side of the business. Food sales were up 3.4% in 2012 with Marks and Spencer 'outperforming the rest of the market' (BBC News, 2012, p.1). One key decision the company has to make is whether they expand in this area or whether they apply resources to use German suppliers for 50% of their sourced goods, which although could impact the price of goods offered would offer a more sustainable future. This identified issue is therefore one that requires the need to involve stakeholders in the active decision making process. An involvement of stakeholders has important consequences for the decision making process and thus it is important to evaluate how stakeholder needs and expectations will be managed (Hayes, 2007). In this instance, it is argued that stakeholders should be considered in terms of their power and interest (Crane and Ruebottom, 2011). The stakeholders who need particular attention are those that not only have a great interest but also have the power to influence a decision within the company. In order to promote cohesion across stakeholder groups, a strong communication process will be adhered to in order to ensure that management decisions are communicated in an effective manner to stakeholders.
When taking a management decision particular outcomes need to be achieved. In the context of the decision being made here, there is a need to ensure that any decision taken is aligned to external and thus stakeholder needs. Whilst it is recognized that it would be unlikely that all stakeholder needs would be addressed there is a need to ensure general support for the decision being made. A key outcome therefore needs to be that the decision has a positive impact on how stakeholders view the company. The decision to largely source from German suppliers is likely to be one, which reflects a general social demand present within the wider macro environment. An additional outcome of the decision needs to be that the decision can be communicated in a clear and effective manner. For this to be the case there is a need to ensure that the decision can be articulated in a manner that relates to stakeholders. For this to be the case justifications and motivations for carrying out the decision need to be articulated.
In order to draw on the current market growth of the food sector of XY Fashion, the decision taken is to source 50% of all products stocked from German suppliers. This decision is made in line with changing social demands towards German produce (Kemp et al, 2010) and a want to differentiate within a competitive environment. Drawing on high growth XY Fashion are experiencing (gained from sales figures/market growth) the firm are evidently doing something right. With a strong commitment to CSR within the company, XY Fashion are able to compete on the basis of their uniqueness, which is built upon a strong German family culture (Schein, 2012). The decision to source a large percentage of food products from German suppliers is a decision, which would enable the company to highlight their commitment to the sustainability of the German farming and dairy industry. Furthermore, XY Fashion would be able to offer an alternative to their consumers where transparency and honesty are key foundations of the products being offered. Building on high levels of consumer loyalty where XY Fashion is considered to be a trustworthy brand, this decision would reinforce the objectives and values of the company.
In order to communicate the decision to stakeholder groups, a hybrid of platforms will be used. Firstly, a message will be placed on the company's website this will also be supported by an online marketing campaign which draws on the growth and popularity of social media. With regards to more traditional communication tools, efforts will be made to invite stakeholders to a meeting to discuss the strategy. This involvement will enable stakeholders to feel actively involved in the process.
Part 4 - Be able to plan improvements to a management decision making
Part four addresses recommendations made to the current decision making process within XY Fashion. Reflecting upon its strengths and weaknesses, recommendations will be made which seek to improve the system. In order to review the current decision making system, information in relation to how decisions are made will be reviewed. Drawing on the work of Teece (2009) information with regards to how the company sense and seize opportunities will be gained. For example, what processes does the company currently make to scan opportunities and environmental conditions and how do they go about seizing such opportunities. This information will reveal in turn how the company makes decisions. In order to evaluate the decision making process there is also a need to understand how often the company meets to make decisions and if they are pro-active or reactive to environmental and internal conditions. In particular, during such analysis there is a need to understand in what way the company incorporates others into the decision making process. For example, is the top management team made up of a range of departments and are members from other departments involved in the decision making process. A review of the strengths of the system would largely be made in relation to how managers and stakeholders view the system. For example, do managers feel that their opinions are considered within the process and are stakeholders happy with the decisions being made? Face to face interaction and observation within the company would aid a process of evaluation. At present, it can be seen that XY Fashion operate within a dynamic and at times turbulent environment which in turn demands a need to be flexible and adaptable to changes. As such, in line with reviewing decision making processes there is a need to analyze the company's overall approach to change. For example, is change within the company continuous or reactive in nature (Hayes, 2007)? In order to obtain a sustainable competitive advantage it is argued that there is a need for the company to follow a continuous approach to change where new opportunities are being continuously sensed and then seized (Teece, 2009). With regards to the improvements needing to be made, there is a need for the company to continue to draw on a range of knowledge and information from external sources. Here, there is a need for the company to continue to seek out new knowledge to ensure that information within the company does not become static or stagnant in nature. In addition, it is recommended that the company promote greater involvement with universities who are at the forefront of cutting edge research.
In a business decisions are continuously made. Accordingly, entrepreneurial activity can be regarded as a chain of decisions. Optimal decisions are the foundation for business success in the competition with other businesses. The reduction of risk in decisions is therefore a key challenge for companies.
A company's well-being, effectiveness and success depend almost completely on the quality of its decision making processes; decision making therefore is a central management task. Planning and making decisions are tightly bound together. Supposing that a decision includes a dedication to future action, it can be argued that every decision therefore must comprise a plan or part of a plan.