Factors Influencing Decision-Making in a Business Environment

by Jackie Lohrey ; Updated September 26, 2017
business people and engineers on meeting

In most businesses, a few common factors usually have the greatest influence on the decision-making process. Although personal characteristics, stress, experience or a looming deadline can play a role, objective business decision-making processes work to minimize these influences. Instead, processes should allow decisions to be based on factors that promote growth and profit.

Information Input Channels

The type, source and degree of information gathered by decision-makers influences the quality of business decisions. According to the U.S. Small Business Administration, businesses that rely on multiple input channels typically get better information -- and make better decisions -- than businesses that allow only one source to influence decision-making. For example, relying on information contained in financial statements, research reports and a warehouse storage floor plan provide a more effective base for making inventory decisions than relying on recommendations from a single warehouse supervisor.

Opportunity Cost

Making the best use of limited resources often means decision makers must choose between two or more alternatives. In these types of decisions, an opportunity cost tradeoff is an influencing factor. The tradeoff, which can be tangible or intangible, is what a business gets vs. what it gives up by choosing one alternative over another. For example, for a business on a tight budget, a decision to upgrade the computer network might increase network efficiency. However, it might also upset employees if this decision delays plans to purchase new desktop workstations

Video of the Day

Brought to you by Techwalla
Brought to you by Techwalla

Return On Investment

Return on investment is the difference between money you invest in things like marketing campaigns, inventory and real estate, and the potential or actual return. Because ROI calculations are useful in mitigating investment risks, they influence both pre-investment and post-investment business decisions. For example, by dividing potential return by the investment expense for a direct mail marketing campaign, a business is better able to decide whether the potential return justifies the expenses and risks involved in creating and implementing the campaign.

Image and Brand Management

Brand and image considerations influence decisions that focus on public perceptions and on intangible gains. For example, concerns about public perceptions can influence decisions about product ingredients, energy conservation policies and procedures, sponsorships and public relations campaigns. Brand awareness, which focuses on differentiating the business from competitors and on building customer loyalty, influences decisions about pricing, marketing and displaying products and services. For instance, just as brand awareness goals for a discount store are different from those of a high-end retail business, so are the pricing and marketing decisions each business makes.

About the Author

Based in Green Bay, Wisc., Jackie Lohrey has been writing professionally since 2009. In addition to writing web content and training manuals for small business clients and nonprofit organizations, including ERA Realtors and the Bay Area Humane Society, Lohrey also works as a finance data analyst for a global business outsourcing company.

Photo Credits

  • .shock/iStock/Getty Images
Cite this Article A tool to create a citation to reference this article Cite this Article