Businesses need information in order to take decisions. The decisions they take can only be effective if they are based on data that meets certain quality criteria.

The questions faced by businesses are impossible of course to quantify. We could use the cliché that they are 'many and varied'. What we can say is that decisions range from the products or services that should be offered to customers, through the mix of resources needed to effect strategic plans, to the selection of markets to be targeted. Better still perhaps to try to summarise the huge variety of decisions that business faces.

Businesses have to marshall resources in order to become active. These resources are usually divided into four categories:

Land
Not only the location of the business, but also the natural resources needed to produce the goods or services specified in the business plan. So, a car maker's 'Land' requirements will include factory premises as well as aluminium and/or steel as the basic raw material.

Labour
Labour is the workforce of the business, which receives wages or salaries for services provided. The mix of manual workers, skilled staff and management is a key decision for a business. In the car industry, one decision that has to be made is the extent to which manual labour is required as increasing use is made of robotic engineering as a solution to labour requirements for example in spot welding or paint spraying.

Capital
Capital is the tools, machinery and equipment that businesses use. The decision to invest in the latest robotics to help reduce reliance on labour for manual tasks, as discussed above, is an example of a capital decision. Capital also means the money that the owners of a business use to set it up. There are serious decisions to be made here too. The balance between labour and capital intensivity is one of the key decision areas in manufacturing industry.

Enterprise
Enterprise relates to the risk-taking decisions that have to be taken by a firm's owners. These are usually made at the start of the business' life, but decisions about strategic direction of the firm are likely to occur throughout the firm's existence.

Enough said! Business decisions are founded on information (data) and the challenges faced by businesses are virtually infinite in number.

Renault/Nissan case study

Let's focus on a particular case study: the part-takeover of Nissan by Renault in 1999, and investigate how data-hungry companies can be when they are effecting change on a global scale.

You might like to try the On the case worksheet (on the main Biz/ed site)that takes this Renault-Nissan story further.

Within two years of the part-takeover, Ghosn-led Nissan had achieved an operating profit of more than 4%. This was projected to rise to 8% by 2006. A total of 22 new or re-vamped models was planned for 2003 to 2006

By 2001 Renault were losing market share and had a 'tired' product range. Their response, like that of many firms with products at late-Saturation/early-Decline phase in their product life cycle, was to offer more incentives to customers. Heavy sales promotion at this stage in the product life cycle usually results in falling profits. This outcome is normally justified by the potential losses had the discounts not been offered. Renault's operating margins suffered in a similar way. New or re-vamped models planned for market in 2002 by Renault amounted to only four (Laguna, Clio, Megane and Scenic).

Industry Bites:

Mean car product life cycle: 8 years

Development time for new car model: Approximately three years.

We can look now at planning from the following four distinct decision areas:

• Strategic aka long-term planning
• Research and development
• Production and distribution
• Marketing

Strategic planning:
Businesses are decision-making organisations. Their strategic decisions are also known as long-term choices because they can affect the profitability and eventual survival of their businesses. An example of a strategic decision could be one concerning the location of the organisation. Most of the day-to-day decisions made by businesses are referred to as tactical decisions. Strategic decisions involve organisations in a higher degree of risk than tactical choices.

Research and development (R & D):
The constant need for invention and innovation creates the need for R & D. Research is about looking for and discovering new ideas; development involves changing ideas into products or services that can be commercially exploited. R & D is carried out by a wide variety of organisations, not only businesses. Because R & D is often very expensive usually it is only done by big business. So R & D is particularly extensive and costly in the pharmaceutical, electronic and car manufacturing industries.

Production and distribution:

Decisions relating to production and distribution are likely to be influenced by a range of factors:

• whether the firm is product or market oriented (the market oriented firm sells products on the key basis that they meet consumers' wishes).
• competitors' behaviour.
• financial value.
• technology.
• management priorities.

Marketing:

Marketing planning decisions will be based on a mix of the following elements:

• the particular industry in which a firm operates.
• the degree of competition within the firm's key market(s).
• management's policy decisions.
• management's outlook.

The following phrases all concern decisions taken by Renault-Nissan during or since the part-takeover.

Study them before deciding which Renault-Nissan decision belongs to which decision area:

Industry Bites:

Name: Carlos Ghosn

Job: President Nissan Motor Co

Career:
1978 Chief Executive Michelin (N. America)
1996 Joined Renault
1999 Moved to Nissan

Born in Brazil, educated and worked in France, later in the USA.

Known as 'Le Cost Killer' with reputation for boosting efficiency by ruthless cost-cutting. 'Parachuted' into Nissan by Renault to turn around fortunes of the Japanese carmaker. Created and saw through massive restructuring programme, cutting over 14 000 jobs, closing factories and trimming debt. In May 2001 Nissan reported its first profits for a decade and a boost in operating margins.

Forecasts a 7 % fall in demand in the USA and a 2 % fall in Europe for 2001. Sales in Europe also predicted to fall and as the market contracts, competition will increase and margins will be affected.

2001-2003 are likely to be true test of what Ghosn has achieved. Despite the forecast contraction of the worldwide car industry, Nissan will be launching 22 new models, 13 of them in 2002. Marketing them effectively, in a climate of uncertain exchange rates, without damaging operating margins will be a real challenge.