BBA RESEARCH METHODOLOGY 4
WHEN IS BUSINESS RESEARCH NEEDED?
A manager faced with two or more possible courses of action faces the initial decision of whether or not research should be conducted. The determination of the need for research centers on
(1) time constraints, (2) the availability of data, (3) the nature of the decision that must be made, and (4) the value of the business research information in relation to its costs.
Time constraints Systematically conducting research takes time. In many instances management concludes that because a decision must be made immediately, there will be no time for research. As a consequence, decisions are sometimes made without adequate information or thorough 11 understanding of the situation. Although not ideal, sometimes the urgency of a situation precludes the use of research.
Availability of data
Frequently managers already possess enough information to make a sound decision without business research. When there is an absence of adequate information, however, research must be considered. Managers must ask themselves, “Will the research provide the information needed to answer the basic questions about this decision?” If the data cannot be made available, research cannot be conducted. For example, prior to 1980 the people’s republic of China had never conducted a population census. Organizations engaged in international business often find that data about business activity or population characteristics, found in abundance when investigating the United States, are nonexistent or sparse when the geographic area of interest is an underdeveloped country. Further, if a potential source of data exists, managers will want to know how much it costs to obtain those data.
Nature of the decision
The value of business research will depend on the nature of the managerial decision to be made. A routine tactical decision that does not require a substantial investment may not seem to warrant a substantial expenditure for business research. For example, a computer software company must update its operator’s instruction manual when minor product modifications are made. The cost of determining the proper wording for the updated manual is likely to be too high for such a minor decision. The nature of such a decision is not totally independent from the next issue to be considered: the benefits versus the costs of the research. However, in general the more strategically or tactically important the decision, the more likely that research will be conducted.
Benefits versus costs
Some of the managerial benefits of business research have already been discussed. Of course, conducting research activities to obtain these benefits requires an expenditure; thus there are both costs and benefits in conducting business research. In any decision-making situation, managers must identify alternative courses of action, then weigh the value of each alternative against its cost. It is useful to think of business research as an investment alternative. When deciding whether to make a decision without research or to postpone the decision in order to conduct research, managers should ask: (1) Will the payoff or rate of return be worth the investment? (2) Will the information gained by business research improve the quality of the decision to an extent sufficient to warrant the expenditure? And (3) Is the proposed research expenditure the best use of the available funds?
For example, TV Cable Week was not test-marketed before its launch. While the magazine had articles and stories about television personalities and events, its main feature was a channel-by-channel program listing showing the exact programs that a particular subscriber could receive. To produce a “custom” magazine for each individual cable television system in the country required developing a costly computer system. Because development required a substantial expenditure, one that could not be scaled down for research, the conducting of research was judged to be an improper investment. The value of the research information was not positive, because the cost of the information exceeded its benefits. Unfortunately, pricing and distribution problems became so compelling after the magazine was launched that it was a business failure. Nevertheless, the publication’s managers, without the luxury of hindsight, made a reasonable decision not to conduct research. They analyzed the cost of the information (i.e. the cost of business research) relative to the potential benefits.