BUSINESS

CHOICES AND
TRADE-OFFS
Wangisai. M
BUSINESS CHOICES
• Businesses have to make countless decisions,
and decision makers are frequently faced with
trade-offs.
• This means that opting for one choice involves
compromising another. A designer clothing
brand will have its tailors and designers focus
on attention to detail and rather sacrifice the
speed of production. In this case, speed has
been traded off for quality.

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REWARD
• One important decision for entrepreneurs is whether
to set up a business in the first place. The rewards of
setting up your own business include:
1. Independence, as owners are in complete control
and make key decisions.
2. The chance to make more money than would be
made in normal employment.
3. Flexibility, as owners can choose a life balance
between work and leisure that suits them.

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 RISK
• The trade-off that exists here is that
entrepreneurs leave their jobs to set up a
business. They take on the following
challenges of running a business:
1. Being responsible for day to day
operations.
2. If they operate as sole traders, they will
have unlimited liability .
3. The demands of running a business may
also result in a lack of free time and a
build up of stress.
 WEIGHING UP TRADE-OFFS
Common Trade-Offs
• Firms might choose to take a more ethical
stance in their operations. However, this is
likely to come at cost, as investment in
cleaner technology might be required.
• Directors of PLCs have to find the right
balance between distributing corporate
profits. They can re-invest profits and
hopefully increase future profitability.
However shareholders may prefer higher
current dividend payments and less in re-
investment.
• When businesses are faced with
trade-offs, the following actions
might be taken to find the right
balance.
1. Obtain info. They could list the
advantages and disadvantages of
each choice and see which one
carries the heaviest weight.
2. Balance long and short term.
They could try to determine what
might be given up in the long
run for some important short
gain.
3. Gauge support. This means
considering how the decision can
affect key staff and whether they
would support or oppose it.
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WEIGHING UP TRADE-OFFS

Balance long and short Obtain info. This would

term. They could try to be to list the advantages
determine what might and disadvantages of
be given up in the long each choice and try to
run for some important determine which carries
short gain. the heaviest weight

When businesses are Gauge support. This

faced with trade-offs, means considering
the following actions how the decision can
might be taken to find affect key staff and
the right balance. whether they would
support or oppose it.

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 YAHOO!
• In 2008, Microsoft approached Yahoo to buy it for $44.6 billion ($53.6 billion today). Yahoo CEO, Jerry Yang,
rejected it because he thought the company was being under-valued. Microsoft wanted to create a synergy with Yahoo
to compete with Google, a rising player in the tech business.
• The internet was just starting to be popular around everyone. Many businesses were trying to get involved and
succeed in this new market. While Yahoo was already the biggest player.

• Yahoo’s problem was that it didn’t know what to do. It was the biggest internet company at the time, and it tried to get
into social media, search engines, photo sharing, video sharing, and many other internet services. In short, it was Jack
of all trades, master of none.

• Many CEOs came and went, and the vision of the company kept changing. Yahoo’s second CEO, Terry Semel, wanted
to make it a new media giant, and its last CEO, Marissa Mayer, wanted to make it a mobile technology company.

• Yahoo didn’t establish itself as a master of one. It tried to do everything. And ultimately, couldn’t do anything. The
company ended up being sold for $4.46 billion in 2016 to Verizon. Whenever a company is driven by a clear plan to
change the world, it has done just that. Bill Gates wanted every house to have a computer with Windows running on
it. That’s why he signed a deal with IBM to create MS-DOS and run it on IBM computers. This deal made Bill Gates
who he is now.

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 • Yahoo failed to properly balance their trade-
off. They compromised the potential to merge
with Microsoft and grow. They might have
been able to bring in new innovation from
Microsoft that would have caused their
THE TRADE- company to provide a superior user experience
and give it an extremely competitive edge.
OFF They traded this off for a chance to try and
profit off exploiting the different areas of the
web such as video sharing, search engines and
other services which were untouched by other
companies at that time. It was a risk they
decided to take but were not rewarded for.

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