The Role of Business Research

I. THE SCOPE OF BUSINESS RESEARCH

Business research fulfills the manager’s need for knowledge of the organization, the market, the economy, or
other area of uncertainty. It helps the manager predict how individuals, markets, organizational units, or other
entities will respond to his business decisions.

The emphasis of business research is to shift decision-makers from risky intuitive decisions to decisions
based on systematic and objective investigations.

A business researcher conducting research may be referred to as a “marketing researcher,” an “organizational

researcher,” a “director of financial research,” or one of many other titles.

II. BUSINESS RESEARCH DEFINED

Business research is defined as the systematic and objective process of generating information for aid in
business decisions. This research information should be (1) scientific; not intuitive or haphazardly gathered
(2) objective (3) impersonal.

Business research can be used for any aspect of the enterprise. By providing appropriate information,
research should be an aid to managerial judgment although it should not be a substitute for it. Applying the
research is a managerial art in itself. All types of organizations that engage in some kind of business activity
can use business research.

III.BASIC RESEARCH AND APPLIED RESEARCH

There are two types of business research:

A. Basic or pure research attempts to expand the limits of knowledge.
B. Applied research is conducted when a decision must be made about a specific real-life problem.

Both types of research employ the scientific method, the analysis and interpretation of empirical evidence
(facts from observation or experimentation), to confirm or disprove prior conceptions.

IV.MANAGERIAL VALUE OF BUSINESS RESEARCH

The prime managerial value of business research is that it reduces uncertainty by providing information that
facilitates decision making about strategies and the tactics used to achieve an organization’s strategic goals.
The decision-making process involves three interrelated stages.

A. Identifying the existence of problems and opportunities. Before any

strategy can be developed, an organization must determine where it wants to go and
how it will get there. Business research can help managers plan strategies by
determining the nature of situations by identifying the existence of problems or
opportunities present in the organization.

B. Diagnosis and Assessment . After an organization recognizes a problem or identifies

a potential opportunity, an important aspect of business research is often the
provision of diagnostic information that clarifies the situation. Managers need to
gains insight about the underlying factors causing the situation. If there is a problem
they need to specify what happened and why. If an opportunity exists they may need
to explore, clarify, and refine the nature of the opportunity.
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C. Selecting and implementing a course of action. Business research is often conducted to obtain specific
information to help evaluate the various alternatives, and to select the best course of action based on
certain performance criteria.

D. Evaluation of the course of action. Evaluation research is conducted to inform managers

whether planned activities were properly executed and whether they accomplished what they
were expected to do. It serves an evaluation and control function. Evaluation research is a
formal, objective appraisal that provides information about objectives and whether the planned
activities accomplished what they were expected to accomplish. This can be done through
performance-monitoring research, which is a form of research that regularly provides
feedback for evaluation and control of business activity. If this research indicates things are
not going as planned, further research may be required to explain why something “went
wrong.”

V. WHEN IS BUSINESS RESEARCH NEEDED?

A manager considering whether or not to conduct research must consider four things:

A. Time constraints: Is there sufficient time available before a managerial decision must be made?
B. Availability of data: Is the information already on hand adequate for making the decision? If not,
can appropriate information be made available?
C. Nature of the decision: Is the decision of considerable strategic or tactical importance?
D. Benefits vs. costs: Does the value of the research information exceed the cost of conducting the
research?

If the answer to any of these questions is “no,” then business research should not be conducted.

VI.MAJOR TOPICS IN BUSINESS RESEARCH

There are many topics that benefit from business research. Some major topics are: general business,
economic, and corporate research; financial and accounting research; management and organizational
research; sales and marketing research; information systems research; and corporate responsibility research.

VII. TOTAL QUALITY MANAGEMENT AND BUSINESS RESEARCH

Business research is an essential aspect of total quality management. Total quality management is a business
philosophy, which has much in common with the idea that the consumer is king. It embodies the belief that
the management process must focus on integrating the idea of customer-driven quality throughout the
organization. Total quality management stresses continuous improvement of product quality and service.
Managers improve durability and enhance products with additional features as the product ages. They strive
to improve delivery and other services to keep their brands competitive. Companies that have adopted the
total quality philosophy view employees as internal customers.

Implementing a total quality management program requires considerable measurement. It involves routinely
asking customers to rate a company against its competitors. It involves measuring employee attitudes. It
involves monitoring company performance against benchmark standards. In short, it uses business research.
Thus, business research with external customers and with employees in the organization (internal customers)
is important under a total quality management program.

VII. BUSINESS RESEARCH IN THE 21st CENTURY

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Business research, like all business activity today, has been strongly influenced by two major trends in
business:
A. Increased globalization
B. Rapid growth of the Internet and other information technologies

Business today is global. Business research, like all business activity, has increasingly become more global.

“The Internet is transforming society. Time is collapsing. Distance is no longer an obstacle. Crossing oceans
is only a mouse click away. People are connected 24 hours a day, seven days a week. “Instantaneous” has a
new meaning.”

Internet and other information technologies are dramatically changing the face of business research. Getting
information from Web sites and conducting Web surveys are examples.

Questions/Answers

1. What are some examples of business research in your particular field of interest?

Ans. Here are two examples.

Business research at Sears found that normal measures of employee satisfaction, such as employee turnover
and claims for workers’ compensation, were very highly linked to both customer satisfaction and financial
results. Similar results were also found at NCR Corporation. When customer satisfaction levels at each of the
company’s 12 plants were compared with the results of a company-wide employee attitude survey, the plants
with the highest employee satisfaction levels also had the highest scores in customer satisfaction.

The Major League Baseball Association’s players’ strike forced the cancellation of the 1994 World Series.
In a survey conducted before spring training in 1995, 77 percent of Baltimore Orioles season-ticket holders
said they would accept refunds rather than watch games featuring replacement players, and 82 percent said
they’d support a decision by the club to forfeit contests rather than use strike-breaking players. The
managerial conclusion from this survey was that the organization would suffer serious damage among its fan
base if forced by Major League Baseball to begin the 1995 season with replacement players. The research
supported management’s conviction, so the Orioles did not field a team of replacement players during spring
training.

Whiskas brand cat food had been sold in Europe market by Mars’ Pedigree Petfoods division for 30 years.
Over time as the brand facing increased competition from new premium brands consumers had difficulty
identifying with the brand. The company conducted attitude research to determine how people felt about their
cats and their food alternatives. The study revealed that cat owners see their pets as both independent and
dependent fragile beings. Cat owners held the attitude that cats wanted to enjoy their food but they needed
nutrition. This attitude research was directly channeled into managerial action. Whiskas marketers begin
positioning its product as having “Catisfaction” because of the owner’s concern. Its advertisements feature
purring kitty, a silver tabby - a pedigreed cat, which symbolized premium quality, but also presented the
image of a sweet cat. The message: “Give cats what they like with the nutrition they need. If you do they’ll be
so happy for you that they’ll purr for you.” This effort reversed the sales decline the brand had been
experiencing. (Source: Karen Nickel Anhalt, “Whiskas Campaigning Recruits a Tiny Tiger,” Advertising Age
International, October 19, 1998, p. 41.)

In the mid-1990s business researchers at Pepsi discovered that many twentysomethings who dislike the taste
of diet cola but don’t want all the calories of regular colas. The name “diet” was tarnish because it connotes
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deprivation and is considered a turn-off, especially among male consumers. Consumer concern had shifted
from calories to fat. They became less willing to compromise on cola taste. The company had had some
experience with Pepsi Light, also a 70-calorie soda, which was introduced in 1978 but phased out during the
mid-1980s. So marketers developed Pepsi XL which fell in between its diet and regular colas for those
who’ve grown up drinking cola but who have become more conscious of food additives and health. Pepsi XL
(‘X’ for excellent and ‘L’ for less sugar) had a mix of 50% sugar and 50% artificial sweetener (aspartame). A
12-ounce can of Pepsi XL had 70 calories instead of 150 calories for full-sugar Pepsi. (Diet Pepsi has no
calories.) The company conducted a number of taste test experiments with thousands of cola drinkers.
Although taste tests provide valuable information, Pepsi’s failed experience with two other mid-calorie
drinks, Pepsi Light and Jakes, convinced marketing executives that further experimentation beyond taste tests
was necessary. In 1995 Pepsi XL was introduced into 5 Florida test markets: Tampa/St. Petersburg Miami,
Fort Myers, West Palm Beach and Fort Lauderdale. The product failed to meet expectations.

2. In your own words define business research and define its tasks.

Ans. Definition of business research is: “The systematic and objective process of gathering, recording, and
analyzing of data for and in business decision making.” Whatever definition the students give, their answers
should include the concepts that information is crucial to reduce uncertainty and that the purpose of research
is to facilitate decision making.

3. How might a not-for profit organization use business research?

Ans. Although not-for-profit organizations have different organizational missions than for-profit
organizations, the functions they perform are very similar to those performed by for-profit organizations. For
example, zoos may conduct surveys of their customers. Government agencies may research employee
satisfaction.

Here is an example.

Texas Department of Highways has the task of reducing litter on the Texas highways. Business research is
needed to learn more about littering behavior and how to stop it.

The Texas Department of Highway and Public Transportation determined that a marketing effort to educate
the people of Texas concerning the detrimental effects of littering was in order. It believed that every citizen
needed to be reminded or persuaded not to litter. It was decided that a full-blown public education program
should be established.

One area to investigate might be to find out how much littering is occurring. The department investigated
126 primary sites for visible litter. The researchers observed litter visible to a pedestrian walking at a normal
pace along the highway sites. A separate sub-count of beverage containers was made.

Additional information that could be observed might be trash in truck beds, acts of littering witnessed,
indiscriminate dumping, and the number of anti-littering signs.

The department might research what environmental conditions other state highway systems are experiencing.
Is this littering trend nationwide or isolated to Texas? This type of information will help in long-range
forecasting of the state’s needs, if one assumes other areas of the country face a similar situation.

The state of Texas conducted a benchmark observation study about the amount of littering and then initiated
the Adopt-a-Highway and “Don’t Mess with Texas” programs. In a Five year period, the litter rate along
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Texas streets and highways, measured in square feet of litter per mile, was reduced by 72 percent (below the
first year baseline level).

Researching public opinions about litter and cleanup programs is another area for research. In other words,
the Department needs to investigate consumer needs and determine “product” modifications necessary to
service these needs. In this case surveys could be used to learn the needed information.

After creating anti-litter materials, and advertising in the mass media (Don’t Mess with Texas) standard
advertising research techniques could be used. A major consideration that the state should investigate is the
nature of its primary target market. Should promotion be toward frequent litterers or community groups
willing to help out with the effort? They should research if there are any secondary target markets that can be
persuaded to help out. Should the anti-littering effort concentrate on the blue-collar workers with pick-up
trucks? Consumers’ attitudes need to be investigated.

In its research The Texas Department of Highways found one very interesting finding: there was a major
effect of wild flowers on vacant lot littering. Based on observation of two sites with profuse wild flowers
there was a 71 percent reduction in littering in a five-year period. In five other sites with few or no wild
flowers there was only a five percent reduction. Apparently, lots with wild flowers appeared different enough
to give the impression that the vacant lot was maintained and not just a bunch of weeds “where littering is
acceptable.”

4. What is the difference between applied and basic research?

Ans. Basic or pure research attempts to expand the limits of knowledge. It is of a theoretical nature because it
does not attempt to solve a particular business problem as applied research does. Both basic and applied
research methods utilize the scientific method and the same methodologies.

5. Classify each of the following examples as basic or applied research.

a. A researcher investigates whether different in a manger’s brain (e.g. right versus left hemisphere) are
active during different kinds of managerial decision-making.

Ans. Basic research

b. A researcher investigates consumers’ attitudes toward a prototype of an innovative type of product, a home
Cleaning kit for use on clothes that require dry cleaning.

Ans. Applied research

c . A researcher investigates 5 personality traits to see if they can explain the purchasing behavior of
automobile buyers.

Ans. Basic research

d. A new technology that nullifies the need to refrigerate fish has been invented. Heat processing and the use
of flexible pouches for storage helps retain the freshness of fish and frozen food for three years. A researcher
investigates how this new technology will impact the market for fish in India.

Ans. Applied research

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e. A researcher working for a candy company has children evaluate concepts and prototypes for new candies.
The researchers ask children to taste the products and rate them. Sometimes, the candy company develops
unique items that taste good and researchers ask children to come up with a concept or a name the product.

Ans. Applied research

f. A researcher working investigates whether introducing a “subbrand” at new-car dealerships, identified by

an AutoNation USA logo below the dealership name, is an effective basic strategy that can be applied to all
its dealerships.

Ans. Applied research

6. Discuss how business research can be used in each stage of the decision making process.

Ans. Decision making associated with the development and implementation of a strategy involves three
interrelated stages:

A) Identifying the existence of problems or opportunities

B) Diagnose and Assessment
C) Selection and implementation of a course of action
D) Evaluating the course of action.

The value of business research is that it can provide information to reduce the decision-maker’s uncertainty in
any of these stages of the decision making process.

7. Describe a situation in which business research is not needed and one in which business research is
needed. What factors differentiate between the two situations?

Ans. The typical situation where research is not needed will be a situation that is relatively routine, or will be
a situation where a decision is needed urgently (where no time is available for research). Situations where
research is needed will be characterized as major decisions where capital expenditures have to be made (e.g.,
a new product is going to be launched). These situations will be characterized by plenty of time and the value
of the information will exceed the cost. Basically the criteria will follow those shown in the section “When is
business research needed?” including time constraints, availability of the data, nature of the decision, benefit
versus costs.

10. What is a cross-functional team? What type of projects might use business research directed by a cross-
functional team?

Ans. Cross-functional teams are composed of individuals from various organizational departments such as
engineering, production, finance, and marketing who share a common purpose. Current management thinking
suggests that cross-functional teams help organizations focus on a core business process, such as customer
service or new product development. Working in teams reduces the tendency for employees to focus single-
mindedly on an isolated functional activity. The use of cross-functional teams to help employees to improve
product quality and increase customer value is a major trend in business today.

At trend-setting organizations many business research directors are members of cross-functional teams. New
product development, for example, may be done by a cross-functional team of engineers, finance executives,
production personnel, marketing managers, and business researchers who take an integrated approach to solve
problems or exploit opportunities. In the old days, business research may not have been involved in
developing new products until long after many key decisions about product specifications and manufacturing
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had been made. Now, business researchers’ input is part of an integrative team effort. Researchers act as both
business consultants and as providers of technical services. Researchers working in teams are more likely to
understand the broad purpose of their research and less likely to focus exclusively on research methodology.

11. Suppose you have been hired as a consultant by an American fast-food restaurant chain that plans to
expand into Europe. What role would business research play, if any, in providing advice to your client.

Ans. Business research could play a major role. Decisions about international strategies and tactics should be
based on sound market information. A research study to determine market potential in each country would be
useful to determine sites for the restaurants. Business researchers have learned that there is no such thing as a
typical European consumer—the nations of the European Union are divided by language, religion, climate,
and centuries of tradition. For example, different cultures have different taste preferences. Surveys and taste
test would indicate if the menus would be different in different countries. In order to make pricing decisions
about products for their European markets, it is to get information about international currency and exchange
rates.