Business

Research Methods

William G. Zikmund

Chapter 1:
The Role of Business Research
LEARNING OUTCOMES
After studying this chapter, you should
1. Understand how research contributes to business
success
2. Know how to define business research
3. Understand the difference between basic and applied
business research
4. Understand how research activities can be used to
address business decisions
5. Know when business research should and should not
be conducted
6. Appreciate the way technology and
internationalization are changing business research
 What is Business Research?
Business Research may be defined as the
“systematic and objective process of gathering,
recording and analyzing data for aid in making
business decisions” (Zikmund, Business Research
Methods, 2002, p. 6)

Systematicness and Objectivity are its

distinguishing features of Business Research,
which is important tool for managers and
decision-makers in corporate and non-
corporate organizations

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 When is Business Research Used?
Typically, business research methods are used in
situations of uncertainty, that is, when decision-
makers face two or more courses of action and
seek to select the best possible alternative under
the circumstances. Business Research is hence
aimed at improving the quality of decision-
making which, in turn, benefits the organization
and helps ensure its continuity and efficiency.

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Business Research
Research information is neither intuitive nor
haphazardly gathered.
Literally, research (re-search) -“search again”
Business research must be objective
Detached and impersonal rather than biased
It facilitates the managerial decision process for
all aspects of a business.
 I don’t know
if we
Information should
offer on-site
Reduces child care?

Uncertainty
 Typical Users of Business Research
Methods
Businesses and Corporations
Public-Sector Agencies

Consulting Firms
Research Institutes

Non-Governmental Organizations
Non-Profit Organizations

Independent Researchers and Consultants

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 Common Business Research Methods &
Techniques
Surveys
Interviews
Observation
Experiments
Archival and Historical Data
Qualitative Analysis
Quantitative Analysis

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Fields Where Business Research is Often Used –
(1) General Business Conditions and Financial and Accounting Research
Corporate Research
 Forecasts of financial interest rate
 Short- & Long-Range Forecasting,
trends,
 Stock,bond and commodity value
 Business and Industry Trends
predictions
 Global Environments  capital formation alternatives
 Inflation and Pricing  mergers and acquisitions
 Plant and Warehouse Location  risk-return trade-offs
 Acquisitions  portfolio analysis
Management and Organizational  impact of taxes
Behaviour Research
 research on financial institutions
 expected rate of return
• Total Quality Management
• Morale and Job Satisfaction  capital asset pricing models
• Leadership Style  credit risk
• Employee Productivity  cost analysis
• Organizational Effectiveness
• Structural issues
• Absenteeism and turnover
• Organizational Climate
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Fields Where Business Research is Often Used –
(2) Sales and Marketing Research Information Systems Research

  Knowledge and information needs

Market Potentials
 Market Share
 Market segmentation
 Market characteristics
 Sales Analysis
 Establishment of sales quotas
 Distribution channels
 New product concepts
 Test markets
 Advertising research
 Buyer behaviour
 Customer satisfaction
 Website visitation rates
assessment
 Computer information system use and
evaluation
 Technical suppot satisfaction
 Database analysis
 Data mining
 Enterprise resource planning systems
 Customer relationship management
systems
Corporate Responsibility Research
 Ecological Impact
 Legal Constraints on advertising and
promotion
 Sex, age and racial discrimination /
worker equity
 Social values and ethics

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 Selected Examples of Real-Life Situations in
Which Business Research Methods are Used
 A firm wants to produce and market a new product but first wants to
ascertain if there is a potential consumer demand for this product in markets
x,y and z
 a multinational firm wants to establish a production facility in another
country after determining its technical and economic feasibility
 A government agency wants to ascertain the satisfaction level of its
employees, the causes for any possible discontent, and propose a scheme for
enhancing this level
 A financial institution wants to invest in commodities and commissions a
study to determine the past trends and forecast future returns in a portfolio
of commodities
 The CEO of a firm wants to undertake a SWOT-Analysis as part of his plan to
redefine his organization’s priorities

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Business Research Types

Basic research

Applied research
Basic Research
Basic business research (also called pure research)
conducted without a specific decision in mind
that usually does not address the needs of a
specific organization.
Attempts to expand the limits of knowledge.
Not directly involved in the solution to a
pragmatic problem.
Basic Research Example
Is executive success correlated with high need for
achievement?
Are members of highly cohesive work groups
more satisfied than members of less cohesive
work groups?
Do consumers experience cognitive dissonance in
low-involvement situations?
Applied Research
Conducted when a decision must be made about a
specific real-life problem
Applied Research Examples
Should McDonalds add Italian pasta dinners to
its menu?
Business research told McDonald’s it should not?
Should Procter & Gamble add a high-priced home
teeth bleaching kit to its product line?
Research showed Crest Whitestrips would sell
well at a retail price of $44
 Science and the Scientific Method
Science has been defined as “the methodological and
systematic approach to acquisition of new knowledge”
(Geoffrey Marcyzk, David DeMatteo, David Festinger, Essentials of
Research Design and Methodology, John Wiley & Sons, 2005, p. 4)

The scientific method, which has evolved since the 13th

century, concerns the set of tools, techniques and
procedures used by basic and applied researchers to
analyze and understand phenomena and prove or
disprove prior conceptions

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 The Essence of the Scientific Method
Characteristics of the Scientific Method
Elements of the
Objectivity Scientific Method
Systematic Analysis
Logical Interpretation of Results

Empirical Approach
Observations
Questions
Hypotheses
Basic Experiments
General Laws
Research Analysis
Scientific
Method

Conclusion
Replication
Applied Information or
Research Ideas for alternative
Courses of action
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Scientific Method
The analysis and interpretation of empirical
evidence (facts from observation or
experimentation) to confirm or disprove prior
conceptions.
The Decision-making Process
Associated with the Development
and Implementation of a Strategy

Identifying problems and opportunities

Diagnosis and assessment
Selecting and implementing a course of action
Evaluating the course of action
Evaluation Research
Evaluation research is the formal, objective
measurement and appraisal of the extent to which
a given activity, project, or program has achieved
its objectives.
Performance-monitoring Research
Research that regularly provides feedback for
evaluation and control
Indicates things are or are not going as planned
Research may be required to explain why
something “went wrong”
Total Quality Management (TQM)
A business philosophy that embodies the belief
that the management process must focus on
integrating customer-driven quality throughout
the organization.
TQM
Stresses continuous improvement of product
quality and service.
Managers improve durability and enhance
features as the product ages.
Managers strive to improve delivery and other
services to keep their companies competitive
The Value of Business Research for Managers – (1)
Reduction of uncertainty and improvement in
the quality of decision-making with several
consequent advantages (e.g. strategic,
operational) and benefits for organizations

Business Research Methods can be employed in

each of the following four stages:
(1) Identification of problems and/or opportunities
Useful for strategy planning, analysis of internal and
external organizational environment

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The Value of Business Research for Managers –
(2)
(2) Diagnosing and Assessment of problems and/or
opportunities

Its purpose is to gain insight into the underlying

reasons and causes for the situation. If there is a
problem, it asks what happened and why? If there is
an opportunity, it seeks to explore, clarify and refine
the nature of the opportunity and, in the case of
multiple opportunities, seeks to set priorities

(3) Selection and Implementation of Courses of Action

After alternative courses of action have been

determined, selection of the best possible course.

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The Value of Business Research for Managers –
(3)
An important consideration is the quality of
forecasting which is an essential tool of research

(4) Evaluating the Course of Action

Business Research Methods are used after a course

of action has been implemented in order to
determine whether activities have been properly
implemented and have accomplished what they
intended to do

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The Value of Business Research for Managers –
(4) Evaluation Research – It is the formal objective
measurement and evaluation of the extent which an
activity, project or programme has achieved its goal, and
the factors which influence performance (e.g. audits). It
is also the formal objective measurement and evaluation
of the extent to which on-going activities, projects or
programmes are meeting their goals (performance-
monitoring research)
Examples of performance-monitoring research:
(1) Are railway passengers satisfied with the level of
service the railway company is providing? If not, then
research may need to be undertaken to ascertain the
reasons for customer dissatisfaction and propose
corrective measures

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The Value of Business Research for Managers –
(5)
(2) What are the trends in retail and wholesale sector?
Can research suggest new ways to improve efficiency
in purchase transactions?

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When is Business Research
Needed?
 The determination of the need for research centers on:
1. Time constraints
2. The availability of data
3. The nature of the decision to be made
4. Benefits versus costs (the value of the research
information in relation to costs)
 Will the payoff or rate of return be worth the investment?
 Will the information improve the quality of the managerial
decision enough to warrant the expenditure?
 Is the expenditure the best use of the available funds?

1–29
When to Conduct Business Research
Time Availability Nature of the Benefits vs.
Constraints of Data Decision Costs
Is sufficient Is the Is Does the
Yes Yes Yes Yes
time information the decision Value of the
research Conduct
available already of
information Business
before on hand considerable exceed the
a managerial inadequate strategic Research
cost
decision for making or tactical of conducting
must be made? the decision? importance? research?

No No No No

Do Not Conduct Business Research

Value versus Costs
Potential Value of a Business Research Effort
Should Exceed Its Estimated Costs
Value Should Exceed Estimated Costs

COST
Value •Research expenditures
•Decreased uncertainty
•Delay of business decision
•Increased likelihood of a
correct decision
•Possible disclosure of
•Improved business
performance and resulting information to rivals
higher profits
•Possible erroneous research
•Higher Profits
•Better Reputation results
Major Topics for Research in Business

General Business Conditions and Corporate

Research
Financial and Accounting Research
Management and Organizational Behavior
Research
Sales and Marketing Research
Information Systems Research
Corporate Responsibility Research
Cross-functional Teams
Cross-functional teams are composed of
individuals from various organizational
departments such as engineering, production,
finance, and marketing who share a common
purpose.
 The Building Blocks of Research

Blend of information, experience and in-sights

KNOWLEDGE
That provides a framework that can be
thoughtfully evaluated when assessing new
information or evaluating relevant situations

Determination of relationship amongst data

INFORMATION with a view to facilitating understanding of the
phenomena, their relationships and decision-making
(e.g. past and predicted future sales trends)

Measurements of phenomena
DATA (e.g. sales statistics of a department store)

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Demands on Data & Information

 Relevance to the problem or situation at hand

 Must be available in a timely manner to the right person (manager or

decision-maker)
 Completeness

 Accuracy

 Accessibility

 Affordability

 Integrateability into a broader global information or decision-support

system

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 Business Research in the International
Context
Business Research is being increasingly applied in an
international context in the wake of globalization and
the consequent freedom of movement of the resources
of labour, capital and information of businesses and
corporations:
 Overseas market potential & Market knowledge is
essential
 Joint ventures and relocating production lines
overseas
 Framework considerations for investment and trade
(e.g. culture, legal environment, security, physical
infrastructure, availability and quality of human
resources, logistics, political stability, trade and
investment incentives)

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Global Business Research
General information about country - economic
conditions and political climate
Cultural and consumer factors
Market and competitive conditions - demand
estimation
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 Research
Seeking facts and figures about an issue
Surveys on Web sites
 Global Information Support Systems

A Global Information System may be defined as “ an

organized collection of computer hardware,
communication equipment, software, data, and
personnel designed to capture, store, update, manipulate,
analyze, and immediately display information about
worldwide business activities”

A Global Information System is a tool for providing past,

current and projected information on internal operations
and external activity. It organizes and integrates data
from production, operations, marketing, finance,
accounting and other business functions

(Zikmund, p. 22)
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 Decision-Support System
 A computer-based system that helps decision makers
confront problems through direct interaction with
databases and analytical software programs

 The purpose of a decision support system is to store

data and transform them into organized information
that is easily accessible to decision-makers

 Decision-Support Systems are integrated in Global

Information Systems. They are aimed usually for
assisting managers and decision-makers in specific
organizational business units (e.g. divisions,
departments and functional areas) by providing
organized and adaptable information

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 Databases & Software
 Databases are collections of raw data which have been
arranged in a logical manner and which can be stored and
processed electronically

 Software are programmes that allow complex operations

to be undertaken on data and which give information for
managers and decision-makers

 Data Warehousing & Data Mining

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Data and Information Sources for Business
Researchers – (1)
 Internal Records

Example: Data about costs, shipments, inventory, sales, and other aspects of
regular operations which are collected from various functional areas of an
organization

 Proprietary Business Research

Example: New data and information from projects which are undertaken ad
hoc to study specific company problems

 Business intelligence Systems

Example: Information about nonrecurring developments in the external

business environment stemming from a network of sources and regular
procedures

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Data and Information Sources for Business
Researchers – (2)
 On-Line Databases

Examples: PROQUEST, INFOTRAC, DIALOG, LEXIS-NEXIS, Dow Jones

News Retrieval Services, CompuStat

 Internet

Examples: World Wide Web search engines (Google, Yahoo, Altavista, Lycos,
Excite etc.)

 All Other Sources

Examples: Research Institutions, Libraries, Books, Journals, Periodicals,

Newspapers, Chambers of Commerce and Industry

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Business Research in the 21st
Century
Increased globalization
Growth of the Internet and other information
technologies