Organisations are required to make ongoing decisions to
maximise opportunities, to adapt and change with the internal
and external environments, to remain relevant with the aim of
attracting and maintaining a customer base, whilst ensuring
that the wealth of the owners is maximised (Atrill & Mclaney,
2021).
Decisions are made at multiple levels throughout an
organisation and are often grouped into one of the following
categories: strategic, tactical, operational (Anon, ND).
Gogo Airlines' decision to establish a low budget airline would
involve decisions at all levels.
Strategic - The board of directors would make the initial
decision to establish the new airline.
Tactical - Senior and Middle management would take the
decision on which locations the airline should travel to.
Operational-Lower-level management would take the
decision on areas such as staff employment and hours.
The CEO of the organisation would have worked with other
stakeholders to take the decision to establish the airline, many
risks would have been involved when taking this decision as
there is a large reliance on the future external micro and
macro environment, which is often beyond the control of the
organisation (Blyth & Martin, 2019). Scenarios such as the
global pandemic, albeit a rare occurrence are areas that are
difficult to predict and would have a large impact on any
organisation.
One common technique used to minimise the risk of taking
financial decisions is the use of the Net Present Value (NPV).
The NPV will look at projected income of an investment
against the initial investment cost, whilst taking into
consideration the time value of money (Atrill & Mclaney, 2019).
Would you suggest any alternative financial technique that
may provide a better judgement when making a financial
decision?