Chapter 1: The Role of Business Research:
Learning Outcomes
After studying this chapter, you should be able to
- Understand how research contributes to business success
- Know how to define business research
- Understand the difference between basic and applied business research
- Understand how research activities can be used to address business decisions
- Know when business research should and should not be conducted
- Appreciate the way that technology and internationalization are changing business research
The Purpose of Business Research
Business research covers a wide range of phenomena. For managers, the purpose of research is to provide knowledge regarding the organization, the market, the economy, or another area of uncertainty.
A financial manager may ask, “Will the environment for long-term financing be better two years from now?”
A personnel manager may ask,“What kind of training is necessary for production employees?” or “What is the reason for the company's high employee turnover?”
A marketing manager may ask, “How can I monitor my retail sales and retail trade activities?” Each of these questions requires information about how the environment, employees, customers, or the economy will respond to executives’ decisions.
Research is one of the principal tools for answering these practical questions.
Within an organization, a business researcher may be referred to as a marketing researcher, an organizational researcher, a director of financial and economic research, or one of many other titles. Although business researchers are often specialized, the term business research encompasses all of these functional specialties.
While researchers in different functional areas may investigate different phenomena, they are similar to one another because they share similar research methods.
Business Research Defined
Business research is the application of the scientific method in searching for the truth about business phenomena. These activities include defining business opportunities and problems, generating and evaluating alternative courses of action, and monitoring employee and organizational performance.
Business research is more than conducting surveys.5 This process includes idea and theory development, problem definition, searching for and collecting information, analyzing data, and communicating the findings and their implications.
Our definition makes it clear that business research is designed to facilitate the managerial decision-making process for all aspects of the business: finance, marketing, human resources, and so on.
Business research is an essential tool for management in virtually all problem-solving and decision-making activities. By providing the necessary information on which to base business decisions, research can decrease the risk of making a wrong decision in each area. However, it is important to note that research is an aid to managerial decision making, never a substitute for it.
Finally, this definition of business research is limited by one's definition of business. Certainly, research regarding production, finance, marketing, and management in for-profit corporations like DuPont is business research.
However, business research also includes efforts that assist nonprofit organizations such as the American Heart Association, the San Diego Zoo, the Boston Pops Orchestra, or a parochial school. Further, governmental agencies such as the Federal Emergency Management Agency (FEMA) and the Department of Homeland Security (DHS) perform many functions that are similar, if not identical, to those of for-profit business organizations. For instance, the Food and Drug Administration (FDA) is an important user of research, employing it to address the way people view and use various food and drugs. One such study commissioned and funded research to address the question of how consumers used the risk summaries that are included with all drugs sold in the United States.6 Therefore, not-for-profits and governmental agencies can use research in much the same way as managers at Starbucks, Jelly Belly, or DuPont. While the focus is on for-profit organizations, this book explores business research as it applies to all institutions.
Applied and Basic/Pure Research
One useful way to describe research is based on the specificity of its purpose. Applied business research is conducted to address a specific business decision for a specific firm or organization. The opening vignette describes a situation in which AFLAC may use applied research to decide how to best create knowledge of its supplemental disability insurance products.
Basic business research (sometimes referred to as pure research) is conducted without a specific decision in mind, and it usually does not address the needs of a specific organization. It attempts to expand the limits of knowledge in general, and as such it is not aimed at solving a particular pragmatic problem.
Basic research can be used to test the validity of a general business theory (one that applies to all businesses) or to learn more about a particular business phenomenon. For instance, a great deal of basic research addresses employee motivation.
How can managers best encourage workers to dedicate themselves toward the organization's goals? From such research, we can learn the factors that are most important to workers and how to create an environment where employees are most highly motivated. This basic research does not examine the problem from any
One useful way to describe research is based on the specificity of its purpose. Applied business research is conducted to address a specific business decision for a specific firm or organization. The opening vignette describes a situation in which AFLAC may use applied research to decide how to best create knowledge of its supplemental disability insurance products.
Basic business research (sometimes referred to as pure research) is conducted without a specific decision in mind, and it usually does not address the needs of a specific organization. It attempts to expand the limits of knowledge in general, and as such it is not aimed at solving a particular pragmatic problem.
Basic research can be used to test the validity of a general business theory (one that applies to all businesses) or to learn more about a particular business phenomenon. For instance, a great deal of basic research addresses employee motivation.
How can managers best encourage workers to dedicate themselves toward the organization's goals? From such research, we can learn the factors that are most important to workers and how to create an environment where employees are most highly motivated. This basic research does not examine the problem from any
Types of Business Research Studies
Business research can be classified on the basis of either technique or purpose. Experiments, surveys, and observational studies are just a few common research techniques. Classifying research by its purpose, such as the situations described above, shows how the nature of a decision situation influences the research methodology. The business research is primarily of three types:
- Exploratory – This kind of research helps in knowing the unknown which is hidden and latent. As the name implies, exploratory research is not intended to provide conclusive evidence from which to determine a particular course of action. In this sense, exploratory research is not an end unto itself. Usually exploratory research is a first step, conducted with the expectation that additional research will be needed to provide more conclusive evidence. Exploratory research is often used to guide and refine these subsequent research efforts.
- Descriptive – This research addresses the characteristics of the group, organization, people, competitors, etc. In other words, descriptive research addresses who, where, when, why, and how questions. This research technique is a conclusive research technique, and managers can take final decision based on this. Descriptive research is conducted on large sample size and hence it can be generalized. A structured questionnaire is used for descriptive research.
- Causal – Causal research seeks to identify cause and effect relationships. When something causes an effect, it means it brings it about or makes it happen. The effect is the outcome. Rain causes grass to get wet. Rain is the cause and wet grass is the effect.
The Scientific Method
All research, whether basic or applied, involves the scientific method. The scientific method is the way researchers go about using knowledge and evidence to reach objective conclusions about the real world. The scientific method is the same in social sciences, such as business, as in physical sciences, such as physics. In this case, it is the way we come to understand business phenomena.
Exhibit 1.1 briefly illustrates the scientific method. In the scientific method, there are multiple routes to developing ideas. When the ideas can be stated in researchable terms, we reach the hypothesis stage. The next step involves testing the hypothesis against empirical evidence (facts from observation or experimentation). The results either support a hypothesis or do not support a hypothesis. From these results, new knowledge is generated.
Organizing the Business Research Function
In all of business strategy, there are only a few business orientations (see Exhibit 1.2). A firm can be product-oriented . A product-oriented firm prioritizes decision making in a way that emphasizes technical superiority in the product. Thus, research gathering information from technicians and experts in the field are very important in making critical decisions. A firm can be production-oriented . Production orientation means that the firm prioritizes efficiency and effectiveness of the production processes in making decisions. Here, research providing input from workers, engineers, finance, and accounting becomes important as the firm seeks to drive costs down. Production-oriented firms are usually very large firms manufacturing products in very large quantities. The third is marketing-oriented , which focuses more on how the firm provides value to customers than on the physical product or production process. With a marketing-oriented organization the majority of research focuses on the customer. Research addressing consumer desires, beliefs, and attitudes becomes essential.
We have argued that research facilitates effective management. For example, Yoplait Go-Gurt illustrates the benefit of business research. The company's consumer research about eating regular yogurt at school showed that moms and kids in their “tweens” wanted convenience and portability. Some brands, like Colombo Spoon in a Snap, offered the convenience of having a utensil as part of the packaging/delivery system. However, from what Yoplait learned about consumers, they thought kids would eat more yogurts if they could “lose the spoon” and eat yogurt anywhere, anytime. Moms and kids participating in a taste test were invited to sample different brand-on-the-go packaging
| EXHIBIT 1.2: Business Orientations | |
| Product-Oriented Firm | Example |
| Prioritizes decision making that emphasizes the physical product design, trendiness or technical superiority | The fashion industry makes clothes in styles and sizes that few can adopt. |
| Research focuses on technicians and experts in the field. | |
| Production-Oriented Firm | Example |
| Prioritizes efficiency and effectiveness of the production processes in making decisions | U.S. auto industry's assembly-line process is intent on reducing costs of production as low as possible. |
| Research focuses on line employees, engineers, accountants, and other efficiency experts. | |
| Marketing-Oriented Firm | Example |
| Focuses on how the firm provides value to customers | Well-known hotel chains are designed to address the needs of travelers, particularly business travelers. |
| Research focuses on customers. | |
The decision-making process associated with the development and implementation of a business strategy involves four interrelated stages:
- Identifying problems or opportunities
- Diagnosing and assessing problems or opportunities
- Selecting and implementing a course of action
- Evaluating the course of action
Business research, by supplying managers with pertinent information, may play an important role by reducing managerial uncertainty in each of these stages.
Identifying Problems or 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 or by identifying the existence of problems or opportunities present in the organization. Business research may be used as a scanning activity to provide information about what is occurring within an organization or in its environment. The mere description of some social or economic activity may familiarize managers with organizational and environmental occurrences and help them understand a situation. Consider these two examples:
- The description of the dividend history of stocks in an industry may point to an attractive investment opportunity. Information supplied by business research may also indicate problems.
- Employee interviews undertaken to characterize the dimensions of an airline reservation clerk's job may reveal that reservation clerks emphasize competence in issuing tickets over courtesy and friendliness in customer contact.
Once business research indicates a problem or opportunity, managers may feel that the alternatives are clear enough to make a decision based on their experience or intuition. However, often they decide that more business research is needed to generate additional information for a better understanding of the situation.
Problem Identification
This is the first stage of the research process that involves translating the management problem into a researchable unit. Problem identification is the starting point for any business research and clear identification of the problem helps the researcher to find workable solution of the business problem. Researcher may identify the problem of the business through direct interviews with the management. The interview required probing and asking questions to management personal to find the information that would help the researcher to finalize the actual problem in the business. Translating a business situation into something that can be research in somewhat like translating one language into another. Hence the researcher must be very careful about this process so that the right problem can be identified. The technique is elaborated in subsequent chapters of the book.
Diagnosing and Assessing Problems or Opportunities
After an organization recognizes a problem or identifies a potential opportunity, business research can help clarify the situation. Managers need to gain 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, refine, and quantify the opportunity. If multiple opportunities exist, research may be conducted to set priorities.
Data Collection
The data collection stage begins once the sampling plan has been formalized. Data collection is the process of the researcher use structured questionnaire to collect research information in repeated manner from large number of respondents. Data collection may be done through online as well as personal interviews. Data regarding issuance are also used in collecting data to a large-scale. Nowadays Web-based questionnaires and data collection method are very popular. The technique is elaborated in subsequent chapters of the book.
Developing Research Strategy
After the alternative courses of action have been clearly identified, business research is often conducted to obtain specific information that will aid in evaluating the alternatives and in selecting the best course of action. For example, suppose Harley-Davidson is considering establishing a dealer network in either China or India. In this case, business research can be designed to gather the relevant information necessary to determine which, if either, course of action is best for the organization.
Opportunities may be evaluated through the use of various performance criteria. For example, estimates of market potential allow managers to evaluate the revenue that will be generated by each of the possible opportunities. A good forecast supplied by business researchers is among the most useful pieces of planning information a manager can have. Of course, complete accuracy in forecasting the future is not possible, because change is constantly occurring in the business environment. Nevertheless, objective information generated by business research to forecast environmental occurrences may be the foundation for selecting a particular course of action.
Even the best plan is likely to fail if it is not properly implemented. Business research may be conducted to indicate the specific tactics required to implement a course of action.
Evaluating the Course of Action
After a course of action has been implemented, business research may serve as a tool to tell managers whether or not planned activities were properly executed and if they accomplished what they were expected to accomplish. In other words, managers may use evaluation research to provide feedback for evaluation and control of strategies and tactics.
Evaluation research is the formal, objective measurement and appraisal of the extent a given activity, project, or program has achieved its objectives. In addition to measuring the extent to which completed programs achieved their objectives or whether continuing programs are presently performing as projected, evaluation research may provide information about the major factors influencing the observed performance levels.
In addition to business organizations, nonprofit organizations and governmental agencies frequently conduct evaluation research. Every year thousands of federal evaluation studies are undertaken to systematically assess the effects of public programs. For example, the General Accounting Office has been responsible for measuring outcomes of the Employment Opportunity Act, the Job Corps program, and Occupational and Safety and Health Administration (OSHA) programs.
Performance-monitoring research is a specific type of evaluation research that regularly, perhaps routinely, provides feedback for the evaluation and control of recurring business activity. For example, most firms continuously monitor wholesale and retail activity to ensure early detection of sales declines and other anomalies. In the grocery and retail drug industries, sales research may use the Universal Product Code (UPC) for packages, together with computerized cash registers and electronic scanners at checkout counters, to provide valuable market share information to store and brand managers interested in the retail sales volume of specific products.
To the Point
The secret of success is to know something nobody else knows.
—Aristotle Onassis
When Is Business Research Needed?
The need to make intelligent, informed decisions ultimately motivates an organization to engage in business research. Not every decision requires research. Thus, when confronting a key decision, a manager must initially decide whether or not to conduct business research. 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, and (4) the value of the research information in relation to costs.
Time Constraints
Systematic research takes time. In many instances, management believes that a decision must be made immediately, allowing no time for research. Decisions sometimes are made without adequate information or thorough understanding of the business situation. Although making decisions without researching a situation is not ideal, sometimes the urgency of a situation precludes the use of research. The urgency with which managers usually want to make decisions conflicts with researchers’ desire for rigor in following the scientific method.
Availability of Data
Often managers already possess enough data, or information, to make sound decisions without additional research. When they lack adequate information, however, research must be considered. This means that data need to be collected from an appropriate source. If a potential source of data exists, managers will want to know how much it will cost to get the data.
If the data cannot be obtained, or it cannot be obtained in a timely fashion, this particular research project should not be conducted. For example, many African nations have never conducted a population census. Organizations engaged in international business often find that data about business activity or population characteristics that are readily available in the United States are nonexistent or sparse in developing countries. Imagine the problems facing researchers who wish to investigate market potential in places like Uzbekistan, Macedonia, or Rwanda.
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 research. For example, a computer company must update its operator's instruction manual when it makes minor product modifications. The research cost of determining the proper wording to use in the updated manual is likely to be too high for such a minor decision. The nature of the decision is not totally independent of the next issue to be considered: the benefits versus the costs of the research. In general, however, the more strategically or tactically important the decision, the more likely it is that research will be conducted.
Research Snapshot
Harley-Davidson Goes Abroad
Before Harley-Davidson goes overseas, it must perform considerable research on that market. It may find that consumers in some countries, such as France or Italy, have a strong preference for more economical and practical motor bikes. There, people may prefer a Vespa Wasp to a Harley Hog! Other times, they may find that consumers have a favorable attitude toward Harley-Davidson and that it could even be a product viewed as very prestigious. Harley recently considered doing business in India based on trend analysis showing a booming economy. Favorable consumer opinion and a booming economy were insufficient to justify distributing Harleys in India. The problem? Luxury imports would be subject to very high duties which would make them cost-prohibitive to nearly all Indian consumers and India has strict emission rules for motor bikes. Thus, although research on the market was largely positive, Harley's research on the political operating environment eventually determined its decision. Even after considerable negotiation, India refused to budge on tariffs although they were willing to give on emission standards. Instead, Harley may direct its effort more toward the U.S. women's market for bikes. Research shows that motorcycle ownership among U.S. women has nearly doubled since 1990 to approximately 10 percent. Product research suggests that Harley may need to design smaller and sportier bikes to satisfy this market's desires. Perhaps these new products would also be easier to market in India. Research will tell.
Business Research in the Twenty-First Century
Business research, like all business activity, continues to change. Changes in communication technologies and the trend toward an ever more global marketplace have played a large role in many of these changes.
Communication Technologies
Virtually everyone is “connected” today. Increasingly, many people are “connected” nearly all the time. Within the lifetime of the typical undergraduate college senior, the way information is exchanged, stored, and gathered has been revolutionized completely. Today, the amount of information formally contained in an entire library can rest easily in a single personal computer.
The speed with which information can be exchanged has also increased tremendously. Internet connections are now wireless, so one doesn't have to be tethered to a wall to access the World Wide Web. Our mobile phones and handheld data devices can be used not only to converse, but also as a means of communication that can even involve business research data. In many cases, technology also has made it possible to store or collect data for lower costs than in the past. Electronic communications are usually less costly than regular mail—and certainly less costly than a face-to-face interview—and cost about the same amount no matter how far away a respondent is from a researcher. Thus, the expressions “time is collapsing” and “distance is disappearing” capture the tremendous revolution in the speed and reach of our communication technologies.
Changes in computer technology have made for easier data collection and data analysis. As we discuss in a later chapter, many consumer household panels now exist and can be accessed via the Internet. Thus, there is less need for the time and expense associated with regular mail survey approaches. Furthermore, the computing power necessary to solve complicated statistical problems is now easily accessible. Again, as recently as the 1970s, such computer applications required expensive mainframe computers found only in very large corporations, major universities, and large governmental/military institutions. Researchers could expect to wait hours or even longer to get results from a statistical program involving 200 respondents. Today, even the most basic laptop computers can solve complicated statistical problems involving thousands of data points in practically a nanosecond.
Global Business Research
Like all business activities, business research has become increasingly global as more and more firms operate with few, if any, geographic boundaries. Some companies have extensive international research operations. Upjohn conducts research in 160 different countries. ACNielsen International, known for its television ratings, is the world's largest research company. Two-thirds of its business comes from outside the United States.8 Starbucks can now be found in nearly every developed country on the earth. AFLAC offers its products on multiple continents. DuPont has a significant presence in all regions of the world.
Back to TopP. 10
Companies that conduct business in foreign countries must understand the nature of those particular markets and judge whether they require customized business strategies. For example, although the fifteen nations of the European Union share a single formal market, research shows that Europeans do not share identical tastes for many consumer products. Business researchers have found no such thing as a “typical” European consumer; language, religion, climate, and centuries of tradition divide the nations of the European Union. Scantel Research, a British firm that advises companies on color preferences, found inexplicable differences in Europeans’ preferences in medicines. The French prefer to pop purple pills, but the English and Dutch favor white ones. Consumers in all three countries dislike bright red capsules, which are big sellers in the United States. This example illustrates that companies that do business in Europe must research throughout Europe to adapt to local customs and buying habits.9
Even companies that produce brands that are icons in their own country are now doing research internationally. The internationalization of research places greater demands on business researchers and heightens the need for research tools that allow us to cross-validate research results, meaning that the empirical findings from one culture also exist and behave similarly in another culture. The development and application of these international research tools are an important topic in basic business research.10
The Role of Business Research: Reviewcard
| Learning Objectives | Key Concepts |
| Understand how research contributes to business success. | While many business decisions are made “by the seat of the pants” or based on a manager's intuition, this type of decision making carries with it a large amount of risk. By first researching an issue and gathering the appropriate information (from employees, customers, competitors, and the market) managers can make a more informed decision. The result is less risky decision making. Research is the intelligence-gathering function in business. The intelligence includes information about customers, competitors, economic trends, employees, and other factors that affect business success. This intelligence assists in decisions ranging from long-range planning to near-term tactical decisions. |
| Know how to define business research. | Business research is the application of the scientific method in searching for truth about business phenomena. The research must be conducted systematically, not haphazardly. It must be objective to avoid the distorting effects of personal bias. Business research should be rigorous, but the rigor is always traded off against the resource and time constraints that go with a particular business decision. |
| Understand the difference between basic and applied business research. | Applied business research seeks to facilitate managerial decision making. It is directed toward a specific managerial decision in a particular organization. Basic or pure research seeks to increase knowledge of theories and concepts. Both are important, but applied research is more often the topic in this text. |
| Understand how research activities can be used to address business decisions. | Businesses can make more accurate decisions about dealing with problems and/or the opportunities to pursue and how to best pursue them. The chapter provides examples of studies involving several dimensions of managerial decision making. Thus, business research is useful both in a strategic and in a tactical sense. |
| Know when business research should and should not be conducted. | Managers determine whether research should be conducted based on (1) time constraints, (2) availability of data, (3) the nature of the decision to be made, and (4) the benefit of the research information versus its cost. |
| Appreciate the way that technology and internationalization are changing business research. | Technology has changed almost every aspect of business research. Modern computer and communications technology makes data collection, study design, data analysis, data reporting, and practically all other aspects of research easier and better. Furthermore, as more companies do business outside their own borders, companies are conducting research globally. This places a greater emphasis on research that can assess the degree to which research tools can be applied and interpreted the same way in different cultures. Thus, research techniques often must cross-validate results. |
The Role of Business Research: Multiple Choice Questions
1. Which of the following is FALSE regarding business research?
a. Business research covers a wide range of phenomena.
b. Business research is not considered rigorous enough to apply the scientific method.
c. The purpose of business research is to provide knowledge to managers.
d. Business research can be directed toward an element of an organization's internal operations.
2. Pamela is testing the hypothesis that employees will be more productive working in offices painted with muted colors rather than bold colors. Pamela is conducting _____.
a. qualitative research
b. essential research
c. scientific deduction
d. business research
3. Which of the following are the two types of business research based on the specificity of its purpose?
a. basic and applied
b. scientific and non-scientific
c. cross-sectional and qualitative
d. quantitative and secondary
4. Campbell's Soup is considering launching a new gumbo product and is testing different recipes with consumers before full commercialization. What type of research is Campbell's using to determine which soup consumers will like the best?
a. secondary research
b. basic research
c. applied research
d. test research
5. Which of the following refers to the way researchers go about using knowledge and evidence to reach objective conclusions about the real world?
a. qualitative method
b. quantitative method
c. scientific method
d. primary method
6. A firm focusing more on how to provide value to customers than on the physical product or production process is embracing which business orientation?
a. marketing orientation
b. quality orientation
c. external orientation
d. value orientation
7. Which of the following is the LAST step in developing and implementing a business strategy?
a. analyzing firm performance
b. evaluating the course of action
c. identifying problems or opportunities
d. diagnosing and assessing problems or opportunities
8. The Chief Financial Officer (CFO) requested research to determine if the financing option the company implemented for a new capital investment initiative achieved the objective of reducing the company's tax liability. Which type of research is appropriate for evaluating this course of action?
a. basic research
b. post-hoc research
c. evaluation research
d. financial research
9. When a manager is trying to decide whether a new product launch decision should be postponed until some additional research can be conducted, which of the following questions should this manager ask himself or herself?
a. Is the proposed research expenditure the best use of the available funds?
b. Will the information gained by business research improve the quality of the business decision enough to warrant the expenditure?
c. Will the payoff from the research be worth the dollar expenditures for research?
d. all of these choices
10. When conducting research internationally, it is important to _____ research results, which means the researcher verifies that the empirical findings from one culture also exist and behave similarly in another culture.
a. cross-validate
b. simulate
c. integrate
d. cross-analyze
Key Definitions
- business research The application of the scientific method in searching for the truth about business phenomena. These activities include defining business opportunities and problems, generating and evaluating ideas, monitoring performance, and understanding the business process.
- applied business research Research conducted to address a specific business decision for a specific firm or organization.
- basic business research Research conducted without a specific decision in mind that usually does not address the needs of a specific organization. It attempts toexpand the limits of knowledge in general and is not aimed at solving a particular pragmatic problem.
- product-oriented Describes a firm that prioritizes decision making in a way that emphasizes technical superiority in the product.
- production-oriented Describes a firm that prioritizes efficiency and effectiveness of the production processes in making decisions.
- marketing-oriented Describes a firm in which all decisions are made with a conscious awareness of their effect on the customer.
- evaluation research The formal, objective measurement and appraisal of the extent a given activity, project, or program has achieved its objectives
- performance-monitoring research Refers to research that regularly, sometimes routinely, provides feedback for evaluation and control of business activity.
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