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44 Part One: Introduction

Chapter Four: The Business Research Process: An Overview 45

Chapter 4

The Business Research Process: An Overview

AT-A-GLANCE

I. Decision Making

A. Certainty

B. Uncertainty

C. Ambiguity

· Problems and opportunities

II. Types of Business Research

A. Exploratory research

B. Descriptive research

C. Causal research

· Causality

· Temporal sequence

· Concomitant variance

· Nonspurious association

· Degrees of causality

· Experiments

D. Uncertainty influences the type of research

III. Stages in the Research Process

A. Alternatives in the research process

B. Defining the research objectives

· Defining the managerial decision situation

· Exploratory research

· Previous research

· Pilot studies

· Stating research objectives

· Linking decision statements, objective, and hypotheses

C. Planning the research design

· Selection of the basic research method

· The “best” research design

D. Sampling

E. Gathering data

F. Processing and analyzing data

· Editing and coding

· Data analysis

G. Drawing conclusions and preparing a report

IV. The Research Program Strategy

LEARNING OUTCOMES

1. Define decision making and understand the role research plays in making decisions

2. Classify business research as either exploratory research, descriptive research, or causal research

3. List the major phases of the research process and the steps within each

4. Explain the difference between a research project and a research program

CHAPTER VIGNETTE: Getting (and Keeping) Up to Speed: Hoover’s Helps HP

Like most global companies, Hewlett-Packard (HP) must continue to innovate in a continuously changing environment. How can HP help their sales staff with data and analyses to keep them up to speed with new companies, new territories, and new technologies? Hoovers, a division of the Dun & Bradstreet Corporation, is an integral part of HP’s customer relationship management (CRM) strategy, with data “plug-in” capabilities that give sales reps real-time information to assist them in their decision-making.

SURVEY THIS!

Based on the data that the survey gathers, students are asked what business problems or opportunities they feel can be addressed from the information. They are asked to specify at least three research questions that can be answered by the information gathered by this survey. Is this survey most representative of an exploratory research, descriptive research, or causal research design?

RESEARCH SNAPSHOTS

· Cute, Funny, or Sexy? What Makes a Mascot Tick?

Research is used to help determine in mascots need to be changed (e.g., Pillsbury Doughboy, Brawny paper towel man, etc.). It often begins with exploratory research, such as focus groups. Exploratory research found that women wanted a sexy Brawny man, Mr. Peanut was perceived positively (but not with Bermuda shorts on!), and that the M&M characters were called by their color, so names were not necessary.

· Taking a Swing at Business Success

Greg Norman is a well-known professional golfer, but he is also a successful vintner. Norman Estates gained fame in the wine trade with Australian wines that offered considerable quality at a fair price. This company is expanding its portfolio by purchasing vineyard properties and production capacity in California. Descriptive research can be vital in making key decisions when considering diversifying beyond a company’s traditional boundaries. Descriptive statistics describe what wine consumers like to drink in terms of where it is from and where they are located. For example, American consumers are switching increasingly from French wines to Australian- and American-made wines, especially in the low and moderate price ranges.

· Rolling Rock

Rolling Rock beer has its origins as a regional brand, and its signature package was a longneck green bottle with a white painted label. The brand, now marketed by Labatt USA, expanded nationally during the 1980s, and a number of line extensions proved ineffective. Executives decided to conduct a massive consumer study, basically running an experiment. They learned that the new packages met with consumers’ strong approval, and consumers consistently indicated that they would be willing to pay more for the brand in those packages.

OUTLINE

I. DECISION MAKING

· A business opportunity is a situation that makes some potential competitive advantage possible.

· A business problem is a situation that makes some significant negative consequence more likely.

· Problems are inferred from observable symptoms, which are observable cues that serve as a signal of a problem because they are caused by that problem.

· Research may help identify what is causing this symptom so that decision makers can actually attack the problem, not just the symptom.

· Decision making is the process of developing and deciding among alternative ways of resolving a problem or choosing from among alternative opportunities.

· Every decision making situation can be classified based on whether it best represents a problem or an opportunity and on whether it represents a situation characterized by complete certainty or absolute ambiguity.

· Certainty

· Complete certainty means that the decision maker has all information needed to make an optimal decision.

· Perfect certainty, especially about the future, is rare.

· Uncertainty

· Uncertainty means that the manager grasps the general nature of desired objectives, but the information about alternatives is incomplete.

· Predictions about forces that shape future events are educated guesses.

· Effective managers recognize that spending additional time to gather data that clarify the nature of a decision is needed.

· Business decisions generally involve uncertainty, particularly when seeking different opportunities.

· Ambiguity

· Ambiguity means that the nature of the problem itself is unclear.

· Objectives are vague and decision alternatives are difficult to define.

· The most difficult decision situation, but perhaps the most common.

· Problems and Opportunities

· Decision situations can be characterized by the nature of the decision and the degree of ambiguity.

· Under problem focused decision making, as ambiguity is lessened, the symptoms are clearer and are better indicators of a problem.

· In opportunity oriented research, as trends become larger and clearer, they are more diagnostic and point more clearly to a single opportunity.

II. TYPES OF BUSINESS RESEARCH

· Business research can be classified on the basis of technique (e.g. experiments, surveys, or observation studies) or purpose.

· Classifying research on the basis of its purpose, it can be broken into three categories: (1) exploratory, (2) descriptive, and (3) causal.

· Exploratory research

· Conducted to clarify ambiguous situations or discover ideas that may be potential business opportunities.

· Not intended to provide conclusive evidence from which to determine a particular course of action.

· Not an end unto itself – usually it is conducted with the expectation that more research will be needed to provide more conclusive evidence.

· Particularly useful in new product development.

· Descriptive research

· Describes characteristics of objects, people, groups, organizations or environments.

· Addresses who, what, when, where, and how questions.

· Unlike exploratory research, it is conducted after the researcher has gained a firm grasp of the situation being studied.

· Often helps describe market segments.

· Accuracy is critically important.

· Survey research typifies a descriptive study.

· Diagnostic analysis seeks to diagnose reasons for business outcomes and focuses specifically on the beliefs and feelings consumers have about and toward competing products.

· Sometimes provides an explanation by diagnosing differences among competitors, but it does not provide direct evidence of causality.

· Causal research

· Allows causal inferences to be made.

· 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.

· Usually follows exploratory and descriptive research and, therefore, the researchers are quite knowledgeable about the subject.

· Can take a long time to implement and often involves intricate designs that can be very expensive.

· Causality

· Causal research attempts to establish that when we do one thing, another thing will follow – a causal inference is just such a conclusion.

· A causal inference can only be supported when very specific causal evidence exists, and the three critical pieces of causal evidence are:

1. Temporal Sequence – deals with the time order of events; having an appropriate causal order of events means the cause must occur before the effect.

2. Concomitant Variation – occurs when two events “covary” or “correlate,” meaning they vary systematically and a when a change in the cause occurs, a change in the outcome also is observed.

· A correlation coefficient is often used to represent this.

3. Nonspurious Association – any covariation between a cause and an effect is true and not simply due to some other variable.

· Even though the previous two conditions exist, a causal inference cannot be made because both the cause and effect have some common cause.

· Establishing evidence of nonspuriousness can be difficult.

· Researchers must use theory to identify the most likely “third” variables that would relate significantly to both the cause and effect.

· Once identified, the researcher must control for these variables.

· Degrees of Causality

· Absolute causality means the cause is necessary and sufficient to bring about the effect. Impractical to establish in the behavioral sciences.

· Conditional causality means that a cause is necessary but not sufficient to bring about an effect.

· Contributory causality may be the weakest form of causality and means a cause need not be necessary nor sufficient to bring about an effect.

· There may be multiple causes.

· As long as the introduction of the other possible causes does not eliminate the correlation between it and the effect, an event can be a contributory cause.

· Experiments

· A carefully controlled study in which the researcher manipulates a proposed cause and observes any corresponding change in the proposed effect.

· An experimental variable represents the proposed cause and is controlled by the researcher by manipulating it.

· Manipulation means that the researcher alters the level of the variable in specific increments.

· A test-market is an experiment that is conducted within actual market conditions.

· Uncertainty Influences the Type of Research

· Exhibit 4.4 contrasts the types of research with respect to these characteristics and provides examples:

· amount of uncertainty characterizing the decision situation

· key research statement (i.e., research questions or research hypothesis)

· when conducted

· usual research approach

· nature of results

III. STAGES IN THE RESEARCH PROCESS

· Business research often follows a general pattern of stages:

1. Defining the research objectives

2. Planning a research design

3. Planning a sample

4. Collecting the data

5. Analyzing the data

6. Formulating the conclusions and preparing the report

· Conceptualized as a cyclical or circular-flow process (see Exhibit 4.5) because conclusions from research studies can generate new ideas and knowledge that can lead to further investigation.

· Management is at the center of the process.

· Stages overlap somewhat from a timing perspective, and later stages sometimes can be completed before earlier ones.

· Forward linkage implies that the earlier stages influence the later stages.

· Backward linkage implies that later stages influence earlier stages of the research process.

· Alternatives in the Research Process

· The researcher must choose among a number of alternatives during each stage of the research process.

· Defining the Research Objectives

· Beginning of the research process.

· Research objectives are the goals to be achieved by conducting research.

· In consulting, the term deliverables is often used to describe the objectives to a research client.

· In applied business research, the objectives cannot be listed until there is an understanding of the decision situation, which must be shared between the actual decision maker and the lead researcher.

· This understanding is often described as a problem statement.

· This is a process of discovery rather than confirmation or justification.

· Defining the Managerial Decision Situation

· An orderly definition of the research problem lends a sense of direction to the investigation.

· Properly defining a problem can be more difficult than solving it.

· Defining the decision situation must precede the research objectives.

· Best place to begin a research project is at the end; that is, knowing what is to be accomplished determines the research process.

· Exploratory Research

· Can be used to help identify the decisions that need to be made.

· Once done, the researcher should know exactly which data to collect during formal phases of the project and how to conduct the project.

· This stage is optional.

· Can employ techniques from four basic categories to obtain insights and gain a clearer idea of the problem: previous research, pilot studies, case studies, and experience surveys (discussed more thoroughly in later chapters).

· Previous Research

· Should first investigate previous research to see whether or not others may have addressed the same research problems.

· May also exist in the public domain.

· Literature review is a directed search of published works, including periodicals and books, that discusses theory and presents empirical results that are relevant to the topic at hand.

· An economical starting point for most research.

· Pilot Studies

· Pilot studies are small-scale research projects that collect data from respondents similar to those that will be used in the full study.

· Critical in refining measures and reducing the risk that the full study will be fatally flawed.

· Often useful in fine-tuning research objectives.

· A pretest is a very descriptive term indicating that the results obtained in the study are only preliminary and intended to assist in design of a subsequent study.

· A focus group interview brings together six to twelve people in a loosely structured format.

· Stating Research Objectives

· After identifying and clarifying the problem, the researcher must formally state the research objectives.

· This statement delineates the type of research that is needed and what intelligence may result that would allow the decision maker to make informed choices.

· Represents a contract of sorts that commits the researcher to producing the needed research.

· Linking Decision Statements, Objectives, and Hypotheses

· Hypotheses should be logically derived from and linked to the research objectives.

· Planning the Research Design

· A research design is a master plan that specifies the methods and procedures for collecting and analyzing the needed information; it is a framework for the research plan of action.

· The researcher also must determine the sources of information, the design technique (e.g., survey, experiment, etc.), the sampling methodology, and the schedule and cost of the research.

· Selection of the Basic Research Method

· Exhibit 4.6 shows four basic design techniques for descriptive and causal research: surveys, experiments, secondary data, and observation.

· Determination of which method should be chosen depends on:

· objectives of the study

· available data sources

· urgency of the decision

· cost of obtaining data

· Most common method is the survey.

· A survey is a research technique in which a sample is interviewed in some form or their behavior is observed and described in some way.

· A researcher’s task is to find the most appropriate way to collect the needed information (i.e., by telephone, mail, Internet, or in person).

· Observations can be mechanically recorded or observed by humans.

· One advantage of the observation technique is that it records behavior without relying on reports from respondents.

· Several things of interest (i.e., attitudes, opinions, motivations) cannot be observed.

· The “Best” Research Design

· There is no single best research design.

· Several alternatives can accomplish the stated research objectives.

· Ability to select the most appropriate design develops with experience.

· Sampling

· Sampling involves any procedure that draws conclusions based on measurements of a portion of the population (i.e., a subset from a larger population).

· Certain statistical procedures must be followed.

· When errors are made (e.g., not using a representative sample), samples do not give reliable estimates of the population.

· Sampling decisions include:

1. Who is to be sampled? ( Identification of a target population.

2. How big should the sample be? ( Concerns sample size.

3. How to select the sampling units? ( Concerns procedure for selecting sample (i.e., simple random sampling, cluster sampling, etc.).

· Gathering Data

· The process of gathering or collecting information.

· May be gathered by human observers or interviewers or may be recorded by machines (e.g., scanner data, web-based surveys).

· An unobtrusive method is one in which the subjects do not have to be disturbed for data to be collected.

· However the data are collected, it is important to minimize errors in the process.

· Processing and Analyzing Data

· Editing and Coding

· The data must be converted into a format that will answer the manager’s questions.

· Editing involves checking the data collection forms for omissions, legibility, and consistency in classification.

· The rules for interpreting, categorizing, recording, and transferring the data to the data storage media are called codes.

· Data Analysis

· Data analysis is the application of reasoning to understand the data that have been gathered.

· The appropriate analytical technique is determined by:

· management’s information requirements

· characteristics of the research design

· nature of the data gathered

· Three general categories of statistical analysis (discussed in later chapters):

· univariate analysis

· bivariate analysis

· multivariate analysis

· Drawing Conclusions and Preparing a Report

· Consists of interpreting the research results, describing the implications and drawing the appropriate conclusions for managerial decisions.

· Conclusions should fulfill the deliverables promised in the research proposal.

· Researcher should consider the varying abilities of people to understand the research results.

· Frequently, management is not interested in detailed reporting of the research design and statistical findings, but wishes only a summary of findings.

IV. THE RESEARCH PROGRAM STRATEGY

· Research project – researcher has only one or a small number of research objectives that can be addressed in a single study.

· Research program – numerous related studies come together to address issues about a single company (e.g., an exploratory study may be followed by a survey).

· Because research is a continuous process, management should view business research at a strategic planning level.

QUESTIONS FOR REVIEW AND CRITICAL THINKING/ANSWERS

1. List five ways that business research can contribute to effective business decision making.

Researchers contribute to decision makers in several key ways. These include:

(1) Helping to better define the current situation.

(2) Defining the firm – determining how consumers, competitors, and employees view the firm.

(3) Providing ideas for enhancing current business practices.

(4) Identifying new strategic directions.

(5) Testing ideas that will assist in implementing business strategies for the firm.

(6) Examining how correct a certain business theory is in a given situation.

2. Define business opportunity, business problem and symptoms. Give an example of each as it applies to a university business school.

A business opportunity is a situation that makes some potential competitive advantage possible. An example of this for a university business school is technology, which could make distance learning possible for students who otherwise would not be able to get an education. A business problem is a situation that makes some significant negative consequence more likely. An example of this is a natural disaster that hinders a school’s operations or causes the students to leave the school (e.g., Tulane University after hurricane Katrina). Another example of a business problem is another university from a distant location establishing a satellite campus in another university’s market. Symptoms are observable cues that serve as a signal of a problem because they are caused by that problem. Declining enrollment in a university can be a symptom of a demographic trend in which the 18-22 age segment is declining, or it could be caused by students selecting another university.

3. Consider the following list, and indicate and explain whether each best fits the definition of a problem, opportunity, or symptom:

a. A 12.5 percent decrease in store traffic for a children’s shoe store in a medium-sized city mall.

This is an example of a symptom, which is an observable cue that serves as a signal of a problem because it is caused by that problem.

b. Walmart’s stock price has decreased 25 percent between 2007 and 2009.

This is an example of a symptom, which is an observable cue that serves as a signal of a problem because it is caused by that problem.

c. A furniture manufacturer and retailer in North Carolina reads a research report indicating consumer trends toward Australian Jara and Kari wood. The export of these products is very limited and very expensive.

This could be viewed as a business opportunity because it is a situation that makes some potential competitive advantage possible. That is, if this manufacturer can secure these types of wood at a reasonable price, they could gain a competitive advantage. However, the fact that the export of these products is very limited and expensive could represent a business problem.

d. Marlboro reads a research report written by the U.S. FDA. It indicates that the number of cigarette smokers in sub-Saharan Africa is expected to increase dramatically over the next decade.

This represents a business opportunity for Marlboro because it is a situation that makes some potential completive advantage possible.

4. What are the three types of business research? Indicate which type each item in the list below illustrates. Explain your answer.

The three types of business research are exploratory, descriptive, and causal. Exploratory research is conducted to clarify ambiguous situations or discover ideas that may be potential business opportunities. Descriptive research describes characteristics of objects, people, groups, organizations, or environments. Causal research allows causal inferences to be made.

a. Establishing the relationship between advertising and sales in the beer industry.

Causal research. Establishing the functional relationship between advertising and sales is the project’s goal. It attempts to predict what would happen to sales if a change in advertising occurred. After the causal variable is manipulated, the researcher observes the effect on sales.

b. Ranking the key factors new college graduates are seeking in their first career position.

Descriptive Research. This study identifies and prioritizes these key factors.

c. Estimating the five-year sales potential for CAT scan machines in the Ark-La-Tex (Arkansas, Louisiana and Texas) region of the United States.

Descriptive Research. This research attempts to describe a market size.

d. Testing the effect of “casual day” on employee job satisfaction.

Causal research. This research can “manipulate” the employee dress code and compare job satisfaction for a group that is given “causal day” privileges to that of a group not given this privilege.

e. Discovering the ways that people who live in apartments actually use vacuum cleaners, and identifying cleaning tasks for which they do not use a vacuum.

Exploratory research. This research is attempting to learn more about how consumers use these types of products and perform cleaning tasks.

5. Describe the type of research evidence that allows one to infer causality.

The critical pieces of causal evidence are: (1) temporal sequence, (2) concomitant variation, and (3) nonspurious associations. Temporal sequence deals with the time order of events. Thus, having an appropriate causal order of events is one criterion for causality (i.e., the cause must occur before the effect). Concomitant variation occurs when two events “covary,” meaning that they vary systematically. In causal terms, it means that when a change in the cause occurs, a change in the outcome also is observed. Nonspurious association means any co-variation between a cause an effect is true and not simply due to some other variable. Often, a causal inference cannot be made even though the other two conditions exist because both the cause and effect have some common cause; that is, both may be influenced by a third variable.

6. What is an experimental manipulation? A business researcher is hired by a specialty retail firm. The retailer is trying to decide what level of lighting and what temperature they should maintain its stores to maximize sales. How can the researcher manipulate these experimental variables within a causal design?

Manipulation means that the researcher alters the level of the variable in specific increments. In this example, the retailer is trying to determine what level of lighting and temperature will have the most positive effect on sales. A study can be designed which manipulates both the lighting and temperature. Sales can be measured at the various levels of the manipulations to determine the optimum lighting and temperature.

7. A business researcher gives a presentation to a music industry executive. After considering the results of a test-market examining whether or not lowering the price of in-store CDs will lower the number of illicit downloads of the same music, the executive claims: “The test-market was conducted in eight cities. In two of the cities, lowering the price did not decrease illicit downloading. Therefore, lowering the price does not decrease this behavior and we should not decide to lower prices based on this research.” Comment on the executive’s conclusion. What type of inference is being made? Will the decision not to lower prices be a good one?

A causal inference is being made. In this case, the executive concluded that since illegal downloads did not decrease in two markets that prices were lowered, that lowering the price does not cause a decrease in the undesired behavior. Is the decision not to lower price a good one? Probably not, because in 6 out of 8 markets in which the price of CDs was lowered, illicit downloads decreased. One could argue that the three conditions of causality support lowering CD prices to decrease illicit downloads. That is, temporal sequence (i.e., lowering price caused reduced illicit downloads in 6 out of 8 markets), concomitant variation exists (i.e., the two events “covary”), and nonspurious association (i.e., there is not another underlying cause influencing the price reduction and the reduction in illicit downloads) all exist to support the conclusion that lowering the price of CDs lowers the incidence of illicit downloading.

8. We introduced the scientific method in Chapter 3. Do the stages in the research process seem to follow the scientific method?

The scientific method is broadly described as a set of techniques and procedures that are utilized to know and understand business phenomena. Individuals observe facts and usually state a prior conception of the nature of a given phenomenon. Then, empirical evidence is gathered and analyzed to confirm or disprove prior conceptions. Testing these prior conceptions or hypotheses may lead to the establishment of general laws about the phenomena. The stages in the research process, (1) definition research objectives, (2) planning a research design, (3) planning a sample, (4) collecting the data, (5) analyzing the data, and (6) formulating the conclusions and preparing the report, illustrate that a scientific process is occurring. The …