Question

Which of the following news items involves a short-run decision and which involves a long-run decision? Explain. January 31,2008: Starbucks will open 75 more stores abroad than originally predicted, for a total of 975 February 25,2008: For three hours on Tuesday, Starbucks will shut down every single one of its 7,100 stores so that baristas can receive a refresher course. June 2,2008: Starbucks replaces baristas with vending machines. July 18,2008: Starbucks is closing 616 stores by the end of March.

Short answer

Opening 75 stores abroad (Jan 31) and replacing baristas with vending machines (Jun 2) are long-run decisions. Shutting down stores for a refresher course (Feb 25) is a short-run decision.

Step-by-step solution

Identify news items

Read through each of the news items: January 31, 2008, February 25, 2008, June 2, 2008, and July 18, 2008. Identify what each item is about.

Define short-run and long-run decisions

Short-run decisions typically involve adjustments that can be made quickly and without major changes to the company’s operations or structure. Long-run decisions typically involve significant changes that take time to implement and have long-term effects on the company’s operations.

Analyze the January 31, 2008 news item

This item talks about opening 75 more stores abroad than originally predicted, for a total of 975. This involves significant planning and investment, which are characteristic of a long-run decision.

Analyze the February 25, 2008 news item

This item talks about shutting down 7,100 stores for three hours for baristas to receive a refresher course. This is a temporary adjustment and does not involve significant long-term changes, making it a short-run decision.

Analyze the June 2, 2008 news item

This item talks about replacing baristas with vending machines. Introducing automation and replacing staff indicates a significant, long-term change in operations—a long-run decision.

Analyze the July 18, 2008 news item

This item talks about closing 616 stores by the end of March. Shutting down a sizable number of stores signifies a substantial adjustment involving long-term impacts, hence, a long-run decision.

Key concepts

short-run decisions

Short-run decisions in business are actions that can be implemented swiftly without major changes or investments.
These decisions usually involve operational strategies that have immediate effects but do not typically alter the company's structure drastically.

• For example, shutting down stores temporarily for staff training is a short-run decision.
• This action can be taken quickly and does not have lasting financial or operational impacts.
• It's meant to address immediate needs, such as improving service quality or updating employee skills.

These types of decisions are often seen as tactical because they address current issues without committing to long-term changes.
The key aspect is the ease and speed of implementation.
Despite being short-term, these decisions are still vital for maintaining smooth operations and adapting to day-to-day challenges.

long-run decisions

Long-run decisions involve significant planning and usually take a considerable amount of time to execute.
They are typically strategic in nature and have long-lasting effects on a business's operation and structure.

• For example, opening new stores abroad requires not just capital but extensive market research and planning.
• Similarly, replacing manual labor with vending machines signifies a substantial shift in how the business operates.

These decisions are all about setting the direction for future growth or restructuring to become more efficient.
They often involve large investments, logistical changes, and sometimes, altering the company’s core business model.
In contrast to the short-run decisions, these are less about immediate fixes and more about positioning the company for long-term success.

business operations

Business operations encompass all the activities that a company engages in on a daily basis to produce its goods and services.
These operations can be influenced dramatically by both short-run and long-run decisions.

• Short-run decisions, like short-term staff adjustments, can temporarily impact business operations without disrupting the overall flow.
• Long-run decisions, like expanding internationally or automating processes, can permanently alter how business is conducted on a day-to-day basis.

Effective business operations depend on a balanced approach to both types of decisions.
Day-to-day issues need to be managed efficiently through short-run adjustments, while strategic long-run decisions are necessary for sustained growth and competitive advantage.
The alignment of daily operations with long-term strategies ensures that the business remains both nimble and forward-looking.

economic planning

Economic planning in a business context involves making informed decisions about the allocation of resources to achieve specific goals.
This can be broken down into short-term and long-term planning.

• Short-term economic planning focuses on immediate financial health, inventory management, and operational efficiency.
• Actions in this planning stage are generally quick fixes like cost-cutting measures or boosting sales through promotions.
• Long-term economic planning targets the vision of where the business wants to be in the future.
• It includes deciding on major investments, entering new markets, and large-scale improvements like adopting new technologies.

Both types of planning are crucial for the sustainability of a business.
Short-term planning ensures there are no immediate financial or operational hiccups, while long-term planning sets the course for growth and adaptation in a changing economic landscape.
Successful economic planning necessitates a clear understanding of the business's current position and future aspirations.