Terms Beginning With 'f'

Freudian Motivation Theory

What is Freudian Motivation Theory?

Neurologist and psychoanalyst Sigmund Freud developed the Freudian theory of motivation. According to the theory, people’s choices are largely based on their unconscious behaviour. This means that people may seek motivation for buying certain goods through their unconscious channel of thinking.

Individuals may not always fully understand why they make certain choices, since these are driven by their unconscious behaviour and not necessarily by wants or needs. This theory is frequently used in understanding consumer behaviour and in analysing the purchasing patterns of individuals.

What are the components of Freudian motivation theory?

According to Freud, the human psyche has two different parts: the conscious mind and the unconscious mind. Both these include three components in total: id, ego and superego.

  • Id: According to Sigmund Freud, the id is the biological component of every individual’s thought process. Id includes instinctive senses that everyone holds since birth. It is the unconscious mind.
  • Ego: Ego represents the conscious mind, and it is made up of thoughts, memories, feelings that individuals may base their decisions on. The ego gives a sense of personality to an individual.
  • Superego: This includes society’s perceptions regarding ethics, values, taboos, etc. It is the moral branch that can influence how humans make decisions. This component shows that humans may not always act on impulse and is the “inner-voice” or conscience of humans.

In some people id may be stronger; however, in others superego may be stronger. The relative strength of id, ego and superego determines how a human being takes decisions.

Why is the Freudian motivation theory important?

Freudian motivation theory can be applied in the fields of sales and marketing. The theory suggests that individuals may decide which products to buy based on their emotions and feelings, without consciously knowing it.

Consider the example of a man who buys a new car given the fact that his old car is in good working condition. It is possible that the man’s decision to purchase a car was motivated by his urge to create a status symbol for himself in society. This decision may not be as conscious as the buyer would think it to be.

To utilise the Freudian motivation theory's emotional standpoint, salespersons can incorporate specific marketing tactics that could trigger an emotional response from the customer, leading him to buy the product. Thus, motivation theory can help sellers achieve the desired response from the customers.

How is the Freudian motivation theory applied?

Corporations may reach out to motivation researchers who collect data from potential customers. The data is collected through interviews to understand the deeper motives behind buying a particular product.

These researchers may use various techniques like word association, picture interpretation, sentence completion, role-playing, etc to understand how individuals make decisions. This information can enable marketing researchers to decide how these unconscious motivations can be best exploited to make the product lucrative to individuals.

Freudian motivation theory states that the sale process has three parameters:

  1. Consumer satisfaction
  2. Functional needs satisfaction
  3. Unconscious needs

What are some other theories of motivation?

Apart from Freud’s theory of motivation, there are two other popular motivation theories. These include:

  • Optimal-level Theory: This theory is also referred to as the theory of homeostasis, a term coined by French psychologist Claud Bernard. Homeostasis refers to the state of equilibrium in the body. This ideology belongs to the “hedonistic” theory, which states that happiness is the highest good.

According to the hedonistic theory, there is an optimal level of normal functioning in every individual, allowing him to make the right decisions. However, if the individual were to fluctuate from this position to disequilibrium, he would not find it pleasurable.

Thus, every human being strives to be in a state of equilibrium by maintaining an optimal level of needs like food, water, etc.

  • Humanistic Theory: This theory believes in human beings' capacity to realise their own potential, strengthen their self-confidence, and achieve the ideal self. These can include biological factors like hunger, thirst; safety needs; love and belongingness need, esteem needs like respect and approval; self-actualisation motive like attaining maximum level of one’s capacities.

What are Diseconomies of Scale? Diseconomies of scale refer to the inefficiency seen in firms when they become too large and start incurring greater costs as they expand. Big organisations move from economies of scale to diseconomies of scale after long-run average costs move past their lowest point. Image Source ©Kalkine Group In the diagram above, the lowest point of the Long-run Average Cost Curve (AVC) is attained when the Long Run Marginal Cost curve intersects the long run AVC from below. Towards the left of this point are the economies of scale while towards the right are the diseconomies of scale. Economies of scale are achieved when firms expand to the extent that their average costs start to decrease. Thus, production becomes cheaper, and profits are increased. However, this continues till the lowermost point of the long-run average cost curve beyond which diseconomies of scale start to occur. Thus, the concept of diseconomies of scale lies on the opposite end of the spectrum from economies of scale. While in the initial stages of production, firms bear high costs, these costs are only limited to lower levels of production. For instance, consider the example of an entrepreneurial start-up. The initial cost incurred by the firm will be higher. As the firm expands, the cost of production is dispersed over an increased number of goods. Thus, effectively it appears as though the average cost is reducing. This is referred to as ‘achieving economies of scale’. These economies of scale are achieved because of factors such as specialisation of labour, incoming of bulk orders, reducing operational costs by spreading them over greater units produced. However, when firms expand further, they achieve diseconomies of scale as costs start increasing with greater production also leading to discrepancy in the balance sheet of the companies. As companies grow too much in size, the advantages offered by more production are overshadowed by various other factors that lead to a rise in the average costs. Why do the diseconomies of scale occur? Poor Communication: As companies grow bigger, the workload is divided among a greater number of departments. Expansion of a company also means that more staff would be hired. These employees are placed in different departments which often leads to information being miscommunicated between them. This is a typical issue faced by large organisations. For big companies, it becomes important to maintain a proper structure of the flow of information and tasks. Proper communication channels are necessary to ensure that information is correct and transparent. As the chain of command expands, and more people are promoted to higher positions, there can also be a conflict of opinion between decision makers. It is important to maintain transparency and to discuss possible options at hand before passing down information. Lesser Motivation: While a small business sees greater outreach among the employees, larger companies may not be able to achieve the same. As the organisational structure expands, it becomes difficult to remain connected with upper-level management. This lack of touch could lead to a feeling of alienation which might cause a lack of enthusiasm among the workers. Deprivation of contact with employers could lead to people shirking from work. Also, it is seen that output per worker falls as many people are hired for the few, select roles available. For example, if a firm hires 5 workers, the output delivered per worker would be very high. Now if for the same number of tasks, more workers are hired, the workload is shared between the workers. Thus, output per worker falls. When the number of workers increases up to an extent where there are too many of them for only a few available roles, then it could counteract their productivity. Loss of Employer-Worker Coordination: As roles grow and new tasks are assigned to the employees, it is easy to lose track of one’s duties. Also, the upper-level employers move further and further away from other employees as more structural additions are made to the chain of command. This lack of contact could also lead to the principal-agent problem. If more prominent roles are assigned to employees with lesser experience, it isn't easy to keep track of whether they can cope up with the responsibilities. When workers are promoted and assigned tasks, they might neglect and not do their duties efficiently, since there is nobody to monitor them. This could lead to a lack of efficiency in the production process. Good Read- Understanding Behavioural Finance & Investment Decisions How can diseconomies of scale be avoided? Diseconomies of scale can lead to decreased competitiveness of the firm. To maintain its attractiveness, it is important for firms to maintain a well structured and organised workflow. It is imperative that firms maintain regular contact with the employees to keep them motivated. Team meetings, morale boosting events, incentive-based tasks are possible solutions to tackle the problem of decreased motivation among the employees.  While both upper and lower level management are occupied with their work, the redundancy of their work may sometimes lead them to underperform. It is important to hold events that can provide a more holistic working environment. Finally, work delegation is the most basic way to achieve structural coordination. As roles become more defined, it becomes slightly easier to fulfil them and keep things streamlined. Also, providing a platform to junior employees could give rise to newer ideas and out of the box solutions to complex situations that companies face. Enhance your knowledge, Go through : Why Move the Earth When A Nudge Can Do! Simple Solutions to Complicated Problems How do the Returns to Scale affect Diseconomies of Scale? Returns to scale refer to the proportion with which the output increases when new inputs are added. Increasing returns to scale is when the increase in input by 1 unit leads to the output growing by more than one unit. On the contrary, decreasing returns is when the increase in input by 1 unit, increases the output by less than 1 unit. As a firm with decreasing returns to scale expands, it would inevitably incur increased costs. Thus, it is hard to observe economies of scale in such a firm, while it is easier to see diseconomies of scale here. However, it is also possible that as input prices fall, the firm can overcome its rising production costs. Thus, diseconomies of scale do not always settle when a firm has decreasing returns to scale.

Qualitative analysis is used to analyse intangible and imprecise data that is difficult to obtain and calculate. It relies on subjective intuition to assess a company's worth or potential, based on soft or non-quantifiable data such as market cycles, labour relations, administrative experience, research and development strength. What is the significance of qualitative analysis? Data that approximates and characterises is known as qualitative data. Qualitative data can be observed and recorded easily. The essence of this data form is non-numerical. It enables statisticians and researchers to create parameters that can be used to observe larger data sets. Qualitative research is largely a social and experiential theory and less of a statistical one. People's feelings or thoughts, or what they experience, are the subject of qualitative data. Qualitative research relies heavily on understanding individuals and business cultures. Qualitative research is aided by pursuing a business from the perspective of a consumer and recognising its competitive advantage. Since aspects like positive brand associations, the trustworthiness of management, customer loyalty, competitive opportunity, and cultural changes are difficult, if not impossible, to capture with numerical inputs, this approach relies on the kind of intelligence that machines lack. This approach isn't just about what people think; it's also about why they think that way. Qualitative analysis’ key focus lies in social science disciplines, psychology, sociology, and anthropology to name a few. As a result, qualitative research allows in-depth and follow-up probing and interviewing of participants based on their responses, with the researcher seeking to understand their motivations and views. Understanding how people make choices will aid in market research conclusions. How to conduct a qualitative analysis? Exploratory qualitative data collection entails in-depth study and analysis. The primary goal of qualitative data collection is to gather information, reasoning, and motives. On a one-to-one basis, the interviewer or researcher gathers data from the interviewee. Here are some strategies for gathering qualitative data. Gather feedback and opinion  The first step in performing qualitative data analysis is to collect all the opinions and reviews that will be used in the analysis. The interview can be unstructured and conversational. The majority of open-ended questions are answered on the spur of the moment. Data can be collected in a variety of ways, including on paper or post-it notes, as well as in online forums and surveys. So, it's important to get everything together in one place. A master spreadsheet can be used as a place to gather feedback for this activity. Maintain a record As a database, this approach uses already existing accurate records and related sources of information. This data can be put to use in future studies. Observation procedure  This qualitative data collection approach involves the researcher immersing himself/herself in the environment where he does certain things on his respondents, like keeping a close eye on them and taking notes, as well as other reporting methods such as photography, video, and audio recording. This is known as the observation method. Longitudinal research This data collection technique is used on the same data source over a long period. It is a form of longitudinal analysis, which lasts for a few years or even decades in some cases. Case research An in-depth analysis of case studies is used to collect data in this process. This method's flexibility is shown by the fact that it can be used to examine both basic and complex subjects. The strength of this approach is how effectively it draws inferences, using a combination of one or more qualitative data collection processes. Example An investor could begin by learning about a company's management team, including their educational and professional histories as well as their industry experience. Before investing in a business, what is the most important to an investor? Are they better at understanding or being connected to the right people, or do they have a track record of hard work and responsible decision-making? Their corporate partnerships are also worth investigating because they can have a direct effect on operations. In qualitative statistics, numbers are not included in the classification of traits. For example, the dress is available in pink, blue, and red. Qualitative analysis Vs quantitative analysis The distinction between qualitative and quantitative methods is analogous to that between human and machine intelligence.  The study of data in qualitative form like that of text content of interview transcripts, is known as qualitative analysis. The researcher's observational and integrative abilities are crucial in qualitative analysis. Rather than forecasting or describing, qualitative research focuses on sense-making or interpreting a phenomenon. Qualitative research necessitates an innovative and investigative approach.  The quantitative study is based on statistics and essentially self-contained by the researcher. We look at measures, facts, percentages, and amounts in quantitative analysis. Quantitative analysis is concerned with how many people purchased the goods, and how many people thought about this brand? Machine-collected analytics, close-ended interviews and questionnaires, surveys, and random sampling are the research methods used in quantitative analysis. Advantages of qualitative analysis The qualitative data gathered allows the researchers to conduct a thorough examination of the subject matter. Researchers prefer to probe respondents and can accumulate a lot of information by asking the right questions; the information gathered is then used to conclude. Market analysts may use qualitative data to better understand their consumers' mindset. The use of qualitative data provides companies with information about why a consumer obtained a product. To plan, evaluate, or improve processes or goods, detailed explanations of people's interactions, emotions, and expectations may be used. Information is compiled in real life or a naturalistic manner. The information collected can aid in future research. Participants are free to express their views because the questions used to gather qualitative data are open ended, resulting in more detail. Disadvantages of qualitative analysis Since collecting qualitative data takes more time than collecting quantitative data, fewer people are researching. Smaller sample size is used unless time and budget allow it. Since there are fewer participants studied, extrapolating results from that sample is difficult. However, huge volumes of text, data processing can be managed and documented via software. Usually, data processing is done manually.

Motivational speaker Natasha Munson beautifully expresses that “Money, like emotions, is something you must control to keep your life on the right track.” She subtly hints that cash management is integral to success and security. Everyone reading this is likely to have their personalized version to the above question. And, rightly so, for it is said that Cash is King. What is the Importance of Cash? For individuals, cash and its management become an integral part of personal finance. People strive to make necessary cash related decisions and its distribution across expenses, savings and investments. When it comes to businesses, cash is the primary asset which companies (just like individuals) use to settle debt obligations and for operating expenses such as taxes, employee salaries, inventory purchases, advertising costs, and rents. Cash is further used as investment capital for long-term assets as well as non-current assets. Besides, excess cash often goes towards dividend distributions. Now that we have understood the significance of cash from corporate perspective, it is imperative to understand that companies must manage cash well to maintain adequate business stability. In this backdrop, we bring to you everything that you must know about cash management. What Is Cash Management? From business perspective, Cash Management is the process which describes the collection, handling, control, and investment of the organization’s cash and cash equivalents. Simply put, it refers to collection and management of cash flows (inflows and outflows). The concept of cash management revolves around efficient management of planned expenditures. Having said so, it is focused on operational efficiency as well as process optimisation.  Understanding it in simple terms, cash management is all about optimising the flow of money that comes in from customers- some money may go into savings, and other to pay the bills. It is one of the most vital processes to any organization, key component of a company's and individual’s financial stability and forms the crux of a total wealth portfolio. What Is The Objective Of Cash Management? It is essential to maintain a sound cash flow position in any company. Adhering to this fact, the most important objective of cash management is to ensure optimum utilization of a company’s liquid resources. Why Is Cash Management Important? As deciphered, cash management is the process of collecting and managing cash flows. This process is important for both individuals and companies. In business, cash management is a crucial component of the company's financial stability. Similarly, for individuals, cash is essential for financial stability and is a vital part of a total wealth portfolio. Besides, cash management is a requisite for all forms of organisations regardless of their type, size, and location. It helps in maximizing profitability by optimizing cash utilization. Besides, it helps in creating provisions for future contingencies such as economic slowdown, bad debts, etc. The below points shed more light on the importance of cash management from business perspective- It helps to maintain ample liquid cash to meet routine expenses, which is possible only via effective cash management. Cash management is integral to ascertaining the ratio of debt and equity. Unforeseen expenses are better coped up with if cash is well managed. For example, cash surplus will be a lifesaver if there is a breakdown of machinery or a likewise calamity. Cash management engages the company to invest the idle funds in the right opportunity and the right proportion. It creates an appropriate balance between the cash in hand and investment. Efficient cash management is believed to be a great tool to avoid insolvency. What Are The Shortcomings Associated With Cash Management? Though cash management is an inevitable part of business organizations, it does come with a few flaws- MUST WATCH: Cash Crunch Fear A Reality? How Can One Practice Cash Management? Individuals make use of a number of tools for efficient cash management. Few of them are- Short term instruments like money market instruments and mutual funds, treasury bills, certificate of deposit (CD), checking account, savings account and long-term low-risk savings instrument. Businesses, on the other hand, aim to follow two basic principles- Maintaining lower levels of inventory Fast-tracking the procedure of cash receivables The cash flow statement is a key element of corporate cash flow management as it records all of the business cash flows- operating, investing, and financing. Companies also regularly monitor and examine liquidity and solvency ratios within cash management. Interestingly, several companies opt to outsource part or all of their cash management responsibilities to service providers, who report to the company on a daily, monthly, quarterly, or/and annual basis. What Does A Cash Manager Do? Business managers, corporate treasurers, as well as chief financial officers are ideally the key individuals accountable for general cash management strategies, cash-related commitments, and stability analysis. Let us cast an eye over the key tasks that a cash manager performs- What is the Significance of Cash Management Across Sectors? Quite naturally, different types of companies have very different needs for cash management activities. However, the importance of this process is equally vital across companies and sectors. Let us look at a few sectors and understand how they ideally practice cash management. Telecom operators, utility companies, and tax authorities- these businesses deal with large numbers of relatively small payments in local markets. The full integration of the systems (reconciliation) is ideally automated. International e-commerce companies- these businesses offer the most convenient and contemporary payment infrastructures.  Cash management for these ideally should be involved in choosing and implementing country-specific standards like Visa or Mastercard or bank transfer schemes. Companies with different subsidiaries- Corporate banking services, such as cash pooling is one of the efficient cash management measures as it concentrates spread out cash over many accounts and makes it easier to organise internal funding for expenditures. Companies that aim to expand- These companies hold accounts with multiple banks that could cause complex international payments. Recent Payment Services Directive and specialized softwares should be looked at in these cases. Bottomline Managing cash is a contemplative process and necessitates a lot of analytical thinking. However, one should understand that though cash management helps solve problems pertaining to the deficiency in working capital, it is not a substitute for profit and loss statements. In closing, we provide a few ideas that businesses can adhere by to ensure effective cash management-

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