Question

A recent report argued that opening a "social media management" small business (e.g., a firm that helps with other companies’ social media) was the best kind of small business for entrepreneurs to create. To argue this point, the report's authors surveyed sixty social media management companies around the U.S. in January, 2023. Among these surveyed firms, between 2005 and 2023, social media management companies reported higher profits compared to other kinds of small businesses. Drawing from research and/or theory regarding decision making, is there a significant flaw in the report's methodology, and if so, what is it and why does it matter? Describe what you could do to improve their ability to draw sound conclusions about whether or not it is a good idea to open a social media management company.

Answer 1

The report's flaw lies in not accounting for broader economic and technological trends. To enhance conclusions, a comparative analysis controlling for external factors and a longitudinal study tracking industry performance over time would provide a more accurate assessment of the social media management business's profitability.

Step-by-step explanation:

The significant flaw in the report's methodology lies in its failure to control for the broader economic and technological trends that occurred between 2005 and 2023. The survey's conclusion that social media management companies reported higher profits compared to other small businesses may be confounded by the overall growth and prominence of social media during this period. The rise of social media platforms likely contributed to increased demand for social media management services, irrespective of the inherent profitability of the businesses themselves.

To improve the ability to draw sound conclusions, the authors should consider conducting a comparative analysis that controls for external factors. This could involve examining the profitability of social media management companies against a matched sample of businesses in different industries, accounting for economic conditions, and technological advancements.

Additionally, a longitudinal study that tracks the performance of social media management companies over time, while considering shifts in market demand and industry competition, would provide a more accurate assessment of their sustained profitability. By addressing these methodological limitations, the report could offer more reliable insights for entrepreneurs considering entering the social media management business.