Organisation purpose and different types of global business
Topic 1: Organisation purpose and different types of global business.
Before the class I had only had some basic concepts about organisation. I thought that organisation is a group of people sharing the same purpose like a company, a university, or a fund. And with the lesson, I learned that although there are a lot of organisations, they can be classified into three main bunches, which are private sector, public sector, and third-sector organisations.
Personally, I believe that the most important term in the lesson is “stakeholders” because it provides necessary understandings about elements affecting an organisation, which plays a significant role in the activities of governance. As we all know, an organisation is influenced by many factors such as customers, shareholders, suppliers, competitors, government, etc. Any decision made for the organisation should always be considered based on the conditions of those factors. Moreover, because of the differences between organisations, there exists no fixed model of how valuable each factor is. For example, a change in the policy of interest rate may have more direct impact on a bank than a football club. Hence, the stakeholders mapping due to the Power/Dynamism and Power/Interest of every factor can be seen as a useful and effective instrument for managers. These two matrixes produce impressive results when the managers have problems with prioritising the factors or when they want to plan strategies to deal with them. Actually, I did practice these matrixes for my company, a small enterprise, and I found out that we might have had some mistakes as we overestimated or underestimated some key stakeholders.
Topic 2: The changing international environment.
If topic 1 introduces different types of organisations and how they are governed, topic 2 focus on the performance of organisations in the international environment. In the lesson, we studied about Bharlett and Ghoshal model which categorises multinational companies into four kinds – multidomestic, transnational, international, and global companies. Each of those kinds has its own characteristics based on its markets, targets, or strategies. This model helps to identify big companies like Toyota, Nokia, or Tesco so that we could understand more about their aims as well as their plans.
In my opinion, the key issue raised in this topic is the new world order of market. Due to the fact that globalisation has come up as an accelerating trend in every single country, a lot of matters should be thought of. Economically speaking, one of the most disputable one is free trade and protectionism. I think the lesson should supply more information about protectionism because this concept is understandable but not easy at all to identify in some cases. For example, tariffs, subsidies, or quotas may be familiar to many people but import licences or standards are sometimes complicated. Can a CO2 restricted laws of a country on the other’s products be regarded as an environmental act or just as a hidden form of trade protection? It is the misunderstanding about protectionism that leads to some argues of law. For instance, in Vietnam, it is common that the poor farmers may get some helps from the government for capital, technologies, etc., which can be repaid after some periods of rearing or growing. However, when Vietnamese famers export their products to other countries like the USA, they are blamed for getting subsidies so that they can underprice their sales. Another example is that Vietnamese workers are paid with rather low wages, and they have to live in poor condition, which is not unusual for lots of Vietnamese people. Nevertheless, this state does not meet the high requirement for products of some countries in Europe.
Then, the question here is that whether trade protection is good or bad? Supporters of free trade may think that it is an obstacle to the development of globalisation. Furthermore, followers of Adam Smith believe that the government should leave the market alone to make them self-develop in order to adjust to changing conditions. However, in some circumstances, the government prefer to protect new industries, which are vulnerable to the market changes. Again, in case of Vietnam, the farmers are too poor to start their own business without helps from the government. Thus, government intervention may have good results if there is thorough understanding.
Instead of trade protection, the lesson concentrates more on free trade and organisations of free trade. Beside the largest trade organisation – World Trade Organisation (WTO), today the world sees many regional trading blocs such as EU, ASEAN, APEC, NAFTA, etc., which allow the development of economies of scale and enhance competitive benefits of each member. However, once a country is overwhelmed in terms of economics, it is easy to lose its own control on the inside issues. On the reverse side, a problem in a country may affect the whole bloc, like what Greece did to the EU recently.
Topic 3: Analysis of the environment.
I feel really lucky to have this lesson because after that I have known how to analyse the environment affecting an organisation. It was a confusion to me when the classification of the environment according to dimensions was given such as the speed of change, complexity, diversity, or hostility.
Fortunately, the model of PESTLE (political, economic, social, technological, legal, and environmental) analysis opened a new aspect of the topic and made it more understandable. Thanks to this kind of analysing, every factor I had known before that has effects on the performance of an organisation can now be categorised into groups, making it clearer. Moreover, when the impacts of those factors are evaluated, it is easier to comprehend the whole environment and to make decisions. On the other hand, I think that the lesson should show how to rank those factors as well as the connection between them so that we can have a broader look into the environment.
Topic 4: The macro-economic environment – The role of government
This lesson was the beginning of topic “the macro-economic environment”. Because of the world economic crisis recently, there have been many debates over Adam Smith’s Invisible Hand theory, i.e. whether the government should intervene the market or not; so I hoped to gain some knowledge about this matter. Although there was no direct answer, I think the lesson have discussed fully about the roles of the government in the macro-economic environment.
Basically, the macro objectives of most economies are steady rates of economic growth, low and stable inflation, high employment, balance of payment surplus, and redistribution of income. Then, the government is a necessary tool in order to achieve those above objectives for some reasons. Firstly, with tools of economic management, the government has the strength to develop the economy and make it steady. By the fiscal and monetary policies, the government can influence the demand of consumers, and then affect the whole production and service in the economy. For example, when the government increases taxes, people now have to pay more for goods, so they will spend less, which means less demand. As a result, the manufacturers have to produce less, or decrease the output, so they do not need as many workers as they do before. Consequently, a part of the workers become unemployed. Another example is that if the government increase the interest rates, people will lend their money to the bank, so they will spend less on buying things. Besides, producers will have hesitation in borrowing money for manufacturing. On the whole, the economic growth will reduce. Those simple examples illustrate how important the government is for the economic growth.
One outstanding matter during the lesson is the payment balance, i.e. the comparison between export and import. Because we are living the era of globalisation, people are exchanging overseas more and more, this is the concern to every government. The governors can give their influence over this matter by exchange rates to obtain the highest benefit for the economy. China can be seen as a typical pattern for this. For many years, they have kept their currency much lower than the real value, then their export has brought a huge amount of profits. In recent times, a lot of countries have followed this pattern, which led to what-so-called “the currency war”.
Furthermore, equipped with the power of laws and policies, the government also plays an influential role in keeping the equality in society by the tools of income redistribution, using taxes, subsidies, etc. By this way, the society can be sure about the fairness, and poor people will have more money to spend, which improves the whole demand and enhances the production.
Topic 5: The macro-economic environment – The European Environment
Honestly, due to the fact that our class are all Vietnamese, I wished to have a class about the macro-economic environment in Vietnam, ASEAN, or Asian area because they are more familiar to us and we can get useful knowledge for our business.
The lesson provided a wholly and deeply view on the European Union (EU) geographically, historically, culturally, politically, and economically. It is rather clear that countries want to join the EU because of so many benefits. Nowadays, the EU can be evaluated as a competitor to the US economy. As I learned from the lesson, 38.1% of world merchandise exports, 50.2% of world exports of commercial services, and 22% of world GDP come from the EU in 2007 (Harrison, 2010: 328). Taking part in the EU will open a chance of free movements in a massive free single market. Therefore, it is a big opportunity for developing the economy and bettering the cultural interactions.
However, there are also many obstacles for the EU when the organisation is widening more and more. The EU may now be imagined as a family with loads of children, and each of them has his own characteristics. The parents have to keep the whole family in harmony along with taking care of every individual. For instance, it is not easy at all to make the economic policies like taxes or subsidies between different countries in balance so that everyone can enjoy the union. Moreover, because the leaders have to balance the ideas between many nations, the decision-making process is often slow and complicated.
It is true that the levels of economic development between nations are different. In consequence, when an economy runs into trouble, the whole organisation will be effected. Greece debt crisis in 2010 is an apparent example for this as the EU had to spend a huge sum of money to help that country. Besides, there appear the diversities of laws, politics, or cultures too. So solidarity – the major principle is a hard matter.
One remarkable question raised here is that why the UK does not join the euro, the unit of money used in the EU. It can be explained that the UK has its own monetary, which is as strong as any other in the world. Changing the whole monetary will cause economic and political issues over the whole kingdom. In addition, the UK today is not “factory of the world” any more. They live on services and import a lot of goods from other countries. Then if they alter to a less valued money unit, loss is obvious.
Topic 6: The macro-economic environment – Understanding the global environment
After discussing the macro-economic environment a lot, this lesson focused on globalisation. Nowadays, consumers all over the world can drive the same Toyota car, use the same Nokia mobile phone, or drink the same Coca Cola thanks to globalisation. It can be affirmed that globalisation is an indispensible trend because of some reasons. As the technologies of every field have been improved in seconds, people produce more and more. The domestic market is not big enough for those products and the internal resources cannot meet the demand of production, so manufacturers have to find new markets in other countries and look for new resources, leading the establishment of multinational companies. New terms such as “franchise”, “offshoring”, or “outsourcing” have appeared more often. And because of the increasing global business activities, political and social organisations like World Trade Organisation (WTO), International Monetary Fund (IMF), World Bank (WB), etc. are founded, making people closer and closer.
Globalisation brings many advantages to economies as it widens the market for producers and enhances the market liberalisation. It also rouses the competitions between companies and countries, making advances in production and competitive advantages. That is because if they want to sell more than the competitors, they must have better and cheaper goods. On the other hand, globalisation is disadvantageous as well. One of the biggest problems is that the environment will be more powerful than the management, which may result in matters of social settlement. The leaders should consider how to keep balance between the rights of multinational companies and the domestic production, between human forces inside and outside, etc.
Topic 7: Analysis of the environment – Making sense of Uncertainty
This is one of my most favourite lessons during the module because I had always wanted to learn how to build a scenario.
As we all know, predicting the future is nearly impossible as the world is changing second by second. We cannot ensure what happens next and what not. However, leaders of organisations always have to construct scenarios so that they can have plans to explore uncertainty and possibility, and guide their employees. Scenarios can be built based on PEST or Forces analyses. Additionally, organisations often have more than one scenario to cope with changes and risks.
In the modern time, scenario planning is aided with advanced techniques but the manager’s flair to see the changing signs, to analyse data is always needed in order to have practical scenarios.
After the module, I have to confess that I have been provided a lot of knowledge and information about the global organisation environment. Those understandings are very useful for me to analyse the business environment so that I can keep up with the macro and micro changing conditions.
I believe that the stakeholders mapping and PESTLE pattern will go along with me during my business in the future as I find them very effective and helpful. The macro-economic environment lessons taught me to comprehend the government’s policies so I can avoid risks and not to miss the chances, to a certain extent.
From my point of view, the lessons about micro-economic environment are rather difficult. Although they are practical for my business, the fact that there was no practice for using the analyses or Porter’s Five Forces of competition framework made them just “theories”.
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