Globalisation has been witnessed at a very fast pace in the last fifty years or so. Today geographical boundaries are becoming smaller and world economies are opening up. It is very easy to find the same product, across different countries in the world today. Import/Export companies, multinational corporations, global trade agreements, world trade bodies, etc., are all a result of massive internationalisation of business and economies around the world.
In this assignment it seeks the benefits and challenges which faced in globalisation. In other part the organisational structure and how its support the globalisation is shown. Business ethics is important in every business. In first part of the second section how business ethics affect on the performance of organisation is seen and in the second part the recommendation and regulation is shown.
one: Globalisation and International Trade
(A) The Benefits and Challenges of Globalisation.
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Globalisation is complex issue when it comes to analyzing the benefits and drawbacks. It can be an excellent concept as it allows for the exchange of information and technologies to help improve our world as a whole. However, along with this exchange of new advancements we are seeing the effects that globalisation has on the very planet we inhibit.
Benefits of Globalisation
Here are some of the benefits of globalisation that are widely known
With improved competition from foreign brands and companies, the local industries of a nation are required their standards and quality to improve and make customer satisfaction services better. This is the benefits as the economy on the whole and to the customers. This raises the living standard of everybody.
For example, In India Cisco has increased the competition for local IT Company. As Cisco has launched their newly and improved technology, local companies have to do improve their technology as well for stand against Cisco.
Increase in Technology
For some country globalisation open the way of newer cultures and technologies, which increase their base of knowledge and expand at the same time, as a result, this helps them to handle their industries both primary and secondary, and their tertiary sector is finally affects in a positive manner.
For example, along with Nokia there are many mobile companies. From the globalisation they appoint many knowledge persons and from the help of these employees they improve their technology and now a day communication become so easily. We can say that the world is now become narrow and we can easily communicate easily with anyone in the world.
Increased Foreign Investment Levels
Increased investment level is one of the biggest globalisation benefits. As many foreign company invest their money in small country which increase the foreign investment level. Globalisation open the way for people to attract short term and long term investment. To improve the developing countries' economies, multinational companies' investment can play a big role.
For example, India is famous for IT as well as customer care centre. There are so many companies from the different areas of the world have placed their customer care centre in India (e.g. Vodafone mobile, Three mobile (3 Mobile)). So, from these the foreign investment is increase in India.
Globalisation has several other benefits like, bigger choice of goods, prices redundant for consumers, improved export markets for domestic manufacturers, improvement of international trade.
Competition between different economies becomes greater by globalisation. It also enables greater trade, leading to lower prices for consumers, greater efficiency and higher economic growth.
Challenges of Globalisation
In different countries in the world there is a difference in culture as like different food, fashion, what they like and dislike, and many other things. Their knowledge, education levels and behaviours are also different. It is necessary to find out the every matter of that culture where we are doing business. And match with your organisation and make strategy for that nation. Some products of the company's are need good knowledge to use them. In some country like this product are not easy to sale it.
For example, In Muslim countries their religious did not allow to wear fashionable cloths. As another example Cisco had faced cultural differences between Indian employees and Western employees. Such difficulties include that, by habitual many Indian workers provide candid feedback and deliver disappointing news, their deference to corporate executives and the dissatisfaction and even shame they experience in adapting to the Cisco tradition of lateral organisational moves.
Collapse the domestic company
Always on Time
Marked to Standard
As some of the global company increase their market, local companies are collapsed. Global companies are highly competitor of local small organisation, if these small firms are unable to stand as a competitor with globalised company they are lost their business and collapsed.
For example, Along with Cisco system there are so many companies are present in India in IT sector. Bangalore, Hyderabad is famous for IT services. They get mostly business from the America and many other countries, because of this reason; many American companies are suffering in IT business.
Different Government System and Different Time Zone
In every country there is a different tax policy, different government's bureaucracy, education system, different time zone, etc. In many countries, the tax policy for overseas company is change many times. So from these different matters it becomes difficult for company to maintain their company policy with government system.
For example, Cisco had faced the same challenge when building a major existence in India. It had to navigate the government's recognized official procedure, compensate for and adjust to the country's deficient infrastructure and inconsistent education system. Another challenge is time difference of the 12½ hour between India and the company's California headquarters. As Cisco's critical members are located far way around the world from each other, they cannot maintain their conventional freewheeling, process for collaboration and real time communication because they did not have any shared working hours.
(B) Organisational Structure to Support Globalisation.
Organisational structure is the way of arranging people and jobs in organisation so they performed them work and achieved the goal. In a big organisation decisions have to be made about the various tasks allocation. The procedures are established that assign responsibilities for various functions. It is Formal and informal framework of policies and rules. In this an organisation arranges its lines of authority and communications, and allocates rights and duties. Organisational structure determines the manner and extent to which roles, power and responsibilities are delegated, controlled and co-ordinated and how the information flows between levels of management.
Globalisation is the mixing of personal, economics resources, and culture of the various countries. The following point must be considered in order to find the appropriate organisation structure to support globalisation firm.
The type of control processes that can be used emphasising the planning process.
Describe from national, international and global viewpoint the opportunities and problems arising from diversification and international scale.
Describe for a range of businesses, the relationship between corporate parent and business unit and how the corporate parent can destroy or create value.
As concern with globalisation one of the most supported structures is divisional structure. Divisional approach or divisional structure often called as product or customer structure or geographical structure. In the product structure there is a group of division for each organisational function while in geographical structure these divisions are made in region wise. In a divisional structure, each division have all the essential resources and functions within it. From the different point of view these divisions are categorized. These divisions are made on a different basis like, geographical (for example division for U.S.A., division for Europe) or product/service (for example different products for different customer in different region or companies). These divisions have their own department for sales, marketing and engineering.
When managers arrange the organisation around their services, customer groups and main products they create a divisional structure. To deliver services to the customer they create separate units and make them responsible for all the necessary function. With distinct requirements these units focus on defined group of customers.
Product division structure
Many divisional structures enable staff to specialise in particular product or customer group. For example, the major banks have identified that wealthy private clients have different needs from other individuals - and have created separate divisions to focus only on delivering services to those clients.
In a divisional structure senior managers give each unit the authority to design, produce and deliver the product or service, using resources under its control or bought from outside suppliers. The advantages are that they can focus all resources on the one product. Separate areas of functional expertise are more likely to cooperate as they all depend on satisfying the same set of customers. It is probably more expensive as each product group may have a wide range of specialism, duplicating provision. The problems of cooperation between departments that beset functional structures may still arise, though in different forms.
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For example, Toyota one of the automobile companies has makes division into SUVs, subcompact cars and sedans car.
General Motors Company is an American multinational automaker based in Detroit, Michigan and the world's second largest automaker. With its global headquarters in Detroit, General Motors (GM) employs 209,000 people in every major region of the world and does business in some vehicles through the following divisions; Buick, Cadillac, Chevrolet, GMC, Opel, Vauxhall, and Holden. GM's subsidiary provides vehicle safety, security and information services. General Motors organisational structure chart is shown below.
Each division is done in product wise. At the top of the organisation Board of the director, president and executive committee is present. At middle stage financial staff, legal staff and other department are present and at the bottom part there is a division of product. Vice president, marketing and sales department and service department are at the bottom part of each product.
General Motors is focused on strengthening consideration for the company's brands and products, shifting from a combined sales and marketing organization to one that enables the company to engage experts in each respective role. With this structure, accountability is elevated to the highest level.
This structure has been developed with as few layers between manufacturer, the dealer and the customer. By removing layers and giving leaders increased accountability, General Motors allow them to move faster and focus on what needs to be done.
Question two: Corporate Governance and Business Ethics
(A) The Impact of Business Ethics on Organisational Performance.
Business ethics (or corporate ethics) is a form of applied ethics or professional ethics. In this it is examines the moral or ethical problem and ethical principles which occur in a business environment. This ethics apply to all aspect of business ways and it is applicable to manner of entire organisation and individuals. It is a written and unwritten code of principles and values that manage decision and actions within a company. For determine the difference between bad and good decision and behaviour the organisation's culture sets the standards. In most terms, business ethics is the way for knowing and differentiates between right and wrong and choose the right option for procedure. It describes the individual's actions within an organisation, as well as the organisation as a whole.
In early 2001, a number of telecom companies and internet service providers were experience major declines in sales and profitability. Some of them are the Cisco's biggest customers. As a result, they stopped buying Cisco equipment. The negative effect on Cisco's performance caused some industry experts to question CEO's leadership abilities. CEOs remained unmoved. His strategy for resurrecting Cisco was twofold: first to downsize the company by making deep staffing cuts immediately, and second to implement a new organisational structure focused on cross-divisional teamwork and collaboration at all levels of the company. Underperforming products were eliminated as part of Cisco's recovery.
In making his case for change, CEOs said the future belongs to those who collaborate. There is a great need for the type of collaboration that bridge traditional geographic, institutional, and functional boundaries, he said. In a world characterized by the need for corporate agility, global competition, and the rise of emerging markets, the focus on collaboration both within and among organisations is imperative. CEOs maintain that collaboration among functional groups and organisations will help companies become more productive and innovative.
Cisco's recovery is largely attributed to CEO's leadership and brilliant strategic mind. He is said to be an excellent communicator and motivator. Cisco's comeback has caused some analysts to suggest that CEOs has ascended to rarefied level, up with the likes of former CEOs jack Welch of general electric and Andy grove of Intel.
Cisco has made their code of business conduct (COBC) which defines their expectations against their employees' ethical behaviour. This COBC code provides such information about their ethics policies and procedures, guidelines for ethical decision-making and real-life examples of ethical dilemmas. Cisco's ethics office oversees compliance, and reviews and revises the COBC annually.
Cisco has committed to conducting business ethically and honestly everywhere they operate. That commitment helps them to attract and retain customers, business partners, and talented employees, and helps maintain their reputation among regulators, government bodies, investors, and communities.
They expect all their employees to follow the code of business conduct and all business partners to comply with the complementary supplier ethics policy. Each of these policies includes a requirement of compliance with all applicable regional and national laws and regulations. Their ethics office raises awareness about business ethics among employees, business partners and suppliers, and offers ethics training programs for employees. They encourage employees to report concerns about suspected unethical behaviour promptly through their ethics helpline and other reporting channels.
Each year, they ask all their employees (who are located in countries where this is permitted by law) to recertify compliance with the COBC, to refresh their commitment to ethical conduct, and to ensure they are up-to-date with any changes Cisco has made to the COBC.
(B) Recommendations and Regulations of Corporate Governance.
Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. In contemporary business corporations, the main external stakeholder groups are shareholders, debt holders, trade creditors, suppliers, customers and communities affected by the corporation's activities. Internal stakeholders are the board of directors, executives, and other employees.
The need for corporate governance arrives because in all but the smallest organisation there is a separation between the ownership and the management control. However the following recommendation and regulation of corporate governance in PepsiCo, inc. as follows.
The responsibilities of directors for reviewing and reporting on performance to shareholders.
In Pepsi corporation directors have maintain their responsibility as, represent the interests of the corporation's shareholders in maintaining and enhancing the success of the corporation's business, including optimizing long-term returns to increase shareholder value. The board are directly accountable to the shareholders and each year the company will hold an annual general meeting (AGM) at which the directors must provide a report to shareholders on the performance of the company, what its future plans and strategies are and also submit themselves for re-election to the board.
The case for establishing audit committees.
The audit committee of the board of directors of PepsiCo, Inc. is to assist the board oversight of:
The quality and integrity of the corporation's financial statement and its related internal controls over financial reporting.
Each member of the committee shall be free of any relationship that, in the judgment of the board from time to time, would interfere with the exercise of his or her independent judgment.
Each member of the committee shall also satisfy, in the judgment of the board from time to time, the required financial literacy.
The principal responsibilities of auditors.
The principal duty of the auditors to a company is to report to the members of the company on the financial statements examined by them. The auditors' report must be read at the annual general meeting (AGM) and should be made available to every member of the company.
Appointment of Non Executive Directors (NEDs).
Non executive directors (NEDs) play an important role in corporate governance. These directors have no managerial responsibility, but they are full board members and therefore have asses to and can influence the highest level of corporate decision making. Their functions include:
Bringing additional experience and knowledge to the board.
Warning executive directors about the high risk areas, ethical problems or in appropriate behaviour.
Providing confidence to other parties as NEDs can provide independents and high level supervision.
Determining executive remuneration.
Appointing and liaising with auditors.
Providing confidential advice to both the board and individual directors.
Organisation of economic cooperative development (OECD).
The right of shareholders.
The corporate governance framework should protect the exercise of shareholders right. By rising capital from shareholder company commit them self to earning and investment returns on that capital. The board of that company must, therefore be accountable to shareholders for the use of their money.
Equitable treatment of shareholders.
The corporate governance framework should ensure the equitable treatment of all share holders, including minority and foreign shareholders. All share holders should have the opportunity to obtain effective redress for violation of their right.
The role of stakeholder.
The corporate governance framework should recognised their right of stakeholders as established by law and encourage the active cooperation between corporation and stakeholder in creative wealth, jobs and sustainability of financially sound enterprise.
Disclosure and transparency.
In PepsiCo, Inc. it is the company's policy that all disclosures made by the company to its security holders or the investment community should be accurate and complete and fairly present the company's financial condition and result of operations in all material respects, and should be made on a timely basis as required by applicable laws and stock exchange requirements.
The responsibility of the board.
The corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the board and the board accountability to the company and the shareholders.
In the business just strategy and resources are not enough to full fill organisational objectives. Along with the benefit globalisation has some drawback as well. Business needs good corporate governance effective business ethics and appropriate organisational structure. All these factors push organisation objectives towards success. As business ethics, it is important to implement successful ethics and compliance guidelines in any organization.