The benefits of Globalisation and International Trade
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Published: Mon, 5 Dec 2016
Every coin has two sides, something like that in globalisation. We can see two sides; one is about the opportunities and second is the threats. Opportunities are the plus point for our organisation, but threats are not good for our organisation, that’s why we need to knows the threats and devise strategies against the threats.
In my assignment I will mention and explain here threats and organisation’s strategy in globalisation.
Benefits of Globalisation
Increase in Opportunities
The opportunities for people increase by a large amount as the there is availability of large number of industries and resources. Globalisation makes more job opportunities for peoples this also opens the way for many people to moving abroad. Altimetry immigration rates increase as well. Thus it can say that this is the chance for many people to grow their economical and social life.
For example, increase development in BPO sector in India there is more opportunity is now available for Indian public.
competitive advantages for coca-cola company:
An advantage of firm has over its competitors, allowing it to generate greater sales or margins and/or retain more customers than its competition. There can be many types of competitive advantages including the firm’s cost structure, product offerings, distribution network and customer support.
For example, Pepsi is continually trying to maximize profits, minimize losses, and gaining more market share. Competitive advantage makes coca-cola stand out from its strong competitors such as Coca-Cola.
Economies of Scale:
If countries can specialise in certain goods they can benefit from economies of scale and lower average costs, this is especially true in industries with high fixed costs or that require high levels of investment. The benefits of economies of scale will ultimately lead to lower prices for consumers.
For example, in UK the 10,000 mobile is made by 100 people and the cost of production is came 100,000 while in China same people make 50,000 mobile with same production cost.
Challenges of Globalisation
POLITICAL: In the overseas country you want to examine political policy for that organisation, which is coming from outside of their country because if the policy is rood and not in favour of good business environment, we can’t expand our business in that country. We want also know the political stability of that country. Because if the government is working with other political parties, means in a situation of hung parliament they cannot taking decisions freely because of different thinking and different opinion. In this situation we want to change our strategies and change the country for our business.
EXAMPLE: In India Enron project of UK established in west Bengal. It was a very big project. But because of internal politics project was stuck-down and company has got very big loss in very short time. After that they have left the project. That’s why we need to examine political stability and their behaviour for business environment.
CULTURE: Culture is a main thing for every organization in the world. Like, dislike, different thinking, different languages, different food, different environment and different body structure Organization has to set their business in different condition. So they want train their employee, or select the employee of that country who are used to from it.
EXAMPLE: In Pakistan their religious did not allow their women to wear fashionable cloths so the manufacture of fashion cloths are suffer for running their business successfully in Pakistan.
DIFFERENT GOVERNMENT SYSTEM: It’s a matter of low. Low about the tax, low about the income, and low about the government policy should be permanently. If we established our organization and after that they will change the low, we will affected by that and we will getting loss or our organization will collapse. Second thing is that before the business expands in other country we want to know the lows very well.
EXAMPLE: If wine company established their organization in overseas country. But because of some reason government makes a new low against the wine. After that company or organization will collapsed.
In an organization of any size or complexity, employees’ responsibilities typically are defined by what they do, who they report to, and for managers, who reports to them. Over time these definitions are assigned to positions in the organization rather than to specific individuals. The relationships among these positions are designed graphically in an organizational chart. The best organizational structure for any organization depends on many factors including the work it does; its size in terms of employees, revenue, and the geographic dispersion of its facilities; and the range of its businesses.
As per globalisation there are mainly two structures are present. This structure is as:
Mainly global company is use divisional structure for the organisation. There are two types of divisional structure means that the division is done by two different methods as, product division structure and geographical division structure. In product structure the division is done be product wise while in geographical structure the division is done by global region wise. But in general all structure has chairman, CEO, president, managers, etc. are in a proper manner which help organisation or company to achieve their goals.
Based on net revenue, PepsiCo is the second largest food & beverage business in the world which uses geographical structure. Within North America, PepsiCo is ranked (by net revenue) as the largest food and beverage business.
Geographical division Structure
Organizations that are spread over a wide area may find advantages in organizing along geographic lines so that all the activities performed in a region are managed together. In a large organization, simple physical separation makes centralized coordination more difficult. Also, important characteristics of a region may make it advantageous to promote a local focus. For example, marketing a product in Western Europe may have different requirements than marketing the same product in Southeast Asia. Companies that market products globally sometimes adopt a geographic structure. In addition, experience gained in a regional division is often excellent training for management at higher levels.
From above structure of PepsiCo, inc. we can see that division is done in geographical region. At the top of the structure the chairman, president and CEO is president. And at the bottom of structure there is a different department like HRM, Finance, Manufacturing and Marketing. The person of bottom line has to report at the top persons.
PepsiCo, Incorporated is a Fortune 500, American global corporation headquartered in Purchase, Harrison, New York, with interests in the manufacturing, marketing and distribution of grain-based snack foods, beverages, and other products. PepsiCo was formed in 1965 with the merger of the Pepsi-Cola Company and Frito-Lay, Inc. PepsiCo has since expanded from its namesake product Pepsi to a broader range of food and beverage brands, the largest of which include an acquisition of Tropicana in 1998 and a merger with Quaker Oats in 2001 – which added the Gatorade brand to its portfolio as well.
As of 2009, 19 of PepsiCo’s product lines generated retail sales of more than $1 billion each and the company’s products were distributed across more than 200 countries, resulting in annual net revenues of $43.3 billion.
This structure has been developed with as few layers between manufacturer, the dealer and the customer. By removing layers and giving leaders increased accountability, PepsiCo, inc. allow them to move faster and focus on what needs to be done.
Question 2: Business Ethics
Ethics and compliance play a tremendous factor in the overall success of an organization. They are excellent tactics for building organizational trust and transparency. Ethics and compliance empowers the organization to minimize risk and maximize your culture of integrity.
Role of Ethics and Compliance in Pepsi-Cola
The Pepsi-Cola company is strongly committed to delivering sustained growth through empowered people acting responsibly and building trust, (PepsiCo Inc., 2010). Pepsi-Cola aspires to be a environmentally and socially responsible company and upholds their commitment with six guiding principles: Take care of the customers and consumers; sell high quality products; always speak the truth; equally balance both short-term and long-term goals; win with both inclusion and diversity, and always respect others and succeed as a team.
The compliance committee is responsible for managing Pepsi-Cola’s compliance program, using issue resolution strategies and making recommendations to support them. The Chief Compliance Official and Vice President, lead the Pepsi-Cola compliance program, and chairs Pepsi-Cola’s compliance committee. The compliance is broken down into four sub-committees. These subcommittees include:
“Anti-trust”- which focuses on the organization’s sales;
“Safety and Environment”- which focuses on operations, fleet, plants, and the personnel that staffs them;
“Human Resources”- which primarily relates to labour issues and employment;
“Finance”- which encompasses all financial integrity, recent overlay of Sarbanes-Oxley, and the requirements that has been placed on the company.
PepsiCo – Procedures Ensuring Ethical Behaviour
PepsiCo is committed to strict corporate standards to ensure accountability for the company actions. This is evident by the many corporate governance standards in place. The processes and policies that are in place include the Amended and Restated Articles of Incorporation, Audit Committee Charter, By-Laws, Compensation Committee Charter, Corporate Governance Guidelines, Disclosure Committee Charter, Nominating and Corporate Governance Committee Charter, and the Policy for Audit, Audit-Related and Non-Audit Services.
The Amended and Restated Articles of Incorporation states the guidelines of the incorporation process regarding PepsiCo Inc. This includes the proper name of the company; that the company is to have perpetual existence; the official address; and the purpose of the organization being incorporated along with the product description as stated by North Carolina law (PepsiCo Inc., 2010). The Audit Committee charter is the charter that handles the financial governance. It is made up of independent directors that have expertise in financial literacy, which guide and monitor the financial reporting and accounting policies of the company (PepsiCo Inc., 2010). The next area of governance is the company by-laws. The by-laws are the rules and procedures the company uses to run the company. These by-laws also document the expectations of the shareholders, officers, and directors of the company and the rights and power of each position (PepsiCo inc., 2010). Along with setting the rights and powers of the executive branch of the company is the need for monitoring and setting policies on compensation; therefore, the compensation committee charter was put into place. This committee is made up of entirely independent directors (PepsiCo Inc., 2010).
It is important to implement successful ethics and compliance guidelines in any organization. PepsiCo utilizes compliance committees and guidelines which help to take the guesswork out of building risk reduction and setting forth standards of the highest ethical standards to ensure that the organization is running at optimal effectiveness comprehensively. These committees helps the organization to also meet unique ethics and compliance requirements that delivers sustained growth through empowered people acting responsibly and building trust.
Recommendation and Regulation of Corporate Governance
Corporate governance is a set of relationship between a company’s management, its board, its shareholders and other stakeholders. Corporate governance provides a structure in favour of organisational objective, means they can set the structure with objectives and they can monitor the performance as well. Good corporate governance should provide proper incentives for the board and management to pursue objectives that are in the interest of the company and shareholders and should facilitate effective monitoring, thereby encouraging firms or companies to use resources more efficiently.
Corporate governance means “The system by which companies is directed and controlled” (Cadbury report, 1992)
Implement a suitable recommendations and regulations in an organisation for the organisational objectives. The Cadbury committee has four recommendations for good corporate governance.
The responsibilities of directors:
The primary objectives of the Directors of the Board of Directors (the “Board”) of General Motors Company (“GM” or the “Company”) are to: 1) identify individuals qualified to serve as members of the Board and, where appropriate, recommend individuals to be nominated by the Board for election by the stockholders or to be appointed by the Board to fill vacancies consistent with the criteria approved by the Board; (2) develop and periodically review and assess a set of corporate governance guidelines applicable to the Company and make appropriate recommendations to the Board for adoption and, where appropriate, modification of such principles; (3) oversee an annual evaluation of the performance of the Board; (4) recommend to the Board the compensation of directors; and (5) perform a leadership role in shaping the Company’s corporate governance practices and provide oversight with respect to its corporate governance conduct.
The case for establishing audit committee:
The purpose of the audit committee is to assist the General Motors board of directors in its oversight of the integrity of GM’s financial statements, GM’s compliance with legal and regulatory requirements, the qualifications and independence of the external auditors and the performance of GM’s internal audit staff and external auditors. The committee shall:
Independently and objectively monitor the effectiveness of GM’s financial reporting process and systems of disclosure controls and internal controls;
Review and appraise the audit process of GM’s external auditors and internal audit staff;
Provide for open, ongoing communications regarding GM’s financial position and affairs between the Board and the external auditors, GM’s financial and senior management, and GM’s internal audit staff;
Review GM’s policies and compliance procedures regarding ethics and legal risk;
Oversee the preparation of the Audit Committee Report for the annual proxy statement (to the extent applicable); and
Provide periodic status reports to the Board.
The principal responsibilities of auditors:
Discuss with management and the external auditors the annual audited financial statements and quarterly financial statements (to the extent applicable) prior to filing. This will include Management’s Discussion and Analysis of Financial Condition and Results of Operations and GM’s earnings announcements, including the use of “pro forma” or “adjusted” non GAAP information, as well as financial information and earnings guidance provided to analysts and rating agencies, and the results of the external auditors’ reviews. These discussions may be general, covering the type of information to be disclosed and presentation to be made, and need not take place in advance. The Committee may be represented by the Chair or a subcommittee to review earnings announcements.
Companies Act 2006: This regulation was reviewed in 2002 and it was implementing in late 2006. The main aim was improvement of corporate governance in UK. They add some new provisions which effect to shareholders, directors, auditors and company Secretaries. The act draws on the findings of the company law review proposal. The main point is as follow.
. Good communication with shareholders through electronic communication system by company.
. Service address of directors can be on public record instead of their home address.
. Shareholders are not fully responsible for director’s liability.
. .Articles of association is carrying simple for private company.
. Company secretary is not necessary in private company.
. AGM of private company hold in some situation.
. Shareholders will get all information more regular.
. Institutional investors to disclose how they can use their vote
Financial Services Authority: This regulation was reviewed in September 2006 by Financial Service Authority. Area of discussed was- corporate governance, continuing obligations and the financial information. The Turner review was published in 2009.The points were risk free remuneration policy, increase the independence of risk management functions and none executive directors required a skill and time commitment to effectively perform their role.
In the global business world the strategy and resources are not enough to fulfil 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.
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