Globalisation is the integration of all resources of the various nations. It can be argued that's move away from national economy system towards a system where national markets are immerging into a huge global market place.
Benefits of globalisation
Increased competition in home market: Quality and lower cost of product can increase a competition in home market. Coca Cola Company has many products. Mostly products are cheaper, taste and popular in the market. So they can easily sell their product in other nation and they can build a healthy competition in global market. Low cost and higher sell of product increase the maximum profit. . Because their production is in large bulk so they can reduce the price of product and they can sell it very easily in different nation. So because of those reason local players has to do same things, because of this competition customer get a product with good quality and in a low price. And Company can finish their targets of sell.
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Lower production cost in less developed country: lower wages, lower rent of site unemployment can support to product for lower cost. Mostly it happen in less developed country. China gets a big deal with America for the weapons because in China the cost of production is low. Man power as well cheaper then America. So because of this reason they can get weapons very easily with low production cost.
Competitive advantage: competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater services and benefits that justifies higher prices. NHS of UK has direct link with Bombay laboratory of India. They have to send their urine and blood sample to Bombay laboratory. They always get their report in just 24 hours by their direct link. In UK for this report they have to pay more money than Indian laboratory because the wages is very higher then India. So they can provide a treatment early and cheaper to patient.
Economies of scale: economies of scale concern with cost per unit. Sony company has a mostly production is in other nations. If they manufacturing the product in Japan then cost per unit will be high. In other nation because of low wages, low rent of production site and skill they can easily reduce the cost per unit. Example- 10 employee - 1000 £ cost - production 100 digital camera in home country. - 1000 £ cost - production 200 digital camera in other nation. In other nation cost per product is lower. That means profit would be higher.
Free trade opening new opportunities in immerging market: Immerging countries are friendly for business. They are believe in light restriction and because of that reason they can get a revenue by tax and employment rate will going higher. BRIC - Brazil, Russia, India and China are the right example for this point.
Global financing: Every organisation or company need enough finance for their operation or their objectives. Sony Company is already in India and it's a listed company in India. So they can issue their share and they can get enough finance for the company.
Development in transportation, technologies and network: Transportation and technology can improve services speedily while technology and network could improve the communication. So because of all this they can save the time and expenditure and they can meet their goals. Orange network provide a lots of communication services in a many countries by very low charges. Just because of technologies and network.
Liberalization of trade, giving rise to huge increase in investment across national boundaries: because of lubrication Sony Company has invest their new organisation in immerging countries with free trade system or light restriction. That means big bulk of capital transfer from one country to other country. And because of that reason employment rate and tax revenue will be high. China has got a highest business from the world because of liberalization.
Challenges of globalisation:
Cultural: everywhere different food, fashion, like, dislike and many things. So 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 sell it. In immerging countries people are not able to buy expensive product. That means company have to find out like this many matter, otherwise accept a failure. In Gujarat 75 % people vegetarian. If McDonald produces their non-vegetarian food in Gujarat they will fail because 75% people are vegetarian.
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Collapse the domestic company: Bangalore is famous for IT services. They get mostly business from the America and because of this reason, many American companies are suffer for this business. Few months ago Barak Obama has give a statement for IT sector. Move forward otherwise Indian companies will finish our domestic IT market.
Different tax policy: In much country they are changing policy many time for oversees company. This matter is not easy to set with company policy and system. In UK tax code every year change. So it is difficult to maintain the cost, company policy and system.
Polluting environment: Blind race of business hitting environment everywhere. Poor policy of environment affect to people's health and life. Mostly this happens in immerging countries because of their light restriction on environment policy for international business. Vapi industrial area is very polluting in Gujarat. Many people have problems for breathing and skin.
Question one. (b)
Introduction: Organisational structure is a chain of relation from top level to bottom level. The chain of relation is considered responsibility and authority of management and employee to meet their objectives. These all matters connected with production, marketing, development, resources and services.
Types of organisational structures are available in the global business world, some of them, are as follow.
Divisional structure: The system of task is design in group for their outputs, such as the needs of different types of customers, services and products. This structure is created by managers when they arrange organisation around its main products, services and customer groups. They have separate units or groups. They are responsible for product, services and customer requirements. Simply we could say that particular group is responsible for their task which is important for organisation.
Advantages of divisional structure: Flexibility and fast response to the environmental changes. It can increase different strategies.
Disadvantages of divisional structure: Limit of knowledge in particular field or area. E.g. machinery operator is not able to operate the computer.
Divisional structure of Coca Cola Company
Coca Cola Company is using divisional structure. In the first stage of structure there is board of directors, different Committee, group for strategy and development. In the second stage chief operating officer, group director of supply chain services, group of commercial director, general counsel and company secretary and chief financial officer. In a last stage of structure different regional directors are connected with different countries and chief operating officer. All board of directors. Committees and officers are operating their functions in their particular area which is support to main objectives of Coca Cola Company.
Coca Cola Company believes in improvement of their goods, product and services. It can increase a total value of company's economic. It can be increased by manager's directors and officers. They have enough authority and responsibility in their particular area. Link of information and communication are very important in Coca Cola Company's divisional structure, which can help to find out new information about product, customers and services. Some time some product, goods and services needs a renovation to fulfil customer's requirement. Because different customers require different taste, price and services. The Coca Cola Company is worldwide company. They have different regional director's country wise to operate their operations and expand their business. Every regional director has many operations in more than three countries. Every area has its own targets and objectives. From the world market they are adopting strategy of customers, culture analysis, competitor's product and marketing policy to increase their total value of company's economic. Some information needs strategic decisions. That's why they are passing this information to the managerial level. They can take decisions on particular point and then they can implement for organisational objectives.
Share holders department is very important in Coca Cola Company. They believe in increase of share holder's wealth. For this matter they are solving shareholders issue and increase a profit by improving goods, services, and product, which is operate by chief financial officer, investor relation directors and share holder department. Their decisions imp roving investment in the Coca Cola Company, which is very helpful to expand company's business.
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Structure divides a task in the company in all area. Every directors, employee and officers knows their efforts result. Result may be positive or negative. They are Follows Company's strategy on proper way. Why this company is leading company in their field? Why their business is all over the world. They have started their global market in 1920. And today the company is very popular. Just because of their organisational structure and the strategic decision.
Conclusion: Structure of Coca Cola Company is suitable and fairly complicated for their objectives. Coca Cola is a famous and popular all over the world because of their structure and their organisational decisions. Success means wealth of shareholders and satisfaction of customers.
Question two (a)
Introduction: Business ethics means what is right and what is wrong. Selection of the option is very tough. We are serving everybody like our employee, customer, stakeholder, shareholder, community and as well our country. How can we walk with all this? And how can we choose best option? Some time we stuck down in this situation. Suitable option gets a positive effect on organisation performance and wrong decision or wrong option pushing them towards negative performance in organisation.
British Petroleum is the largest oil and gas producers company in the world. Few months ago they were in a problem of oil spillage in a Gulf of Mexico. They have repeated safety problems. The spillage was caused by an explosion aboard an offshore drilling rig leased by BP. 11 workers were dead and 15 were injured in this incident. They have loss 210,000 gallons oil per day in the Gulf of Mexico. In this incident environment, human, marine life, birds and sea animals were affected.
In this incident ethical issues involved their disaster system and responsibility for oil spillage. They have started to manage it but they were largely failing in recover this problem.
Why they got this problem/?
Because BP had put a profit before safety and developed an " unhealthy corporate culture " .That means the cost cutting was the first priority and health and safety was second. Management of BP is responsible for oil spillage in the Gulf of Mexico.
Who were affected by this incident?
BP Company and their shareholders: They have spent a many days to recover it, during this time it was the big news in the world. And result of this reason in a share market they loss their price and loss as well trust of all out-side factors.
Legal issue: They have faced court process for the big amount of claim.
Environment: Because of this problem many birds, sea animals and marine life was affected.
11 workers were dead and 15 were injured.
Cost cutting create more profit but in case of health and safety it is not fair. They have put profit before health and safety.
In sort their organisational performance affected in business ethics of health and safety. We can say that management of BP is not healthy in business ethics because they repeat the health and safety problems.
Just business and just profit is not important in the modern business world. Business or organisation is responsible for shareholders, human life, environment, community, country and as well for whole world. Before any decision, involve all this factors in the objectives and find out the ethics on particular matters. Performance of organisation is depending on business ethics, because resources and strategy of organisation needs a business ethics. Business ethics is concern with management. They are on decision level. Their decisions always will affect to all organisational activities and in the end of year as well on financial data. That means all ethics will affect to organisation's performance.
Question two (b)
Introduction: 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.
(1) The responsibilities of directors for reviewing and reporting on performance to shareholder: shareholders are the owner of the organisation or company or entity. They have right to know about the performance of the company or situation of the company. In other side, directors has to pass an all the report of performance to shareholders. The share holder are surely entitled to ask , if all the significant risk had been reviewed and appropriate actions taken to mitigate them and why a wealth destroying even could not be anticipated and acted upon. Effective management or board of directors can reduce the risk of fraud or failure. They have to check internal control and if something is wrong then they have to solve it. So, directors are responsible for the system's direction and controlling. Directors can communicate, evaluate and respond to risk within the system. If they get some problems or positive things, they can inform to the entire share holder.
(2)The case for establishing audit committee: Audit committee is become important in recent years. Their research concerns their value. Make a true and fair report on company's performance and pass to the shareholder in annual general meeting.
(3)The principal responsibilities of auditors: auditors responsibility is review the business report, including the company's financial statements, and the express it's opinion in the audit committee's audit report as well as its opinion as to the performance of duties by the directors and the corporate executive officers and the work of the independent auditor. Monitors the performance of duties and done by directors and corporate executive's officers. they also monitors the performance of the duties by directors by attending the nominating committee or compensation committee and reviewing report and the documents relating it to the proxy statement. If the auditor fails to audit then shareholder and organisation face a risk. Find out the origin performance and review it, if need the action do it for shareholders and Board of directors.
Example: Scandal of Satyam computer in India.
Scandal of licences for telecommunication companies in India.
In both scandal auditors were involved. They have displayed a false balance sheet in annual general meeting. They had avoided standards of company. And get licences by fake face of company. Because of these share holder got a big loss in their investment
(4) The links between shareholders, boards of directors and auditors: Shareholders are the owner of the company. They are the real caretaker and risk taker of the company and they have right for voting. They can ask and suggest to directors and auditors many matters for company's better future. Directors are responsible for relation with stakeholders, but they are accountable to the shareholders. They are making strategic decisions for the organisational objectives. Get information around the organisation about performance and try to renovate to related division. It is board's duty to present a balanced and understandable assessment of the company's position for the shareholders. The directors should report that the business is a going with supporting assumptions or qualifications as necessary. The directors should explain their responsibility for preparing the accounts next to a statement by the auditors about their reporting responsibility. The auditors should have power to investigate any activity within its terms of reference, to seek information from any employee, to obtain outside legal or professional advice and to secure attendance of outsiders if necessary
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.