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Businesses operate in a global framework: even if they do not trade directly with other countries, they are affected by many factors such as skilled manpower, new technologies or may be subject to developments on the global financial markets. Globalisation is the term commonly used for the process of integration on a worldwide scale arising from human activity and interchange of natural resources, ideas, technologies etc.
Organisations go globally for a variety of reasons but the main goal is growth and expansion. Their main aim is to enhance their profits by expanding their market reach and creating other sources of revenues in other countries. They use four strategies to go globally: direct investment-it involves takeovers, mergers and acquisition; opening up a settlement company in the other country; partnership with the local company; entering into global competition through the various means. From the above mentioned strategies acquisition is considered a better option for growth and expansion. Growth through expansion is cheaper and quicker and it is also less risky than other options. It has advantages of easier financing and instant economies of scale (McLean, 2005)
Section 1 The key differences between global business operations
Major differences between organisations working in different sectors, industries and contexts.
To be successful at global level organisations need to compete at both local and global levels. For this they use various strategies for operations.
Many companies of this industry are establishing their manufacturing units in different countries. They collect the parts and then assemble them. This strategy is very cost effective than producing all the parts at the same plant. Ford Company has manufacturing operations worldwide, including in the United States, Canada, United Kingdom, China, Germany, Turkey, Mexico, Brazil, Argentina, South Africa, and Australia.
Toyota has 50 overseas manufacturing units in 27 countries and regions (Toyota worldwide operations, 2012).
Electrical engineering Industry
Organisations of this industry pay more and more attention towards innovation of their products and developing new technologies.
Samsung comprises of nearly 80 companies. The Samsung Group of companies is leading global manufacturing, financial, and services conglomerate. Samsung comprises of nearly 80 companies. The Samsung Group of companies makes extensive use of SCM solutions, advanced planning and scheduling (APS) systems and process innovations to support and improve its operations.
Service industry is considered as the tertiary sector of industry and it function is to provide services to businesses as well as final consumers. Their strategy is to provide quality service to all the clients and retention of all the customers (Guy, 2009).
Responsibilities of organisations operating globally
Global organisations have many responsibilities from organizational, social cultural responsibilities to environmental responsibilities.
Human resource- makes improvement in health of their employees, employee satisfaction, enhancing productivity and employee retention.
Financial- increase revenues by expanding their market reach and creating other sources of revenues.
Supply Chain Management - enhance SCM and built transparent relationship with suppliers.
Operations -increase operational efficiency and reduce waste.
Marketing - create brand awareness, reputation, transparency positioning, and credibility
Sales - expand market reach, increase customer satisfaction and improve customer retention.
Risk - eliminate risk profile with the help of comprehensive risk management.
Corporate social responsibility (CSR)-
The other important responsibility of organisations operating globally is corporate social responsibility (CSR). It can be defined as the expectations (economic, legal, ethical, and discretionary) that society has from the organizations. The corporate social responsibility implies that organizations must have moral, ethical, and philanthropic responsibilities along with their responsibilities to earn a return for its investors and comply with the law. (CORPORATE SOCIAL RESPONSIBILITY, n.d).
Different types of businesses have to face particular environmental issues. For example, factory operations involve use of large amounts of energy and hazardous substances, while office-based businesses face the problem of energy and water waste. Transport businesses involve large amounts of fuel and cause significant amount of harmful vehicle emissions. A good step is to periodically conduct an environmental review of business. This will help to identify what measures are required to comply with the law and how waste and emissions can be minimized, increase energy usage and access its impact on the environment (Trevino, 2005).
Business firms strive to survive by the resourceful use of the factors of manufacture and other amenities of the society. To continue their business operations they are mutually dependent on government, community and the environment. Increasing degradation of natural resources and ecosystems has warranted a worldwide concern from the public, the governments and non-governmental agencies.
As a result of human activity the world is losing biodiversity at an ever-increasing rate. All types of business operating near protected areas have responsibilities for conservation and protecting biodiversity. Environmental Impact Assessment (EIA) is to be carried on by all the business organisations. The aim of conducting EIA is to study the effect of business operations on the environment and take measures to prevent environment degradation.
An evolution of the strategies employed by organisations operating globally
Business organisations operating globally struggle with cutthroat competition in the market, but often lack the necessary funds to develop important organizational and support processes. Many times company functions operate alone and it fails to provide a credible cross-functional company case. For example, IT organization tries to devote their funds in applications with no close connection to other important functions such as operations, marketing etc. Instead of contributing to broader corporate objectives organizational functions pay too much on their own operational efficiencies. For instance, HR organizations can outsource their processes to decrease their managerial costs, but it fails to develop a business case that develops highly brilliant, cost effective manpower to global working units.
Business organisations are employing strategy of outsourcing to speed up business benefits such as lower cost of operations and improved business processes. Today many global organizations centralize some functions into joint services and outsource various others to third-party service providers. Organizations are adopting global business services models i.e. they are focusing on aligning business strategy, improving decisions related to portfolio investment and reallocating current expenditure.
Section 2 The impact of external factors on organisations
External Environment poses significant threats for an organization. External environment directly affects the activities of organisation.. The external environment provides the pattern, the thrust and the most essential factor that helps in the formation of an organization. Survival of the organisation depends on adaptation of the organisation to the external environment and the ones that fail to adapt are eliminated from the market.
An analysis of how the performance of a national economy impacts on the activities of business organisation
Performance of the national economy has direct impacts on the activities of the business organisation. When GDP of a nation slows down, there will be fall in demand for their goods or services and as a result revenues will fall and profit margins may be squeezed if they try to cut prices to increase sales. Unemployment may start to crawl up. When GDP of a nation rises at a faster rate than the organisations try to sell more goods and services. For this they need to increase stock levels, which exert pressure on prices. As a result prices may start to sneak up. Unemployment will decrease because organisations will employ more manpower to meet the increase in demand.
An explanation of the measures taken by the governments to influence the activity of the business organisations
Measures taken by the government to influence the activity of the business organisations are:
1. Taxation policy: Businesses pay taxes and contribute to the community. The government in return utilizes this money for providing loans, building roads, airports etc. Government formulates tax policy and influence directly the business activities.
2. Inflation policy: The government control rises in prices. It is done by the Monetary Policy Committee (MPC) of the Bank of England by controlling interest rates. Interest rates are increased if people have more purchasing power. Raising interest rates makes borrowing money. So the people have less to spend, this helps to decrease prices.
3. International policy: The government control import and export of goods and services by formulating various exam-policies to promote trade.
4. Regional policy: European Union and Financial institutions supports those regions by providing funds which have high rate of unemployment and are socially deprived (Government and EU influences on business activity, 2012).
Government take actions and frame laws for the protection of employment, and safeguarding the environment. It also create equal opportunities for all the citizens, framing laws for company's acts and consumer and product liability.
Section 3 the impact of global factors on business organisations
An explanation of the implications of global integration on business organisations.
One of the toughest challenges facing any organisation is Global business integration. It cause organisation to make necessary changes in structural environment, organisations have to overcome huge differences in language, culture rules and regulations (Griffiths, 2008).
Foreign trade has become more important to world economy in recent years. Growth has been reported in exports and imports of goods and services. The income generated from the export forms the part of GDP and imports create income out of the country, so to obtain a complete picture of how much is produced by the economy income from the imports are deducted from the other categories of expenditure (Mcteer, 2012).
An assessment of the effect on international trade on domestic product and services.
International trades have positive as well as negative effect on domestic product and services. International trade helps the countries to earn by specializing in goods and services in which they have a comparative advantage over other countries. Therefore it is more cost effective for countries as they can specialize in a certain product and can import the products which are costly to manufacture in their own country.
It can result in destruction and exhaustion of natural resources. There will be shortage of resources for the domestic firms. This will hamper their production and operation efficiency. Domestic goods will have to compete with foreign goods. Destruction and exhaustion of natural resources is caused by International trade. The profit-driven countries allow over-exploitation of their natural resources, which may definitely lead to serious environmental damage (What Are the Disadvantages of International Trade, n.d) .
A review of the impact of the global economy on business
The global economy has had a remarkable impact on the way firms carry on their business activities. Global economy brings tremendous opportunities for growth and expansion into new markets, and it also leads to attractive and exclusive challenges (Adler and Gundersen, 2008).
An assessment of how ICT has facilitated globalization
The decreasing role of boundaries has lead to the increasing density of global competition. Globalization is considered as the major driver of technological progress. The global environment is undergoing drastic changes with the innovations in of information and communication technologies (ICT)
New developments in ICT is acting as a vital force for the process of globalization (Blanchard, 2009).
Section 4: A reviews of the current issues impacting on business activities
A review of the United Kingdom's global environment where businesses are operating
Economic Growth- The GDP growth of UK has matched growth in the European Union.
Exchange Rates in UK- Government formulate policies that support a constant and competitive pound, consistent with the objective of price stability. Interest Rates-The Bank of England set independently official Bank Rate , is 0.5% as of May 2011(the rate is subject to review on a monthly basis)
The UK is very good in attracting foreign investment. In 2009, foreign investment in the UK was more than US$1.2 trillion, and it was the third highest level of FDI stock. The UK also attracted 1,619 FDI projects in 2009/10, creating over 53,000 jobs (The UK Business Environment, 2012).
Proposed strategy to address issues affecting business activities in United Kingdom
There are two main propositions that are being followed by United Kingdom are- planning for the long term and other is to deal with actual market failures.
Industrial Strategy- healthy and competitive environment should be created for the entrepreneurs so that they easily start and grow a new business. A strategy must allow for failures, and recognizes that improvement may strike in an unpredictable place. Finance, Technology sector, supply chain management is areas where government can have a real and early impact (Elliote, 2004).
Business bank - Long term finance facilities must be made easily available to business because most of the businesses face problem in raising finance. There is a persistent deficiency of long-term capital-limited options for 5 plus year loans.
Sectors- They should try to build a mutual strategic partnership with key sectors like aerospace, automotives, and life sciences etc.
Globalization is one the significant factor that is shaping the economy of the world. The rapid changes brought about by it spread more widely and have impact on business, economy, society and environment.
Globalizations brings changes such as expansion of trade and services between countries, increases transfer of financial capital across nations, internationalization of products and services, expansion of outsourcing and off shoring of products and services.