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You have been a manager for some time in a successful national business organisation. You have been identified as someone with potential and placed on the organisation's fast track programme for managers. As part of this you have been seconded to act as an assistant to the CEO, in order to gain experience of how senior managers and the board operate.
The organisation is considering an acquisition, which will move the company from a national to a global entity. The CEO has asked you to produce a report for the consideration of the senior management team and the board. She has already done some thinking and produced key headings for each section of the report.
Before you start writing your report you must identify the country where your company is currently located. This is important as some elements of your report will refer to the national context.
Table of contents:
Section 1:The key differences between global business operations.......................................04
Section 2:The impact of external factors on organisations....................................................05
Section 3:The impact of global factors on business organisations........................................07
Section 4:A review of the current issues impacting on business activities...........................08
Section 5: Current Issues Affecting Businesses in a Named Country..................................09
'Globalisation' meansÂ 'the reduction of the difference between one economy and another'Â so that trade within and between different countries is increasingly similar all over the world.
Globalisation has become a big buzz word in the last 15 years, but it has been going on for centuries, and especially since 1945. What has changed is the pace of this trend; it used to be quite a slow process and in recent years it has become much faster.
In the 17th Century new ship design allowed Europeans to start trading with the rest of the world in a much bigger way, although trade was still a tiny part of the economy compared to agriculture.
Later developments in transport, steam ships, the railways and now aircraft, have all contributed to the development of trade. Aircraft also move people around quickly, so the sense of the size and distances of the world 'shrinks' making us feel that far-away places are no longer so strange. The internet now allows international communication in a way that was not possible before; your favourite site could just as easily be in New Zealand as in London.
The WTO has, since 1945, made major reductions to the barriers to trade, and this has led to an enormous increase in international trade compared with domestic trade. Because world trade has consistently grown much faster than world GDP, the proportions of domestic versus international business have changed; much more of all countries' business is now done overseas than used to be the case.
A second important idea is that ofÂ 'integration'.Â In the past, an economy was largely self-contained, and imports and exports were something that happened almost co-incidentally. Now, economies depend closely on each other for inputs e.g raw material and for market outputs.
A recession in one economy (especially a large economy like Japan or the US) affects many other economies. Consumer markets are the most important in any economy. There has been a rapid convergence of consumer tastes and buying habits, so the purchases of consumers all over the world have an increasing amount in common (although there are still many important differences); a business can sell much the same product in many different markets. A global brand like 'Coca-Cola is very good examples of this.
Multinational companies ("MNCs") have existed for many years, but today there are many more of them and their importance to all economies has become much greater. Their example, and their success, has led many businesses to change their strategic objectives and their management thinking so 'thinking globally but acting locally' is now much more common; many businesses used to almost ignore what went on elsewhere. (http://www.tutor2u.net)
Section 1: The key differences between global business operations:
The varying cultural context in countries may influence understanding of the term 'teamwork', due to different experiences in using the term in everyday language, experiences from a person's own work, and the influence of the media and public debate. When analysing quantitative surveys in particular, it is not possible to be certain what respondents understand teamwork to mean, especially if the question does not offer a precise definition. Qualitative surveys may then complement this information. Primarily, different historical experiences emerge in countries of the former Western and Eastern European country groups. In western European countries, and in particular Northern European countries like Sweden, Denmark and also the Netherlands, the concept of teamwork has been in place for decades, experiencing a surge in the 1980s and 1990s. Conversely, in eastern European countries, new forms of work organisation and their influence on company efficiency have only been considered since the start of the 1990s, so their development has thus far been brief. In view of the transformation in key areas of the economy that these countries had to undergo, the implementation of new forms of work organisation was not a central topic for debate: rather, it was and still is a question of implementation at individual company level. How employees understand the term 'teamwork' is linked to the popularity of the topic itself in the country in question. Employees may regard teamwork as any kind of cooperation with colleagues or have a clearer idea of a team that works on a common goal, makes joint decisions on what action to take and takes responsibility for the task. (http://www.eurofound.europa.eu)
A corporate responsibility assessment analyses your company's risk profile and benchmarks your performance against industry standards and international best practice in four impact areas. The four impact areas are:
Business ethics - business practices (e.g. business conduct, bribery and corruption)
Environment - impacts associated with operations, products, manufacturing, distribution, and packaging (e.g. use of natural resources, emissions, climate change, ecosystem and biodiversity)
Society - impacts from operations and products on societies and communities where a company is present (e.g. community relations, human rights, product safety, market place practices)
Employment - impacts associated with the recruitment, protection and management of labour (e.g. diversity, working conditions, recruitment and retention, strategic positioning)
A corporate responsibility assessment focuses primarily at the top of your organisation, looking at your strategies, policies, responsibilities and performance management. It answers the question: "Is the company controlling and managing its major risks in a way that maximises its value and addresses reasonable stakeholder concerns?" (http://www.dnv.co.uk)
The term "strategy" has been so widely used for different purposes that it has lost any clearly defined meaning. For our purposes a strategy is a set of objectives, policies, and plans that, taken together, define the scope of the enterprise and its approach to survival and success. Alternatively, we could say that the particular policies, plans, and objectives of a business express its strategy for coping with a complex competitive environment. One of the fundamental tenets of science is that a theory can never be proven to be absolutely true. A theory can, however, be declared absolutely false if it falls to stand up to testing. Similarly, it is impossible to demonstrate conclusively that a particular business strategy is optimal or even to guarantee that it will work. One can, nevertheless, test it for critical flaws. Of the many tests which could be justifiably applied to a business strategy, most will fit within one of these broad criteria:
â€¢ Consistency: The strategy must not present mutually inconsistent goals and policies.
â€¢ Consonance: The strategy must represent an adaptive response to the external environment and to the critical changes occurring within it.
â€¢ Advantage: The strategy must provide for the creation and/or maintenance of a competitive advantage in the selected area of activity.
â€¢ Feasibility: The strategy must neither overtax available resources nor create unsolvable sub problems. A strategy that fails to meet one or more of these criteria is strongly suspect. It fails to perform at least one of the key functions that are necessary for the survival of the business. Experience within a particular industry or other setting will permit the analyst to sharpen these criteria and add others that are appropriate to the situation at hand. (http://www.anderson.ucla.edu)
Section 2: The Impact of External Factors on Organisations:
External Environment may pose significant threats or in some cases herald openings and novel possibilities for an organization. An organization is directly affected by events happening in the environment that it is supposed to be functioning in. The external environment provides the paradigm, the impetus and the most essential factor that shapes an organization. Any organization that easily adapts to the environment essentially survives and the ones that do not are the ones that are eliminated in theÂ competition. External environment may effect in any of the following areas:-
1) Political Environment:- The politics of a country or region that an organization is functioning in affects the policies of an organisation. Both harms and benefits can be derived from the respective political system. Also, it's the main pool from which theÂ human resource policiesÂ of an organization are selected from, and hence, it is likely to shape an organization both internally and externally. Also, the political environment and external policies that an organization needs to adhere to are actually dictated by its political environment
2) Technological Environment:- Any new development may render an organization's processes and systems obsolete if it is not quick to adapt to the new changes. To move forward it is essential to keep updating an organization on a reiterative basis. This becomes even more relevant in case of businesses that rely heavilyÂ on technologyÂ and are technologically sensitive.
3) Social Environment:- The social environment and the ethical leanings of the individuals responsible for an organization's functioning and the ergonomic leanings with the external environmentÂ defineÂ an organization's charter and it's modus operandi. (http://environment.blurtit.com)
Measures taken by Governments to Influence Businesses
Governments are able to exert a certain amount of influence on businesses in their respective countries due to their position as legislators. This is done through the introduction of policy which is enforced on the business environment. A recent action taken by the government is set to have financial implications on businesses, especially SMEs. The British government has proposed a compulsory pension scheme to be set up by businesses for all new employees. This move although beneficial for the employee, would leave the employer with a big bill to foot. For corporate businesses potential thousands of pounds will be added to their recruitment bill, for SMEs it would make the difference between hiring or not.
Section 3: The Impact of Global Factors on Business Organisations
Businesses are affected by the external environment as much as they are affected by the competitors. Global factors influencing business are legal, political, social, technological and economic. Understanding of these factors is important while developing a business strategy.
a. Social factorsÂ - These factors are related to changes in social structures. These factors provide insights into behaviour, tastes, and lifestyles patterns of a population. Buying patterns are greatly influenced by the changes in the structure of the population, and in consumer lifestyles. Age, gender, etc all determine the buying patterns and understanding of such changes is critical for developing strategies which are in line with the market situations. In a global environment it is important that business strategies are designed keeping in mind the social and cultural differences that vary from country to country. Consumer religion, language, lifestyle patterns are all important information for successful business management.
b.Â Legal factorsÂ - These factors that influence business strategies are related to changes in government laws and regulations. For a successful business operation it is important that the businesses consider the legal issues involved in a particular situation and should have the capability to anticipate ways in which changes in laws will affect the way they must behave. Laws keep changing over a period of time. From the point of view of business it is important that they are aware of these changes in the areas of consumer protection legislation, environmental legislation, health & safety and employment law, etc.
c.Â Economic factorsÂ - These factors involve changes in the global economy. A rise in living standards would ultimately imply an increase in demand for products thereby, providing greater opportunities for businesses to make profits. An economy witnesses fluctuations in economic activities. This would imply that in case of a rise in economic activity the demand of the product will increase and hence the price will increase. In case of reduction in demand the prices will go down. Business strategies should be developed keeping in mind these fluctuations. Other economic changes that affect business include changes in the interest rate, wage rates, and the rate of inflation. In case of low interest rates and increase in demand Businesses will be encouraged to expand and take risks. Therefore, business strategies should have room for such fluctuations.
d.Â Political factorsÂ - This refers to the changes in government and government policies. Political factors greatly influence the operation of business. This has gained significant importance off late. For example: companies operating in the European Union have to adopt directives and regulations created by the EU. The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. Business must consider the stability of the political environment, government's policy on the economy etc
e.Â Technological factorsÂ - These factors greatly influence business strategies as they provide opportunities for businesses to adopt new innovations, and inventions. This helps the business to reduce costs and develop new products. With the advent of modern communication technologies, technological factors have gained great impetus in the business arena. . Huge volumes of information can be securely shared by means of databases thereby enabling vast cost reductions, and improvements in service. Organisations need to consider the latest relevant technological advancements for their business and to stay competitive. Technology helps business to gain competitive advantage, and is a major driver of globalization. While designing the business strategies firms must consider if use of technology will allow the firm to manufacture products and services at a lower cost. Firms can select new modes of distributions with the help of technology. It has become easier for companies to communicate with their customer in any part of the world. (http://www.businessteacher.org.uk)
Section 4: A Review of the Current Issues impacting on Business Activities
Many companies are starting to monitor and manage key indicators. Substantial evidences prove that addressing such issues can directly cut cost and save money. As such, these can evaluateÂ the applicationÂ of management theory and how company are putting those in practices specifically those that can have impact on the company's reputation.
1)Â Corporate Social ResponsibilityÂ (CSR)- TheÂ corporate social responsibilityÂ concerns theÂ social environmentÂ and a changed social contract. Â Many argued that organizations must consider the societal impact of their decisions and actions. Furthermore, the organizations must act to protect and improve the welfare ofÂ the generalÂ public. The organizations must aim not only on organizational effectiveness but on existence to address the needs of society.
2)Â Business Ethics- Some major corporation faced scandals and unethical acts which lead to public distrust in one time or another. The wordÂ ethicsÂ means character or customs. As such, the organization's codes and by-laws must convey moral integrity and values in serving the public to avoid misgivings and scepticism. However, other organizations are concerned with the greater specificity, usefulness and consistency of ethics.
3)Â Corporate Governance- The concepts of firm and the interests it govern contribute to the understanding of the issues faced by the corporate governance. Since the term governance implies the exercise of authority, corporate governance, thereafter, is the study of the allocation and exercise of such authority.
4)Â Quality of Work Life and Quality Circles- The quality of work life (QWL) is essential for continuous attraction of future employees and retention of current employees. The QWL is a comprehensive company-wide program which aims at the improvement of employee satisfaction, strengthening of workplace learning and helping employees to have a better change- and transition-management.
5)Â Workforce Treatment and Workforce Discrimination- The work treatment and the work discrimination per se have three dimensions: the formal vs. informal, potential vs. encountered and the perceived vs. real. These dimensions transcends across all status, race, gender, and etc.
6)Â Transparency- Generally, transparency is critical in corporate accounting and statements. The companies must practice publicizing in order to gain and regain the confidence of shareholders and consumers in all aspects of business. The benefit of the people around and within the company is the avoidance of misleading information and false announcements. (http://ivythesis.typepad.com/term_paper_topics/2009/08/current-issues-in-management.html)
Section 5: Current Issues Affecting Businesses in a Named Country
In this section the current business issues of Greece will be discussed. Greece is a perfect example of a failed business environment due to its own policies. The cause of the issues is the government itself. The bureaucratic nature of the systems available to new and existing businesses makes it increasingly difficult to commence business activities. In a recent article in the New York Times indicates the difficulties new businesses have to face before starting up a business.
In an attempt to start up an international export business in the food market, the director was required to submit medical checks, pension checks, and was required to fill a multitude of forms just to start the business registration process. Although the director preferred to source all his interests locally, after tackling many obstacles, he was forced to process his payments through PayPal. Thus, part of his revenues are now claimed by an international company.
The payment processing problem which was faced by the Greek director presents a problem in local policy. However, where local policy has failed to facilitate business, global corporations has provided an alternative. Greece which was operating in an apparent global environment had actually isolated local businesses from it. Not only has the government restricted trade internally to external, it has also restricted investment coming in from other countries. 'Only 4% of total capital formation between 2000-2008 was from direct foreign investment' (McKinsey&Company). This paints a dire economic state in need of stern and steady reform.
Strategy to Address the Issue of New Businesses in Greece.
The strategy proposed to improve the bleak situation for new businesses in Greece is a simple but difficult task for the Greeks. Indeed, due to the history of Greece's reliance on its public sector to support life, a culture change is first required. The Greek government must encourage the start up of new businesses independent from public finances and support. A marketing campaign will be required by the government through every outlet to ensure everyone is informed about the change of direction the government is taking. Thereafter, the bureaucracy of forms and official stamps need to be reduced to the bare minimum to simplify the business registration process. Taxes can remain high as long as the registration procedures are easy and the start up costs remain low from the governments perspective. The government must also promote international investment. This can be achieved by setting up general investment conferences and inviting industry leaders to invest in their relative business. Another option is to allow local businesses to sell parts of their business to foreign companies. This would not only add much needed investment, it would add to the talent pool which is available to the local business.
There are lot of challenges in today's global business environment. The challenges range from cultural and linguistic differences to political and technological environment. As businesses are adapting to a more global society it is necessary for stakeholders to take an open attitude to where their businesses can go and what they can achieve. Although many differences have been highlighted, globalisation presents many benefits hand in hand. For example, Greece is one such country which has benefitted from the EU by keeping the Euro and negotiating massive bail-out deals. Greece's businesses which are struggling in their local markets have a chance of benefitting from globalisation by concentrating on exports from its own country, and attracting potential investment from abroad. Globalisation has provided management teams the tools to face challenges in a comprehensive logical, technical, and practical manner.