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Environment and business: Economies and the states (State (Difficulty of…
Environment and business: Economies and the states
Intermediate level: local environment (approval/local market)
National environment (laws, banks interest rate, inflation, national employment and education): adopt accordingly
International environment (money exchange rates): cheap labor, supranational bodies and import
Ability of manager to influence the environment drop as they move from small to big level
Models used in assessing the environment
Political environment
law and regulation imposed by national government and supranational bodies
political environment encompass the influence of stakeholders
economic environment
economic structure (% in agriculture, mining,...)
economic health (growth rate, interest rate, level of unemployment...)
-role of financial situations (banks...)
Socio-cultural environment: changing composition of population
skills of labor force,relationship between skills and education system
Technology environment: PESTEL
Legal environment: stock market regulationm taxation, contract law, employee rights
Ethical environment:
rate of pay, child labor, disposal of waste, use energy, how to treat supplier, customer and employee
Local National Global PEST:
influence on compartments and general -> can't be understand on their own
overlap
fairly deterministic, focus on factor operating in a firm
business in context model: treating elements separately, interactive nature of all aspects and model at all level, acknowledge the influence of organzation and stakeholder on environment
model is static: only present factor
SWOT examine external opportunities and threat of organization
Ownership: goals and how business operate
Types of ownership
Sole trader: can employ staff and sole proprietor
common route for entering business
unlimited personal liability but take all the profits
Partnership: professions
unlimited liability, partner may have personal assets at risk to cover when being sued -> malpractice
-> become companies with limited liability
hybrid: Ltd. must register so liability don;t extent to other members of firm
combination of mutual interest, income is divided by partner through a share of profit
role and responsibility are controlled by law
management and control issues: decision making and managing staff
partnership/practice manager -> create limited separation of ownership and control
Limited companies:
public limited company: shareholders are available for general public to buy, usually large firms
private company: shares not open, family interest and current management, liability is limited to amount of contribution
legal entities seperate from people who owns it
regulated by company law, have directors and shareholder/ may have non-executive director (hired outside bc skills, experience, connection)
govern by board structure
Cooperatives: autonomous association of persons united voluntarily for common economic, cultural and social need, aspiration
key principle: equal opportunities / voluntary / democratic, member pay nominal sum / profit divided equally or for specific purpose. early form of retail cooperation are divided profit (receive what you share)
wholly-owned and democratically controlled enterprises
originally buy in bulks and share because economies of scale, member have equal saying
modern: adapt to chainging,social enterprise movement
types: wholesale, retail, manufacturing, employees, banking, saving, agricultural, fishing...
independent and autonomous. agreement with external organization must made by all member
benefit of education and training as means to improve the welfare of all
active cooperation between cooperation movement is encourgae
sustainable development of communities
ethical trading and business operation
Ownership and control: agency problem: issues of joint stock and professional manager to replace owner-manager (bc shareholders)
in volatile share markets with large proportion of institutional investors (high levels of share trading can lead to large munber of mergers)
pressure from shareholders for dividens => manager do short-term decision not benefit long-term goals
high level of pay and generous pension arrangement for senior manager
Berle and Means: discover management control in dominant form of control, in wealthiest and mosst powerful firm
Agency problem:
agency relationship: contractual relationship: agent perfrom for principal
other forms: employees vs. employers / firsm and sub-contractors
management control professional: guide by more scientific analysis and more answerable to the society than narrow self-interest
management control: force for good -> effective decisions for the profitability of firm and the general good
Counter argument:
manager don't have more power than shareholders bc: - need to satisfy share holder
shareholder can sell their share -> instability
Large and influential companies are both family-owned and controlled - > no seperation
Shareholder are passive
Institutional framework (state, financial system, labour market)
Nation states have developed business system for different institutional arrangement, major role play by state
Whitley model (actors and mechanism for integration)
actors: - providers, customer, competitors, firms in other sector, employees
variations exist in relationship between actors and degree of integration
Types of business system
Anglo-Saxon: emphasize free-market with: - market are competitive
shareholders are important stakeholders
private property
institutional shareholders
mergers, takeover, may be hostile
manager are more rewarded for maintaining share price and profit
trade union are restricted
Social market model (German/Rhineland)
state intervention - private and state operate side by side
law and state bureaucracy
sharemarket are stable with few merger and takeover by laws
reinvestment in business> high dividend to shareholder
manager are less rewarded for their counterpart
trade union important
labor market are less flexible
Social democratic: Swede...
Continential European: Switz...
Mediteranean: Italy...
Asian model:
freemarket need state intervention
Confucian
bureaucratic, pragmatic to smooth the way
weak social welfare
firm and supply chain are family
stable stock market
manager do long-term strategy
trade union are weak
inreccession, protect employees and supplier -> firm reluctant to restructure, manager and government are slow to economic problems
Variation of capitalism
5 sphere of activity:
individual relations relate to productivity and wages
vocational training and education: recuting people w skills, motivate them do use and develop skill
corporate governance: relation with stakeholders and access to finance
relationship with other firms (supplier, buyers and joint venture partner)
relationship with employees
Convergence to Anglo-Saxon?
yes - liberalization and privatization
prioritization of shareholders
reduce involvment of banks in decision making
increase focus by bank short-term
less protection for worker
increase adop US practice: performance-related pay, job mobility and performance appraisal
no
greater involvement of banks
cooperation between employees than self-interest individual
greater commitment of employees and corporate culture
more complex legal framework
State and business
State: monopoly over taxation, money supply and legitimate use of violence
not an untied body because tension can occur
variation on policy because different political ideology
direct the economy and regulate business vs. wishes of business to pursue interest
state influence demand as consumer and pressure group
5 core responsibility:
establish legal framework
develop economic policies
build basic services and infrastructure
protect the vunerable
protect the environment
For liberals:
maintenance of order and provide condition so business can prosper
state is neutral in pluralist society
intervention needed when: protect workings of free market / protect and control of good and services to individials / take long-term view
Criticise:
state preserve the status quo, not neutral
Marxism: ruling class exploit -> intervention is to maintain status quo of ruling class
In different economic systems
State control and central planning: the state have total ownership of business control production via targets
Anglo-Saxon: free market and non intervention
active through laws and regulation
too interventionist
Social market system: key role in protecting social welfare
considerable investment in health and education by high taxation
law limit mergers and takeovers, facilitate employees involvement
some are becoming Anglo-Saxon
Asian model: state responsible for individual
is a pro-business and assist in business growth
State
Difficulty of state intervention:
impact of government is difficult to measure
government change and with them policies change
business company oppose attempts by government to control in many owner or manager have ideology of laissez-faire
MNCs have greater alliance
Types of intervention
collective provision: goods would be expensive, dangerous, ineffective if left to private control
The state as employer:
privatization have reduce this
government hold down wage in public sector to reduce public expenditure -> confrontations
The state as consumer:
buy office equipment -> many rely on goverment as source of revenue
involvement in defense, health care, education -> influence innovation
Legal regulation (extensive and complex)
Law of contract is use to regulate market place
company law deal with protection of consumer through regulation of monopoly power, rules governing the provision of company information....
patent law: encourage innovation by granting monopoly rights to patent holder
Demand management
all government influence and control economic growth, balance payment, wage, price, stability and level of unemployment
measures:
fiscal measure (taxation)
monetary measure (control of credit)
direct measure (import control)
raise revenue to finance activity by taxation and monetary policies (tabacco)
give aid to specific purpose and aid firm or industry
Training: skils of composition of work force through education and traning polices
Protection: against unfair competition from overseas
direct measure: import tariff
control: quota restriction
-> ensure playing field for conduct international trade
Marketing:
most government support their business in exporting goods
diplomatic service involve trade function and embassy actt as host for trade delegation
Advisory service: advice business to people (international and domestic)
Transference: the projection of beliefs onto (unspecified) others endows them with a material efficacy by which they adopt a ‘life of their own
•Political: the organization of society
•Economic: the system for the generation and distribution of wealth
•Socio-cultural: demographics, cultural customs, habits, predispositions &c.
•Technological: instruments of control over social and natural phenomena
•(+ ethical and legal: normative views and regulations of human interaction)