Government Business Models in China and the USA - Essay Example

Running Head: Title: Institution: Instructor: Module: Date: Government business models in China and USA Introduction Government business models are very important to improve the current economy of a country. A government business model in any country is used for depicting the business processes of the government. A government business model in any country may involve process models, organization models and resource models. The following essay compares various government business models used in America and china. The essay also describes the effectiveness of such models in improving the economy in the countries. The comparison of the government business models used in these countries will enable us determine the models that provide the best services to the citizens in the two nations. Any government business should be aimed at using resource for the purpose of meeting customer needs (Shleifer et al, 1994, p. 996). Governments have expectations with which businesses in a particular country should model data which moves across the organization. The government identifies service plans that would be used by businesses for the satisfaction of the customer. Governments can also advice businesses to collaborate with other agencies to enhance growth of profits and diversification of markets. Government business models in china The Nortel Huawei Deal The Nortel Huawei Deal model was a business model that china government established for the purpose of managing its business relations with Canada. The two countries would establish a joint venture for developing an ultra broadband access that will provide solutions to the markets in the world. China and Canada have decided to go into a supply management agreement that will allow customers to engage with the leading broadband access portfolio in Huawei’s current industry. This will improve corporation between Chinese and Canadian companies. The countries are also teaming up to enhance their bilateral investments. For example, the joint venture between Bombardier Transportation, Power Corporation of Canada and Sifang Locomotive and Rolling Stock Works owned by the Chinese Ministry of Railways is one of the bilateral relations that strengthen their operations in business (North, 1990). Nortel is the leading company in communication capabilities. Huawei leads in the provision of advanced telecommunication networks in the world. According to Hoff et al, (2003), the joint venture between the Nortel and Huawei was aimed at combining Huawei’s market leading broadband access solutions with Nortel’s voice and broadband networking technologies. This combination will form a new product portfolio which is designed to be a leader in the industry. Nortel is able to gain an immediate range of broadband access equipment with less development costs. Through Nortel’s business network, Huawei gains by getting better access to the North American market. The joint venture between the two countries is aimed at reaching the global market which is of great importance to the two counties. The strategic partnership business model The relationship between china and the European Union helps the two countries to grow both commercially and economically in business. As advocated by Yakovlev, (2005, p.47), the strategic partnership between china and the European Union transforms china to modernization and greater integration for the EU. There are strategic interests and positions that are shared by both China and the EU. The two countries emphasize on the role of the United Nations in resolving global disputes and the importance of multiculturalism. The sharing of common interests and positions improves both bilateral and international business relations between the two countries. The business of lobbying in china The china’s national economic policy is highly influenced by the growing influence of domestic and foreign businesses. The formation of cartels in china provided the solution to change in prices that would occur due to inflation. However, cartels could not work in china since more successful businesses would have been affected. The successful businesses owners would lobby for price controls to be imposed by the government instead of cartels. There is a low concentration of industries in china where an industry has many companies. This situation makes it easy for companies to cheat in terms of price setting due to the existence of collective action problem that leads to difficulties in monitoring. There are different ways in which policies are set in china that determines how prices are set in the country. Policies and their results in china are as a result of negotiations between influential politicians and the system of government. Researchers in government sponsored institutes also play a role in the formation of policies in china (Akerlof, 1970, p. 493). Firms in china interact directly and indirectly with the government in relations such as trade associations. There is a wide spread business lobbying in china which influences economic policy in the country. How Lobbying is carried out in china is highly affected by the firms’ economic context and their industries. All industries in china practice active lobbying. Companies in an industry are able to negotiate with the state on the costs of acquiring inputs and the prices at which their outputs will be sold. The business and trade associations and chambers of commerce in china do not have much influence to the businesses like in America (La Porta et al, 1999, p.228). Business associations with no autonomy do not have any influence while those with complete autonomy experience find difficulties when trying to influence. The fact that associations are not powerful encourages predomination of direct lobbying by state owned companies, private and foreign owned companies. The existence of many policies in the state makes it difficult for companies to lobby. Most public policy lobbying in china does not support client list relationships where the local government is concerned. Public policy issues operate at the national level where many regulations are to be met. This reduces the possibility of influence by many businesses in china. Hoff et al, (2003), argues that, there are variations of lobbying in china where by better developed associations in some industries than others. In addition, the intensity of direct contact between the firms and the government varies extensively. The firms that are significant economically are the ones that can access to the administrative system. A firm’s aggressiveness depends on the size of the firm. Small firms are not recognized when trying to disagree with the government. There are also variations in the transparency system in the firms where some industries are found to be more transparent than others. There are lobbying coalitions that exist in the industries, here the enterprises are state owned, and others are private as well as foreign companies. The variations in lobbying in the Chinese government pose problems to particular businesses when carrying out activities. The government and business reforms The abandonment of the government in the intervention of economic decision in businesses increases the autonomy of economic agents in making decisions. The Chinese government has been reluctant in protecting contract enforcement and property rights in the country which has led to deficiencies in the operation of law. This is due to failure of the government to provide a defined legal framework for economic activities in the country (North, 1990). In addition, businesses are not willing to implement the requirement of the law and this leads to abuse of power by officials. Failure of government regulation of businesses in china has led to low reforms in the economy. Government business models in America Lobbying in America Foreign lobbying in America takes the center stage for many companies. The fact that most companies America are owned by foreigners undermines the political system. This situation poses a threat to the nation and the national security on several levels. Foreign lobbyists do not disclose many activities that are undertaken in the company. Foreigners exploit clients. The American government has addressed the issue of foreign lobbying. The government requires that, lobbyists working for foreign owned companies should disclose their relationships with those companies (Acemoglu et al, 2005). People who meet with politicians outside the country must register as lobbyists according to the new law. In America, the foreign Agents Registration Act requires that, any foreign government or foreign official should inform the department of justice incase of foreign lobbying. In addition, lobbyists who work for foreign owned companies should make complete disclosures. Lobbyists who have registered under the Lobbying Disclosure Act governing lobbying for domestic companies are not required to register under the foreign agents act. The disclosures made by lobbyists are important since they enable the government to understand the kind of businesses being undertaken. Lobbyists working with foreign companies are required to file extra documents such as contracts signed with foreign customers. This does not provide any exemption for the lobbyists. More complete details given by lobbyists enable the lawmakers and the public understand how lobbyists for foreign businesses influence the congress. The government supports the idea of collaborating with foreign companies in enhancing its culture. All activities and information related to lobbying must be made public on how the present lobbying companies influence the government. The government advocates for the maintenance of the American culture to avoid being slaves of other countries (North, 1990). Diversification According to Hellman et al, (2000), diversification of markets in America provides a solution to firms that are highly affected by economic crises in America. Investors should respond positively to the volatility of equity and asset markets. Economic crises in America have led to increase in prices of commodities as well as real asset prices. In America, Brazil has existed as a commodity based economy which is highly diversified. Diversification of securities in the American market leads to congestion of the system in the market. The government works towards liquefying the system by dislodging the inertia in the capital markets. Mobilization of liquidity ensures more confidence in the system. The government in America has worked very hard to create a pan Latin American business model to deal with the diversified securities. There is also a model that allows for integration between the American wealth management businesses with institutional businesses. The ownership of businesses in America is based on family owned companies and small private companies. This ownership structure of businesses increases the synergy that improves wealth management and investment banking businesses in America. The American government encourages businesses to use initial public offers as a strategy for dealing with various markets. It is evident that, the formation of equity capital is very difficult in America due to the existence of monopoles in big businesses. The use of IPO’s, private placed equity and private equity will ensure that, there is a fixed income currency commodity business which is large, growing and stable. In more complex business, the government has proposed the use of equity broker dealer, fixed income and investment banking business. For example, the government has introduced an equity broker dealer with financial capabilities (Fernandez et al, 1991, p.1149). For investment banking, the American government advocates for Wall Street’s standard operating model that covers all multinational companies and cross border flows. The priority multinational companies are provided with relationship management. The government encourages businesses to use an offshore wealth management strategy for managing their wealth (Schattenschneider, 1960). Businesses in America should develop local private client delivery systems so as to serve a large market share. The offshore wealth management system supports businesses who offer local products to the market. Many people tend to invest a lot in Brazil’s economy since it is considered the strongest economy in America. This brings problems since investments in America will not be well distributed hence the creation of distortion in the market. Conclusion In conclusion, the government business models in the two countries are very different and each has its own advantages and disadvantages. In America, the government business models seem to encourage more investment in the country. It also encourages transparency in businesses being undertaken in the country by foreign people. The American government argues that, the disclosures made by lobbyists are important in the sense that, they enable the government to understand the kind of businesses being undertaken. Lobbyists working with foreign companies are required to file extra documents such as contracts signed with foreign customers. The government of china mainly focuses on joint venture and strategic partnership to encourage the growth of businesses in the country. There is no emphasis on how individual business people or the investors in such businesses can benefit personally. The government business models in china play a big role in the growth of china’s economy but they are outweighed by the business models of the American government. Lobbying in china is seen to be faced with many problems while in America is seen as a strength to the country. Hence, the government business models in America are better than government business models in china. References Acemoglu, D., Johnson, S., & Robinson, D. (2005). Institutions as the Fundamental Cause of Long- Run Growth. Handbook of Economic Growth. Vol. 1A, Elsevier: New York. Akerlof, G.A. (1970). The Market for “Lemons”: Quality Uncertainty and the Market Mechanism. Quarterly Journal of Economics. Vol. 84, pp.488-500. Fernandez, R., & Rodrik, D. (1991). Resistance to Reforms: Status Quo Bias in the Presence of Individual-Specific Uncertainty. American Economic Review. Vol. 81, pp.1146-1155. Hellman, J.S., Jones, G., & Kaufmann, D. (2000). Are Foreign Investors and Multinationals Engaging in Corrupt Practices in Transition Economies. Transition. Hoff, K., & Stiglitz, G.E. (2003). A Dynamic Model of the Demand for the Rule of Law, with Applications to Post-Communist Transition, manuscript, World Bank, Washington DC. La Porta, R., Lopes-de-Silanes, F., Shleifer, A., & Vishny, R. (1999). The Quality of Government. Journal of Law, Economics and Organization. Vol.15, pp.222-279 North, D.C. (1990). Institutions, Institutional Change and Economic Performance, Cambridge University Press, Cambridge. Schattenschneider, E. (1960). The Semisouvereign People: A Realist’s View of Democracy in America, Dryden: Hinsdale. Shleifer, A., & Vishny, R.W. (1994). Politicians and Firms. Quarterly Journal of Economics, Vol.59, pp.995-1025. Yakovlev, A. (2005). Government, Business and the Driving Force Behind Economic Development in Russia: Before and After the Yukos Case. Social Sciences. 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