The Purpose of International Business - Assignment Example

The Purpose and Function of Business AFFILIATION: 1 The basic purposes of business. Show your understanding of the economic problem, factors of production, entrepreneurship and opportunity cost. Give three examples of the features of business. The purpose of International business is basically to solve the economic issues of the country. Businesses are regarded as economic activities that are operating to cater the needs of individuals which in turn are of benefit to both the individual and the business. Human beings have some needs and wants and through the manufacturing and distribution of the goods and services, these needs and wants are fulfilled by the business. Running businesses also gives the citizens to be employed and earn money out of which they can make purchases to fulfill their needs and wants. The basic factors of running a business are land, labour, capital and enterprise (or expertise). Entrepreneurs are those who work upon developing and running a business. The entrepreneurs have to use the factors of production for starting a business. Opportunity cost refers to the alternatives that we leave while buying a certain product. We buy particular bread and leave the others; the left one is called the opportunity cost. Consumers have to undergo opportunity cost because they have to make choices while buying their products and services. Three examples of features of business are: 1. Buyer and Seller 2. Marketing and Distribution of goods 3. Profit is the main objective 1.2 How the basic purposes of business have influenced globalisation? Show your understanding of the factors driving globalisation and their relationship to business objectives Each business has its own goals and objectives for becoming successful and profitable. To increase market share, earning higher revenues and building a large customer base, utilizing latest technology, reducing labour costs are some of the objectives of businesses. To achieve all these objectives and purpose of the business, the organizations have to plan in becoming an international business as well. Once they make an international presence, they knock on many opportunities, have the chance to invest in latest technology and ensure that business operations are running successfully with higher profit margins. Importing and exporting, licensing and franchising allow new business units to commence and also allow the products and services to reach a wide audience at the global level. There are certain factors that are increasing the demand of globalization such as advanced technology, liberalisation of cross-border trade which allows the process of trading to easen, services that help international business in becoming successful, consumer demands, competition in the global business environment, the effect of political situations (favourable in many of the countries) and other such factors. These factors impede local organisations to have an international business expansion plan and deal with all rules and regulations of each country accordingly. 1.3 The legal and financial structure and liabilities of a sole trader company. Clearly explain the advantages and disadvantages such a structure presents to the owner of the company Give three examples of the kind of business for which this structure might be suitable. Companies run by a sole trader means that one particular individual is running the entire business without any partners. In this type of business there is no legal difference between the owner of the business and the business entity in particular. This means when we refer to the owner, it can also mean we are referring to the business. The profits earned by the business are of the owner entirely. Any loss or any debts faced by the business are the responsibility of the owner. The owner is accountable for all the business activities taking place in a sole trader company. When setting up the sole trader company, the owner is responsible in placing all the assets for the firm. Advantages: 1. Running a sole trader company is easy for the owner. 2. All profits are owned by the owner. 3. Flexibility of running the business is in owner’s hand. Disadvantages: 1. Resources are limited for the owner. 2. Unsuccessful business may cause the owner to sell off business assets in repaying the creditors. 3. Owner has unlimited liability in dealing with business debts. Examples of sole traders: Photographers, Solicitors, Hairdressers. These can run their own business without any partners. 1.4 the legal and financial structure and liabilities of a partnership. Clearly explain the advantages and disadvantages that partnerships present. Identify and briefly explain the different types of partnership. Give three examples of the kind of business for which this structure might be suitable. Explain what a PPP is. Partnership can be defined as two or more individuals that are willing to combine their finance and other resources to start up a business. When a business is in partnership, different skills, ideas and decision making becomes competitive. The profits and liabilities are divided amongst the partners. The responsibilities and duties of the partners are divided according to the expertise of each partner. General Partnership This includes two or more people who have the will to combine their skills, finance and labour into the business. Example: Different doctors working in one Hospital. Limited Partnerships This includes general partners as well as limited liability partners. Example: Real Estatae Development Limited Liability Partnership (LLP) This is similar to a General Partnership; the only difference is that partners do not have personal liability if the other partner fails to perform his duties. Limited Liability Limited Partnership (LLLP) This includes a certification of limited partnership by the partner in terms of liability as well as other things. Public-Private Partnership This partnership includes the funding of a business (government or private) by a partnership of government-private service with a private sector company. This is known as PPP or P3. Example: Parks and Educational Institutes Advantages of partnerships 1. Setup is easy and finance availability increases 2. Versatile ideas, decision making and skills are shared in the business 3. Responsibilities of the business are shared according to expertise of the partner Disadvantages of partnerships 1. If partnership structure is unlimited liability, then losses and debts will have to be borne by all partners 2. Conflicts in decision making and disagreements may occur 1.5 The legal and financial structure and liabilities of LLCs and PLCs. Clearly explain the advantages and disadvantages each structure presents to the shareholders. Give three examples of businesses which are PLCs. Limited Liability Company In an LLC, the corporation’s personal liability is combined with the taxing policy of the partnership. LLC is a company that allows its owner to have limited liability. Advantages of LLC 1. They have pass through taxation process, which means the profit and loss is incurred on the individual partner’s tax return. 2. Members have no limitation and management structure can be designed according to members. 3. There are fewer formalities which allow managing business easily. 4. There are no restrictions on subsidiaries. Disadvantages of LLC 1. This type of partnership is expensive than a sole trader. 2. Transfer of ownership is harder as compared to a corporation 3. There is no law protection in this type of partnership. Public Limited Company This is an organisation with limited liability and the securities of this firm are traded on the stock exchange. The securities can be traded by anyone on the stock exchange. Example: Microsoft, GM, Tim Hortons Advantages of PLC 5. Shareholders have limited liability. 6. Business operates as an entity and it does not stop even on the death of any shareholder. 7. Large amount of capital available and no limit to shareholders 8. Shares are transferred easily Disadvantages of PLC 4. High legal issues, expensive and requires a lot of time to set up a PLC 5. Original owners may lose their rights on the PLC 6. Higher chances of management conflict and decision making. 1.6 Describe three common organisational structures, pointing out the advantages and disadvantages of each. Give one example of businesses which use each type of structure Hierarchical Structure Example: Military Organisations Advantages: 1. All authorities are defined clearly. Each job has clear distinct roles that have to be completed by the authorised person. 2. Career promotion is clear on the structure. 3. Loyal employees are found in such a structure Disadvantages of Hierarchical Organizations 1. Bureaucracy can be observed and resistance observed towards changing customer demands. 2. Poor communication amongst organisational departments. Team-based Structures Example: General Electrics Advantages: 1. No communication barrier 2. Every team member works together 3. Decision making is easing and through consensus Disadvantages 1. Chances of team conflict 2. Team member has no accountability towards anyone which may result in incomplete tasks. Matrix Structures Example: Procter and Gamble Advantages: 1. Employees are selected according to project requirements 2. Experts may have their own specialised ways of dealing with problems 3. Managers of the project are accountable for the completion of the project according to the deadline and budget allocated. Disadvantages: 1. Resource allocation may result in conflict between different managers. 2. Complexities faced in following up with tasks due to independency 3. Costs of hiring many managers for different projects are there because for each different project, a different manager may be required. 1.7 What is important about the design of the organisation’s constitution, and explain the ways in which this is affected by the purposes and objectives of the business. Give one example of each of the business which has or might have a static, dynamic, or ecological constitutional design. The design of the organisation’s constitution is drafted under two documents. First is the Memorandum of association and the second one is Articles of association. The first document is usually considered a formality nowadays. The article of association document consists of the rules set by the company. All rules and regulations of how the firm will operate and distribution of profits amongst shareholders are written in this document. Shareholders may invest in the organisation based on the rules of the organisations’ constitution. The rights of the shareholders are discussed in the Articles of association document of the firm. The organisational structure design of any firm commences with first deciding on the mission of the firm, then the strategies to be used for attaining the mission successfully with the help of small milestones or objectives being set for the firm. Mission, purpose and objectives of the firm have to be in alignment with each other so that the desired level of results is achieved successfully. The three models of organisational design are the static model, dynamic model, and ecological model. Static: Consultancy firms use such a model. Dynamic: Recruitment firms may use such a model. Ecological: Educational Institutions may use such a model. 1.8 What is important about Corporate Social Responsibility and the application of ethics to business practices? Explain how the need to present a caring image to the external environment can affect the structure of an organisation. Show how Triple Bottom Line and the 3 R’s can be used to help with this process Corporate Social Responsibility is an important application for businesses as this reflects that businesses are sensitive towards the needs and requirements of their valuable consumers. The code of ethics implemented by organisations reflects upon the moral standards abided by the firm. The code of ethics acts as a tool which ensures organisations are representing a committed and moralistic behaviour. Through ethical behaviour the business is able to provide better service; it has the ability to gain higher profits and also develops a good image of its organisation in the minds of the consumers. By building a caring image, the organisation can attract more loyal customers and hence sales and profitability increases. The external environment of the business can become more favourable for the business to operate successfully. The Triple Bottom Line is a good tool for measuring the business position of the organisation. Organisations that produce TBL are aware of the entire cost required in running the business. The 3R’s are Reduce, Reuse and Recycle. If firms start implementing the TBL and 3R models then they can run a cost effective business. By reducing waste, higher extra costs can be saved and invested in some other business unit of the firm. Read More