Post for week 9

Post for week 9

 This week we looked at Globalisation and International trade.

Firstly, we have to look at international trade, what is international trade, this is when an organisation trades in more than one country. How do companies trade internationally?

·         Outsourcing – This is when an organisation decides to transfer some of its activities to a place that will do them more cost effectively. For example, the phenomenon of the call centre. Nowadays if you have a problem with your network provider, and you call the free help hotline, it is more likely that you will be answered by a call centre in India, this means that your network provider is outsourcing.

·         Exporting and Importing – One of the longest established ways of dealing with customers that are overseas, this is done by transporting goods across national borders.

·         Foreign Domestic Investment (FDI) – This is when a firm sets up a branch or chain of branches in a foreign country and manages them directly. (This is very popular amongst car companies)

·         Licensing – This occurs when a company allows another company in a foreign country to produce and sell its products for a specific period of time. (This is to be differed for Franchising which is where a firm in one country allows a firm in another country to use its brand name for a fee, however it is not the same product).

·         Joint Ventures – This enables a firm in two or more countries to share the risks and resources required to do business internationally. Most involve a foreign firm linking with a firm in its host country.

·         Wholly Owned Subsidiary – Managers who want to watch their organisations international activities create a subsidiary in another country. It is quite expensive but it ensures all profits stay within the company.

·         E-Commerce – This is the ability to buy and sell products via the internet, the goods are then transported to the customer in another country via an agent.

Before going into international trade a firm should be able use a PESTLE analysis to see what political, economic, technological, legal, environmental and socio-cultural factors are in another country before moving their business there. They should analyse the tax rates, the exchange rates, the cultural diversity (what works in the western part of the world, may not work in a third world country). For example recently Tesco tried to move their business to China, however it did not entirely work out and they may have to close their branches there. http://www.bbc.co.uk/news/business-24374863

 Next we look at Globalisation. What is Globalisation? Globalisation could be referred to as the worldwide movement toward economic, financial, trade, and communications integration. Globalisation implies the opening of local and nationalistic perspectives to a broader outlook of an interconnected and interdependent world with free transfer of capital, goods, and services across national frontiers. However, it does not include unhindered movement of labour and, as suggested by some economists, may hurt smaller or fragile economies if applied indiscriminately.

Globalisation includes the rapid expansion of international trade, developments in internationalisation of products and service by large firms, growing importance of global corporations, globalisation of technology, economic integration, global economic dependence etc.

However not everyone necessarily sees globalisation as a good thing, some argue that globalisation is caused by human greed, it gives less choice as large multinationals put small firms out of business, it leads to technological poverty, that it causes loss of cultural diversity, lack of proper control of manufacturing, intercorrectedness, etc. (https://www.youtube.com/watch?v=QGLseQFTgeM) 

Joseph Stiglitz on Globalisation - http://www.youtube.com/watch?v=sV7bRLtDr3E

Naom Chomzky on Globalisation - https://www.youtube.com/watch?v=AHJPSLgHemM

Post For week 8

Post for week 8

This week we looked at organisations and their different strategies. What is strategy? There is no specific definition of strategy, there are just different ways to which you could view strategy. According to Henry Mintzberg(1972) strategy could be defined as “a pattern in a stream of decisions”. Chandler (1963) describes strategy as “the determination of the long run goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals”. While Johnson and Scholes (2011) describes it as “the long term direction of an organisation”. But generally, strategy is about how people decide to organise major resources to enhance the performance of an enterprise. The difference in these definitions differ mainly because of what context the person defining it was looking at. There are different levels of strategy, the operational level, which is how an organisation delivers in terms of resources, processes and people, then there is business level, which looks at how individual business units compete in their particular markets. Finally there is the corporate level, this looks at the overall scope of the organisation.   

What are the processes involved when forming strategy?

Firstly you have to look at who actually forms the strategy, strategy is typically the responsibility of senior management. But some believe that in conditions of rapid change enabling more people to contribute will improve the result. How is strategy developed? There is a shift from formal planning processes to informal conversations between managers, then there is less forecasting and more scenario planning, there is less documentation, the timespans are shorter, there is more flexibility in the plan meaning some small changes could be made and then more emphasis would be placed on specific targets.

What ways could an organisation form its strategy?

A SWOT analysis Can help managers find the fit between internal capabilities and external changes/ opportunities. What is a SWOT analysis? This is an organisations strengths, weaknesses, opportunities, and threats for example Apples strengths could be its brand loyalty, its weaknesses could be its high prices, its opportunities could be its advances in technology and its threats could be the progression of Samsung. A SWOT analysis is probably the main tool a manager should be using when forming strategy. There  could also be the use of Ansoff’s Matrix

, which would make it easy for a manager to see how to strategize or a manager could also make use of Porter’s generic strategies.

In conclusion, strategy is always key in order for a business to be able to move forward, the right strategies would lead to the right outcomes, for example because of Nokia’s poor strategic decisions, it has led to the fall of one of the largest mobile phone companies in the world. http://www.bbc.co.uk/news/technology-23947212

Henry Mintzberg on Emergent Strategies -  http://www.forbes.com/sites/karlmoore/2011/06/21/emergent-strategy-demands-emergent-learning/

Post Week 7

Post for week 7 

This week we looked mainly at PESTLE analysis. PESTLE which stands for political, economic, social, technical, legal and environment looks at how organisations could be affected by their external environment. Organisations should be aware of all the factors that could affect them, PESTLE analysis looks at the external factors just like porters five forces looks at the micro environment of an organisation PESTLE looks at the macro. Pestle analysis looks at the most important factors and provides a visual representation of the external pressures that could pose a threat to an organisations strategy. Pestle first looks at the political factors which consists of how changes the Government makes could affect an organisation, a new government elect could make changes to taxes, legislation, regulations etc., firms would need to be aware of these changes. For example the recent change in corporation tax dropping from 30% in April 2008 to 23% in April 2013 is an external factor all organisations would need to be aware of and it will drop to 20% in April 2015 (http://www.hmrc.gov.uk/statistics/ct-receipts/corporation-tax-statistics.pdf). Then there is the economic effects that organisations need to be aware of such as the exchange rates, inflation rates, consumer activity, unemployment rate, changes in the organisations costs (such as energy, rent, oil prices for transportation etc.), subsidies, etc. For example if the inflation rate is going up an organisation would need to increase it prices in order to keep up with the rising value of the currency

Pestle also analyses socio-cultural changes, such as changes in lifestyle,  the distribution of income, changes in season, demographics (an ageing population would affect pharmaceutical companies).

etc. This is one factor clothing line organisations would need to be particular about, for example they would need to keep up with fashion trends, also expensive stores would also need to locate their branches in high earning areas. Pestle analysis then looks at the effects of changes in technology and how organisations would need to watch out for new production methods, new patents and products, speed of change and adoption of new technology etc. For example, Nokia has been a powerhouse in the mobile phone industry until recent years when their failure to adopt new technology has left them lagging behind the likes of Samsung and apple.

Pestle also looks at the legal factors that could affect an organisation, such as; changes in law, competition law, environmental law, employment and safety laws etc. For example the Joint Stock Companies Act in 1862 where people were discouraged from investing in companies as they would be personally liable if it failed, until The Act in 1862 which limited their liability to the value of their shares meaning just the loss of their investment but not their personal belongings, this act coined the term ‘Limited Liability’ (Mickletwait and Wooldridge, 2003). Finally, Pestle looks at the environmental factors that could affect a company, such as green issues, energy consumption, refuse disposal, pollution etc. One main cost most production firms face is to keep try and keep pollution down in order to avoid law suits, or for example the case of the Coca cola company in India where the factories are causing water shortages in some small communities (http://www.righttowater.info/ways-to-influence/legal-approaches/case-against-coca-cola-kerala-state-india/)

Very useful video on pestle analysis - http://www.youtube.com/watch?v=ppl9WCARDK0

This week we also looked at stakeholders and the effects they could have. Freeman (1984) defines a stakeholder in broad terms as any group or individual who can affect or is affected by the achievement of an organization’s purpose. There are two types of stakeholders, these are internal and external stakeholders. Internal stakeholders  consist of managers, shareholders, employees and directors. While external stakeholders consist of the government, competitors, customers, suppliers, pressure groups etc. 

 Stakeholder Theory - http://www.fsu.edu/~pea/Stakeholder_Theory.html