What are the major differences between capitalism, communism, and socialism - Essay Example

? BUSINESS Questions WA1-6 ……………………… College………………………………. What are the major differences between capitalism,communism, and socialism? Capitalism is a system of private enterprise in which the main economic decisions, such as what, how, how much, where, to whom and for what price several items are to be produced, are made by private individuals in their capacity as owners, workers or consumers (Perry, Chase and Jacob, 2008, p. 359). Capitalism is referred as free enterprise system as the basic economic decisions are not left to individuals but rather these decisions are also made in response to market forces such as demand and supply. According to the concepts of capitalism, people are free to accept the law of supply and demand. Communism is, according to its founder Karl Marx, an economic system that promotes the idea that the society must control the production or goods and services. Capitalism was much concerned about acquisition of wealth where as communism focused on serving others with concerns on poor and underprivileged arguing that there were major disparities between classes. Socialism is an economic system that seeks to manage the economy through collective social control, but communism is an economic system that seeks to manage the economy as well as society. McConnell and Brue (2004, p. 33) noted that capitalism is a system in which each participant acts and performs business and non-business activities in his own self interest. Each individual is looking for maximizing his satisfaction or profits through own decisions regarding production and consumption. They pointed out that socialism and communism can be considered as command system as an alternative to market system. In both communism and socialism, government owns most of the property resources. The economic decision making in these systems occurs through a central economic plan Socialism and communism are similar in that both these dogmas are systems of production for use based on public ownership of the centralized planning. Communism is a further development or higher stage of socialism (Williamson, 2011, p. 47). 2. Discuss the three major economic indicators and how they are indicative of our current economic climate. The major three economic indicators are 1) Gross domestic product, 2) Consumer price Index, 3) Employment. The most important economic indicator is GDP- Gross Domestic Product- which represents the total market value of all final goods and services that are produced in a specific period of time. GDP includes all goods and services produced by citizen-supplied or foreign-supplied resources employed inside the country (McConnell and Brue, 2004, p. 113). Consumer Price Index is used as main measure of inflation in the United States as compiled by the Bureau of Labor Statistics. Consumer Price Index is considered as the base to report inflation rate each month and each year and also for adjusting social security benefits as well as income tax brackets for inflation (McConnell and Brue, 2004, p. 141). Another important economic indicator is Employment Statistics which provides a comprehensive data on national employment situations, unemployment rate, wage and earning data etc. Normally, information is disseminated from different ways such as agricultural, industrial, employment or unemployment among men, women or other classes etc. All these major economic indicators are clearly indicative of our current economic situations. For instance, the latest statistics show that there has been an expansion of 2.8 percent in the gross domestic product figure in the fourth quarter of 2011 over the previous quarter (tradingeconomics.com, 2012). Another example is that the unemployment rate in the United States has been decreased to 8.3 percent in January of 2012, showing a lowest rate from February of 2009 (tradingeconomics.com, 2012). 3. In considering to enter the global market, identify the major strategies an entrepreneur may consider and discuss the advantages and disadvantages of each of your selections. An entry mode in to a foreign country is an institutional or organizational arrangement that is facilitated to export or make possible the products, human skills, technology, management and other relevant resources of a company in to a foreign country (Wagner, 2009, p. 3). For an entrepreneur who wishes to go global, a mode of entry must be closely aligned with varying degrees of resource commitment, risk factors, business control, legal boundaries etc. Mainly, there are three entry modes, namely export relates, contractual and foreign direct investment related. The depiction given above illustrates briefly these three entry modes. Along with these modes, levels of resource commitment, organizational control, expected returns and related risks also increase (Shenkar and Luo, 2004, p. 274). Exporting is a very commonly used mode of entry by which firms are getting valuable expertise on international operation and deep knowledge about countries in which operates. A company can export goods or services directly or indirectly through export agent, commission agent or international firm etc (Ball, McCulloch and Frantz, 2005, p. 431). Contractual entry modes comprises of contract manufacturing, international licensing, franchising and joint venture etc. Firms in developing countries may not have sufficient financial capacity to pay for equipments and they may prefer leasing or other arrangements. Foreign direct investment is a mode which is fully internalized by the concerned firm and the risks associated with the FDI is relatively lesser even though the control and resource commitment are high (Wagner, 2009, 4). 4. Can a business add to the quality of life and the standard of living in a community? If so, how? Undoubtedly, a business can contribute much to the quality and standards of living conditions in a community. Business ensures continuous production of variable goods and services, quality of the items they produce, marketing of these items in a way they are made available to the right people, in right time, for right price and in right quantities. A business may survive in the market only if it meets certain qualities that people are expecting from a normal business and in order to meet this requirement, most of the business management is keen about ensuring greater quality in all of its operations. The business is therefore required to ensure quality assurance and quality control throughout its production process, product designing and development, marketing activities, sales and customer contacts etc. The more satisfied the customers are, the more purchases of goods or services they will make and this is the way ‘customer satisfaction’ helps a business stay longer in the market. In short, a business can certainly add to the quality of social life and living conditions if the business is able to ensure quality in operation and maximum customer satisfaction as well. A business can add to the quality of living conditions by discovering opportunity for a newer product or service, or by improving the standard of the product or service that it already markets, or by making positive changes to the distribution channel and so on. 5. If you were to consider a franchise such as McDonald's, Burger King, or Starbucks, what would you need to know? Franchising is a business start-up strategy whereby an entrepreneur may approach an already established and well reputed business to make use of its brand name or retailer’s name for establishing and developing his new venture. A franchising fee will be paid by him for making use of the brand or retail name since that name itself serves to be a valuable asset to the business. The major advantages of choosing franchising are that it helps the entrepreneur get an easy access to the market, attract relatively greater numbers of customers, create a positive zeal among the customers and get training or other sorts of helps from the franchiser. If we have to consider franchising with McDonald’s, the major factors that are to be considered include the size and nature of the business that is to be established. If the business is very small and is going to be sole trading business, it certainly doesn’t require to be franchised with McDonalds. Franchising will be an effective start-up strategy only if both the franchiser and franchisee are running similar business. Both the businesses are to market same kinds of goods or services. For instance, a businessman who is willing to start a textile retail shop cannot choose franchising with a soft-drinks manufacturer. In order to go for franchising, the businessman should know some basic things related to franchising and franchiser’s business nature, character and size etc. He must know the worth and value of franchiser’s business so that he will be aware of the fee he will be required to pay. He also should attempt to understand the business ideas, business strategies and managerial techniques that the franchiser follows for his business. 6. Develop a business plan, and justify each area in your plan. Planning is critically important element to establishing a successful business. A business plan must comprise of business objectives, mission and vision, environmental scan, marketing mix strategy, financial projections for a specific future period, profit and loss analysis for next few years etc. Business objectives are essentially important components in a business plan as they are the pathway to convert the business dream in to reality. Business objectives help the business man identify what to be done, what to be produced or marketed, whom to be targeted, how to be produced or marketed etc. Business mission is a statement that shows specific target that the business is aiming to reach at. The mission statement should give clear understanding of the quality aspirations of business activities. The environmental scan refers to a comprehensive analysis of both the internal and external environments. For a comprehensive environmental scan, various tools such as SWOT analysis, PESTEL analysis, Five force analysis of Porter etc are to be used. All these tools will present both internal and external environmental scan through heads like strengths, weaknesses, opportunities and threats. Political, economic, social, technological, ecological and legal environments will be analyzed by PESTEL. A marketing plan is an extremely important component and it must give details of the marketing mix strategies of the company. The business plan should also detail future financial projections and funds flow statements, profit and loss statements etc for a specific period of time. 7. Discuss sources of funds one should investigate before tackling such a business endeavor. For an entrepreneur, there are various choices of funds to start or develop the business. The financial sources are normally classified in to two, namely short term and long term sources of funds. Short term sources include trade credit, over draft and debt factoring, but these are not convenient for start-up business since they can be used only for small amounts and for shorter period as well. Long term sources of funds are hire purchase, leasing, venture capital, bank loan, mortgage, reinvested profits etc. All these funds are repayable within 2 to 25 or more years, and therefore they are very convenient for starting a business venture. Out of all these sources, venture capital, mortgage and bank loan are more useful sources of funds as compared to the advantages of depending on leasing, hire purchase etc. but, leasing has been found to be a very effective source of financing if the business has to but some equipments or electronics that are ore likely to become obsolete within next few years. 8. If you were going into a business, what form of business ownership would you select (sole proprietorship, partnership, corporation), and why? Choosing a specific business form solely depends upon the size, nature, financial capacity, funds sources available etc of the business he is going to start up. Each form of business has its own advantages and disadvantages and therefore a business can either be sole trading or partnership or corporation according to how the business man wants his business to be in the future. For instance, if he wants his business to be a big manufacturing company, the best choice will be corporation as this form of business ownership takes the advantages of limited liability, possibility of getting huge funds, advantages of large scale etc. if the business is a small scale retail shop, both sole trading and partnership will be more appropriate choices. The sole trader is one man business and therefore he is less likely to be distracted in taking business decisions, and is more likely to enjoy full profits. Though he has greater freedom and flexibility in business operation, there is none to share the risks associated with his business and he alone has to take the risks of loss. Partnership is a form of business in which there are two to twenty people as owners. In partnership form of business, there are more than one owner and managerial decisions are more likely to be effective since there are more people to take corrective actions or help the other in taking proper decisions etc. Though there can be interference from other partners, there is an advantage that losses incurred for the business can be shared among all of the partners. One of the main disadvantages of both sole trading and partnership is unlimited liability of the owner by which the owner’s liability is not limited to the amounts of his capital, but rather, he will be personally responsible for all the debts or liabilities of the business. In contrast, a private or public limited company has the advantage of limited liability since the share holders are liable only for the face value of their shares. Choice of the form of business ownership is largely depending on various factors related to the business to be started. For a small retail shop, a service providing business, a small street-business etc, sole trading will be more appropriate choice. But for comparatively a bigger business such as an agency, a small hospital, a large scale retail or wholesale business with 10 to 50 employees, partnership will be much better choice than sole trading. But for a large scale business such as a textile or electronic manufacturer, for instance, corporation will be much convenient than other two forms of business ownerships. 9.What leadership style would best describe the boss or supervisor you are working with currently or have worked with recently? Justify your choice of leadership style. Recently, when I was worked for a supervisor, I observed that my supervisor was very similar to a transformational leader, since has been highly influencing with a sort of charismatic character. A transformational leader is one who influences his followers in a way they are motivated to bring better changes. I found that many managers fail to bring change, but my supervisor was very effective and strategic in making others aware of why a change is required and then ensuring that the change is communicated effectively to all those who are involved in the change process. Transformational leadership is highly attractive since it influences the followers to do whatever the leader wants them to do. Being different from transactional or situation leaders, I found that my supervisor has been successful in creating a positive appeal among the minds of his followers and thus they are motivated to work in a collaborative way. 10. What type of planning would each of the following job titles be concerned with: president, plant manager, supervisor? A president may take a long-range planning which generally considered to assume that current knowledge about future conditions is purely dependable on ensuring the plan’s reliability over the duration of its implementation (Allison and Kaye, p. 7) This planning will be taken for long-term in nature. A president of a government or political party may go for that kind of long range planning. A plant manager is very likely to take operational planning because he will be planning about the plant and related operations. He may plan about the operation expenses, the operation objectives, operation period, operation strategies etc. A supervisor may take strategic planning assuming that the organization has to respond to an environment that is dynamic, complex and hard to predict as well. 11. What are the operations planning issues involved in both the manufacturing and service sectors? Operation in both manufacturing and service firms are largely different and therefore the operational planning in both manufacturing and service firms will also be different. In manufacturing, the operational planning must comprise of issues such as plant requirements, plant operation timings, budgets required for plant purchase or repairmen etc. More specifically, the core of the problem in manufacturing firm is related to production intensive, but the issue in service firm is related to labor intensive. A service firm is labor intensive and the operational planning will give much emphases on the numbers of labors, their abilities, skills and qualifications, their working hours, their pay and so on. All these mare 12.As the manager of a large organization, discuss your major functions in detail. Management’s main functions are planning, coordination, direction, staffing and controlling. As a manager to a large organization, I will have to plan the business activities in detail. Planning is the first and foremost important management function. While planning, I may have to consider various factors such as business objectives, its possibilities, employees, business operation, marketing function, targeted customers etc. Secondly, as the manager, I have to coordinate various functions and business activities among the employees and different levels of people in the organization. The manager has to direct his staff about things that they are expected to perform within a stipulated time. The manager is also required to finds sufficient numbers of people for various jobs, after scrutinizing their qualifications and qualities that are required for various jobs. Recruiting, selection and training processes are some of its major elements. Finally, the manager is expected to take a corrective action, that is controlling function of management. 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