The Reality of Recession for Small Businesses - Essay Example

? Examples of How Changes in the Environment Affect Organizations Contents Introduction 3 The article, “the reality of recession for small businesses? ‘We need help' authored by Julia Kollewe, Nadine Schimroszik and Dan Milmo on 25 October 2012. 3 The article, “Starbucks 'paid just ?8.6m UK tax in 14 years'” written by Simon Gompertz on 16 October 2012. 4 The article, “Apple sells over 5 million iPhone 5, supply constraints loom” written by Poornima Gupta and Jennifer Saba on Sep 24, 2012. 5 The article, “Wal-Mart files legal complaint against growing protests ahead of Black Friday” written by FoxNews.com on November 20, 2012. 6 References 8 Introduction It is factual that no business exists in a vacuum but in an external environment that consist of various factors and other players outside the business. Indeed, there are factors that the business can control. Nevertheless, the presence of external factors which the business cannot control is a fundamental challenge that all businesses face. As such, business manager must consider these factors and establish their influence on the business. The magnitude of external factors’ effect on business progress depends on the type of business and type of influence. We can conveniently classify the external factors into social, legal, economic, political, and technological factors. This paper will draw a comprehensive report on the external influences affecting four different firms and their activities. In doing this, the paper will summarize the information in four relevant stories that address external influences on specified firms and their activities. The companies in this context will include the Starbucks, Cheetham Hill Construction Company, Apple, and Wal-Mart. The article, “the reality of recession for small businesses? ‘We need help' authored by Julia Kollewe, Nadine Schimroszik and Dan Milmo on 25 October 2012. Ideally, one of the external business factors includes the effect of recession. This article addresses the effects of Britain's double-dip recession on Cheetham Hill Construction Company. According to the authors, the company pulled through recession by managing to keep its 150-strong workforce although the recession led to a significant decrease of the company’s annual turnover (Kollewe, Schimroszik &Milmo 2012, p. 1). The article notes that although the construction company had recorded fair progress, the company faces serious challenges in generating new business since the recession ended. Indeed, the article reckons that the company now operates under tight margins and the company encounters challenges in paying the employees and the suppliers. In fact, the article notes that the effects of recession on construction manifested the true picture of the economy at the time. Assuredly, most small firms including Cheetham Hill Construction Company now live on a knife edge and they constantly delay payments to suppliers except to the main suppliers (Kollewe, Schimroszik &Milmo 2012, p. 1). More so, the article establishes that the company called for tax breaks to enable the company train a new generation of construction workers. Prior to the recession, the company used to take apprentices every year but now the company cannot afford that subject to the recession. Indeed, since most of the workforce in construction comes from SMEs, the construction companies are lacking labor supply as the SMEs suffer from the recession (Kollewe, Schimroszik &Milmo 2012, p. 1). Notably, recession has very significant adverse effects on any business. Ideally, the most adverse effect of recession on business is reduced job security as workers prefer recession-proof businesses which have capacity to thrive or survive a recession. Furthermore, small business suffers the greatest loss in a recession subject to their inadequate preparedness, budget constraints, and few resources. Other effects that derive from recession include reduced cash flow, loss of demand, and marketing constraints (Sandilands 2013, p. 1). The article, “Starbucks 'paid just ?8.6m UK tax in 14 years'” written by Simon Gompertz on 16 October 2012. Government directives and business requirements are fundamental external legal factors that affect every business. The article simulates the government’s requirement for all companies to pay corporation tax in the UK. According to the article, Starbucks did not pay any corporation tax for three years when the company reported losses and thus avoided paying the corporation tax (Gompertz 2012, p. 1).The article records the company’s assertion that it is fully compliant to all UK tax laws. However, the article notes that the company is under probe for allegation of tax avoidance. Indeed, the article notes that tax researchers are researching on how Starbucks did not pay corporate tax for three years. Notably, the article reckons that there is need for the government to reinforce the tax laws to avoid instances of tax avoidance. As such, the article states that the UK government is seeking to close down all tax evasion avenues to avoid tax avoidance by both individuals and companies (Gompertz 2012, p. 1). In fact, the article quotes the Reuters investigations which reveal that Starbucks paid companies within the group to reduce its taxable income in the UK and hence the probe. Indeed, the UK government confirms that the company’s practice was against the interests of the country and of fair competition. Therefore, the article asserts that the government condemns companies from moving its income to tax havens (Gompertz 2012, p. 1). Indeed, government directives on spending plans form basic external factors that affect business. Such directives may relate to corporate tax, business requirements, business ethics, terms of investment, and sustainability requirements. The article, “Apple sells over 5 million iPhone 5, supply constraints loom” written by Poornima Gupta and Jennifer Saba on Sep 24, 2012. Ideally, we have economic factors that affect business. This article addresses economic factors which demean Apple’s ability to supply iPhone 5 phones leading to many pre-orders (Gupta & Saba 2012, p. 1). The article confirms that the company is struggling to produce enough iPhone 5s for everyone. Indeed, subject to the historical quality of Apple products, the expectations for iPhone 5s was consequently very high beyond the companies supply capacity. The article notes that subject to this growing demand, many people are watching Apple to establish the supplier problems that may derail the production of smartphones. Ideally, the article notes that the supply constraints that Apple is facing will weigh on the company’s sales. Indeed, the article confirms that the supply problems that Apple faces emanate from the closure of Apple's largest contract manufacturer Foxconn Technology due to civil unrests in Taiyuan (Gupta & Saba 2012, p. 1). More so, Apple’s key supplier for screens, Sharp Corp struggles with high production costs and rising debts thus limiting the production capacity of Apple. The article also notes that Apple's key supplier and competitor, Samsung Electronics Co Ltd, is now producing smartphone sales thus limiting supply and increasing competition to Apple. Ultimately, the article confirms that smartphones running on Google Inc.’s Android software are also competing with Apple (Gupta & Saba 2012, p. 1). As such, we can establish that there are various economic factors which affect businesses. These may relate to something happening to a supplier as seen in this article. This draws significant adverse effects on the business. The article, “Wal-Mart files legal complaint against growing protests ahead of Black Friday” written by FoxNews.com on November 20, 2012. There are various political factors which may include labor unrests that affect any business. The article informs that Wal-Mart is taking legal action against its organized labor opponents who are planning widespread protests at Wal-Mart stores across USA (FoxNews.com 2012, p. 1). The suit is against United Food and Commercial Workers International Union which is planning rallies to advocate for better working conditions at Wal-Mart. Indeed, the company claims that the labor union is unlawfully disrupting the company’s business by organizing protests at all Wal-Mart's stores and warehouses in USA (FoxNews.com 2012, p. 1). As such, Wal-Mart seeks an injunction against the unrest from the National Labor Relations Board (NLRB). In its argument, Wal-Mart claims that such rallies and protests will directly and adversely affect the company’s customers and associates. Indeed, we can establish Wal-Mart worries as the company’s competitors have already planned to maximize on the day of the unrest, Black Friday (FoxNews.com 2012, p. 1). Notably, the article asserts that the labor board will establish if the company’s complaint has merit and decide whether to take the matter to the district court. This defines the seriousness of political factors on the business. Indeed, Wal-Mart employees have already begun walking off the job ahead of the Black Friday. More so, the union groups are urging the employer to dismiss Wal-Mart’s retaliatory tactics which demean the quest for better working conditions (FoxNews.com 2012, p. 1). This explains the potential effects that political factors can derive to a business. As such, business seeks to avoid them but rarely succeed as seen in this article. References FoxNews.com 2012, ‘Wal-Mart files legal complaint against growing protests ahead of Black Friday,’ Fox News, November 20, 2012, retrieved 23 August 2013, Gompertz, S 2012, ‘Starbucks 'paid just ?8.6m UK tax in 14 years,’ BBC News, 16 October 2012, retrieved 23 August 2013, Gupta, P & Saba, J 2012, ‘Apple sells over 5 million iPhone 5, supply constraints loom,’ Reuters, Sep 24, 2012, retrieved 23 August 2013, Kollewe, J, Schimroszik, N &Milmo, D 2012, ‘the reality of recession for small businesses? ‘We need help,' The Guardian, 25 October 2012, retrieved 23 August 2013, Sandilands, T 2013, ‘Effect of Recession on Small Businesses,’ Houston Chronicle, 2013, retrieved 23 August 2013, < http://smallbusiness.chron.com/effect-recession-small-businesses-61164.html> Read More