Economic, Political and Cultural Factors Important for Comfortable Managing Business - Assignment Example

Business Question 1a Economic There are various economic models that are used by countries in trying to manage the country’s risks. Two of these models include Mann’s SPT and Porter’s Diamond even though there is a debate on which economic model is most appropriate. I strongly believe and support the Porter’s Diamond model as opposed to Mann’s SPT model because it aims at explaining the competitive advantage; that some countries or organizations have as a result of certain factors that are within their reach, discussed in the subsequent sections that follow. This model assists in analyzing and improving a country’s position in an internationally competitive field. It demonstrates that nations can be competitive regardless of factors like natural possessions such as land and the other resources. According to (Botten, 2007), the government has a role of encouraging and pushing organizations to the most competitive levels so as to increase performance and eventually help realize a total joint benefit. Mann’s SPT model only talks of developing the triangles used in profiling countries and organizations, as depicted in (Wesport: Praeger Publishing, 2006) by Clarence Mann when the author talks about ways of managing risks in a country using social process triangle. Question 1b Porter’s Diamond model highlights major points in managing risks in a country. The points outlined here major on; foreign direct investment, government, multinational enterprises and the Double diamond. Foreign Direct Investment tends to focus within a particular continental area. According to Porter’s model, outward FDI (Foreign Direct Investment) is very valuable in generating competitive advantage as opposed to inward FDI which is termed entirely unhealthy. (Norton, 2009) points out that comparative disadvantage results from foreign subsidiaries being only importers, one of the reasons that has ultimately influenced India’s Coca cola import and export economy. FDI’s statements have been questionable but results from research and development carried out by foreign-owned firms indicate that the big 20 U.S subsidiaries in India, export nearly as much as the ones they import! The Government also has influenced the competitive advantage of this nation and its policies. For instance, they can employ subsidies for penalizing foreign investors indirectly or use tariffs directly for entry barrier to penalize them. (Dunning, 1991) suggests that using Porter’s Diamond model enhances international competition, but when government restrictions on foreign competition are introduced, inferior goods are produced which amounts in failure to compete successfully due to restrictions. Multinational Enterprise such has Coca Cola has led to the tremendous growth of the economies due to the same product being consumed worldwide by many nations. Also, as a result of its acceptance by multitudes worldwide, it has become easy for the Company to monopolize the market setting a stiff competitive market to its advantage. Apart from this, Double diamond has influenced India in a very devastating way. Case in point, Porter’s views are accustomed and limited to their own trainings and working as per US standards and business principles! Meaning, firms that are in economically small nations, like India, the repercussions of Porter's diamond are distressing (Hodgetts, 1993). Question 2a Political Coca Cola Company in India has got several stakeholders that keep it up and going. Some of these stakeholders include; International Union of Foodworkers, International Labor Organization, Aim Progress, Human Rights Conferences, Bank of New York Mellon Corporation and State Street Corporation. The International Union of Food Workers is a federation of trade unions working worldwide to represent workers needs and interests. They serve to represent workers in sectors such as agriculture and plantation, food and beverages and also hotels. The IUF provides a forum for Coca Cola to discuss quite a number of labor related matters. The Human Right Conference helps engage businesses such as Coca Cola on Human rights fronts. Another Major Stakeholder is the International Labor Organization (ILO) which usually has an annual meeting in Geneva, Switzerland that brings together 2000 representatives from Labor Unions and other major bodies to discuss and adopt International Labor Standards that are then implemented by member states. Lastly is the Brand Collaboration (Aim process): Coca-Cola Company is the leading member of the Aim Process, a forum of 30 fast moving consumer goods companies that work together to promote a responsible sourcing through brand collaboration. The aim is to accelerate supply chain compliances, improve and streamline the assessment processes. Question 2b Sources of Societal Instability Facing the Firm Societal instability in a firm arises due to group issues affecting the members within a Company. There are certain matters that lead to these societal instability which may include; income issues, inequality, insecurity, governance and rapid growth related difficulties. To begin with, income earnings and all other stipends can be a leading factor of instability of firms as far as morale, integrity, professionalism etc. is concerned. People who are unhappy and dissatisfied with life at work are likely to be disconnected socially as compared to happier people. The not so obvious characteristics such diminishing ambition and morale, are linked directly with steady or gradual decline in performance and productivity hence lowering one’s happiness (Knight and Gunatilaka, 2011). Also, inequality, i.e. the continued economic inequality that has accompanied economic reform and growth, poses a threat to social stability. Differences in income that emerge due to productivity and effort might appear justifiable while those that arise for other reasons might arouse feelings of injustice and inequality which would bring enmity and create conflict between workers and colleagues. Insecurities at work places may lead to injuries, health determent or even risk of death. Ones working area and conditions should be very conducive, secure so as to encourage and motivate workers. To add to this, poor or bad governance and administration of a firm can lead to societal instability. For example, the governing body may be corrupt, unjust or unfair in their their rulings and judgments or even go to the extent of swindling funds from the company. This has the probability of leading Firm’s Bankruptcy or loss of trust in the governing body. Corruption is a potentially serious source of social discontent and it is what causes fall and failures in governance of firms. Uncontrolled rapid growth on the other hand causes a sharp rise in population, making it hard to control and efficiently perform managerial tasks. This would also result in poor quality of products and instability. Question 3a As far as Mann’s model is concerned, the three benchmarks that clearly describe the cultural aspect of life; through this model we understand the triangle to be a tool for identifying means and ways of efficiently and effectively synthesizing social change. The three benchmarks are education, symbol and style even though they all vary from one nation to another. In this case I am going to compare the benchmarks in India and USA. To begin, the kind of education offered to kids in the USA greatly differs from that offered in India. For instance, students in the USA may be exposed to quite a wide range of study books, infrastructure in institutions, professionalism and advancement in technology. This gives them a greater advantage over kids in India who do not have good access to such facilities. Also these two nations possesses deferring culture lives e.g. In India, women must put on clothing that cover the entire body and during marriage, the spouse is selected by the parents. Meaning marriages are pre-planned, prepared well and differently as opposed to the USA. There exist a lot of contrasting styles and customs practiced by these two nations. Lastly, is the symbol used to represent the culture; USA and India both have their own symbols for their culture. Indians have sculpture balls to symbolize their God. They have many gods and each God symbolizes something. For instance, there is god Shiva, goddess Lakshmi who is the goddess of beauty whom they pray to whenever they need assistance or for thanksgiving. Similarly the Americans have their own symbols to represent something they believe in. Cultural Culture refers to people’s way of life. By studying relationships and rules in India, knowing their ways, it would ease Company’s strive towards adjusting itself so it may fit in for the sake of Business since Indians prefer working with those that they know and can connect with. Their relationships involve hierarchies. Every relationship has a clear cut hierarchy which must be followed in order to maintain social order. Relationships to them are usually built upon mutual respect and trust. Generally speaking, they prefer to have a long lasting personal relationship prior to starting or doing business. They also have rules that must be followed to the latter as this constitute their way of life. Therefore, the company needs to have a prior personal relationship with an Indian company and populace. Consequently, on individualism and communitarianism, Indians are usually conscious of their social order and status, so not all Indians mingle that easy! This is due to different levels of hierarchy. Indians like to keep their close personal ties and maintain their families, including the extended family. Therefore knowing their individualism would help the Firm know how to interact with an Indian business market and Companies. Lastly Indians are so keen on the Status and can be so discriminating. In Indian culture, status is determined by age, level of education, caste and profession. They can’t do business with anyone not within their status. They consider them as outcasts and so they look down upon them. Conclusion For a business to run smoothly and the country to be well managed, economic, political and cultural factors should be put into consideration and clearly understood. This will definitely help build the nation, promote peace and understanding among different nations and communities which would eventually propel the country to industrial prosperity. Reference Norton, A., Hughes, J., & Chartered Institute of Management Accountants. (2009). E2 – Enterprise management. Oxford, U.K: Cima/Elsevier. Botten, N. (2007). CIMA Official Learning System Management Accounting Business Strategy. Burlington: Elsevier Science & Technology. Dunning, J; The Globalization of Business; Routledge; London (1993). Dunning, J; Dunning on Porter, Paper presented at The Annual Meeting of the Academy of International Business (1991). Henry, A. (2008). Understanding strategic management. Oxford: Oxford University Press. In Mann, C. J., & In Götz, K. (2006). 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