General Business Issues - Assignment Example

General Business Questions Answer The factors of production refer to the inputs required to manufacture goods and services. These factors of production are land, labor, capital and entrepreneurship. The factors of production are also classified into 4Ms; materials, machines, men and money. The goods and services manufactured by using these inputs are sold to consumers to generate profit. Experts aver that information resources should be considered as the fifth factor of production. The importance of each of these factors depends on the nature of the product being manufactured. Skilled labor is important in the service sector while capital is important to set up a technologically advanced production plant. In the ultimate analysis, entrepreneurship appears to be the most important factor of production as the entrepreneur decides the quantum of other factors and is also responsible for organizing them. Answer 2 A demand curve depicts the quantity of a product demanded at different prices. On the other hand, the supply curve depicts the quantity of a product supplied at different prices. There is an inverse relationship between price and quantity demanded. When price decreases, demand increase. The demand cure is therefore downward sloping. The price and quantity supplied however move in the same direction. When price decreases, supply also decreases. The supply curve is therefore upward sloping. The point at which the demand curve and supply curve intersect is called the equilibrium price. The quantity of goods supplied is equal to the quantity of goods demanded at the equilibrium price. Answer 3 Gross Domestic Product (GDP) refers to the monetary value of all goods and services produced in a country. When GDP is adjusted for inflation and is expressed in base-year prices, it is called Real GDP. GDP and Real GDP are measures of performance of an economy. Answer 4 Moderate level of inflation is good as it signifies economic growth. Too much inflation however decreases the purchasing power of money and thereby reduces the standard of living of people. The government tries to control inflation through the monetary policy tools like increasing or decreasing interest rates and changing the amount of bank reserves. Answer 5 Many countries have moved from planned economies to market economies due to the failure of communism. It is prudent to believe that the private sector has more expertise to manufacture and market goods and services as compared to the government. Evidence suggests that consumers tend to benefit when companies fiercely compete with each other. This heightened competition results in low prices or better quality products for the ultimate consumers. The planned economies will resurge if capitalism leads to uneven distribution of profits. In case the gap between the rich and the poor widens in countries that have adopted a market economy, it will be a good idea to adopt the planned economy model. Answer 6 When there is a surplus, suppliers tend to reduce the price to monetize the inventory. This situation will hold true for perishable products, consumer durables as well as fast moving consumer goods. To cite a specific example, there was a glut of natural gas in the United States which led to a reduction in prices. When there is a shortage, prices tend to rise as more demand chases lesser goods. A good example of a case where shortage led to increased prices is the oil shortage of the 1970s that led to an increase in prices. Similarly, the ticket price of a concert will shoot up if the number of seats is limited in comparison to the number of people interested in attending the concert. Eventually, the market forces determine the price at which the supply can be sold off. Answer 7 Inflation increases the prices of goods and services. My personal disposable income will decrease in case of inflation. Unemployment too does not bode well for me as an individual. Joblessness in the economy reduces my chances of landing a job. Both inflation and unemployment will affect me as a manager as these variables determine demand in the economy. Moreover, if there is inflation, I will have to increase the wages of my employees. In case, there is unemployment, I will get more applicants and I can hire the person with the desired skill sets. Answer 8 Economic growth, measured by gross domestic product, increases output and employment. The economy witnesses’ creation of wealth and the consumer sentiment is positive. Economic growth is linked to improvement in standard of living of people of that economy. Economic stability refers to nominal output growth and low rate of inflation. This is an ideal situation for a developed economy. It is noteworthy to mention that a stable economy increases certainty and encourages investments in technology and human capital. Economic growth and stability should be seen as different stages through which an economy passes. After the benefits of growth have been reaped, it is essential to ensure stability in the economy so that the gains are not eroded. Answer 9 The following factors should be considered in an ethical situation; social consensus, urgency of the situation, probability of effects, immediacy of harm, extent of agent’s influence on events and availability of other options. Answer 10 Individuals and institutions that affect and are affected by the operations and decisions of an organization are referred to as stakeholders. The various stakeholders of an organization include shareholders/investors, management, employees, customers, business partners including suppliers and channel partners, community, special interest groups, environment, media and government. Good organizations take decisions keeping in mind the interests of all stakeholders. Investors and customers have the maximum influence on a business and are therefore the most important stakeholders. The investors have put in money and therefore rightly expect the organization to pay back a fair rate of return on their investments. The management is entrusted with the task of carrying out the day-to-day business operations smoothly. The profits from such operations are the returns to the investors. The second most important stakeholder is the customer. Without customers, the organization will cease to exist. Answer 11 The main areas of social responsibility are; Responsibility towards the environment: The organization should take all possible initiative to thwart air, land and water pollution. Responsibility towards the customers: The organization should indulge in ethical advertising and ensure that the consumer rights are protected. Responsibility toward the employees: The organization should give fair remuneration to its employees as well as institute a whistle-blower policy. Responsibility towards investors: The organization should carry out business operations in fair and transparent manner. Answer 12 The four basic approaches to social responsibility as delineated in the Archie Carrolls ‘Pyramid of Corporate Social Responsibility’ are economic responsibilities, legal responsibilities, ethical responsibilities and philanthropic responsibilities. Answer 13 My personal code of ethics may clash with the operations of a company if it does not conduct its business in a fair and transparent manner. Initially I’ll become the whistle blower and raise the matter to my immediate superior so that the issue can be taken to the appropriate authority. If things are not resolved to my satisfaction, I’ll quit the organization. Answer 14 The activities that pose a potential harm to other individuals like sexual harassment or sabotage of machinery will prompt me to become a whistle blower. On the other hand, deviations like employees gossiping with each other or whiling away time during office hours are wrongdoings that I’ll ignore. Such tittle-tattle amongst employees is part of the informal organization, strengthens bonds and serves their social need and therefore little attention should be paid to such behavior. Answer 15 All areas of social responsibility are important. Ideally, the organization should take initiatives which fit with its own capabilities and core competencies. Donating money for an earthquake relief fund or setting up a training centre for the illiterate people of a remote village to make them more employable fall under the domain of corporate social behavior. According to me, a company should make all possible effort to make a positive impact on the society and environment. Answer 16 Small business managers will face the same corporate responsibility issues as their counterparts in big organizations face. The only difference is that these issues will be on a smaller scale and the small business manager will have fewer financial and human resources to cater to these issues. Answer 17 Small businesses are important to the U.S. economy because they are the engines of job creation. These small but important businesses also make meaningful contributions and build prosperous neighborhoods. It is important to remember that big corporations like Starbucks and Coca-Cola made a humble beginning. Some of the small organizations of today will become behemoths in the future. Answer 18 Industries that have low entry barriers and high growth potential are the best for start-ups. The service industry entails relatively lower capital investment than manufacturing set-ups. The hardest start-ups would be high capital intensive industries. In case the entrepreneur contemplates competing with the well established companies head-on, it will be a daunting task. Answer 19 A new business venture will succeed only if it serves an unsatisfied need of the target market. A ‘me-too’ product is likely to fail as customers will continue to buy the existing brands. Sound market knowledge, fool-proof processes and procedures and access to adequate low cost funds are a recipe for success. Businesses tend to fail if the break-even period is too long and the entrepreneur does not have the financial muscle to sustain losses for a long period. Answer 20 Sole proprietorship and partnership are the two forms of non corporate business ownership. The key advantages of sole proprietorship include ease of starting business, being one’s own boss and retention of profits. The limitations of sole proprietorship are limited resources, unlimited liability of the owner and limited life span of the company. Partnership is a legal form business that has more than one owner. The advantages of partnership form of business include access to more financial resources and diverse skills and competencies of partners. Disagreements between partners are one of the biggest limitations of such firms. Answer 21 A closely held corporation will choose to remain private so that the control remains in a few hands. The reason for going public is to get access to more funds. Answer 22 I would like to enter the service industry so that I can make best use of my skill and expertise. Initially, I would be involved in all aspects of business personally. After the business stabilizes and cash flows are consistent, I’ll hire people from outside and increase the scale of operations. Answer 23 I would like to start a business from scratch. This will help me rise from the grassroots. Moreover I’ll have the discretion to decide everything. If I acquire an existing business, I’ll acquire the assets as well as the liabilities. Answer 24 The entrepreneur should reject the venture capital if the terms of the agreement are loaded too much in favor of the lender. The entrepreneur should ideally have the right to take decisions related to the business and the venture capitalist(s) should not interfere in these decisions. In case the rate of interest, repayment period and other terms are favorable, the entrepreneurship should take more venture capital than required. Read More