The Purpose and Function of Business - Assignment Example

The purpose and function of business Presented by Foundation Department Introduction According to SLEE , business is a form of activity whose objective is earning profits. In the current economic world, human needs are diverse, and entrepreneurs seek to meet these different human needs. Businesses are therefore set up to offer goods, services or professional services to provide a solution to a current economic problem in the society. It is the process of combining the factors of production; that is; land, entrepreneurship, labour and capital while still making profits. For the company to thrive productively, the entrepreneurs must consider the opportunity cost of their operations. Opportunity cost mainly represents the value of the foregone choice when making investment decisions. 1.1 Analyse the different purposes of international business The purpose of International business is principally to solve the economic problems of the nation. That is taking sparse resources and converting them into services and goods then distributing them in some fair, profitable and sustainable way. For this to succeed in the long term businesses, it has to satisfy the needs and wants of customers. Businesses form a connection amid the end users and primary producers: they add value to services and goods that they process, buy, sell as well as provide. The value that they add strongly equates to profit (SLEE 2011). Businesses are considered economic activities that are running to cater the needs of people that in turn are advantageous to both the business and the individual. People have some wants and needs and by the manufacturing along with distribution of the services and goods, these wants and needs are satisfied by the business. Operating businesses as well gives the citizens to earn money and be employed out of which they can buy items to cater for their needs and wants. Profit Maximisation is another purpose of international business. Every firm wishes to maximise their profit. They ensure this happens by increasing revenue. Higher profits make a firm to pay dividends to shareholders, high wages, and survive an economic decline. 1.2 Analyse the advantages, disadvantages and requirements of different international business structures. Sole proprietorship This is a business structure whereby an individual has set up a business and set out to make profits through its functions. The sole dealer is answerable for all the milestones of the company and makes all the decisions regarding the company (SLEE, 2011). Advantages One main advantage of a sole proprietorship is that owners can establish a sole proprietorship at any time because it has few procedures to be followed by its formation. Sole proprietorships also have very little or none legal formalities to be observed which makes them easy to form and run (SLEE, 2011). Disadvantages First, the owner is personally liable for all the liabilities of the business and may at times be required to take out his personal earnings to offset business debts. Second, the owner is obliged to pay personal income taxes for all net business profits earned (SLEE, 2011). Partnerships Partnership is a business structure formed automatically when two or more persons engage in a commercial activity for profit. The partners must sign a partnership deed which governs their relationship and if that does not exist, the general partnership guidelines apply. Advantages First, the owners can register the partnerships easily and without incurring many costs; Partnerships also offer favourable tax benefits to the owners. Disadvantages The owners have unlimited liability for the debts, losses, and liabilities of the partnership. This is an exception for limited partnerships because their liability is limited. Another shortcoming of partnerships is that individual partners share the responsibilities for the actions of other partners. Limited Liability Companies This is a business entity that provides members with limited liability protecting them from company debts and obligations. The members of a limited company can divide business profits in any manner, regardless of ownership in the business. Advantages They are easy to operate. The limited company members are protected from personal liability for business debts and obligations. A third advantage of limited companies is that they enjoy favourable tax benefits because of their nature. Disadvantages They are more expensive to set up than partnerships (SLEE, 2011). Another drawback of a limited company is that they are expensive to form and have very many legal formalities (SLEE, 2011). Corporations A society is a body and is a legal person in the eyes of the law. It can bring lawsuits and can also buy and sell property, be taxed, contract, and still commit crimes. A corporation has limited liability and has perpetual life (SLEE, 2011). A companys directors, shareholders, officers, and directors must observe particular formalities in a companys operation and administration. Advantages One advantage of corporations is that the members are protected from personal liability for the company’s debts and obligations. They also have a reliable body of legal rules to guide owners and managers. Corporations are also able to raise capital through the sale of securities. Disadvantages First, it is mandatory for corporations to hold annual general meetings so as to be able to meet certain formalities. Second, firms are more expensive to set up than all the other forms of business. Finally, firms require annual fees and periodic filings with the state offices. 1.3 Assess the way in which the constitution of an organisation is influenced by its purpose. Managers have to co-ordinate many elements in order to design an efficient organisation that can satisfy its general objectives and purpose. The efficient orchestration of these can have a noteworthy impact on the success or the organisation. The relationship between organisational design and organisational strategy is at the centre this process (SRIVASTAVA 2002). The organisation’s constitution design is drafted in two documents. Foremost is the Memorandum of Association plus the second one being the Articles of Association. At the moment, Memorandum of association is usually considered a custom. The article of association consists of the guidelines the company sets. All regulations and rules of how the business will run and profit distribution amongst shareholders are outlined in this article. Shareholders can invest in the business depending on the rules of the constitution of the organisations. The shareholders rights are considered in the firm’s Articles of Association document. The design of organisation structure of any business starts with first settling on the mission of the business, then the approaches to be used for achieving the mission productively with the assistance of small objectives or milestones being set for the business. Mission, objectives, as well as the purpose of the business, have to be in line with one another so that the required level of outcome is accomplished successfully (SRIVASTAVA 2002). 1.4 Assess the ethical considerations relating to the constitution of international businesses. In current business, codes of ethics are employed to deliver the moral approach of organisations clear. They are a key tool that firms use to adhere to promises, to commune these and to give a reason for their ethical behaviour to humanity. Business ethics codes are usually subject to close inspection; It emerges that devising promises are inadequate. What defends the integrity of the business? Whose and what interests are at stake? What are the effects of publishing ethics codes on a corporation? What suggestions can be made? Corporate social responsibility always concerns people, regards human responsibility. The commerce world normally and globally has been developing since the second half of the twentieth century. Local and national financial systems often rely on worldwide business. Corporate Social Responsibility is tremendously significant to industries all over the world, but is more and more contributing to most of the negative globalization effects, like the divide between rich and poor, ecological pollution along with the discourteous development of labour concentrated industries, Western industry, as well as customers, want the Third World to make cheap goods. Business ethics is applied to ensure a certain necessary level of trust subsists between customers and a variety of forms of market contributors with businesses (DUSKA, 2007). For instance, a portfolio manager has to give the same deliberation to the portfolios of members of a family and small entity investors. Such practices make sure that the public has a fair treatment. A strategic advance to CSR is ever more significant to the enterprises’ competitiveness. It can bring gains in terms of cost savings, risk management, access to capital, human resource management, consumer relationships, and the capacity of innovation. 2.1 Identify different international stakeholders, their interests and needs. Stakeholders A stakeholder is an individual with something to benefit or lose from the outcome of a particular business activity (SLEE, 2011). It is imperative to include the views of the stakeholders on the enterprise operations because they determine if the business will flourish or not. Stakeholder management will lead to the growth and development of the whole business. Stakeholders usually have resources and information that can indirectly or directly have an effect on any business negatively or positively. Internal stakeholders Investors are very important to kick initiating a business. They offer the financial support required to produce quality products, effectively promote them as well as display them in a well-organized manner with simple access to the market targeted. The management is important stakeholders in taking main decisions concerning production, branding, and promotion of its goods and services. Employees are also stakeholders. A team of diverse and talented employees serve as a customer magnet. Commitment and professionalism ensure retention of customer as well as attracting more clients (DUSKA, 2007). External stakeholders Suppliers: They follow the code of conduct and prevailing laws to offer high-quality materials to the business. Customers: They are important in the business growth and success. Promoters: They use all kinds of publicity to advertise their products e.g. TV and e-marketing. 2.2 Assess the potential impact of primary and secondary international stakeholders’ opinions and actions on an organisation Shareholders Company owners always have a substantial impact on the direction the organization takes. Across all the forms of business, the owners are a very crucial stakeholder and must be consulted when making vital decisions that will have an overall impact on the organization. Customers and Community The business goal is to meet its customer’s needs as well meeting the general requirements of the community. Therefore, the organization must come up with strategies that will enable it to meet and exceed the expectations of its customers while at the same time maintaining good conduct with the customers and helping solve social problems (DUSKA, 2007). Employees In the modern world, businesses have realized that employees are an essential part of the business. For any business to thrive, the employees must be satisfied and motivated. The organizations are therefore focused on treating their employees better in order to get the best from them. Suppliers Suppliers are decisive to the achievement of any business. Working closely with the suppliers will improve the quality of materials supplied, the time the materials reach the premises and also will lead to getting fair prices from the vendors. Government The government always comes in to regulate the transactions to ensure that no party is on the receiving end. When transactions are being done across nations, it is important to liaise with the various states to ensure that the business operation is legal. Sponsors Businesses also have sponsors who sponsor them in certain ways in their operations. The authors may come in to enable the companies to operate in unreachable markets (SRIVASTAVA, 2002). 2.3 Explain the importance of effective relationships with international customers. Clients are the livelihood of each business, counting the retail along with business-to-business consumers. Whether or not someone thinks of client satisfaction as an issue of social responsibility, each business owner will view it as a prosperity issue! Time along with resources put into appreciating the customer viewpoint is at all times a good investment. Effective and strong consumer relations can be the shortest route to lasting success (SLEE 2011). Many corporations are still focusing on the services and products which they provide or manufacture rather than with the consumers they service. The product does not make the profit but the customer. One applicable definition exists concerning the business rationale: to create a client. It is the consumer who decides what a company is. What the company thinks it makes is not of the first significance - particularly not to the business future to its accomplishment. What the consumer thinks he is purchasing and believes "value" is important - it decides what a firm is, what it manufactures and whether it will flourish. Maintaining efficient rapports with clientele of all types now involves a complicated mix of practices. Relationships are dependent very much on communication. The way a firm communicates with its clientele as well as the message it gives is mainly the work of the department of marketing. 2.4 Examine the value of concepts of corporate good citizenship and social responsibility to an international organisation Corporate social responsibility,(corporate citizenship) can entail acquiring short-term costs that do not give an instant financial profit to the company, but rather promote positive environmental and social change. Corporate Good Citizenship along with CSR are ever more indispensable parts of concepts of Business Ethics. Business Ethics concerns doing what are right, adhering to the law, and any Codes of Conduct or Regulations pertain to the situation or industry (DUSKA, 2007). The study of good business practices and policies concerns potentially contentious issues, like corporate governance, bribery, insider trading, favouritism, corporate social responsibility as well as fiduciary responsibilities. Business ethics is usually guided by law; while at times offer a basic structure that businesses can decide to follow in order to get public recognition. Because CSR needs engagement with external and internal stakeholders, it makes it possible for enterprises to foresee better and take advantage of speedy changing community expectations and functioning conditions. It can consequently drive the growth of fresh markets and form opportunities for expansion. By tackling their social responsibility, businesses can build lasting worker, customer and citizen trust as a foundation for models of business that are sustainable. Advanced levels of trust in succession help to build an environment in which businesses can innovate as well as grow (DUSKA, 2007). 3.1 Examine how international markets interact For international trade to take place, there must be buying and selling of goods. This can just happen with an agreed value of the products in a universal currency. Therefore, there has to be a system of valuing one currency in terms of another. Many nations make up their Balance of Payments with diverse types of trade. Some countries use their natural resources as well as the proficiency of their management and workers to focus on their own strengths Exchange rates concern the value of one currency compared with another. It refers to the value of your money in the foreign country with which you are trading. A devaluation of the currency lowers one currencys value in terms of the other whereas an appreciation of the currency increases one currency’s value in terms of the other (SLEE 2011). The equilibrium for a floating exchange rate is found in the market for foreign currency. Exchange rates are made in terms of a currency in return for another. To get the dollars value compared with the weight in the foreign exchange market. It looks at the supply along with demand for dollars in the exchange market. Balance of Payment (BoP) is where there is a balance in the current account such that the monetary value of the imports equals that of the exports. 3.2 Identify the issues affecting international trade (e.g. globalisation) Global Value Chain Of late, international production and trade are increasingly organized where the different stages of the production process are located across various countries. There is close monitoring to ensure that each process is carried out in the right way. Globalization inspires business to reorganize their operations globally via outsourcing fewer vital activities. Industries try to optimize their production cycle by locating the various stages across different countries. The distribution of the value chain across different nation adds value to the production process which leads to the idea of global value chain (DUSKA, 2007). Logistical barriers are another significant obstacle to consider. Increased transport costs and long delivery times over the long distances should be considered before entering into international trading. Businesses should also consider political barriers before going global. Some markets are controlled politically and, therefore the business owners should study the structure carefully before entering a certain market to be able to meet the requirements. Finally, the business owners should consider customs regulations and duties. Import duties can disrupt prepaid cost estimates at very short notice, and political motives can also hamper business. 3.3 Assess the impact of supply and demand on an international business and the resultant interactions The supply as well as demand methods in a competitive market control the price and product quantities. The demand is the amount of a product that purchasers are eager to purchase at diverse prices. The product quantity that customers are eager to buy is dependent on its price. Customers are naturally willing to purchase less of a product as the prices increase and more of the product as when prices decrease. Generally speaking, products are more attractive when the prices are low, and customers buy extra at lower prices since their income lasts. On the other hand, supply is the product’s quantity that sellers are eager to sell at diverse prices. The product amount that a company is eager to sell is dependent on its price. Firms are more prepared to sell a product as the price increases and less eager to sell it as the prices fall. This fact is sensible: Businesses are built to make profits, and there are better profits to be made with higher prices (SLEE 2011). The supply curve moves opposite to the demand curve: As prices increase, the quantity of bananas that farmers are prepared to sell as well rises. 3.4 Examine the reasons for and impact of the global recession Global recession refers to an extensive period of financial decline in the world. The International Monetary Fund (IMF) employs a broad set of techniques to recognize global recessions, counting a decline in global per-capita gross domestic product. When there is a global recession, international business activities are affected (DUSKA, 2007). The major causes of the great recession were: Credit crunch together with and fall in bank lending; decrease confidence due to the financial instability; decrease in global recession exports; fail in housing markets resulting in negative effects on wealth; fiscal severity compounding the primary decrease in GDP. In Europe, the single currency leads to extra problems due to over-valued exchange rates, as well as high bond yields. Global recession impacts are still being felt all over the globe. In some areas, the impacts were greater, deeper as well as longer lasting. There is still some arguments about whether the recession is over; to what extent recovery has reached, and if any effects will be seen as temporary or permanent. Some of the impacts are corporate governance, closer media attention, closer public analysis, stronger policies on permitted actions by employees, business practices internal inspection, fall in company values, reduced recruitment, and bankruptcy (DUSKA, 2007). 4.1 Analyse the purpose, role and typical structure of the different functions within an international business Marketing Marketing is at the centre of the success of the business in the global market. Any business that is investing globally must do extensive marketing to ensure that it can identify markets around the globe (DUSKA, 2007). The company must come up with strategies and identifying new markets and working to meet the needs of people in those markets. Sales The sales function ensures that the business can service its markets correctly. Sales deals with distribution to ensure that the products reach the distribution centres when they are required. Finance The finance function is charged with the duty of planning for the financial implication of operating globally. They must work to ensure that there are enough funds to serve all the current markets that the business has. Human Resource The personnel must make sure that the business has adequate staff with the correct qualifications to meet the global needs. When hiring, it must also consider hiring people from the region they are planning to enter to carry on in that market well. Production The production department must work to ensure that there are products available when they are required and in correct quality and quantities. Quality and Assurance This works to ensure that quality is incorporated in all the stages of production to ensure that the final products have the best quality (DUSKA, 2007). Research and Development The main reason for this department is to engage in extensive research and innovation to ensure that new brands are being set up in the market to meet the ever-changing market needs. 4.2 Analyse the interrelationship of different functions within an international business A comprehensive understanding of interrelationships of different functions in a business needs predominantly acknowledgement of the significance of understanding the magnitude and the nature of these interrelationships. Finance and marketing: marketing plans entails a main financial dimension. A business profit history as well as pro forma financial budgets and statement are related to strategies of marketing (SRIVASTAVA, 2002). Alternatively, marketing can be utilized as a main tool for the attainment of financial objectives. In addition, financial concepts are used in marketing programs. Accounting and marketing: most of the managerial accounting approaches and practices are related to those of financial management thus affecting appraisal of a firm’s new products as well as marketing activities. Production and marketing: production capacity influences the type and the number of the products to be marketed. On the other hand, the accurate sales prediction of a product line is important for effective production operations. Personnel and marketing: marketing should work with the personnel department to develop job descriptions, designing training programs and screening candidates. Legal consideration and marketing: most decisions concerning marketing are subjected to a legal review. Legal function of an agency usually reviews the advertising claims. Decisions concerning marketing must therefore conform to the legal option (SRIVASTAVA, 2002). Conclusion Entering the global market is a critical decision and, therefore the businesses must plan wisely. It is important to engage all the departments of your office effectively in order to survive well in the international market. Modern businesses are focused on operating globally to offset barriers that come with working locally (DUSKA, 2007). International trade has grown recently due to the many benefits it has offered to different countries across the globe. The global trade accounts many countries’ gross domestic products around the world. It is as well one of the main sources of revenue for developing countries. With the assistance of modern production practices, transnational corporations, highly advanced transportation systems, outsourcing of manufacturing and services, and swift industrialization, the global trade system are growing as well as spreading swift. References DUSKA, R. F. (2007). Contemporary reflections on business ethics. Dordrecht, the Netherlands, Springer. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=196746. SLEE, R. T. (2011). Private capital markets: valuation, capitalization, and transfer of private business interests. Hoboken, N.J., Wiley. SRIVASTAVA, R. P. (2002). Belief functions in business decisions. Heidelberg [u.a.], Physica-Verl. Appendix A Demand and supply curve Appendix B Appendix C Read More