Political and Legal Issues - Bangladesh - Case Study Example

Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission: Executive summary Business involves trading of goods and services locally and across the borders. They are prevalent in economies that practiced capitalism where most of the firms are privately owned. Bangladesh is one of the most business growing countries have achieved economic freedom mark of up to 54.1 making nit more favorable economy in the 2014 market index. Since the past years, the average score index has been increasing over time. This represents major improvements in trade business and trade freedom. Bangladesh like any other growing nations tries to maximize it opportunities with an aim of achieving higher stock index in future. It has concentrated its efforts in legal and political issues affecting the business, the ethnicity and cultures affecting the business, regionalist effects, open market operations and access to global markets. Contents Executive summary 2 Introduction 1 Political and legal issues 1 Cultural influences on business 3 Cross-culture communication and negotiations 4 Ethics and social responsibility 6 Regionalization 7 Government intervention in Business 7 Assessing global market opportunities 8 Conclusion 8 REFERENCES 9 Introduction Bangladesh is one of countries that have experienced growth in its GNP over the past years. It has scored average marks of 54.1 which keep on improving every year. These results are linked to Bangladeshi business well reformed environment that allows for free business and freedom trade. A bigger percentage of Bangladesh economy is made of private investments. This has not only promoted the GDP of the country but it has also expanded business opportunities in this country using the modern technology. Product production has increased due to readily available resources and government interventions. Government intervenes by setting rules and regulations those moderate business activities in Bangladesh (Bingham and Spradlin, 2011) Over the past 20 years, Bangladesh has improved its economies to greater heights by over ten points. Trade, business and fiscal freedom have improved above 20 points. However, with all this growth, Bangladesh is considered “unfree” in other sectors of the economy. Implementation of law is still at lower pace because judiciary is subjected to political intolerance and other property rights. Some other sections are discussed below; Political and legal issues Bangladesh is considered a capitalist country. The political arena was marked by violence early 2013. Majority of the people are working under agricultural sectors and garment production accounts which estimates to over 90% of their exports. Bangladesh has experienced (Joshi, Bremserand Al-Ajmi, 2008) stability over the past two years. Death mortality rates have reduced as well as the rates of corruption due to political interference. Prime Minister Sheik Hasina ordered for formation of independent body to investigate about the violation of human rights during the past years. These scenes occur due to past greediness on political power and social gains between the leaders. In general, international relationship has advanced over the last years. Bangladesh has been able to extend the marketability of their produce abroad. This is evidence by reports produced that shows that the stock index of Bangladesh since 2013 has grown over 10 points. It also reveals that business, finance and other important economic freedoms have improved up to 20 points. Bangladesh has advanced their business sectors through government intervention (Christian and Lüdenbach, 2013). There are many bureaucratic implements aims towards economic development exist. The informal sector is the major source of labor during this business season in Bangladesh. Corruption is one of the major problems that have slow economic growth in Bangladesh. There have been measures incorporated to cap this. All products produced to be exported to the market are required to operate within a set of legal regulations. These rules are set by relevant authorities to all production and distributing firms in Bangladesh. It is aimed at setting order in the means of doing business. The major rules in Bangladesh are those of property rights allocation, rules that define allowable corporations and those that do not. It also defines allowable forms of competition that a given firm is allowed. Well defined regulations regarding business are a bench mark to ensuring that property rights allocation is essential. (Christian and Lüdenbach, 2013) People should be protected against business bad practices by individuals or other business parties. However, Bangladesh is still regarded as one nation whose judiciary system is contaminated by political intolerance. There is no fair judgment regarding claims about property allocation rights. However, regulations that define entry conditions and business boundaries on competition and corporation activities are clearly defined. The implementation of guideline standards has increased availability of information to many customers globally. Licensing policy is also an essential requirement in Bangladesh. It assists in reducing transaction costs by facilitating the agencies responsible for marketing products and services. The idea of licensing always revolves around solving of financial issues, asset holdings and many other important aspects. Bangladesh authorities require firms to produce clear information’s about their products, labeling, packaging and how it is used. Any company is liable for any information that is found to have misleading information. It requires those responsible to provide manufacturing details, any liability associated to the product, test and inspections regarding the product, handling techniques and manufacturing processes. (Alpheus Bingham and Dwayne Spradlin, 2011) The government of Bangladesh always charges an individual income tax at the rate of 25% and income taxes at the rate of 45%. However, this government taxes financial firms and mobile operators’ higher taxes than normal firms. This taxes charged by the government is value added tax inclusive. The total tax payments have increased to 9.9 of its total GDP. Cultural influences on business Business values changes with different nations due to differences in cultural and religious practices. However, cultural and religious levels in many countries have clearly showed that it affects important business sectors including accounting system and managerial systems. It views an environment that is composed of morals, education, religion, social practices, material culture, attitudes and basic morals. Bangladesh is one of the nations with these features. The rates at which managers and accountants operate their activities are influenced by cultural practices of the people of Bangladesh. Most people in Bangladesh practices Islamic religion. The facts here is that some organizations have been observed not to like Islamic cultural practice because it forbids many practices (Alpheus Bingham and Dwayne Spradlin, 2011). This implies that many firms draw their conclusion on beliefs and other core principles that are established under Islamic religion. In this case, the affiliation of Islamic organization will become contingent here. It implies that it will have much impact on the managerial and accounting system of the company. Research reveals out that, informational asymmetry may affect business entity due to cultural values and religious faith of the Islamic community. Language barrier may deny customers an opportunity to acquire information regarding your products. Contingency theory reveals out that, contingency match between business entities that operate within similar environments under similar conditions may be successful. This is because they share the same cultural beliefs, religion, morals and attitudes. The general business structure, locality and information systems also matters a lot in determining the success of business in Bangladesh (Joshi, Bremserand Al-Ajmi, 2008) It is clear that this country is composed of ¾ of Islamic religion. However, cultural differences that occur between different organizations may pose different results to your business entity. Religious values are one essential contingent aspect. Bangladesh banks reveal that, its management teams have to work under special corporate governance techniques in order to incorporate all activities under special contract events. It implies that managers of this banks requested for systematic information system that fits their cultural differences. Irvin Fisher argues that there is a relationship between information symmetry and the level of management within given information. Information flow is an essential aspect in any given business entity. However, any barrier that prevents smooth movement of information may hinder the way management operate their daily activities. Management is responsible for planning and organizing the activities within the organization (Alpheus Bingham and Dwayne Spradlin, 2011). They make varied decisions regarding the operations of the entity. However, this decisions made depends on information that are acquired through other sources, this is where management problems starts. Culture is regarded as one of the major aspects that define many organizations within Bangladesh. It can be observed by the type of organizations depicted by Bangladesh firms. Different systems of accounting and management may arise due to different practices within different nations (Hail, Leuz and Wysocki, 2009). It is noted that people under different cultures may differ in their thoughts or ideas thus making it hard to incorporate them together. Cross-culture communication and negotiations Businesses that are set up in Bangladesh are conservative of cross-cultural management. It knows how much degree to put in every business entity. Respect still prevails despite cross-cultural interventions within many organizations. Top management is dominated by older and experienced employees which comprises of the senior management. Most people in Bangladesh prefer working with collogues whom they know more about them (Hail, Leuz and Wysocki, 2009). This implies that, Islamic groups who know more about themselves prefer working with themselves. Studies reveals that it is not only for security measures but because they understand each other more easily. Cross –cultural aspect will be more applicable in Bangladesh if you understand the roles of every individual within the organization. Managers are in place to put strategies, plan and make effective decisions of the company while employees are there to execute those decisions made. Employees are not allowed to disrespect any decisions that have been made by their seniors regarding the development of the organizations (Hail, Leuz and Wysocki, 2009). Bangladesh is a hierarchal society where managers may take given attitudes to their employees. It has low risks tolerance with regard to changes in cultures. Cross-cultural practices are essential when it comes to timing important timeline and priorities. Managers in different organizations in Bangladesh are always slow towards meeting required dates because they need to avoid upsetting many people. This implies that managers may find it important to adhere to deadline dates as agreed by parties involved. Decision making format is different in Bangladesh. Decisions are tend to be made by top officials of the country and their report on proper recommendations forwarded to mangers. Mangers are then required to implement it effectively. Though making of decisions by senior government officials is essential, they often seek information from experts before reaching their final judgments (Hail, Leuz and Wysocki, 2009), All employees in Bangladesh are required to be more sensitive. Honor and respect plays major roles here. If you are a manger preferring to increase motivation regarding work operations, then you must understand the needs, behaviors and characters of your employees in order to create a favorable working environment for them (Hail, Leuz and Wysocki, 2009). This practice will enable them to have more respect on you as their manager. In Bangladesh, the common methodology of approaching a stranger is through a more formal manner. Higher rank personnel or people most known to strangers are the perfect people to engage in such conversations. Negotiations may take longer time period because it involves long procedures that are built in entrust worthy situations. It is a practice that one is not allowed to put off his jacket or coat unless told otherwise by your seniors (Hail, Leuz and Wysocki, 2009). It is essential to understand the verbal cues that may be used by this people to mean various items or cases. This ensures that, misrepresentation of ideas is avoided. Ethics and social responsibility Business entities are considered most instrumental elements of developments in areas they operate from. Most firm in Bangladesh have been trying to balance concentration diverged towards the community and the general management of the organization. Over the past years, this concept of corporate social responsibility has gained wide recognition which has cross the boundaries to influence the performance of many firms in Bangladesh (Christian and Lüdenbach, 2013). Firms are required to provide voluntary corporate social responsibility reports every year to show the extent in which they have been committed towards the society in which they operate from. Bangladesh just like any other developing nations encouraged their firms to extend their services to the society. They insist on firms developing the society in which they operate with an aim of improving the living standards of those residents. The operations of corporate social responsibility differ from one firm to another depending on the size of the firm. Larger organizations may have a complex CSR structure than smaller firms. Although it may take time to implement CSR activities so as to benefit the entire society, it is one of the most important activities that any business sector ought to do so as to distinguish itself from its competitors. Most firms in Bangladesh use the same techniques to cap Competition Bridge from their competitors. Such firms provide annual reports regarding CSR that they have implemented in one year time period. This implies that such firms are transparent and accountable in their activities. According to research done by Irvin Fisher, it reveals out that firms which practice corporate social responsibility achieve higher profits because they win big amount of customers by building trust in them. They engage themselves on development activities that ought to promote the entire society. (Christian and Lüdenbach, 2013) A complex and stable CSR system does not only improve the reputation of the firm but also improve customer’s loyalty in the organization. Customers will perceive the products produced by such firms as the best than other firms. It builds confidence within the customers that such firms are reliable, effective and efficient for them (Christian and Lüdenbach, 2013) . Every firm in Bangladesh tries to link itself with ethical values, transparencies, practices and attitudes of the people through developing effective CSR structure. Regionalization Bangladesh uses Centre for policy and dialogue to implement the issue about regionalization in business sectors. This is due to emerging needs from the civil society that requires production of more services. Through CPD, Bangladesh tries to encourage multinationals stakeholder to implement their investments in different regions in Bangladesh. The center of policy and dialogue conduct research from different regions with an aim of establishing the needs that are required by the target region (Christian and Lüdenbach, 2013). It is implemented through a policy making process. Over the past years, CPD have become the thinking point for the people of Bangladesh regarding regionalization. It has been considered as one of the major platform where political issues, social, financial etc. are solved effectively. It focuses its efforts on regions that have low developments standards (Christian and Lüdenbach, 2013). They aim at improving the development status of different regions in Bangladesh. They supervise all development activities to ensure that they are efficiently done. Government intervention in Business The government of Bangladesh regulates the operations of various business entities through taxation structure. It charges 25% tax on individual operators and corporate tax of up to 45%. However, there is a different tax scheme for mobile operators and financial firms in Bangladesh. The government will charge higher corporate tax to those operating mobile services and financial firms because they engage themselves in transaction activities. The revenue generated from the government over the past years has risen by 9.0 percent. The spending by the government has fallen over the past years have fallen. This impliesthose loans are readilyavailable to investors because the rate of borrowing is lower. (Alpheus, Bingham and Dwayne Spradlin,2011). However, the government has been interfering frequently with prices that are set by private firms. This was because the retailers were setting cheaper prices than those of open mkt. This raises fears among major firms who complain of such practices. Assessing global market opportunities Though being one of the countries with high rates of poverty, its GDP has risen over the past years due to access of global market. It has an average of 13% tariff rate that is used to finance the government. Regulations that influence non investments are not transparent and may be too much burdensome. Amendment to bank’s act was intended to reduce the number of state owned banks. Bangladesh is one of the nations with high number of populations; however poverty rate leads into lower rates of earnings. Bangladesh government exports some of their products to neighboring nations. This has help to create a good market for their products (Hail, Leuz and Wysocki, 2009). Conclusion In summary, Bangladesh is among major business points for investments because its legislative system is designed to protect the interest of investors. It political system s well defined. Although it has diverse cultural and religious practices, normal business operation will still operate under respect to seniors within the organization. Bangladesh operates a cross-cultural practice to operate its practices. However, it uses CPD to organize on the influence of regionalization by implementing multi stakeholder investments. The government intervenes through implementation of tax policies to business firms. However, Bangladesh has access to open markets such as those of their neighboring nations. REFERENCES Alpheus Bingham and Dwayne Spradlin (2011).The Long Tail of Expertise.Pearson Education.p. 5.ISBN 9780132823135. Foster, Patrick (22 December 2008). "Long Tail theory contradicted as study reveals 10m digital music tracks unsold". Times Online. Joshi, P., Bremser, W. and Al-Ajmi, J. (2008). Perceptions of accounting professionals in the adoption and implementation of a single set of global accounting standards: Evidence from Bahrain. Advances in Accounting, 24(1), pp.41--48. Christian, D. and Lüdenbach, N. (2013). IFRS essentials. 1st ed. Chichester, West Sussex: Wiley. Saxena, R., Srinivas, K., Rai, U. and Rai, S. (2010). Auditing. 1st ed. Mumbai [India]: Himalaya Pub. House. Hail, L., Leuz, C. and Wysocki, P. (2009). Global accounting convergence and the potential adoption of IFRS by the United States: An analysis of economic and policy factors. Available at SSRN 1357331. Read More