Differences between Global Business Operations, The Impact of External Factors on Organizations - Term Paper Example

Name and surname Student ID The Unit name and number Word Count: 3613 Table of Contents Executive summary 3 Section 1: 4 1.0 The key differences between global business operations 4 1.1 An analysis of the key differences between organizations working in different sectors, industries, and contexts. 4 1.2 An assessment of the responsibilities of organizations operating globally 6 1.3 An evaluation of the strategies employed by organizations operating globally 7 Section 2 8 2.0 The impact of external factors on organizations 8 2.1 An analysis of how the performance of a national economy impacts on the activities of business organizations 9 Profit realization 9 Cost of raw materials 9 2.2 Measures taken by governments to influence the activities of business organizations 9 Fiscal Policies 10 Monetary Policies 10 Section 3 11 3.0 The impact of global factors on business organizations 11 3.1. Implications of global integration on business organizations 11 3.2 Effect of international trade on domestic products and services 12 3.3 Impact of the global economy on businesses 13 3.4 ICT and globalization 13 Section 4 15 4.0 A review of the current issues impacting on business activities 15 4.1 Global environment in which businesses are currently operating in your named country 16 4.2 Proposed strategies to address issues affecting business activities in Libya 16 Conclusion 17 References 17 Executive summary Globalization is the global interconnection between countries due to increased trade of goods and cultural exchange. As a result, companies have increased the production of the goods and services for export purposes. To join the world and to achieve the organization`s goals, the term globalization describes the broader view of products and advantages, ideas, technologies, cultures throughout the geographical area of various nations to expand an organization. Globalization in enterprise organization infers to the global movement of economic and financial activities by developing business activities. This is the process of communicating with all over the places of the world market and production. The paper focuses on Alboraq Company in Libya. The company operates locally in oil and gas industry. The paper focuses on enhancing the company to export thus spreading its business and services from the local level on an international scale. The company has a successful national business organization in Libya due to the administration's knowledge of business strategies, and efficient utilization of the strategies and the organization has succeeded in spite of the competitors in the local market in this sector. The company has seconded me to act as an assistant to the CEO. My aim is to expand the business market from local to international level. First, it is significant to discuss and partner with different companies in different industries. A joint venture with other companies will enable in covering all types of services and legal liabilities to enhance business expansion. When considering the global market, there is a need to the environmental factors that may affect the business and so as to come up with solutions. The paper suggests various ways in which Alboraq Company may enter into the global market. Section 1: 1.0 The key differences between global business operations 1.1 An analysis of the key differences between organizations working in different sectors, industries, and contexts. Our main focus is in oil and gas industries, import and export goods to be able to change the company from national to a global entity. We need to view all aspects that will change the company from local to a global organization. This means understanding the advantages and disadvantages of sole trader’s partnerships Corporation companies and the risk of the capital involved. The company’s profit or loss of capital is determined by the countries that we will expand into venture our business. Therefore, we need to consider the country’s economic status, environmental conditions and the natural terms of oil and natural resources. Also, we need to consider the company that we will do a partnership with her to change Alboraq Company from local to global business. Globally, many companies operate in different sectors. Each company in various sectors focuses on operating in a unique style. Also, the companies that operate in the same sector try to have unique and different working ways to beat the competition. Therefore, there are various operating differences that include; The difference in the culture and values- There are various patterns and working trends in any companies in various sectors. The employees hold different values due to the surrounding environment and the different beliefs and practices. The difference in the organization chart- The organizational chart is significantly determined by the size and nature of an enterprise. Therefore, companies from various industries embrace different authority hierarchy and responsibilities. The difference in the price strategies- Different enterprises uses various strategies to price their products. Some companies such as food retailers focus on keeping the costs low whereas in other sectors such as automobile industry; they are determined to maintain their prices high. The difference in the process- companies focus on their product that goes through a process from raw materials, processing to the end product. Different companies in different sectors engage in different process of coming up with the end product. Some companies engage in the multistage process like automobile industry while others engage in few stages like food industry. Therefore, each company in any sector engages in the unique process of coming up with the end product. 1.2 An assessment of the responsibilities of organizations operating globally Globalisation has enhanced more competition from local and international companies. We must know the market in the country which we will operate on. Therefore, companies need to expand their operations internationally so as to boost their existence in the market. While the focus on employees, shareholders, and customers companies have various responsibilities of surviving in the foreign market. The responsibilities include; Analysing customer needs- it is vital for any business to identify customer needs of the intended country of investment. Customer needs and wants vary in different countries due to do different culture and economic status. It is likely that a company will fail to penetrate a market if it does not identify the customer needs. To offer the needed solutions to the customers- A successful enterprise am is to ultimately meet better solutions to customer needs and wants.the company’s responsibility is to satisfy the customer needs. Understand and consider the environmental factors of business- The peoples’ purchasing power significantly affects a business.theere are many environmental factors such as culture and location. To analyze business capabilities- A company produces product and services according to their capacities. Therefore, an enterprise should determine if it's capable of producing better goods and services with the available resources (Bellamy, A.J., 2011). Seek customer feedback and act on continuous improvement on the feedback given- It is vital for a company to seek feedback on whether the products and services meet customer needs and what the customers expects the company to make an improvement. Also, the company should act on the feedback by making recommended changes. In our scenario as Alboraq Company, we should take responsibilities to research and analyze the market before and after expanding in a country. To beat the competition, we should focus on countries that have high demand and need the final product such as petrol and gas. Failure to analyze the market may lead to low demand and even losses thus making a company expansion unsuccessful. 1.3 An evaluation of the strategies employed by organizations operating globally An enterprise needs to use various strategies so as to survive successfully and expand into a foreign country. Each approach a company decides to use has benefits and disadvantages based on business nature, market conditions, and customer needs. The strategies include; The joint venture- The strategy involves two companies in a similar business venture joining and sharing resources to deliver product and services. Franchising- franchising is categorized into product, process and business where a business provides rights to independent people to market and distribute products and services using its business name for an agreed fixed period. The method is used by companies to capture market share. Manufacturing in foreign countries- The developed countries manufacture their products in the developing countries so as to minimize the cost of manufacturing. This is due to the low cost of materials labor and avoidance of customs duties upon manufacturing in the host country. The targeted developing country which in our case is Turkey should provide a suitable condition to enhance marketing and manufacturing activities Wholly owned subsidiary- A company establishes a branch of the main company in a foreign country. The main company controls the branches 100% and provides all the resources to the subsidiary companies. There are other methods a company can use to expand its business internationally. Alboraq Company should use franchising method so as give rights to other people to go through the process of making stations and gas tank, fuel gas transmission fuel, spare parts, provide oil services companies reservoirs, import, and export all the oil field equipment.So we can do a Joint venture with a big company in Turkey which work in the same field manufacture the same product. This is beacuseTurkey's presence in a region contains 80% of the oil reserves in the world. The country is located near Russia, Iran, Iraq, and Libya, and has abundant energy sources. Turkey acts as the center of energy for transportation and thus can change our Alboraq to a global company. Section 2 2.0 The impact of external factors on organizations External factors hugely impact the operations of business. This is because a business growth is determined by the surrounding environment (Erixon and Sally, 2010). External factors include the government policies and the economic condition of a country’s. Organizations that adopt easily to an environment survives while if an organization cannot adapt to the environment, it is eliminated from the market due to the competition. The political stability of a nation can also act as a factor affecting the operation of a particular firm. With this in mind, the country in question has experienced a lot of cases of concern politically in the last few years. Alboraq is no exception. It has to operate competitively under such an environment. 2.1 An analysis of how the performance of a national economy impacts on the activities of business organizations Economic factors involve country’s nature of the economic system, business cycles, structural anatomy, social, economic infrastructure and the economic policies. Alboraq should visualize these external factors while anticipating market situations to realize maximum benefits while minimizing cost.The economy of Libya heavily depends on the revenues generated in oil and gas industry. Libya has the highest nominal capita GDP in Africa due to revenues generated in the petroleum sector. The performance of any country’s economy can affect the performance of business in various ways that include; Profit realization A healthy external environment where the economy is performing well enhances high revenue to the business. Libya economy heavily relies on Petroleum sector and thus provides a suitable environment for this industry. Therefore, Alboraq Company significantly benefits from the favorable environment. Cost of raw materials The cost of raw materials for the production of petroleum oil and gasses is relatively low in Libya. The oil wells are readily available in Libya, which is a significant competitive advantage over other firms in the world. The low cost of raw materials implies that the firm will have less challenges in penetrating other international markets as the company can easily apply the price-cutting strategy. 2.2 Measures taken by governments to influence the activities of business organizations Governments influence business performances in any country due to the position they hold as legislators. The government introduces policies that are implemented in the business environment. When the government takes such actions, businesses are affected financially. There are various ways in which government can influence the business operations in various sectors of the economy. The following explains some ways in which the government ensures control and monitoring of business operations, especially in Libya. Fiscal Policies Under this section, the government applies taxes as well spending so as to enhance or control the business operations. The government imposes taxes on the operations of business so as to tap money for its national development goals. The projects that the government engages in are mostly funded by the taxes collected from various sectors of the economy. Monetary Policies The government applies the necessary financial tools which are geared to put limits on businesses as well as the consumers. These controls include the control over interest rates through the central bank and price controls. Price floors and ceilings are techniques used by the government to curb the manipulation from the sellers of various products regarding prices. A price floor is used in instances whereby the demand for a particular product can easily be controlled by the sellers and therefore affecting the margins of the sellers. This is done to ensure that the sellers get their rightful share of profits at all times even when the demand for certain products is less. Price floors are rarely used in the oil industry. Price ceilings are whereby the government dictates the maximum price for a certain product for the good of its citizens. A ceiling helps in protecting the consumers from manipulation from the sellers who are after making supernormal profits at the expense of the customers. The interest rates may increase affecting the businesses who use bank loans for their operations. Under such a case, the retained profits by the firms is deemed to decline respectively. Section 3 3.0 The impact of global factors on business organizations When a firm decides to diversify its operations to the other parts of the world, it is subjected to the global factors that affect business organizations. Alboraq has been able to deal perfectly and successfully on its operations in the local government. It is not guaranteed that the company will have the same success globally because the factors that the company will be subjected to will be different. 3.1. Implications of global integration on business organizations The businesses that operate globally have a lot to benefit as well as challenges to bear. The benefits associated with operating globally are quite numerous. First, enjoys the economies of scale. Increasing the operations imply that there shall be reduced the cost of production as well as the variable costs associated with productions. The oil industry is quite large, and every country must have well-established structures for this sector. Alboraq is likely to enjoy the various benefits associated with using established structures in other nations (Peters & Hertwich, 2008) The oil industry has a ready market for its products. Alboraq will enjoy the ready market for its products worldwide. However, the company will be forced to cope with the challenges in other nations including political instability and insecurity. Use of insurance policies can mitigate These external challenges. There are insurance firms offering insurance policies to companies operating globally and therefore helping mitigate some of the risks associated with global expansions. 3.2 Effect of international trade on domestic products and services International trade operations have various implications for the local products on services. There is an aspect of inflation that is associated with operating globally. A firm or firms in an industry may encourage inflation from other countries through their operations. This type of inflation may be referred to as imported inflation because it results mostly from other countries (Peters & Hertwich, 2008) In most instances, domestic products and services experience a decline in prices. This decrease in prices is attributed to the fact that the company experiences an increased efficiency as well as maximizing on the available economies of scale. This efficiency has a ripple effect of reducing the cost of production especially on the products and services of the mother company. 3.3 Impact of the global economy on businesses The global economy has its policies and procedure especially in conducting businesses outside the citizen country. There are requirements to meet especially when a firm has just started operating globally. These requirements include tariffs and business permits which should be obtained prior to the start of global operations. Some of the tariffs which are charged on multinational companies are too high such that it may be expensive expanding globally. This is the main challenge when it comes to dealing with the global economy. Global regulations have to be also observed. The regulations may not be present in the mother company or citizen country implying that there is a lot of training needed for the staff diploid abroad. On other instances, the global policies may favor the firm indicating that there shall be increased efficiency in operating globally. Given such opportunity, Alboraq will maximize its operations to ensure maximum profits are maintained. 3.4 ICT and globalization ICT has highly promoted the success of globalization. Every firm willing to expand globally is encouraged to embrace technology as part of creating efficiency in its operations. The success of most firms has been attributed to the use and application of technology in their operations (Roy, 2005). Technology enhances communication from the headquarters to the branches all over the world. With advancements in technology, one can view the processes going on at the branch without having to travel there (Roy, S., 2005). ICT has been noted to improve the performance of most firms operating globally through creating an efficient platform of working. Innovation and invention come along with the application of ICT which is said to promote sales through improved quality improvement hence increase in incomes for the firm. Section 4 4.0 A review of the current issues impacting on business activities Currently, various matters have affected significantly on business operations. Alboraq operates in the oil industry, and it may be of concern to concentrate on this particular sector. First, various communities have issues when it comes to using non-renewable energy. Some communities have equipped themselves with renewable energy products which is a big blow to Alboraq’s global move. Secondly, some countries are still experiencing political instability and therefore a cause of alarm to the company. Such a country is not suitable for such expansions. The reason why a company should consider the political issue as an important aspect of the business is the fact that destruction of plant and property may occur as a result. The loss may be too huge to recover in the foreseeable future. Political instability may be in the manner in which laws are made. If there are uncertainties over what a government may impose taxes on foreign companies, then such a country may not be suitable for the global expansion program. Consumer behavior is another issue of concern when it comes to global expansion. The company should review the current trends in consumer behavior in a particular country. The behavior may be in such a way that it favors the local firms against the foreign organizations. 4.1 Global environment in which businesses are currently operating in your named country Multinational companies operating in Libya experience a tough global environment. The government has been reported severally on accounts of corruption. The cases include bribes which the multinational companies have had to pay to survive the tough business environment. Libya’s major sector is the oil industry. Imposing harsh policies on the sector has made the firms operate under low incomes and in other instances losses. The companies operating in Libya always have to be conversant with the current government operations if at all they have to survive the tough business environment. Unfair competition from the corrupt companies operating illegally under the support of rogue government officials has been an issue of concern in Libya. This kind of corruption has led to some firms exiting from the industry while other firms struggle to make reasonable profits. 4.2 Proposed strategies to address issues affecting business activities in Libya The company in question has set aside a department to deal with the various challenges of operations in the country. On corruption issues by the government officials, the company through its legal department will ensure that the company is compliant with all legal requirements of the country. The company has also set aside a marketing department which will market the products and services of the firm so as to counter the stiff competition offered by other firms that are pro-government. The company will also ensure that the advertising plans are in line with government requirements to avoid colliding with the authorities. The unfair competition has been a difficult issue to deal with. For Alboraq, the legal department has been tasked with the issue to ensure that the company does not succumb to the illegal acts of the government officials. The company has set plans on how to work efficiently to ensure profits are assured even within such an environment through reduction of operating costs and the expansion process. Conclusion Conclusively, the company is set to benefit a lot from the globalization program. The set strategies are geared to give the company a competitive edge over the other firms. Efficiency is also expected to multiply sales leading to increased income. Income is also expected to increase as a result of a reduction in the cost of production through economies of scale. References Erixon, F. and Sally, R., 2010. Trade, globalisation and emerging protectionism since the crisis. ECIPE, Brussels. Roy, S., 2005. Globalisation, ICT, and Developing Nations: challenges in the information age. Sage. Peters, G.P. and Hertwich, E.G., 2008. CO2 embodied in international trade with implications for global climate policy. Environmental Science & Technology, 42(5), pp.1401-1407. Bellamy, A.J., 2011. Libya and the Responsibility to Protect: the exception and the norm. Ethics & International Affairs, 25(03), pp.263-269. Read More