National Governments in Shaping Business Behaviors and Intervening in the Business Activities - Coursework Example

National governments in shaping business behaviors and intervening in the business activities Student’s Name: Instructor’s Name: Course Code: Date of Submission: Introduction Business activities contribute a great deal to the performance of any economy. However, since every investor is always interested in making good use of the available opportunities irrespective of the process used, then it becomes almost a constant that dubious ways find their way to the economic activities. This may have long-term effect in the performance of any given economy (Gritton 2003). This situation is further accelerated by the fact that there is stiff competition taking place as a result of globalization and liberation of trade whereby multinational business can cross borders with a lot of ease. Perhaps, it is for this reason that government intervention is highly recommended. Different national governments do create different rules and frameworks which ensure that sanity is maintained as businesses try to compete for the few opportunities available. These rules and frameworks are considered to be very important governments as they always keep in check, the way businesses operate (Helm 2006). Because of this reason, the interventions may change from time to time based on the business situation. It is from this perspective that this analysis is aimed at presenting that the various business behaviors and activities that need national government intervention and the justification of those activities. The activities that will be considered in the analysis include: management of subsidies and paying of taxes, changing consumer behaviors, creation of markets, public procurement, sustainability and ethical sourcing. In addition to these, the analysis will also cover the various problems that multinational companies face and which they must overcome in order to be serious global competitors. The problems that must be overcome include: cultural differences, political risks and pricing and taxation policies. Business behaviors and activities that need intervention In the modern markets, government intervention is very essential. This is because both the suppliers and the sellers need to be assured of their protection especially when they enter into different contracts and when they want to own property. National government interventions in different business behaviors and activities can actually have beneficial effects. This is because the national through different interventions, will have the opportunity to protect individuals. For instance, it is possible to ensure the safety and health of the workers if the government interventions are clear about that. In the same line, different government interventions are very critical in protecting the consumers from undue exploitation and from access to those suppliers who have not been authorized (Barrios and Strobl 2001). This is actually important in ensuring that both the supplier and the consumer are protected from any form of practice that may be considered unfair. This is possible since only licensed suppliers will be allowed to operate. National government intervention actually entails different government policies and frameworks that administered in the market to influence different business behaviors and activities. From this sense, the national government intervention captures a very spectrum of the various actions by the government on business behaviors and activities that take place in an economy. In a number of aspects according to Gritton (2003), the impact that results from the government interventions is positive. For example, in a competitive business environment, the law on competition is used as an intervention to ensure that the consumers are no subjected to practices that are considered harmful as a result of dominating the market powers by a few suppliers. As identified earlier, there are a number of business behaviors and activities that the national governments intervene in and they include: management of subsidies and paying of taxes, changing consumer behaviors, creation of markets, public procurement, sustainability and ethical sourcing (Schrank 2003). Management of subsidies and paying of taxes According to Barrios and Strobl (2001), subsidies and taxes can have a direct impact on competition. This is because both subsidies and taxes are related to the cost of doing business and as such influencing the production activities of any business. These interventions can have a positive impact on the way businesses behave and operate. For instance, the subsidies can be used to offer support to those suppliers who engage in business activities that help supply essential services to the consumers. On the same line subsidies can be used to encourage stimulate the investment activities in an economy while high taxes could be transferred to fighting environmental pollution. From this perspective, it therefore, becomes absolutely necessary for the national government to initiate certain interventions that will be used to ensure that subsidies are well managed and that businesses comply with the taxpaying procedures. This is so important because taxes are an important source of revenue. However, in a situation where there are no clear interventions by the national government with regard to paying taxes according to Helm (2006), tax evasion which is a common behavior among many investors could be on the increase. This is due to the fact that there are many loopholes on how to avoid paying taxes. In order for the government to get enough revenue to incur its spending interventions on how taxes are being paid by different businesses is of absolute importance. Taxes are levied on different business transactions through VAT and income tax. The way different businesses are likely to behave towards the process of paying taxes might be different. While that are those businesses that can honor the taxpaying requirements, the other businesses may use different ways to avoid paying taxes as they want to triple their profits. This calls for the need to have national government interventions in the taxpaying procedures. The same applies to the way businesses manage the subsidies given to them. Subsidies are given to businesses in terms of direct grants, capital injections, soft loans, equity participation and tax exemptions. Subsidies provide economic empowerment for the investors to champion different economic activities (Walsh & Zhu 2007). It is from this ground that the national government intervention is highly recommended to ensure that all business behaviors and activities correspond with utilization of subsidies and paying of taxes. Changing consumer behaviors At the market place, consumer behaviors are a very important aspect. This is because they what should be brought to the market by the suppliers. Government interventions in the marketplace are aimed at influencing both the consumers and the firms on how they should behave. Even though it is advisable for the government not to exercise direct regulation on the way businesses behave and operate, it is necessary to take into account the fact that some firms may engage in anti-competitive practices by trying to influence the consumers to fit their own choices (Barrios and Strobl 2001). It is therefore, absolutely important for the government to intervene and ensure that the consumers are playing their rightful role in the market. This is especially when trying to ensure that the consumers have the right information and also can switch among different suppliers with a lot of ease. In the modern economy, there is increasing need for the national governments to intervene in the market in order to influence the way the businesses and the consumers behave. To avoid direct regulation which can be of negative impact in the long-run, the national governments do apply policy statements and other information campaigns as well as discussion with key stakeholders. For example, the national government can intervene in behavior change in the market place in order to help manage adverse effects that are related to certain behaviors and characters. For instance, consumer behaviors on alcohol consumption may be regulated to avoid antisocial behaviors and other related health risks (Schrank 2003). Creation of markets The national government has a very big responsibility in creating a market. This is because if the markets are well designed, they will translate into increased consumer benefits in relation to customer choices and market efficiency. The basic principle of the government acting in making the market is to ensure that competitive pressure is well balanced between the suppliers and the consumers (Konnings 2001). More often in unregulated markets, different competitors tend to create the market mechanisms that can benefit them as individuals without due regard to the other players. This is to some point leads to exercising of powers by a few individuals who will always control the market pace and thus acting as a barrier of entry by other suppliers. In a well-designed market, there is always a possibility that the power exercised by each player is controlled. This helps the businesses to move away from traditional approaches of ‘command and control.’ This is important in cushioning the cost of production and quality of goods and services since the government does not have any access to the market prices (Schrank 2003). It is from this sense that the national government cannot afford to leave all business behaviors and activities that are related to market making to individual players. This is because efficiency will not be assured as key players will design the market in such a way to suit their own needs and interests. Because of this reason, the national governments are therefore obligated to design, supervise and enforce different policies to ensure that efficiency in the delivery of goods and services is maintained (Walsh & Zhu 2007). Public procurement Public procurement in the market place is very health in promoting competition in the supply of goods and services that were previously a reserve of the public sector. In this case, the government is the major buyer and his decisions can have some influence in the competition. In public procurement, what the government does is to exercise its purchasing powers to encourage healthy competition among the suppliers. This is so because different suppliers irrespective of their size and capital base, will have the opportunity to compete on a fair ground (Konnings 2001). The situation could be worse in the market if the government could not exercise its powers to promote fair competition. This is so important in ensuring that there is no market failure when it comes to market failure in supplying important services such as health care and law and order as well as housing and other important social amenities. Public procurement is actually carried out through a competitive process. This process promotes the most efficient suppliers and in the process ensuring highest value for the tax payer’s money. In the case where public procurement is not adhered to, prices could easily be exaggerated by the suppliers and in the process making inefficient use of tax payer’s money (Schrank 2003). Sustainability and ethical sourcing The world is limited of important resources. The same applies to businesses which rely on the natural environment for important resource. With high levels of scarcity, competition for available resources is becoming stiff. This means therefore, that only those businesses that are innovative, creative and economic in resource utilization will be able to compete and also sustain themselves even in the future (Keller and Yeaple 2002). In some cases, there are those resources that are of absolute importance to mankind and all the living things. For instance, while individuals may be trying to fell trees to saw timber, there is need to take into account the effects of such practice in the water catchment areas and the beauty of the environment for the life today and tomorrow. More important, is continued supply of the same products. This is to say that only those businesses that have the capacity to employ different sourcing strategies and that are sustainable that can be able to compete (Konnings 2001). This is because some raw materials are very scarce. Whether the business is manufacturing or supplying products for the consumer or for other businesses, sustaining the supply chain is highly recommended. This therefore calls for the need to continuously engage in activities that will improve the social, environmental and economic performance. However, because of competition, it is very rare that businesses will engage in fair sustainable and ethical sourcing practices as they try to outdo others. It is from this perspective that the national government intervention is recommended in order to exercise control on how different resources should be allocated for business activities today and tomorrow. Interventions are also recommended in protecting the natural environment from undue exploitation (Schrank 2003). Justification of business behaviors and activities The different business behaviors and activities that take place in the marketplace according to Keller and Yeaple (2002), they are all justified. This is because they add flavor to the competition and bring vibrancy to the business environment. In other words, the business environment cannot be said to be balanced if the any one these activities is missing. The identified business behaviors include management of subsidies and paying of taxes, changing consumer behaviors, creating of markets, public procurement and sustainability and ethical sourcing. To start with, management of subsidies and payment of activities is a very important responsibility for any market. The management of subsidies remains the responsibility of the beneficiary businesses. Subsidies can have a direct impact on competition especially when the competition is not so favorable to small businesses or multinational companies which are not so established locally (Schrank 2003). Whether the subsidies fall within the national rules and frameworks or not, there is need to ensure that their benefits far outweigh the associated costs. However, in the case of taxpaying, all businesses are expected to participate in the development of the appropriate infrastructure and this will only happen if every business is paying the tax. In addition to this, changing of the customer behaviors in the market place is a very important activity. For instance, it helps the consumers drop certain practices like excessive alcohol consumption which can be harmful to their health (Schrank 2003). Further, in the case of creating of markets as a business activity, it helps reduce what can be termed as a monopolistic kind of business by enhancing flexibility that can help achieve certain goals and objectives. This will further enhance efficiency in the market operations. Public procurement is also a very important practice in a business environment. This is because it gives equal opportunity to all suppliers to provide important services to the government. This is especially important in ensuring that efficiency in government operations are actually enhanced since only suppliers that undergo the competitive process of bidding are allowed to supply. Finally, in the aspect of sustainability and ethical sourcing, businesses are obligated to engage in sourcing procedures that are not harmful to sources and can be used for long-term benefits (Walsh & Zhu 2007). Problems that must be overcome by multinational companies In the quest to be great global competitors, multinational companies are subject to various problems they must address. Among these problems are cultural difference, political interference, managing of price disputes and tax requirements (Aghion et al 2009). First and foremost, despite the fact that the world is highly globalized, cultural differences are very eminent and they influence how different multinational companies operate in different market context. The ability to respond to these cultural differences is starting point to succeeding in doing business in the global environment (Crafts 2001). What this means therefore, is the management to consider how diversity in culture can impact on the performance of their business and the possible to reconcile the most aspects of culture such as communication, time keeping and negotiation. In other words, multinational companies should try to be flexible and embrace cultural diversity (BERR 2008a). In the global business environment, there is also the aspect of political interference. This is because the host countries are likely to make decisions that are considered to be political and that can have adverse effects on their performance and achievement of their goals. For instance, the political decisions may be those that limit the movement of capital across borders (OFT 2003). This could have adverse effects on the performance of the company. This problem could be eliminated by carrying out a prior study to establish the political trends of the host country (Beardsley and Farrell 2005). In the contemporary business environment where the world has become highly globalized and liberalized, multinational companies that want to become competitive in the global market, must contend with ways to deal with different disputes (OFT 2006). This is because the policies and regulations that govern international business are so diverse and they reflect how symmetry lacks in the world of business. The world is therefore, in constant change. From this perspective therefore, it is important for multinational companies to accept that these landscapes do exist and therefore the need to agree on the basic principles of operation with their business partners (BERR 2008b). Further, different countries of the world have different consumption tax policies. This has subjected many multinational corporations into very serious scrutiny to determine if they fail to comply. The recent report by the An Ernst and Young Guide on Burdens for Multinational Companies has shown that many of the multinational companies are likely to face increased costs and other resource requirement as they seek to adapt their businesses into different contexts. Enterprise and resource planning systems are aimed at helping the companies comply with various requirements imposed onto them by different tax systems (OFT 2007). However, as VAT obligations continue to increase, compliance is also becoming harder and for that reason, many of the companies are facing different penalties for failing to comply. For this reason it is therefore, advisable that the multinational companies take into account different tax systems before investing in a certain market (OFT 2006). Conclusion This essay has analyzed the various business behaviors and activities that National governments intervene in. The different business behavior and activities that have been discussed include: management of subsidies and paying of taxes, changing consumer behaviors, creation of markets, public procurement, sustainability and ethical sourcing. Further, in the discussion, the justification aspect of these business behaviors and activities has also been considered. Some of the reasons these behaviors and activities are justified include: promoting fair competition, curbing unfair practices like excessive consumption of alcohol and promoting efficiency in the market operations. Finally, this discussion has also covered the aspect of multinational companies and in particular those problems they must overcome to be competitive in the global environment. The different problems that have been identified are: cultural differences, political interference, managing of different disputes and the existence of different consumption tax policies. In general, this discussion has covered what the business environment entails and what different enterprises should take into account if they want to be competitive by enhancing their productivity and efficiency. References Aghion, P., Blundell, R., Griffith, R., Howitt, P. & Prantl, S., 2009, "The effects of entry on incumbent innovation and productivity," Open Access publications from University College London, http://discovery.ucl.ac.u. Barrios, S. H. and Strobl, J 2001, “Explaining firms’ export behavior: the role of R&D and spillovers”, GEP Research Paper, No. 01/27, University of Nottingham. Beardsley, S., and Farrell, D. 2005, ‘Regulation that’s good for competition’, The McKinsey Quarterly, 2005 no. 2 BERR 2008a ‘Competition Law: Issues which arise for business when the Government or lobby groups seek to encourage businesses to work together to deliver desired policy outcomes.’ www.berr.gov.uk/files/file45711.pdf BERR 2008b, ‘Public Service Industry Review’, accessed on August 22nd 2013, available online: www.berr.gov.uk/files/file46965.pdf Crafts, M. 2001, ‘TFP Growth in British and German Manufacturing industry, CEPR Discussion Papers 3078, 1950-96. Gritton, P. 2003, “Toyota: surviving and thriving through supplier partnerships”, Global Automotive Conference Bowling Green, Kentucky, 8 April), Western Kentucky University. Helm, D. 2006, ‘Regulatory Reform, Capture, and the Regulatory Burden’, Oxford Review of Economic Policy 2006 22(2):169-185 Keller, W. and Yeaple, S. 2002, Multinational Enterprises, International Trade and Productivity Growth: Firm Level Evidence from the United States, Rhode Island, Brown University. Konnings, J. 2001, “The effects of foreign direct investment on domestic firms: evidence from firm level panel data in emerging economies”, CEPR Discussion Paper, No. 2586. OFT 2003, ‘The control of entry regulations and retail pharmacy services in the UK’, www.oft.gov.uk/shared_oft/reports/comp_policy/oft609.pdf OFT 2006, ‘More competition, less waste: Public procurement and competition in the municipal waste management sector’, accessed on August 22nd 2013, available online: www.oft.gov.uk/shared_oft/reports/comp_policy/oft841.pdf OFT 2007, ‘Guidance on how to assess the competition effects of subsidies’, accessed on August 21st 2013, available online: www.oft.gov.uk/shared_oft/reports/comp_policy/oft829.pdf Schrank, A. 2003, “Luring, learning and lobbying: the limits to capital mobility in the Dominican Republic”, Studiesin Comparative International Development, vol. 37, No. 4. Walsh, J. & Zhu, Y. 2007. ‘Local Complexities and Global Uncertainties: A Study of Foreign Ownership and Human Resource Management in China’. The International Journal of Human Resource Management, 18-2, 49-267. Read More