The Future of Business: Cengage Learning - Assignment Example

Introduction to Business Studies Business Studies has gained considerable value among professionals today because of its utility in the trade environment. In this course you will be introduced to a multitude of aspects of the business environment of the UK and abroad, its components, and mechanisms. The objective of this guide is to introduce to you what you will encounter in your future courses in business studies and to allow you to practically apply concepts learned. Mixed Economy To begin with let’s define what a mixed economy is. Today, almost all of the worlds economies are "mixed". A mixed economy is the congruence of capitalism (for profits) and socialism (for the society). It has the characteristics of these economic systems through the co-existence of private and public sectors which help the government to effectively control and monitor the business environment yet at the same time allow enterprises to achieve their objectives of profit making and wealth creation. In this economic system, private property and economic equality is prevalent where people are free to acquire private property; wealth are distributed according to the income of the country; and the government is responsible for formulating economic policies through imposition of taxes, tariffs, and regulations. Instead of letting private enterprises control the price mechanisms, an "invisible" hand control to ensure the social welfare of the people (Jain, Trehan and Trehan 2010). The majority of the economies of the world are mixed including the United Kingdom. This is because mixed economy is unlike pure capitalism in which the business sector controls every aspect of peoples lives to the exclusion of social welfare. It is also unlike socialism which emphasise too much on the welfare of the people to the extent of being unfair to those who deserve the credit for being enterprising. Hence, a business enterprise like Tesco, plc would have concentrated on pure profit making if it had been in a capitalist economy. Because it exists in a mixed economy that Tesco enjoys the balance of profit making and corporate social responsibility (Gorman 2003). Types of Businesses In an economy, there are numerous business enterprises which operate to support the system. There are two broad categories in an economy - the private and the public sector organisations. Regardless of their orientation, both private and public sector organisations are important. A look at the local business scenario like in Bradford will demonstrate that the importance of business enterprises and concerns cannot be neglected from our lives (Cole 2003). One may take them for granted but they nevertheless operate and influence our lives: a. Private Sector Companies Private sector companies refer to firms or enterprises which are owned by private individuals. They are set up and funded by individuals and can be sole proprietors, private limited companies (Ltd), public limited companies (Plc) or operate under partnerships. Private sector companies are totally reliant private funding. Their objectives of operation are to earn profits and expand business to earn even more profits while at the same time trying to minimise liabilities. In a sole proprietorship, the individual owner is responsible for his/her income or liability. This is the same in the case of partnerships with the difference that the partners share the liability. In both cases the liability are unlimited. For example enterprises like Dave Spink Photography and Mr. Electric in Bradford operate under sole proprietorship or partnerships (Bradford Free Index 2010). They are easy to setup with few regulations and licensing requirements. In a partnership two proprietors share the setup fees, liabilities or profits. The majority of companies start off as sole proprietors to expand to include more partners - as in partnership and private limited companies (Cole 2003). This brings us to private limited companies - organisations which limit the scope of liability to certain share only. Hence, even if the company goes bankrupt, the owners pay for the liability to the extent of their share only. The majority of companies like John Loker Electrical Ltd., Voytec Construction ltd and Maximia Technologies Ltd in Bradford and elsewhere operate on this structure. Their objectives are to recruit more partners to share the initial cost of investment for assets and equipments or buildings, operate the business successfully, and share the profits and liability. Each partner share only certain degree of risk for loss hence, they feel more secure in investing more in the business. Their setup is formal and regulated by the local business authority. They have to report to the partners the financial statements after a time period, and plan for business expansion regularly (Cole 2003). On the other hand, in public limited companies like Tesco, Sainsburys or HSBC Bank have a different type of operating environment. The objectives of this type of organisations are to earn extraordinary profits which they distribute to the "shareholders" or owners. Shares are sold in the market for generating funds for setting up public limited companies. Shareholders become the owners. However, the operation of the company rest in the hands of a chosen few, called members of the Board of Directors (BOD). The directors are responsible for the everyday operations and decisions for business plans etc. Public limited companies are managed by a system of management; they are financed by shareholders whose finances are managed by a formal financial organisation such as a bank or lending authority. They are also strictly under the regulations of the authority like the FSA (Financial Services Authority of the UK) (Bized 2010; Cole 2003). b. Public Sector Companies A public sector organisation refers to an organisation which is owned and funded by the government. Due to the mixed nature of most economies of the world, the number of public sector organisations is becoming less and less due to the huge infrastructure and funding required for its operations. Some examples which exist in the UK include the Royal Mail and National Health System. The objectives of these organisations are to provide infrastructure services such as mailing system, transport system, health system and financial system to the local communities at minimal charges. They are what one would call welfare organisations designed to serve the public. Some of the public sector organisations share their operations with private sector owners due to the lack of expertise or funding. These are semi-private companies such as utility companies in the UK (Bradford Free Index 2010; Bized 2010; Cole 2003). c. Charitable or Voluntary Sector There are not-for-profit organisations which exist for the sole purpose of welfare creation. They may be charity based businesses or volunteer organisations which operate to earn profits but they use the profits for charitable or specific causes. For example in Bradford the British Red Cross is a volunteer humanitarian organisation which uses its profits to help individuals in crisis. Its objectives are to earn profits through sale of clothes, furniture, books or electrical appliances to raise funds for helping the community. The Coloursave Printer Cartridge Recycling is dedicated towards the national printer cartridge recycling programme which uses its fee to donate to the programme for recycling purposes (Bradford Free Index 2010; Bized 2010; Cole 2003). Organisational Structure The internal workings of organisations depend on the span of control on the number of people working in the organisation, the tasks to be achieved and the amount of interaction required. This can be categorised as centralised or decentralised. In a centralised organisational structure the degree of formal authority is concentrated at one level or at the top management. In this type of setup the management makes quicker decision because they do not need to confer with staffs. As a result they are responsive to their environment. On the other hand, centralised organisational structure tend to be authoritative; they do not allow feedbacks from any channels to interfere with the decision making process. As a result they are limited in their scope of vision and tend to be rigid in their management (Gitman and McDaniel 2007). Figure 1 Centralised Organisational Structure In a decentralised structure, the process of decision-making is dynamic allowing everyone to participate in the welfare and future of the organisation. Anyone from the organisational hierarchy can intervene in its operation. This sometimes makes decentralised organisation slow to response to crisis situations. And at times these organisations tend to have too many ideas for operation making it difficult for the management to decide which course of action is the best. Nevertheless, decentralised organisations facilitate feedback and interaction employees, elements which are necessary for the growth of the organisation (Gitman and McDaniel 2007). Figure 2 Decentralised Organisational Structure A business organisation may have a tall or flat organisational structure which refers to the span of control. In a flat organisation everyone has the authority to participate in the decision making process. In a tall organisation however, the decision-making process usually concentrate at the top with communication of decisions going down the hierarchy (Gitman and McDaniel 2007). Decentralised organisations usually are adopted businesses which have more units to operate and require decentralisation of authority to speed up the process of decision-making such as public sector organisations or large public limited companies. On the other hand, centralised organisations tend to be businesses in which the management has full control over all aspects of its operation. The management usually comprise of a few individuals who carry out the roles of management, operations, finance, and delegations etc. For example private limited companies or sole traders or partnerships. Decentralisation and centralisation tend to overlap tall and flat organisational structural. Flat organisations tend to be decentralised with more individuals sharing the management authority such as in charity, private sector or even charity organisations. A tall organisation today exist but in lesser number but may include firms which needs to be dynamic in response to their environment (Gitman and McDaniel 2007). Business Influence on the Environment The above businesses are critical for the support of Bradfords community and vice versa. A business functions within certain elements and react according to the changes which occurs in one or all of the elements in its environment. This response process can be categorised as external factors or internal factors. External factors refer to those factors which the organisation does not have control over such as political, economic, social, technological, legal and natural environment. Internal factors include its employees, management system or organisational structure (Worthington and Britton 2009). Alternatively, businesses also affect the environment. Whether private, public or charitable sector organisations, they are responsible for generating income for the economy through employment. Thus, the companies mentioned above provide opportunities for work to the Bradford community. When people have money they can purchase thing that they need like shelter, food, health or housing. The businesses in turn earn their profits through the sales of their products and services to the community. The cycle goes on with only the difference that each type of organisation operates and influences the environment differently. For example the charitable organisation earns profits but they use it for social causes. The private sector organisation uses its profits for further business expansion. The private sector organisation in turn uses its funds for providing infrastructure services to the Bradford community. Each of them helps make it possible for the people of Bradford to live, earn, and lead a comfortable life. The people in turn pay for the goods and services these businesses provide. However, what happens when there is no such balance in the Bradford community? Bradford has been hard hit economically with half of the population living under the poverty line (Bradford Cares 2010). In such a scenario businesses can influence and improve the community as well by providing opportunities for raising funds and distribute them to the poor, or providing them free health, food or shelter services through a portion of their profits. This is one of the reasons why the majority of the worlds economies prefer mixed economy as it is flexible in adverse social and economic conditions to allow the local community and the government adapt to it accordingly. References Gitman, L.J. and McDaniel, C. (2007) The Future of Business: The Essentials. Cengage Learning. "Bradford Cares" Accessed on 15 April 2010 from: http://www.bitc.org.uk/yorkshire_and_humber/programmes/community_investment/cares/bradford_cares.html Worthington, I. and Britton, C. (2009) Business Environment. Pearson Education Canada. Cole, G.A. (2003) Management theory and practice. Cengage Learning EMEA. Bized UK. Accessed on 15 April 2010 from: http://www.bized.co.uk/educators/16-19/business/strategy/lesson/typesorg.htm "Bradford Free Index" Accessed on 15 April 2010 from: http://www.freeindex.co.uk/yorkshire/bradford/bradford/ Gorman, T. (2003) The Complete Idiots Guide to Economics. Alpha Books. Jain, T.R., Trehan, M. and R. (2010) Business Environment. FK Publications. "Mixed economy" Accessed on 15 April 2010 from: http://www.businessdictionary.com/definition/mixed-economy.html Read More