Contemporary Business Model - Essay Example

As businesses go global, they look for new locations around the world that provide greater competitive advantage. It is argued that the geographical location of new operations are mostly influenced by the resource costs which are facilitated by the accessibility of resources for example technology, corporate governance etc. Multinational firms are likely to undergo some internalisation of innovation which is meant to disseminate activities and knowledge globally for example a company like Tesco Company. It is therefore important to develop a mechanism possible for achieving competitive advantage. Technological changes improve corporate decisions, accountability and transparency thus improving the competitive advantage in the market and better margins (Claessens et al. 2000, p. 100). This study focuses on the contemporary management issues faced by businesses as they enter the global market. It also shows the factors that influence the geographical location of businesses especially those that operate globally. The study tends to evaluate corporate governance and corporate social responsibility and the difference between the two in reference to the international market. Factors that influence organisation’s strategic planning and business decision making in relation to the location of its production are also analysed. The study finally describes why most businesses chose technology as the major factor providing competitive advantage to businesses. The traditional management model of 1870 to 1914 indicated a golden age in the international market. This was different from the 21st century since there is increased number in economic transactions. Global economy which first began after the Great War was crushed by the use of protectionism. The second one was based on multilateralism and trading blocks such as EU were involved which resulted to a rise in regional relationships. The current global economy is very different from the rest as it is characterised by increased level of technology and there has been reduced costs and increased complexity in terms of technology. This has made large markets in the world seen too small internationally. There is also the growth of transnational strategic unions that change the organisation method of operation in economic transactions. Global networks replace trade (Freeman 1984). Finally, the economy in the 21st century is integrated through technological systems and not through organisational hierarchies. These results to a world that is technically networked and the national markets are losing their reputation since units and geography is not considered in the economic activities. Costs on research and development have increased rapidly as the product lifecycles are shrinking especially in industries such as telecommunications and pharmaceuticals. To sustain technological growth, companies ought to expand their production internationally. Cross national alliances are therefore needed for companies want to pull knowledge in order to survive. It is therefore difficult to achieve technological sovereignty as the scale of complexity in terms of technology in various sectors has combined markets. Grace and Cohen (2005) show the growth of these alliances represents a change in the mode of organisational activities. In the 19th century, various economic transactions were set up through trade, market and portfolio investment. The multinational companies later replaced the market. This resulted to the introduction of direct investment and intra company trade. Organisational hierarchies were also replaced by networks in this case from mass to supple production and also from integrated organisations to disintegration. These networks make up a social form of economic interaction where by trust and reciprocity is essential. Multinationals are involved with hundreds of relationships that link various parts of the organisation this reason make the company to employ a complex web of relationships. The introduction of the networked economy has resulted to differences in the global economics and global politics as well as the geographical scope of economic and political units. As companies decide to expand their markets, they are faced with several contemporary issues. These include lack of anti-trust laws and accounting standards. This factor has made globalisation lack the right standards where people can do business guided by the right rules and regulations. The other issue is the increase in costs and thus demand for rationalising due to the needs of foreign employees. To avoid this problem, companies must employ better strategies of increasing efficiency and reducing costs. Competition poses a major challenge to these companies as it is difficult for them to maintain their viability. Other challenges involve failure to provide effective services to the customers in the outside world. Good communication with the customers improves return as they gain trust with the company and so will continue buying from them. In order to handle internet customer inquiries, companies in the global market have to ensure that they develop advanced tools for better technological analysis such as language processing where the language can be translated in case the recipient use a different one. Cultural and language issues are on the rise though companies are aware that not all internet users use English as their native language, they have shown no effort in customising their websites. These may lead them to become losers if technical issues are not customised by the time e- marketplace is introduced. Leadership skills are necessary to transact businesses for business to succeed in the global market. Corporate governance controls and directs the activities of companies using set policies and rules. It also involves the goals that a company sets to achieve and the relationships among stakeholders. This has resulted to developing practices to avoid collapsing organisations example in U.S Enron Corporation and MCI Inc. Company was affected. This is where individuals are accountable for the organisations responsibilities and thus avoids principle- agent problems (Sather and Ruth 2008). Corporate governance is different from corporate social responsibility in that the later functions as a self regulating mechanism where the organisation monitors its functions and is responsible for the impact that these activities cause to the environment, communities and the stakeholders. Businesses that focus on CSR promote communal interest by supporting community growth and development in addition to curbing harmful practices. Tariffs, restrictions, and standards cost organisations a great deal of investments. It is for this reasons that some companies opt to use CSR approach as a strategic plan for gaining support from the public. This approach enables these companies to maintain competitive advantage due to the use of social role that provides a great level of advertising for example the McDonald House. One of the most convincing arguments for corporate governance is related to the provision of stability of values in a state. This is an important part in the business conduct as it standardises procedures, regulators and the stock exchange which are desirable qualities. There are three arguments against corporate governance that relate to shareholder -centred and developed capital market. The first one is that the systems used in corporate governance are couples tightly with regulatory rules in areas such as tax, labour and competition law of which they will probably not be changed in the near future. The second argument is that the systems that are not real and are separated from other features related to the competition in the global market. The third one show global issues on the activities of corporate governance are arbitrated by the political system in the domestic country in such a way that makes union across other countries improbable (Erturk et al. 2004, p. 700). Organisations need to change their activities to be able to survive as they can not protect themselves from environmental instability. Colley et al. (2004) shows this instability may occur in any department for example industry sector, market sector or the economic conditions sector. Changes may occur when the managers are not satisfied with the performance or when an opportunity of expanding the current position. These changes involve incremental changes and radical changes. There is also the dual core which involves administrative core and the technical core. Administrative core deals with structure, control and coordination of the activities taking place in the organisation. It constitutes of the government, economic conditions and issues relating to human resource. The technical core relates to the transformation of raw materials into products and services. Every strategy in the market can be imitated (Crawford 2007). Businesses must therefore look for a niche in the market that differentiate them form their competitors. Innovation is therefore a competitive strategy that makes businesses stay ahead of their counterparts for instance the use of technological products such as mobile phones, media and entertainment. Entrepreneurs should therefore be in a position to change the needs of their customers into new and modernised ones. The best strategy to use is one that identifies the unique features of the company which are difficult to be imitated by the rest. These features should be based around the resources, systems and knowledge. The more it gets hard to imitate the competences the more the organisation maintains its market advantage in both the domestic country and globally. Other resources are easily imitated such as technology, location and manpower and so this strategy should not be adapted. Systems on the other hand are firm and difficult to identify therefore less likely to be imitated. These include division of labour, lean and mass production whose competitive edge takes a longer time. In all the above knowledge in the most important as it is intangible. It can never be imitated and it is durable thus maintains competitive advantage (Clarke and Chanlat 2009). Strategic planning as a process that defines the requirements also tends to deliver great results in terms of formulating business models. The method identifies ways of getting from the current business position to a position that add more value to the business. It tried to develop, create and analyse various factors influencing businesses such as vision, mission, strategic objectives and means of delivering the expected internal and external goals. According to Brassington and Pettitt (2007) this planning assures the organisation that it is ready for future challenges by focusing more on setting the right priorities, identifying the issues that hinder development as well as opportunities that are meant to achieve the goals of the business. Location of a business really matters in strategic planning process. This is because managers are able to look in to the future basing on the present outcomes. It also helps to create awareness of the needs of the customers in the area and the environmental issues. Strategic planning also provides principles for peoples responsibilities and allocated resources. According to Denis and McConnell (2003, p. 20) one factor that influences geographical location is the impact of global challenges such as the change in climate. This has influenced partnerships among boundaries which later lead to formulation of regional policies. The other factor influencing the geographical location of a business is the accessibility of the market. Most businesses are situated near trade routes so as to ease the transportation of products. In China for example there are so many businesses operating near the ports since more opportunities are found such as shipping services and tolls (Feltus and Vernadat 2009). Availability of resources can mostly be influenced by the infrastructure around the region. Companies wishing to go global have to ensure that the host country is reach in resources such as oil is the main resource factor in Saudi Arabia and other countries in MENA region. Environmental stability also leads to development of new businesses. Countries that are stable tend to offer a good environment for investments whereas those countries characterised by war and natural disasters such as Bangladesh may be disadvantaged in terms of investments thus slows development (Baker 2007). It is also important to analyse the strengths, weaknesses, threats and the opportunities available in the geographical area. This is by analysing the internal and external influences affecting the business. The more the opportunities available in the area the more the investors are likely to set up their businesses in that particular area. However, if there are threats such as harsh government policies, then investors will be driven away since their businesses will not develop (Blythe 2009). In today’s competitive market, businesses must ensure that they choose the best strategic approach that will be in a position to offer their goods and services in ways that will outsell them in the competitive market. In order to succeed it is important to harmonise the strategies, resources as well as the expertise of implementing the proposed methods. According to Bhattacharya et al. (2008, p. 40) advanced technology improves tools used in enhancing partnership in organisations that operate globally. Businesses with improved technology tend to target more clients in terms of market share. One big revolution in the market is the introduction of mobile technology that has built a new transition in the business today. This facilitates business dealings between clients and investors (Brickley et al. 2004). Conclusion The elements of a business model are customers, customer relationships, distribution channels, key resources and partners. Business models have significantly changed since the introduction of better communication networks. Structurally, the leadership skills have improved as it now becomes easy to appraise performance of employees. The resources have also changed as employees are currently exposed to enough information and are also involved in the decision making process thus this has improved efficiency. In the past decisions could only be made by the entrepreneur who also involved disturbance handler to resource allocator and finally to the negotiator. The model has now changed as every one is free to contribute through giving ideas and views which are later analysed to come up with a general statement. Improved technology also improves automation, production levels, outsourcing decisions. It can also affect changes in quality, cost and the demand since more customers will want to purchase from businesses that have advanced technically. References Baker, M 2007, Marketing strategy and management, London: Palgrave Macmillan. Brassington, F & Pettitt, S 2007, Essentials of strategic planning, Harlow: Financial Times/ Prentice Hall. 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