Question 1 a. A public listed company gathers the money by financing in the market. People who give money to the company will get the company’s shares in return. When a company has a good reputation and is foreseen to have a huge return in the future, people from all over the world will be attracted to buy some of the shares of the company. As the public company getting bigger, the shareholders are getting more and they are spread world widely. Hence, the company will need an agent to manage the company’s operation and to work on maximizing shareholders’ interests. However, the agents are also trying to maximize their own interests, such as: securing their jobs and maximize their incentives. As a result, monitoring the agents is also necessary. …show more content…
As the improving in technology and transportation, the scope of business conducting has enlarged. Local business cannot satisfy the businessmen and expansion of business geographically can be seen everywhere. However, with the business being globalized, the differences in laws, working conditions, health insurance and salary, etc. become significant and it also creates unfairness to some of the stakeholders. For instance, the coffee bean farmers in Africa work very hard to earn their livings, but only can earn 41.17 US cent per pound before 2004 whereas the retailers can earn billions of dollars (Wikipedia). The prices which are paid to the farmers are unfair and too little and hardly for them to survive. One of the reasons why those workers are paid unfairly is that they are mostly uneducated. The uneducated farmers do not know how much their corps is actually worth. They also do not know how demanding the coffee is in the market. Since the globalization has also created unfairness in businesses, fair trade has been raised. The fair trade includes paying a fair wage, providing equal employment opportunities, providing a safe and healthy working environment and condition and establishing long-term, sustainable business relationships. In the coffee farmers’ case, when some companies perform fair trade, the prices for one pound of coffee bean have increased. According to the article: Economics of Coffee, the price for one pound of coffee bean has increased to US$1.01 since 2008. The increase in the pricing not only made the farmers earn more but also improved the reputation of the companies who have joined the fair trade project because the consumers become more aware of how the corporations concern about their employees and
On the other hand, since just 5 companies: Dole, Del Monte, Chiquita, Fyffes and Noboa control some 80% of the International banana trade (in accordance to Banana Link, a UK based organisation campaigning for fairer and sustainable banana trade), we can perceive how workers are being exploited by a “race to the bottom.”
Until about 1990, coffee was traded in a managed market, where both consuming and producing countries agreed on pre-determined coffee supply levels through export quotas for the producing country. This managed market was regulated by the International Coffee Agreement (ICA). But in 1990, disagreements broke out among the countries and the ICA was broke down. This, along with market liberalization, created an increase in the global coffee production. The increase in coffee supply brought on a rise in inventories in consumer countries along with a poor demand. One of the consequences of this shift was a change in power to the roasting and retailing industries and created a decrease in the prices that were paid to producers. This whole scenario is known as the coffee crisis.
Increased global trade has intensified competition in amongst businesses all over the world. Finding and capitalizing on the most efficient sources of finance, trade and production is what gives a business or even a country a competitive edge over other international entities. Corporations have reacted by targeting the labor market and reducing money being spent on labor intensive activities. This led to a series of global events and trends ranging from downsizing of labor forces to outsourcing manufacturing activities to developing countries with lower wages and even automating processes through technological advancements to minimize use of labor. Global economic changes caused countries to shift away from the Industrial Age activities of manufacturing which was predominantly unionized.
With the proliferation of the internet international Business transactions are more common today than ever. Globalization is now a key factor when creating a business strategy for most companies whether they are small family own businesses or huge corporations. Globalization however does not just involve selling a product in other countries. There are legal and cultural concerns that must be addressed. The legal aspects are fairly simple because in most places the laws are spelled out. It's the local customs, and regional way of doing things that can be tricky. Research on globalization has shown that it is not an omnipotent, unidirectional force leveling everything in its path. Because a global culture does not exist, any search for it would be futile. It is more fruitful to instead focus on particular aspects of life that are indeed affected by the globalizing process. (1). In this new economy, as it has been in the past, it will be the people not the machines who will determine a company's success. Having an effective Human Resource Management team that effectively analyze your company's current and future personnel needs is key in any business organization.
With the advent of the Internet, decreased shipping costs, and the removal of trade barriers, the world market has shrunk in such a way that everyone can be a player. While many businesses thrive solely on serving a small local area, a globalized company has the benefits of increased customer markets, gross production, and brand awareness. Take for example Coca-Cola; this multi-national corporation offers products in countries all over the world, operates in over 200 of those countries with the help of its franchisees, and is the most well-known beverage companies. It is interesting to note however, that as positive as globalization may seem, there are many negative ramifications and a large population of detractors to this movement. While increased product availability is good for profits, if a local market is inundated with imported products, locally grown or manufactured items may be squeezed out, to the detriment of the local economy. Although it is cost effective to have your product produced in another country with low wages, you are essentially taking away jobs from the people of your own country, negatively impacting your national economy. However, if you manufacture your products in a country with higher wages, you must increase your products’ prices which may be harmful to your profits. While maximizing your companies profits is always of great importance, it is essential that you weigh the pros and cons of globalization and its effects on not only your company, but the areas in which you wish to spread.
The development of free-market economics has, since the 18th century, resulted in the spread of a set of ideas, creeds and practices all over the developed and much of the developing world. Today, the globalisation of trade, capital, technology and innovation has accelerated competitive conditions for businesses all over the world. Globalisation may be defined as the opening of markets to the forces of neoliberalism and capitalism; it is characterised by the free movement of people, talent, skills, capital (intellectual, social and economic) across international borders. All kinds of barriers have either been swept away, diffused or made obsolete by the forces of globalisation: trade barriers, subsidies, geographical boundaries, linguistic and cultural differences. Technological advancements have pulled the world closer and, in the process, affected how labour relations and worker/employer relations operate and develop. The multinational corporation as well as the public sector alike are affected by global competition.
Agency Theory or Principal Agent Theory is the relationship that involved the contractual link between the shareholders (the principals) that provide capital to the company and the management (agent) who runs the company. The principals will engage the agent to carry out some services on their behalf and would normally delegate some decision-making authority to the agents. However, as the number of shareholders and the complexity of operations grew, the agent, who had the expertise and essential knowledge to operate the business and company tend to increasingly gained effective control and put them in a position where they were prone to pursue their own interests instead of shareholder’s interest.
The movement particularly emphasizes on exports from developing countries to developed countries, with products such as handicrafts, coffee, cocoa, sugar, tea, bananas, honey, cotton, wine, fresh fruit, chocolate, flowers and gold. Moreover, coffee is one of the most widely traded goods in the world. For many developing countries, coffee trade is an important source of income. Producers can provide a better trading and improve terms of trade. Moreover, this allows producers to improve workers’ living environment and future life in general (De Pelsmacker, Driessen and Rayp, 2005).
A globalizing business sector advertises viability through rivalry and the division of the work it permits individuals and economies to keep tabs on what they specialize in. It also allows people to go globally. Globalization has stretched the assets, items, administrations and markets accessible to individuals. The increasing set of reliable connections around individuals from distinctive parts of a world that happens to be separated into countries.
Fair Trade is considered as an alternative trading system, which aims to protect the economically disadvantaged producers, especially in developing countries. It provides transparency and respect in international trade (Gingrich and King, 2012). Besides, Fair Trade also contributes to sustainable development by offering better trading conditions for marginalised producers and workers and securing their rights (Mohan, 2010).
In conclusion, Fair Trade provides reasonable amount of evidence that it is a great way to improve the lives of the workers. Reading more about Fair Trade gives the consumers a better understanding of how to help those who work under horrible conditions. Going out of our way to buy foods that are a little higher than usual would not hurt us. Personally, after researching Fair Trade, I would try my best to go to whole food markets in order to buy food products that are a little higher than regular price.
... interfere with corporate business. Withal, globalization has had its own effects on other countries such as Nigeria in western Africa. The use of the internet and social media has increased drastically over the last 40 years. A long time ago, people depended solely on letters to send messages but now, due to globalization, you can send a message to someone who is the other side of the world in a couple of seconds. More so, globalization has brought about the death of some Nigerian cultures such as the new yam festival. People in Nigeria have stopped the practice of this culture because they want to be like the globalized countries.
Globalization’s history is extremely diversified and began during the beginning of civilization. Now we live in a world that is constantly evolving, demanding people to use resources in locations that are very difficult to obtain certain resources. This could make it completely impossible to operate in these specific parts of the world. However, globalization allows people across the world to acquire much needed resources. Globalization creates the opportunity for businesses to take advantage and exploit the ability to take part of their business to a different country. Nevertheless, globalization is part of today’s society and will be involved in virtually all situations.
Not to mention we also have HR and OSHA rules that oversea a lot of other regulations and rules are broken down showing political corruption of power. Business managers must understand territories across regions managers. They must follow rules, guidelines, and acceptable approaches. It’s no different from a woman going to Saudi Arabia and having to cover herself up versus a man that does not, while in United States she is freely allowed to dress as she pleases. A company that’s able to follow the guidelines within a country is able to increase is growth. The majority of the time businesses can cut costs if it operates within a third world market.
Globalization has changed the world economy. Most of the small companies cannot ignore any events that occur outside their borders this is because of what happened in one country an impact on the rest of the world has. Individuals who work for small companies that believe they can act independently is not a realistic people, but they are myopic and have narrow minded. Actually, the study of international business is relevant to all people who are in the business world does not matter whether the organization is a large or small organization. The first reason is that so many things are imported from other countries. In the example, closing a deal in China will be a very different process than would be in U.S than it is in India. Customs of other countries need to be followed if a businessperson is to be successful worldwide.