18th November - 24th November, Globalisation and International Trade

Trading Internationally is nothing new, it is been happening since hundreds of years, just differently, people had to travel long distances on animals such as camels, and communication was very limited, never have been International trade has been to such level to it is today. International trade is possible through alot of ways, one way is outsourcing, it is taking part of your business to abroad, mainly it is in manufacturing for example Adidas, a German company has moved it production to different parts of Asia. Importing and exporting is another example of trading internationally, while giving out franchisees to other part of the world like Hardees just opened their franchise in Lahore,Pakistan, is also a part of international trading. A joint venture, that is a contract between two companies from different regions is also a way to do business internationally, moreover, one of the most ways to trade internationally is buying things online, from websites like Ebay, Amazon, Taobao, etc.

We can use PESTLE's tool to international trade to consider the aspects of trading internationally. Firstly, political factor of the country where we plan to trade is very important, it is always a threat to operate in a politically unstable country, which has high corruption level and alot of risk is involved. Economic factors are always a plus point according to the theory of absolute advantage, do what your country is good at, with other parts of the world like in Pakistan, there are lots of fishes, so selling in places where their is no assess to fishes would be a great target. Also, thinking about the culture you are planning to trade in, for instance, if you try to sell something which is off against hindu interest, you can never sell that in India as it is a Hindu majority populated country,so you must know that what you are willing to trade is accepted culturally. Technology is also very important, you can question yourself, does it have a port? good roads? port? do they have a good internet service?. Also, legally whether the laws support you, or they restrict you from trading, for instance, the European union, it is a trading bloc, where there is no tariff or taxes imposed for trading goods and also, like in Saudi Arabia, you cannot sell alcohol easily, you need lots of formality and procedures. Lastly, environmental, it is mainly about natural resources, do they have the needed resources available? 

So PESTLE helps us in finding the context, the external factors which might affect the organization.

Globalisation is the movement of domestics and national markets to international level, in simple words it is nothing but an increase in international integration making this world a global village. Some of the factors that leads the world to globalisation is advancement in communication, that is, it is easy to be in contact with the whole world, doesn't matter where you are. Internet, which has opened the boundaries, we can trade on it, communicate on it and advertise on it, in the whole world within seconds, Easy and quick travel methods and reduction in barriers to enter new places, a British passport holder can enter 173 countries in the world without a visa or a on arrival visa and also, Saturated markets forces business to move to different markets, where the cost of production is lower. 

There are alot of advantages of globalisation, for instance, Adidas opening their factory in Pakistan, would benefit by having all the raw material available, decreasing their production cost like cheaper labour would be available, while a huge capital would be invested for Pakistan, which will be good for their economy, employment would be created also too for example. Also, saturation is stopped, for example, China is overpopulated, so the people can move to less populated places, like Canada and Australia. Also, Trade barriers getting lesser means that lesser formalities to trade, imports and exports can be made easily and cheaper. Furthermore, it provides incentive for countries to specialize and gain advantages of it, like Hawaii in America has a very good tourist industry which attracts people internationally.

Globalisation just doesn't have advantages, it has alot of disadvantages too, most importantly, globalisation is a threat to small businesses, as bigger companies may benefit from economies of scale and lower cost, while the smaller businesses struggle with cost. Also, it is not always good for the country, maybe the host country may send all the profits to the parent country. Also one of the major disadvantages is, if one country goes into recession, the affect is faced by other countries too, like because of the recession which struck America in 2008, alot of asian countries also got into recession, like UAE and also, in alot of countries in Africa, using child labour is very common, so the bigger companies setup because they could benefit from the advantages of using child labour for their production which is very unethical. Also, because of globalisation, alot of people, whose interest conflicts with globalisation starts to protest, which causes instability. Moreover, the natural resources of other countries might be exploited by an International company and lastly globalisation leads to technological poverty, for example, even today, only 1/100 people have acess to the internet in Africa. Also,the diagram below shows how the rich becomes richer while the poor suffers.

11th November - 18th November, Organisational Strategies

One of the main focus of our week was Strategies. Different people have different opinion about this word strategy, for example Mintzberg think it is a pattern in stream of decisions while Chandler thinks it is the determination of the long run goals and objectives of an enterprise and the adaptation of courses of action and the allocation of resources necessary for carrying out these goals. There are three levels of strategies, one of them is on corporate level, in which the decisions are the most important and and those decisions which are taken by the head of the organization, usually directors, it is the overall scope of the organization. The second level is business level, where how will the individual business units will compete in the market is decided, these decisions are taken by the departmental managers, like marketing manager and the last level is the operational level, here the day to day decisions are decided, for example how will the organization deliver in terms of resources, people and process.

Moreover, there are two types of strategies, the one which are planned to achieve the future goals and aims of an organization are deliberate strategies, while some strategies are made automatically for instance by a certain consistent pattern, to tackle a problem or miss hap, they are not made intentionally, they are called emergent strategy, usually flexible organizations like Microsoft uses this kind of strategy alot.

Another important thing we came across was SWOT ANALYSIS, swot is an acronym for:

Strengths: These are the strengths of an organization, the uniqueness,the USP which differentiates one organization from another in other words, what is something that you have an advantage of over your competitors, like Brand loyalty for Apple is one of their major advantages, as their customers don't buy other products usually.

Weaknesses: The places where an organization needs to improve,the things they should avoid or what factors leads you to lose sales?

Opportunity: This is nothing but the potential opportunities a business might get, right decision making is required on the right time.

Threats: These are actually the disadvantages you can assume, for instance, developing in technology may change the market beyond an organization's ability to adapt.

The method of Swot analysis is simple, it is to take the information from the environmental analysis and separate it into internal (strengths and weakness) and external issues (opportunity and threats). Lets do a swot analysis on Samsung's mobile phone company on which we did our PESTLE too.

The Strength of Samsung could be its customer loyalty, innovation they bring with their technology, their unique design, low cost comparatively to other brands, like Apple, their share and ability to phenomenally market their product while the weaknesses could be its competitors, who have a big market share, again, like Apple, their profit margin is quite low, borrows their operating system(Android) and doesn't have their own system like Apple has and most importantly, Samsung has diversified into hundreds of products, so they can't focus only on smart phones. Samsung's main opportunity i believe is the growth in the Asian market, and the growth in the demand for smart phones, they can avail it by partner-shipping with one of the Indian smart phone company producers, as Indian market is going vast while the threats to Samsung is the price war between competitors, no matter how low they put their profit margin, the competitors follows the same rule, other organization coming up with innovative technology in the market and a huge technological market change. 

4th November - 11th November 2013, - PESTLE Analysis

Like Porter's Five forces, PESTLE is also a tool, the difference is that porter's tool help to look at the internal part of the organization, the micro-environment while PESTLE is used to look at the macro level, how the outside forces may effect an organization.

PESTLE STANDS FOR:

P: Political

E: Economic

S: Socio-Cultural

T: Technological

L: Legal
E: Environmental 

We cannot change the impact or influence of these factors on an organization, we can just evaluate or predict its effects and by doing that we can develop strategies that would counter the problems or the problems that could arise. Lets see how each of these factors would effect SAMSUNG (particularly smart phones).

Political factors are actually the government intervention in an economy, the tax rates, policies,trade restrictions, laws and also the political stability. An increase in taxes may want an organization to change its cost methods. Democratic Republic of Congo's political instability might affect Samsung as they are one of the major rare earth minerals provider as it is one of the important raw material for making smart phones. Also, a change in taxation policy for international businesses might affect Samsung too and Trade barriers too, such as you cannot trade from Saudi Arabia to Israel .

Economic factors are very important of a country, a country with high unemployment rate would buy lesser Samsung smart phones than a country who has a lesser unemployment rate, as more people are earning. Similar to this, is the inflation rate, if there is more inflation, the spending power of people would decrease, resulting in less spending on smart phones. 

Social factors include the cultural aspects, includes health conciousness, population growth, age distribution, career attitudes, etc. Strategies can be made and targets can be set, according to the culture, by questioning what is accepted and what is want or what is unaccepted and what is not? for example mini skirts would never sell in Saudi Arabia as their women are restricted to wear full clothes and not reveal skin. I believe more youngsters opt for smart phones than old aged people, so in a country where there is more old generation than young, might affect Samsung's sale.

Technological factors are very important for Samsung. Smart phones are all about technology, the latest innovation they come up and if they don't maintain their technological level, competitions might come up with better technology, such as APPLE and HTC, and take over their market share as they are offering something Samsung is not. so basically technological factors are innovations in technology that effects the industry. Check the pictures below to see the difference made in technological level in the last 20 years.

Legal in simple words mean law. The patents holded by Apples means, you cannot copyright their products, the technology they have come up with and how they have made their smart phone, so for samsung, they have to make their smartphone differently, also with different technology, else Apple can sue Samsung like they did in 2010 for copyright claims. So Legal in PESTLE means laws which might restrict a company or affect it, for instance, comsumer laws and health and safety laws.

Environmental factors means the influences and impacts of surroundings, such as weather or climate. These factors might impact alot on some industries, for example a frequently flooded area is always a disaster for farming industries. A natural disaster in one of the Samsung's producing hubs, might affect the whole of the Samsung smart phone industry. 

20th October 2013 - 27th October 2013, Porter's 5 Forces.

20th October 2013 -  27th October 2013, Porter's 5 Forces.

This week consisted of understanding the Harvard's professors invention of five forces and the importance of it and how it can be applied to every business in this world. The diagram above shows what those Porter's five forces are, and how it acts as a simple and powerful tool for understanding where the power lies within a business.When you understand where the power lies in the business, you can take advantage of your strengths and can work on your weaknesses. In these classes, we learnt on how to use these five forces to determine competitive power in a business.

Bargaining Power of the suppliers: This is nothing but the dependency of your business to a supplier, that is, if you have lesser suppliers, the more you are dependent on them, making them more powerful, the more suppliers you have, the bargaining power of the suppliers weakens as he know that you have a variety and you can switch if he doesn't give you a good offer. Also their uniqueness and control over you, if they can make a product which other suppliers can't, they are in power and they can take the benefit by charging higher.

Bargaining Power of Customers: Here you ask yourself, how easy it is, for a buyer to bargain with you, Again, this is driven by the numbers of buyers, each being equally important to you and the cost of them, switching to a different product from yours.

Industrial Competitiveness: You're in control, if the competition is low or you're a monopolist, you can control the customers, while if there is high competition, you know that if you don't come up with a good and unique deal, which differentiates your product in a unique way, from those who are your competitors, your customers will switch to your competitor's product as they have a lot of available choices for a particular product. So, you need to bring a deal, which others can't offer to stay in a competitive market.

Threats of New Entrant: If you're in industry where the barriers to entry is high,and entering that particular industry is not easy, you have a benefit, you know that your competition level will stay stable at some level and you can benefit from this while if there are lesser barriers and entering this industry is easy, more people can invest and enter this industry making in more and more competitive which might make you weak towards your suppliers and customers.

Threat from Substitute Products: If your customers or people find a substitute way of the services or product you are offering, which are more cheaper and easy to get, they will surely turn to that , destroying your industry. So in other words, if substitute product or service is easy and viable, this weakens your power.

This was not it, no doubt the entire week was about this, but we also learned  by looking at some examples and realising the importance of it. We were shown example of three companies which were a blast in their time, but neglecting these 5 points, made them vanish from their industries. one of the example was KODAK, which neglected the rivalry increase and technological increase, the use of digital cameras, they were confident with their printed photos and neglected the upcoming competition. What is Kodak today? i can just say it was a huge company and one of the biggest for cameras and now it doesn't even exist. Same with black berry, they came up with their unique messenger but didn't follow up nicely, the competitors took over their market and now black berry messenger is available on all the phones.

Also, these 5 forces benefits people for evaluating and forecasting on, before investing into a business, that is, if i want to start a business, i can use these 5 forces and research with these to get myself an idea on whether it is worth investing, whether i can make my market share, for instance, if there is high competition, it is difficult for me to enter into a market, with my competitors having the benefit of supplier and customer bargain, they are already leading me and i can get an idea of how the market is, and if i want to enter, what would i have to do, how would i make myself unique to prove myself better from others, what would be my strengths and weaknesses.

Porter's five forces are really important, but using it only gives you a partial picture of what it looks like. Also, with the advancement in technology, their is an increase in the converging industries, which makes you realise that this is not enough, you have to take your competitors seriously and you have to think broadly, you have to predict future advancements and be the starter of innovative products in your industry, not your competitors.

Here is the video, which was shown us in class, in this, porter himself explains his five forces.

http://www.youtube.com/watch?v=mYF2_FBCvXw

13th October 2013 - 20th October 2013, Management Theories.

13th October 2013 -  20th October 2013, Management Theories.

Just after enriching ourselves with the knowledge of  different organizational structures in the business, we moved forward to the management. As always, the Monday's lecture was the first class, it started with the question, what is management? It is nothing but performing things according to the plan with the aid of people and other resources. The functions of management are to set goals and deciding strategies by which these goals could be achieved, by deciding on how things would be done and dividing those into tasks and responsibilities, by controlling the path of the organization on which it moves, to ensure that things are been done the right way and effectively by the right communication and co-ordination between people, finding weaknesses and resolving them, motivating workers and making the best possible decisions.

The main focus was on the management theories throughout the week, most of them are old and as they were made by people itself, so they were actually a POV of how they thought would bring better results for businesses. Some of the theories we learnt about this week goes as follow:

The above picture is of Frederick Taylor, his theory was known as Scientific Management. He believed in efficiency and productivity, he introduced the idea of picking the best way of performing a task by observing different people doing a particular task, which takes the least time and gives the most output and by making everyone follow it, which would increase efficiency by reducing waste, time and money. He believed that workers are only motivated by money and they are only concerned with their job. The negative side of his theory was simple, he never thought about the people who wouldn't cope up with the new style of doing a task and regarded workers as machine and not humans.

The name is already mentioned in the picture, Fayol emphasised on administration. After searching for him on Google, to understand his theories in depth, he was actually an engineer at a mining company, later promoted to director. He thought alot about the management of the organization and developed the 14 principals of management and 6 functions of management, which were summarized in our class and we were given a background about what mindset he had.

This is Max Weber, his theories are strictly about rules and regulation and an organization being bureaucratic in order to be successful. He thought that an organization needs to be organized, and it can be only done if rules are followed. His theories are only suitable for some businesses and it is not very flexible. It also has minimal employee discretion and too many rules may be discouraging for employees. His theory is very old fashioned and some rules must be there in his rules based theory to country bureaucracy itself. Although, his theories can be used in today's organization too, where there is little need of flexible, but organization like google and apple which are extremely flexible cant apply his theories.

He observed theories of others like Taylor and Webber and integrated them with his thoughts. He believed that the span of control of a company should be limited, in our lecture class, when we came to this point, we were revised the previous weeks lecture which included this, Span of control and were asked the possible limitations of span of control which Urwick supported. His theories are also applicable to some particular organizations which would match the criteria of his theories. Communication is easy as spans are limited and because the supervision level and control would be high, there would be less chances of delegation. Giving rights and delegating to labours may bring motivation and innovation in an organization.

He is Elton Mayo, he got famous because of his Hawthorne effect in which he shifted the place of people into an Hawthorne factory and changed their environment and equipments and the way they used to work daily, since people get bored of the way they perform a task with the same method. According to the research, the output did increase by the improved social relationships and human interaction which bought this change in the theoretical world of management and brought the thought of thinking about human relation and how it improving it could benefit an organization.

He might not be known to alot of people by face and also personally, but he was the owner of the famous Ford Motor Company, which is even famous till today. We were also showed a clip about his work and the way he mass produced cars and how he believed that mass production brings maximum efficiency in an organization. He believed to create car which would be accepted by everyone and created thousands and thousands of cars with a little or no diversification in it. It focuses on producing a same kind of product on mass, and doesn't give a choice and varierty for consumers, this theory would support businesses that benefits from monopoly.

Also we discussed about the thoughts of Eric Trist and his theory about the socio-technical system and how he believed change should be accepted by everyone. We were more over told to search about different theorists apart from the ones we discussed and were also given a paper quiz. In short, the week ended up by enhancing our brains with different styles and theories of management and how different kind of businesses can take advantage of these theories.

7th - 13th October 2013, Organizational structure.

This was the first week of my classes at the ISC (International study centre) at University of Sussex and this blog is about my first week of the Business Management classes.
Everything went pretty well, I like the idea of how the group working technique is used, with breaks in between long duration classes (classes of more then an hour) and a little crack of funny jokes in between, making the class and subject interesting, also, dividing one whole group into two, for better attention and interaction between students and their teacher. Moreover, I like the way how they have divided work, responsibilities, students into groups and the communication levels which are the signs of a good ORGANIZATIONAL STRUCTURE,  which was the main focus of the week.

So the week started with a lecture by Vishal Patel, it was a summary of what the whole week would be about,the organizational structure of a company. It was well explained using a chart, how work is divided within an organization, responsibilities are shared by giving roles to all the employees and how the communication levels are built so that everyone is aware of who to report for the work they have done for the smooth running of the organization. Also, theories for instance by Mintzberg, which explained his thought that how an organizational structure divides its labour to achieve co-ordination amongst them which indirectly is important for the performance of a company. Dividing work also creates the chances for specialization which increases the creativity level of a department or a worker itself, that is he becomes more expert in a work which he is doing everyday and gets better ideas with the time on how to do that work more effectively.

After viewing an organizational structure from a distant point of view, it was more over taken to a maximized point of view and discussed on how things work within.

 Chain of command is also one of the things which was discussed in one of the classes,it is the communication network  through which the command moves to the down hierarchy from the top and also formal authority and responsibility is set also and how delegation takes place, where the responsibility of work is given by the top to low level employee but not the final responsibility.

Lets come to span of control now, it is the number of sub-ordinates who are responsible to report directly to an appointed manager. There are two type of span of controls, narrow and wide.
If the span of control is narrow, there will be many management levels, that would result in a tall organizational structure where as if the span of control is wide, there would be more people working under one manager which would result in a flat organizational structure. 

One of the hot topics of the week was centralization and decentralization decision making. Centralized decision making requires more delegation and more communication is required where decentralized decision making is a strict technique and mostly used for non-motivated staff and non-professional or unskilled workers.

Apart from this, we discussed about mechanistic and organic structures. Mechanistic structures consist high degree of specialisation and works with centralised decision making and is found in tall structures while in organic structures  individuals work together to solve a problems, coordination and fewer rules are required and is found in flatter structures. Lastly, matrix structure was also defined, it is actually nothing but project management.  It works well within an functional structure. Teams are created for a specific project and will be led by a project manager.