Economic system refers to the organizations and institutions created for the purpose of satisfying the wants of human beings. In a country, available resources have to be utilized to manufacture and distribute goods and services, which would meet the needs of the people so that they are satisfied. These institutions and organizations function with their own rules and regulations. The economic system has certain broad characteristics. The economic system always functions with scarcity of resources. How the system effectively and efficiently uses the resources will determine the extent to which the needs of the people are met. An economic system comprises people. That is, a society of human beings alone can constitute economic system. A set of institutions are created and used for the purpose of smooth functioning of an economic system. For example, banks, money, technology, government, price mechanism, planning etc., are all institutions through which the systems Continue reading
Global Business Environment
Global Compensation Practices
For many companies, maintaining a domestic compensation program that supports the strategic goals of the organization and meets the needs of employees is a difficult challenge. This challenge is intensified when a similar program must be designed to operate in multiple countries with different cultures. For organizations competing in a global marketplace, managing compensation requires a through understanding of the taxation of compensation and benefits, differing state social systems, differences in living standards and employee values and expectations. Some of the most challenging questions in compensation practices are following: How does a company pay expatriates from difference home countries brought together to work on a project? What about compensation packages for same country nationals sent to different regions of the world? Traditional compensation systems for expatriates, such as the balance sheet approach and going rate approach, may not be adequate for the company or expatriate in facilitating an case of Continue reading
Foreign Direct Investment and the Business Environment
Direct investment abroad is a complex venture. As distinct from trade, licensing or investment, Foreign Direct Investment (FDI) involves a long-term commitment to a business endeavor in a foreign country. It often involves the engagement of considerable assets and resources that need to be coordinated and managed across countries and to satisfy the principle of successful investment, such as sustainable profitability and acceptable risk/profitability ratios. Typically, there are many host country factors involved in deciding where an FDI project should be located and it is often difficult to pinpoint the most decisive factor. However, it is widely agreed that FDI takes place when three sets of determining factors exist simultaneously; the presence of ownership-specific competitive ages in a transnational corporation (TNC), the presence of locational advantages in a host country, and the presence of superior commercial benefits in an intra-firm as against an arm’s-length relationship between investor and recipient. The Continue reading
External Environment Factors Causing Uncertainty in Organizations
Businesses are bound to encounter several forces whenever they are in operation. In some cases, these forces are over and above their control. In spite of this reality, there is no single business which can exist without going through the external environmental forces. It is therefore imperative for a business establishment to put into consideration all the possible external forces which may affect its operations either positively or negatively. In this regard, opportunities and threats are worth noting because they account for the external factors which would often affect a business environment. When the external factors are considered and concurrently compared with the internal factors, it will be possible for a business management to formulate the right policies of dealing with the inevitable external forces. Some of the factors which may cause uncertainty in the external business environment are inadequate needs of customers, technological changes, regulations and elimination of foreign Continue reading
Economic Policies Affecting Business Environment
The economic environment of business is composed of various set of economic policies, economic system, strategy of economic growth and development, resource endowment, size of market and status of infrastructural facilities in a country. All these economic policies affecting business environment one way or the other. Economic policies include fiscal policy, monetary policy, foreign trade policy, price policy, etc. These policies lay the framework within which every organization has to function. To understand the impact of these policies on business environment, let us discuss each one of these components in detail. 1. Fiscal Policy By fiscal policy we mean, the government’s tax efforts, public expenditure and public borrowing. Through these the government can effectively encourage consumption, investment and savings habits and also restrict them. For example, suppose there is inflation in a country. Inflation implies that the people have high purchasing power and so they demand goods. To curb this, Continue reading
The Importance of Population Trends in Business
The population of a country and its economic growth is closely interlinked with the attainment of economic development; a country must consider its human resources both from the angle of assets and liabilities. That proper utilization of natural endowments and the level of production of national wealth depend very much on the extent and efficiency of human resources, but too much of population will again eat up all the fruits of developments. From the point of view of economic welfare it is quite essential to study human resources in detail at the same time it should be stressed human beings are the vital instruments of production. The fruits of all economic activities are rested on the betterment of conditions of living of human being. The human resources are playing a vital role in attaining economic development of country. The economic development of country involves proper utilization of its physical resources Continue reading