In a simple terms the term Transfer pricing refers to the prices that related parties charge one another for goods and services passing between them. The most common application of the Transfer pricing rules is the determination of the correct price for sales between subsidiaries of a multinational corporation. These prices can be used to shift profits to tax-favored jurisdictions, If in a transaction between a subsidiary in a high-tax jurisdiction and another in a low-tax jurisdiction, the high-tax subsidiary charges a price below the “true” price, some of the group’s economic profit is shifted to the low-tax subsidiary. Obviously taxpayers would want to engage in this sort of behavior because it can significantly reduce their taxes. If there were no limitations on this behavior, the entire income of multinational corporations would be taxed at the lowest tax rate in the world to zero rate of taxation. Consequently most countries Continue reading
Management Concepts
Henri Fayol – Father of Modern Management Theory
Henri Fayol was a French industrialist and manager, working in the mine industry and looking for applicable solution to business management. He went to school in Lyon (the second largest city of France) and enrolled at the engineering school of Saint-Etienne (Ecole Nationale des Mines). He received an education as a mine engineer and graduated in 1860 from this school at the age of 19. He was first employed as an engineer at Boigues, Rambourg and Co. In 1874, this company became Commentry-Fourchambault SA or Comambault). It is important to notice he spend all his professional life in the same company experiencing its expansion and knowing well its structure and production methods. Fayol was first remarked as an engineer when he wrote a paper proposing a solution to fire hazard, fire fitting and spontaneous combustion in mine, destructing men and installations. In 1866, he was appointed director of a single Continue reading
Role of Leadership in Times of Crisis
A crisis is the truth of today’s fast-paced business world. Rapid organizational change, changing economic conditions, problems with personnel, unexpected technological changes, and political effects cause instability in today’s business world. This instability appears out of state control as economic disruptions that result in crisis. The process approach to crisis management builds on the concept of crisis incubation, that crises evolve within organizations, they do not simply appear, and they are not divorced from the actions of those managers who may ultimately be required to deal with the management of such events. The role of the leader, especially in crisis cannot be diminished, due to all of the responsibilities being on the shoulders of the leader and the cost of loss being too high. In a period of crisis, a leader should not only be a person who leads and inspire people but a person who can efficiently fix a Continue reading
Entrepreneurship Characteristics
The process of discovering new venture with creativity and innovation is called entrepreneurship. Entrepreneurship requires assumption of risk and reaping of awards. It brings resources together and provides option for self-employment to an individual. Entrepreneurship also creates employment opportunity for others. Entrepreneurship is a mind set of creativity and risk taking. It is a process of identifying opportunities and bringing together factors of production to exploit these opportunities. Entrepreneurship results in creation of new venture by planning, organizing, operating and assuming the risk. It always aims for innovation, profitability and growth. The entrepreneurial spirit has appeared as the engine of economic development. Entrepreneurship has resulted in millions of new ventures in the world. Entrepreneurship has appeared as the driving force for industrial and economic development. Therefore, the interest in the concept of entrepreneurship is growing in today’s world. Entrepreneurship has the following characteristics: Creating New Venture – Entrepreneurship is concerned Continue reading
Formalization – Meaning, Advantages, and Disadvantages
Formalization is the process of creating structures that govern operations within an organization. In a formalized organization, work activities are often controlled by a set of accepted rules and procedures. In addition, a formalized structure has a hierarchical and clear reporting structure that runs from bottom to top. To a large extent therefore, a formalized organization is managed through several levels of supervision. The extent of formalization, however, varies from one organization to another and is mainly determined by the size of the organization. As opposed to informational organizational structures where individuals are esteemed higher than the job positions, a formal organizational structure is made up of rules that unmistakably state how work should be done at the various levels in the hierarchy. Since rules that guide the holder of a position are static, no confusion arises when the holder of the position changes. This thus implies that the transition Continue reading
Impacts of Strategic Change on Organziations
Businesses usually face the complicated process of alternating culture, leadership, values, and structure while executing strategic change. However, no matter how complex these means are, they are performed mainly to advance the company’s strategy to thrive in the future. In other words, strategic changes tend to be conducted in terms of meeting the latest trends in the industry to remain equal with rivaling businesses of a similar sphere. Thus, before implementing such alternation, it is vital to analyze the possible impacts on the other parts of the company operating. Firstly, it is significant to start changes when the business is thriving and not in a crisis. Specifically, any alternations take a considerable amount of effort and funds; hence it might be impossible to perform them with the deficiency of at least one factor. Every employee should be involved in the process of a proper transformation execution and not only top Continue reading