Introduction
Modern global economic system is a considerably distinct from the dogmatic frameworks of political economy (Mankiw, 2014). Professor Blanchard contests that extreme increase in production and substantial automation of the business processes have seriously changed the global economic landscape (2011). In order to stay competitive the companies have to develop and implement new business solutions, as well as they have to stay socially and environmentally responsible (Goldin, 2014). In addition, Gartner wrote that there is an increasingly important need to stay in line with the perpetually evolving customers’ preferences (2006), and the smallest disharmony with their predilections may result in catastrophic repercussions for a firm. In other words the bargaining power of the customers is dramatically increasing, while the profit margins (in all industries) are shrinking.
Another essential aspect of the 21st international economy is increasing role of the government (Geiersbach, 2010). Harari and Thomson argue that although the global community is focused on drifting to the purest form completely self-regulated capitalism, the advent of digital information technology forced the state to intensify control over the market to prevent unfair competition and other violations of the law (2013). The practice shows that the ‘invisible hand’ of the government is no longer effective – the state has to intervene too frequently to remain invisible. For instance, the EU Merger designed to protect the principles of fair competition results in imposing prohibitions on more than 200 merger and acquisition per year.
This complexity is aggravated by internationalization of business. Today, the businesses have many opportunities of stationing their research & development centers overseas, attempting to reduce costs, but inflicting a heavy impact to the domestic labor markets. Davis Service Group was listed as one of the largest United Kingdom based textile provider that experienced various impacts of the global market permutations. Eventful business story of this company is a good case scenario for understanding how the United Kingdom as well as the global markets changed, and evaluating their impact on the UK business and non-profit organizations is.
This research pursues several objectives:
It identifies the purposes and objectives of different organizations with regard to their legal structures and types, describing the extent to which organizations similar to Davis Service Group. It also explains what the responsibilities of the Davis Group are and what strategies this organization employs to meet the interests of its shareholders.
This paper attempts explaining the way modern economic systems allocate resources in a most effective way, emphasizing the importance of fiscal and monetary policies on Davis Group. In this section the paper also analyzes the impact of pending European and UK competition policies and regulatory frameworks on the business cycles of the business entities.
Thirdly, this research aims at explaining the connection between market structures and output decisions, including pricing models used by business organizations, providing examples of how market forces determine responses from business organizations. This section of the paper also evaluates the impact of cultural and business environment on Davice Service Group ( Berendesen).
Ultimately, this research discusses international trade importance to the United Kingdom corporations. Specifically, this section of the research focuses on the impact of the policies of the central regulatory European authorities on the United Kingdom commercial companies.
Part One
The Types of Business Organizations in the United Kingdom
Many types of business organizations exist in the common law jurisdictions nowadays. Reflecting the evolutionary trends of its domestic legal system, each type of organization is suitable for achieving special objectives designated by its founders (Lowry, 2006, p. 132).
Sole traders and partnerships
One of the simplest of forms for doing business in the United Kingdom without incorporating a legal entity are forming a partnership or becoming a sole trader. Under such scenarios the new legal entity is not formed, and the founders become personally liable for all debts and liabilities incurred in the course of business activity. The income tax is paid individually both in partnerships and in sole trading. Mishkin emphasized that that business people form partnerships and register as sole traders when they do not intend to grow the business to middle and large sizes, and when their personal skills and characteristics constitute the core productive assets of such enterprise (2004).
Private Company Limited by Shares
A private company limited by shares is one of the most popular legal structure in the country ( Lowry & Dignam (2006,). Their distinctive advantages include:
Civil and commercial liability of founders are limited to the equity amount. In other words, these people put at risk only those assets, which they personally contributed to the company. There is no link between a personal and a corporate bankruptcy.
Founders of such companies may not sell their shares to the general public.
Public Limited Company
A private company limited by shares and a public limited company differ in way, that in the second case the shares are not available to the public(Lowry & Dignam, 2006). In order to raise capital, the company may sell shares to anyone, though the practice demonstrates that in some cases the shares may be consolidated in one entity or individual (ibid.).
The main characteristics of a public limited company in the United Kingdom are the following:
These companies can issue two types of shares: simple and privileged. The amount of dividends of the first ones is determined by the company profitability. The second group of shares provide stable dividends irrespective of the company performance, but, in return, their holders do not have voting rights..
In order to register a public limited company, a minimal statutory capital of fifty thousand sterling pounds is required.
Business owners usually choose this type of legal formation, when there is a need to raise capital, and no other alternatives are available. Although the benefits of PLC in the financial context are rather obvious, yet it has several noteworthy shortcomings. In particular, the regulatory requirements are more rigid, as well as such companies are more frequently audited.
Cooperative
A cooperative is a form of independent, autonomous group of people. These unions are formed to satisfy mutual economic, cultural and social interests by means of establishing a jointly owned and managed business. A central idea of making a cooperative in the United Kingdom is exclusively non-profit, i.e. their founders manufacture goods or render services to satisfy personal needs, and make contributions to the society. However, these organizations are entitled may make profits, but only on condition that the profits are be spent only to the accomplishment of a cooperative’s statutory objectives.
Meeting Objectives of the Shareholders
Blanchard (2011, p. 65) wrote that under the concept of a stakeholder the one should understand different individuals, organizations, local and central government, social organizations and other physical and legal members of the community, who are interested in successful performance of the organization. These stakeholders are categorized into two main groups:
Internal stakeholders – those, who own the company or is employed by it (permanently or temporarily). In other words, to this group the scholars usually ascribe those, who have interest in successful financial performance of the company.
External stakeholders – those, who are interested in high professional performance of a company (customers; beneficiaries; partners and suppliers; etc.).
Strategic Framework and Stakeholders Management
Some scholars argued that in order to stay competitive a business organization has to meet interests of its stakeholders to the utmost extent (Sullivan, 2003). In the meantime, it is important to highlight the fact that satisfying interests of all stakeholder groups is virtually impossible, because some interests are always conflicting. For instance, founders’ interest in collecting higher profits is contrary to the employees’ inducement of high salaries, and the client’s interest in lowers prices.
Varian and his associates (2009) concluded that there are several effective strategies for keeping the stakeholders interests balanced, so that they do not overlap and each group is satisfied to the extent that it agrees to give it contribution. These strategies include:
Stakeholder Expectations Management - in order to make its project successful, the company has to influence the interests and desires of its stakeholders to ensure that they conform to the objectives of the project.
Leveraging Perception of the Stakeholders- satisfying expectations of shareholders all the time is not an always implementable task. At the same time, analyzing perception of the shareholders is a good way for understanding whether their non-financial interests are satisfied or not.
Resolving problems of the shareholders in a timely manner - dealing with stakeholder’s expectations timely and ethically is a critical element of a corporate development.
The synergy of strategies mentioned here can facilitate a company to keep its stakeholders relatively satisfied, in order to ensure that there is a sufficient interest in contributing to the company development and, if necessary, increasing their equity shares.
Part Two
Distributing the Resources in an Effective Manner
Because our economic system refers to the intricate system of entangled social and economic relationships involving consumers and manufacturers, different methods of allocating resources among the population evolved (Sullivan & Sheffrin, 2003). The development of human civilization produced several major economic systems. The most important and popular systems are the antagonistic planned system and the uncontrolled, freely regulated markets. Although both planned and free market systems have their advantages and disadvantages, the problem of scarcity of resources is inherent to the both frameworks.
A well-tested solution to address a scarcity problem is the development of free market institutions, because the demand becomes always balanced by supply. Besides, many scholars emphasized that the institutions, established by the free market, are the ones, which propel economic growth and technological development.
Evaluation of financial policies impact on economy
Both fiscal and monetary policies focus on ensuring economic stability and growth, reducing inflation and otherwise protecting the domestic currency (Goldin, 2015, p. 62). The main purpose of administering the first ones is to control economic cycles, by means of leveraging state incomes and expenses. The toolkit of a state fiscal policies comprises taxes and state purchases (procurement). Therefore, when the government needs more funding, it may either increase the taxes and other payments (excise duties, customs etc.) or it may decrease the amount of state procurement contracts. In the first case it leads to the tax burden increase. In second scenario, the government may reduce curtail
The purpose of monetary policies is controlling cash, which is emitted by the central banking authority. As a result, national interest rates are changed, critically influencing demand and supply. Decreasing interest rates stimulate further spending (Varian, 2009,). This tactic is a very successful method of helping the business to keep afloat in times of recession.
Assessing the Impact of Competition Policies
In order to promote fair competition, the government may sometimes intervene into the economy. In particular, some activities may be restricted by means of issuing licenses.
In practice, it prevents the company from acquiring other companies, preventing it from becoming a market monopolist.
Part Three
The Correlation between market structures and pricing models
Several main factors determine a market structure type. Thus, these factors include the quantity of business entities, which operate domestically, type of their products. In addition, difficulty of surmounting the market entry barrier is an important indicator in this context (Gartner, 2006).
Firstly, monopoly refers to a situation when all products in a particular industry belong to a single manufacturer. Because no other competitors are present on the market, a monopolist can impose practically any prices. Therefore, under this economic system the prices are frequently the highest, while the quality of products is moderate or low.
Under oligopolistic market models the prices are rarely lower than in monopolies, but the products quality is higher, owing to the quality-focused competition solutions employed by the companies.
Lastly, free markets produce the best fusion of prices and quality, because businesses have to compete in the both segments.
Determining Market Responses
Sullivan and Sheffrin (2003, p. 41) argue that under the concept of market forces the one should understand internal and external factors, which affect supply and demand. Thus, manipulating demand and supply invariably affect pricing situation on a market. For instance, if supply increases, prices will drop and vice-versa.
A vivid illustration is the international market of oil products. For example because of internal political crisis, the country of Libya stopped oil extraction. As a result global oil prices increased (see illustration 1).
In the meantime, competition is another factor which critically influences the price. E.g. Apple is the only company, which produces premium mobile and tablet-gadgets with unique software. Therefore, the company is free to impose the highest prices.
Illustration 1
Business and Cultural Influences
Operating effectively across different economic regions necessitate using various product ‘localization; strategies, as well as business dealings with the foreign partners require special cultural approaches. Because the majority of the company sales is happens overseas, influence of the local culture is critical in product development, marketing and local human resources management.
Therefore, before penetrating into the new market, contracting an overseas service provider or hiring foreigners, the company has to understand two primary elements of a local culture:
Its core values – it will help to understand the main inducements;
Its main communication patterns- it helps to understand what approach to communication and business negotiation is the most successful for a specific national environment.
The answers to these questions lie in the core of Davis Service Group strategy to dealing with its foreign stakeholders.
Part Four
The factors of international trade importance
International trade was the factor, which converted the United Kingdom, an isolated, d country, to the leading global power. In accordance with the Findings of Bank of England (2007) international trade is vitally important for the United Kingdom business because it is a developed country, where the demand for locally manufactured products is modestly low. Therefore, domestic producers’ success often hinges on the availability of foreign market. For instance, 78% of cotton produced in the UK is exported (EEAC, 2006).
Moreover, international trade allows the UK importers to bring cheap raw materials, which reduces overhead expenses of the UK manufacturers, and increase their profit margins proportionally (Thompson & Harari, 2013).
Influence of International Economic Processes on Domestic Business
Nash mentioned that the import-export amounts of the United Kingdom is one of the largest in the world. (2013). As a result, almost any event of serious importance in the world is likely to have an impact on the business community of the country. The most prominent factors in this context include:
Economic factors – e. if unemployment rises in Germany, decline of the British products in that country is quite predictable.
Environmental – e.g. global warming make some products (e.g. made of leather) less popular in the United Kingdom.
Legal – the adoption of an international treaty may limit the UK export quotas.
Political factors – for example, introduction of common taxes in Europe, or European Union enlargement will result in increase of the local companies’ financial burden.
Technological –breakthrough technology can make the UK products outdated.
The Policies of European Union and their Impact on the United Kingdom Business Organizations.
The main reason of creating European Union is to remove domestic trade barriers. Griebach wrote that today it is the largest single market in the world (2010). A business organization s is no longer controlled by the national regulatory authorities, as well as the phenomenon of double taxation gradually faded from the European financial landscape..
Moreover, while the companies registered in the UK are entitled to these benefits of the common European economic systems, their competitors from overseas are not privileged with such benefits. Therefore, the profit margins of the United Kingdom companies and its European counterparts are higher
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