Global Business

Global Business

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Question 1

Deciding how a business should be structured is the first step to the success of any business in the international market. Before deciding what organization form is appropriate, it is important to consider the control level a business owner wishes to have, vulnerability to lawsuits, expected gains from a business, and the tax implications of organizational forms. There are various business forms that one can consider in starting a business in the international market including a sole proprietorship, partnership, and LLC.

In a sole proprietorship, one person owns a business. It is simple to start such a business considering that it requires limited regulations. The owner keeps all the profits. However, with this form, the owner has unlimited liability on business debts. The amount of equity is limited to the personal wealth of the owner. With this form, it is close to impossible to exploit new opportunities because capital is mostly insufficient. Transferring such a business is challenging as it requires selling the entire business to new owners. Additionally, lack of enough information about a local market in the international market limits the growth of a business structured in this form.

Partnership as a business organization form involves various partners. In establishing a business in an international market, the partnership is considered more effective. The strategy involves identifying a partner in the foreign market and partnering with the business. The partnership has various advantages. First, the partner will help in identification of local consumers and preference and therefore it will be easy to penetrate the market. Second, there is a limited liability as it is shared among the partners. Third, capital is sufficient as the partners engage in the investment. Fourth, the partnership enables a business in an international market to conform to the regulations laid by the foreign government. However, to be successful the partnership must be made formally to avoid later misunderstandings.

In choosing the employees for the internationally established market, a business owner must consider several things. The employee depending on where they are based must have a command of language that is commonly used in that specific language. For example if it is in the UK, the employees must be able to speak English. This way language barrier will be eliminated. The employees must be familiar with the kind of business that is being established. This way they will handle the business will experience associated with enhanced operations. Additionally, the employees must be exhibit professionalism to avoid ethical issues in the foreign market.

In establishing a business whether locally or internationally, it is important to consider finance and accounting from the planning stage. This is because, they play an important role in any business management. By evaluating the available capital and how it should flow in a business, budgeting will be effective. With a budget, it is possible to create a business that has a greater potential for success and stability in a foreign market. The capital structure is very important for any business as it is responsible for operations financing, and purchasing of assets. The debt versus equity issues helps in determining the capital weighted costs. Finance and accounting responsibility plays a key role towards the success of any business in a local and foreign market.

Other issues to consider in entering international market include cultural factors such as the language used to avoid communication barrier, preferred taste, regional values, habits of the potential consumers, and demographics. On economic factors, it is important to consider class structure in the new market, per capital income, demand and supply, and financial transactions.  Legal factors to consider include labor laws, restrictions, customs laws, business procedures, tax laws, liability regulations, and employment laws. Additionally, a business owner must consider investment, discriminatory, and operational restrictions in the new market.

Question 3

Measurements of GDP are essential in starting, running, and ending a business in an international market. Through the measurements, a business owner is able to identify the economic growth of a target market. GDP provides a general picture of the economy state of a market. With this picture, people are able to judge whether to enter the market or not. With the GDP measures, economists are able to analyse the effects of economic shocks, and monetary policies on the general economy. These details guide the running of a business in international market. While running a business, GDP measures help businesses to flow with the trend. For instance, when the measures show that GDP is fluctuating, business owners know that it is time to reduce spending, and lay off employees.

When the measures show that consumer confidence level is high, then businesses know it is time to reach the consumers since their willing to spend is also high. When the consumer confidence is low then investors know that the future faces challenges. GDP measurements help in determining whether the foreign market has a growth potential or not. In such a case, investors can decide whether to exit a market or continue investing. In entering a workforce, GDP is significant because it guides on which market to seek employment. For instance, by looking at the GDP of a target market, one can evaluate whether there are employment opportunities or not. When the GDP shows that an economy is growing, then one is assured of an employment opportunity and in this case a good pay is highly likely to be provided. However, when the GDP is falling, then employment opportunities are minimal as many companies are laying off employees and reducing operations. Therefore, GDP is significant while graduation because it provides guidance on markets with high employment opportunities as well as markets with higher income opportunities.

Reference

Hill, C. & Hult, T. (2017). Global Business Today. 10th Ed. McGraw-Hill Education.