One who knows the enemy and knows himself will not be endangered in a hundred engagements. One who does not know the enemy but knows himself will sometimes be victorious, sometimes meet with defeat. One who knows neither the enemy nor himself will invariably be defeated in every engagement. (Sawyer, 1993, p. 162)
In fact Mary’s company has already shown tremendous growth for the past three years and it would be 100% logical to plan ahead, learn and understand their competitors, and act accordingly to the future market in the fashion industry.
Secondly, planning forces top-management and managers to think: If Miss Mary and her managers are involved in planning, which provide a valuable framework for thinking, analysis and creativity. Then the company will enjoy and benefit from it which can be cost saving, time saving, more productive and will be able to break through many barriers through creative and innovative solutions. The planning process actually forces the managers to think for better ideas and pushes the top-management harder to think of implementing those ideas from the managers.
Thirdly, planning provides direction throughout the organization: If Miss Mary is to draft out a plan it will involves activity and actions. These activities and actions will then be broken down from Miss Mary, top management to managers, from managers to supervisors and down the line. Each and every employee including Miss Mary to the production workers will have a role to play and a direction to follow, which in return, will comes back to the organization goals and objectives. Miss Mary need not worry too much if the plan can go astray because the whole process can be systematically monitor and controlled by the immediate superior. In this case it forms a two-way communication channel to ensure that the plans are moving in one single direction.
Once Miss Mary’s company have a plan, then directions would be clear and it will not involve unnecessary activities, time wasting, money wasting and over lapping of job scope which in return can contribute to the company’s productivity and cost effectiveness.
Fourthly, planning can ensure proper use and allocation of resources: From planning, Miss Mary’s company can easily identified the strengths and weaknesses of her individual employee and from there she can analysis and plan functional roles and responsibilities for them. This action can lead to the individual manager and supervisor to fully contribute their strengths to the company and without having to display their weaknesses at work. As resources are both useful and scarce it is important to create a competitive advantage by gathering one’s resources and maximising them. Miss Mary must use resources effectively and turn them into growth opportunities to contribute to the company.
Lastly, planning can be psychologically benefiting and rewarding for employees: This is solely a personal comment, as I believe that if an organization is committed in planning, actively involve and striving to keep pace with the market, then the employees will be shown the efforts of survival from the management. The employees will see a long-term job security as they saw all the efforts from the top-management to keep the business going. Miss Mary should protect the interest of her employees and show the need for team members to share similar aspirations. In return, employees might respond with hard work, commitment, loyalty, higher morale and fighting spirit to keep the company going.
Miss Mary should consider this point as her employees might loss trust in her and the top-management as they understand that there’s no planning and direction in Mary’s Fashion right now.
QUESTION 1
(C) Can you suggest a suitable form of business ownership for Mary’s Fashion which
is currently a sole proprietorship? Explain your answer in detail.
ANSWER 1(C)
Mary’s Fashion is currently a sole proprietorship and this might not be a suitable business ownership as there are many disadvantages and limitations.
The disadvantages and limitations are as follows:
1. Sole proprietor is personally responsible for all the debts.
2. Limited capital as banks will not give loan to small businesses.
3. Limited expertise and professional.
4. In the event of sole proprietor death, the problem of who will take care of the business and responsibilities will arise.
5. Slow and limited growth.
I would suggest that Mary’s Fashion would benefit and gain more if the business ownership is change to a Private Limited company.
Structure of a Private limited company
1. Minimum 2 to maximum of 50 shareholders.
2. Private Limited Company is not allowed to offer shares to the general public.
3. The right to transfer shares are not easy and is restricted and subjected to approval from the directors of the company.
4. There is no requirement to publish financial reports.
5. Minimum of 2 directors is required.
The advantages are as follows:
Limited liability of shareholders: The liability of its shareholders is limited to the amount remaining unpaid on the shares held and will not be liable to contribute towards payment of the company’s debt beyond the amount of shares held. In case Mary’s fashion goes burst she will not be losing all her wealth, she will only be liable to lose all the share that she held in the company. This will not affect too much on her personal life, as she will still have her personal wealth and belongings like her house, car and personal savings.
Financial Back-up: Being a Private Limited company it is always easier to have loans from banks or other financial companies. Private Limited company sounds and look bigger, stronger and it is essential for Mary’s company to have enough capital and funds to compete with other players and to enjoy growth and expansion without the hold-back of insufficient capital.
Employment of expertise and professionals: If Mary’s Fashion is strong in the market and shows potential for growth then it would be logical that employment of expertise and professionals will be a lot easier compare to a sole proprietorship business that have difficulties rasing capital and employing top professionals. An employee will see bigger career advancement and chances to peak with the company that is worth joining. Being Private Limited Company with financial back up and freedom to expand, it will definitely play a part in convincing talents to join the company.
Example: Microsoft CEO Bill Gates sees no activity as more important as meeting young undergraduates to convince them that they should join his company. As each summer, he invites groups to his US $60 million home where he mingles with the young guests, answers their questions, give advice, and reinforces the excitement of a career with his company.
(The Straits Times, “Gates Picks The Talents Himself”, August 27,1998)
In today’s cutthroat world of business, it pays to arm oneself with top talent. And the boss who knows this stands to win the corporate war.
(The Straits Times, “Gates Picks The Talents Himself”, August 27,1998)
Enjoy fast expansion and potential for growth: The result of fast expansion and potential for growth is closely related to the second and third advantages. As Mary’s Fashion have financial back up the company will have the ability to employ expertise and top professionals to run the business. From decisions and knowledge of the professionals Mary’s Fashion will be able to come out with plans for future expansion.
An important point to note is that Mary’s Fashion have already reach $3 million turnover in just three years, not forgetting that the growth is achieved without the assistance of financial back up, expertise and professionals in the company. This shows that there are huge potential for growth if all the advantages are blended in, there is certainly a growth in the near future for Mary’s Fashion.
All types of business ownership will have fair share of advantages and disadvantages. The disadvantages of a Private Limited Company are as follows:
Firstly, disagreements and differential: If Mary’s Fashion is to be turn into a Private Limited Company then she might face problems like the company actually spend more time and effort to resolve certain issues and sometimes might even lead to voting, that will express the will of the majority.
Secondly, involve in more rules and regulations: Company might be involved in stricter rules and regulations when running the fashion business.
Thirdly, higher tax rates: Private Limited companies are required to pay higher tax rates which will be seen as a additional cost to company’s expenditure.
Lastly, unlike sole proprietorship, the Private Limited Company is required to maintain proper accounting records and to summit financial statements of its annual returns to the Registry of Companies.
QUESTION 2
(A)‘In a public limited company, there is often a divorce between ownership
and control’. Explain this statement fully.
ANSWER 2(A)
Ownership:
When someone invest in the shares of the public limited company, he or she will be consider as one of the owner of the company, even if he or she is to buy only one share of IBM or GM stock. The fact is that these companies have tens or hundreds of thousands of ‘owners’. Legally they are named the owners of the company but they do not control and have no authority to do so either, but they do share something common ‘risk’.
But the fact is that before making any investment, it is important that the investors have a close examine and review on their understanding towards investment and the company rather than a so call ‘owner’. Knowledge and understanding should enable an investor to realise that there’s no investment that is safe and all investments are subjected to risks.
“On the professional side, it can’t be stressed enough that reading, of a wide variety, contributes enormously to an investor’s ability to make insightful decisions” (Mobius, 1996, p. 353)
It is human nature and everyone out there on the street would like to make more money and a perfect example will be those companies that issue stocks and shares. The fact that majorities of investors have very limited knowledge in what they are doing, their involvement with stocks and shares only occurred when they believe there are profits. These investors are usually lured into stocks and shares through word-of-mouth influence.
Such investors come from all walks of life and there is simply no way for public limited company to let these tens or hundreds of thousands of shareholders to have control over the company. It will be foolish and would threaten the business, as they are basically not professionals to handle the level of job scope.
Control- those with ability and authority:
Those controlling the company are talented professionals, holding key- position and have individual functional roles to play and contribute to the company. Top executives are involved in planning and controlling so to achieve the company objectives. Their presence is extremely critical and the qualities and knowledge they process are so much better compared to the shareholders.
The main difference between these two is that those controlling the company will need to have in- depth knowledge and understanding of operational procedures, while those shareholders just need to have enough money to make their investment.
Those top- executives are required to have qualities that enable them to see the business environment from a multifaceted approach, considering all the variables that could negatively or positively affect the company’s performance.
But the fact is that these top- executives who have the authority to control are usually not shareholders/ owners. Reasons could be as follows:
Firstly, when he or she is too close to the company the decisions made might not be as fair and could be biased.
Secondly, top- executives themselves might be restricted to be a shareholders/ owners simply because they are too close to the company and they can have access to more information about the company.
Lastly, it could also be a personal reason not to invest in the company they are working for, as stress and worries can be easily built if shares are not performing. This might lead to disturbance and a lack in performance of the top- executive.
Companies nowadays do give out shares to top- performing employee as a form of encouragement. Shares were at times given for free or at a very low price. This type of action can be seen as a way to retain high performance employees. But there will be a need to vote or hold a meeting with the directors to agree on the issues. Shares of the company cannot be given out as when they like there must be a reason and must be justify doing so.
Employee loyalty can also be developing when management recognises and show concern for high performance employees by offering company’s shares to them. In return employees response with hard work, commitment and loyalty back to the company.
It is common and usual for public limited company to see a separation between ownership (shareholders) and those who control the company. (Top- executives) This scenario can be seen in all public listed companies and I personally felt that a clear- cut separation is needed, as it will divide the role between an owner, someone who invest, and a controller, someone with the ability and authority. Over lapping of these two roles seems confusing especially when all the owners are involve in controlling, this ideal properly can’t work and might even result as a form of burden to the company.
QUESTION 2
(B) Why do firms today have to be socially responsible? Provide some examples
to explain how they do this.
Today’s firms have to be socially responsible because there is a increasing need to balance and juggle the often conflicting criteria of company profits, consumers want satisfaction and public interest. It is also dependent on cultural, social and psychological factors, consumers and public attitudes diverge widely and can be influenced, at the personal level, by individual’s level of education and one’s socio- economic status. It can also be seen as an opportunity for companies to enhance their corporate reputation, raise brand awareness, increase customer loyalty, increase sales and have good press coverage.
As time changed, so is the way business used to be, companies nowadays simply can’t just sell what they think is profitable but must also include a sense of social responsibilities within their trade with consumers. Customers will increasingly look for demonstrations of good corporate citizenship.
Consumers have expanding choices in the global market place. Savvy shoppers ask questions and the answers are the foundation for their purchasing decisions. Many consumers want to know what they are getting- and what they are supporting- when they buy. (Williams, 1999, p. 54)
This can be largely due to the educational background of the consumers and not forgetting the powerful influences from the media. (Newspaper, television, radio, posters etc.) The mass media are taking a greater responsibility in correcting and objectively educating the public on being green and socially responsible. Consumers are better-educated compare to before and they will have the ability to grudge those companies who are not contributing to the society and environment. Companies should put in efforts and start contributing before more and more consumers support socially responsible companies than it will be too late for those who are left behind to catch-up.
Society
(human welfare)
Societal
Marketing
Concept
Consumers Company
(want satisfaction) (profits)
Definition of Societal Marketing Concept: The idea that the organization should determine the needs, wants, and interests of target markets and deliver the desired satisfactions more effectively and efficiently than do competitors in a way that maintains or improves the consumer’s and society’s well- being.
(Kotler and Armstrong, 1999, p. 16)
The societal marketing concept looks into the ever-growing environmental problems, resources shortages, rapid population growth and human and civil rights. It is a call for all firms and marketers around the world to look into and balance the three, which is first company profits, second consumer wants and lastly society’s interests.
Example 1- Recycling
Recycling is one of the oldest and most effective way to be associated with being socially responsible it is easier for companies to start off using recycled products like paper bags, paper cups, cardboards and boxes. Recycling not only helps to cut waste, but also reduces our use of resources. Corporations and large organizations are recycling to save money on garbage disposal fees and farsighted players have already found profitable openings.
Top managers of companies like Bell Atlantic and Coco-Cola have made buying recycled products and investing in green R & D part of their business strategies. (Biddle, 2000, p. 170)
McDonald’s effort in green and social responsibilities makes ADWEEK’S Marketing week described McDonald as repainting its golden arches green.
McDonald’s green programs include using brown carryout bags made from recycled paper, recycling cardboard boxes at each restaurant, serving coffee in washable mugs instead of paper cups, replacing single- serve ketchup packets with a pump dispenser, and some three dozen other changes thus moving on from the days of Styrofoam burger packages paper burger packages. (Marconi, 1997, p. 222)
Example 2- Against animal testing
Animal testing have always been an issue concerning every animal lover, especially those consumers who are deeply involve with animals. Animal testing seems to be a threat, a sight of cruelty and most importantly there isn’t a need to do the testing on animals, animal testing can be written off.
A very familiar name, Anita Roddick founder of The body Shop has been actively in the campaign to ban animal testing in the cosmetics industry. In an interview she said, “I would close The Body Shop down completely than comply to animal testing- and I meant it”. She was supported worldwide with four million signatures in a single year to protest against animal testing and in November 1998 the United Kingdom at last introduced a ban on animal testing on cosmetics.
(Roddick, 2000, p. 173)
Example 3- Company that involves in human and civil rights.
Companies shouldn’t just exist and operate because of money and profits, they should also look into other socially responsible area; one example will be child labour.
The International Labour Organization (ILO) estimates that there are 250 million children between the ages of five and fourteen working in developing countries. (Springer, 1997, p. 13)
‘GAP’, fashion company
In 1995 when people realized a fashion company name ‘GAP’ was marketing clothes made by workers under extremely poor working conditions. A huge number of North American Labour, Women’s, Student, Consumer and Religious groups put pressure on the clothing chain. The ‘GAP’ didn’t want people to start a boycott and stop buying its’ clothing, so it signed an agreement that allows human rights observers to check the conditions at all its factories. (Springer, 1997, p. 13)
‘NIKE’, sporting goods
On October 25, 1997, a local newspaper in San Luis Obispo County, California, reported. “In a crusade highlighting the alleged human rights abuses of NIKE”, a high school club is asking the sporting goods goliath to “Just don’t do it”. Paso Robles High School organized a boycott, collecting all NIKE products and was to be shipped back to NIKE headquarters in Beaverton, Oregon to CEO Phil Knight. A letter asking the CEO to change his company’s employment practices regarding children and young adults. (Kielburger, 1998, p. 312)
The last two examples show a great difference in behaviour changes and unhappiness over a socially irresponsible company. It clearly displays the strengths and thoughts of both the consumers and the public. In the case of “NIKE” the media (newspaper) have indirectly created a negative image of the company but at the end of it, it is still up to the consumers and public to grudge and whether to continue to support the company.
As consumers, they can help to eliminate child labour in industries through their purchase choices. They are able to demand and influence companies not to use child labour in the production and this will result a change in employment practices.
Companies that are prepared to identify opportunities for more environmentally friendly products and practices, and which can produce genuinely green products and practices to meet these, will find a growing market. Companies that continue to ignore the green consumer or to address green issues only in a superficial way will increasingly find their sales threatened by a more environmentally aware consumer. (Lancaster and Massingham, 1994, p. 353)
There are no denials that a company that shows concern, moral value and responsibility gains respect from the public, consumers and the government. The government will certainly not let off those companies who are involved in irresponsible social activities. So being green and socially responsible does pay off and with concern for environmental issues growing the importance in defining the controversial relationship between business and the environment has become even more essential. In time to come, it will be another way of running the business and capturing of new market and consumers.
REFERENCES
1. Biddle, David, Harvard Business Review on Business and the Environment,
HBS Press, 2000
2. Gabriel, Vincent, Management (second edition), Longman Singapore Publishers, 1989
3. Kielburger, Graig, Free The Children, Harper Perennial, 1998
4. Kotler, Philip and Armstrong, Gary, Principles of Marketing (international edition), Prentice Hall International, 1999
5. Lancaster, Geoff and Massingham, Lester, Essentials of Marketing
(second edition), McGraw- Hill Book Company, 1994
6. Marconi, Joe, Crisis Marketing- when bad things happen to good companies,
(second edition), NTC Business Books, 1997
7. Mobius, J. Mark, On Emerging Markets (second edition), Pitman Publishing, 1996
8. Robbins, Stephen P and Coulter, Mary, Management (sixth edition)
Prentice Hall International, 1996
9. Roddick, Anita, Business as Unusual, Thorsons, 2000
10. Sawyer, Ralph D., The Seven Military Classics of Ancient China,
Westview Press Inc, 1993
11. Springer, Jane, Listen To Us, The World’s Working Children,
Groundwood Book, 1997
12. The Straits Times, “Gates Picks The Talents Himself”, August 27,1998
13. Thompson, John L., Strategy in Action, Chapman and Hall, 1995
14. Williams, Mary E., Child Labour and Sweatshops, Greenhaven Press Inc, 1999
CONTENTS PAGE
1. Question 1(A) – page 1
2. Question 1(B) – page 3
3. Question 1(C) – page 6
4. Question 2(A) – page 8
5. Question 2(B) – page 10
6. References – page 13