The Global Economy and Business

One way of describing the function of the office is the administrative back-up for the organisation. Everyone involved in a business operation has to refer to the office from time to time. Even in the first minutes of the day the office comes alive. The salesperson telephones from a customer’s shop to find out some details about prices, or discounts, or delivery dates. A customer telephones to find what has happened to the order he sent in last week. The short-listed applicants for the new Quality Control Manager’s job turn up for their interviews with the Personnel Manager. The company secretary arrives earlier than usual to ask whether the agenda for the Board of Directors’ meeting later in the day has been typed yet. And the office junior brings in the morning mail which he has opened and sorted, and which now needs to be distributed to the various managers. There is a great variety of tasks undertaken in the office and the staff engaged in these operations need to know a great deal about the business. For example, when customers visit the office or telephone, they naturally expect the staff who deal with them to be knowledgeable. They expect their enquiries to be dealt with courteously, promptly and competently. Receptionists may occupy a comparatively lowly position in the organisational hierarchy, but they create the vital first impression which often determines whether we get the order or not.

The importance of the office is obvious. It is the hub of the communications network for the whole organisation. Technology affects the whole of business, not least the office, and the concept of a completely paperless office is beginning to emerge. Already on many executives’ desks there are keyboards or other devices to communicate with the computers which control all the electronic de-vices in the office. Electronic files are replacing conventional filing cabinets, and copying machines are appearing together with a variety of printers able to print anything from letter-quality characters to four-colour diagrams. Telephone systems are now incorporating a host of facilities from an answering service to video-conferencing.

Video-conferencing involves executives separated by hundreds and per-haps thousands of miles, discussing problems face-to-face on television screens. This in turn conjures up the notion of clerical workers performing many of their daily tasks away from the office, so that offices of the future are not only going to be paperless. They are also going to occupy less space, require fewer staff and al-low much shorter working weeks.

These changes will affect a large number of people. The introduction of robotic production lines in factories and new technology in offices will change the way men and women work, and the roles they expect to fulfil. There have al-ready been great changes in the traditional patterns of employment due to new technology, and this seems likely to continue, with implications for both sexes.

Whatever happens as a result of the new technologies, the role of the office will be changed rather than diminished. Most office workers of the future will find themselves seated at multi-function work-stations able to exercise control over routine purchases, sales, market research, production runs and accounting procedures. In other words, we can expect a centralisation of decision-making powers, with the office becoming even more emphatically the very hub of the business.

I want to explain, that SWOT analysis is an analysis of strengths, weaknesses, opportunities and threats. You can use it to analyze business activity. Also it will be very helpful for you marketing plan. But you can use SWOT analysis not only in business, but in you live to see you own strengths, weaknesses, opportunities and threats. For example, I did it analyzing my English studies at university (my first year - 2003):

 

«As for my progress in English studies and also in special subjects as economics, mathematics, etc.,  I’d like to say that my English has become much better this  semester, than it was at school, and my progress in other subjects is not worse too. I think it is so, because I have overcome such my weaknesses as laziness and absent-mindedness, but some problems have still remained unsolved. For example, I often have a good plan for my working day, but I seldom follow it.  And I try to change the things I can’t change; it’s hard for me to accept them. I don’t overlook threats that can prevent my study. For example, when something is important, I don’t deal with it I often wait until it becomes argent. But I also have some strength as patience, persistence and a critical attitude to myself. I also remember my opportunities to become successful. For example, I have ability for independent studying. And I have an opportunity to improve my physical form at our university. »

I hope that SWOT analysis will help you to improve not only your business, but you own live too

Yesterday I wrote an article about sources of financing for a franchisee. And an interesting thought came to my mind. I was thinking about some associations and unions and their role in economic development.
 

Just think about it a bit. Small business companies have very little power to influence the legislation of the US or any other country. Even when they understand the necessity of some changes or improvements they are too small, too busy and don’t have enough money to protect their rights. As a result, 2-5 big companies have all the possibilities to lobby legislation favorable for them. They can put into operation new tariff or promote necessary educational program.
 

The only way out for small and medium-size companies is to become organized. And we can see this in almost every country in the world. The activity of different Small Business Associations and Unions of Entrepreneurs is a great power that can be one of the guarantees that protect competition.
 

But what about franchising? Yesterday I realized that franchisee can get the benefit of lobby twice! On the one hand as a representative of small business, and on the other as a representative of Franchise Association.
 

It seems for me that I found an additional benefit of franchising!

I think that it’s time to write a few words about financing your future franchise business. It’s evident that to start your business you’ll need money. You have to cover franchise fee, buy equipment, hire personnel and bear some other costs. The exact sum depends on the type of business and many other factors. But there is at least one thing that remains invariable: you have to look for and to choose the sources of finances.
 

I decided to say a few words about choosing the sources as it seems to me that there are some facts of misunderstanding or even false beliefs in this sphere. I’ll describe the main of them using “pro&con”.
 

Personal savings
Pro:
- this money belongs to you and if something goes wrong you will not have problems with paying back; bad results will not influence your credit history;
-you can start using them immediately (or just after talking over with your family);
-it costs you nothing (except the opportunity cost).
Con:
- in most cases personal savings are not enough to finance even 50% of prospective business;
- there is an opportunity cost of using them (the things that you planned to purchase for that money and the interest you received for them);
-as you don’t borrow money this transaction will not impact your credit reference when your business succeeds.
 

Bank credit
Pro:
-it’s the most common way to finance your business;
-if everything goes OK, you’ll contribute your credit history;
-bank has an incentive to finance only profitable and pay back projects. As a result they insist on business plan development and carefully evaluate it. So you’ll get professional and unbiased opinion concerning you franchise business almost for free.
Con:
-it costs you;
-to get a bank credit it’ll take time.
 

Small Business Association (SBA) credit
It’s close to a bank credit (I’ll write more about this form of financing later)
 

Private venture capital firms’ credits
Pro:
-they even credit the ideas deflected by banks because of high level of risk;
-they can give professional advice concerning not only idea itself but your prospective franchisor.
Con:
-the interest rate usually is much greater comparing to the one given by a commercial bank.;
-it also takes time to get such a credit.
 

Franchisor’s direct financing programs
Before comparing advantages and disadvantages of this way of financing I need to attract your attention to the fact that it’s also one of the advantages of franchising in general. The previous ones are used by any form of small business.
Pro:
- about a third of franchisors provide such programs, loan guarantees or leasing programs. As a potential franchisee you have an access to them but competition is lower in comparison with bank credit and other standard financing variants;
- you’ll have an advantage in securing loans because franchises have the credibility, reputation and experience of an established trademark.
Con:
-you become more dependent on your franchisor;
- it still takes time and you still have to pay an interest.
 

And don’t pay with you personal credit card as the interest rate will be too high. It can eat all you profit…
 

I’m going to continue sharing my opinion about finances in general and franchise finances in particular in next posts.

Signing a franchise agreement can be taken up as ordinary transaction. Franchisor is a seller and franchisee is a buyer. Franchisor is the owner of the product and tries to make his offer as attractive as possible. But an interesting peculiarity of franchise transaction makes it different from the ordinary one. The relations between two sides do not end after the agreement has been signed. Franchisor continues providing training and other kinds of support. So I need to make a short conclusion: franchisor also lays down his demands toward potential partner. And if you want to be an attractive franchisee you need to think this over too.
 

At first I think it’s necessary to distinguish the differences between franchisor’s requirements and the things he wants you to provide before signing the agreement. The first group of factors (requirements) usually includes the following:
1. Money (for sure it’s the first). Franchisor needs at least to cover his expenses.
2.  Credit checks and personal references. He wants to be aware that you have enough business and financial experience not to “cause damage” to his reputation.
3. Relevant background and professional experience. Franchisor understands how important they are to determine your suitability. It means that provided by him training will be enough to start a business and to succeed. By the way background traits are the factors that franchisee has to think over too. It seems for me that it’s too lightly to dive in a business without any professional experience in that business sphere even if it promises high profits.
4. Sometimes franchisor demands some legal requirements and other levels of control. It usually concerns high-cost franchises because in this case franchisor worries more for his reputation as it costs him more…
 

The second group of factors includes question that franchisee has to ask himself. But this has to be done absolutely honestly. I know that some prospective franchisees changed their minds after answering them and saved their efforts and money. These questions may include:
1. What is the total sum of money do I really can and want to invest in that business?
2. What business sphere is right for me?
3. What average profit do I expect to earn per period of time?
4. What about my background? Am I aware in my professional experience or have access to it?
5. Do I have management and accounting skills?
6. Will I need external financing?
7. Can I work in a team?
8. Will this be my primary income, or supplemental?
 

Maybe if you give your honest and well-founded reasoning to your potential franchisor this will lead to some additional services or help from his side. Or even he will think over decreasing some fees… Maybe…

Speaking about company structure, I’d like to say that there are two main types of it. The first is hierarchical and the second is flat. The hierarchical system or organization is one in which people have different ranks or position, depending on how important they are. Companies with a flat structure are organized in less hierarchical way than traditional companies, with the aim of giving all employees an equal status within the company.

The hierarchical system is characteristic for the majority of the companies. Such system is used by the Philips company. Royal Philips Electronics is managed by the Board of Management, which looks after the general direction and long-term strategy of the Philips group. The President is in the head of the Board of Management. The Supervisory Board supervises the general course of business of the Philips group; makes sure policy is realized and advises the Board of Management. The policy of the company is realized by the Corporate Departments, which consist from different departments, such as Finance, Information Technology, Human Resources Management, Legal Affairs and Communication and Public Relations.

So as we know such organization of the management of this company has made it the world’s biggest electronics company.

There are a lot of talks on different business approaches in different countries. For instance many say that it’s almost impossible for an American to do business in Japan as there’s absolutely different culture. The employees of such an enterprise will not understand the demands and requirements of their employer. And at the same time they will expect something absolutely strange from the employer. For instance in Japan corporations considered to be the main home of the employee providing him a life-long contract.
That’s the fact. And we have to pay attention these approaches while organizing a franchise.
As a result of national mentality top franchising industries are different in your country and mine.
For instance in the United States franchise system is developing rapidly in services while in Russian Federations there are almost none service franchisers. I wonder what are the most developed franchising industries in Korea? And in Australia? In Nigeria? In your country?
 

Does anyone knows?

At the beginning I would like to recollect the scientific statistic about main reasons people don’t like shopping. About 42 per cent of people don’t like shopping because of queues. 18 per cent don’t like shopping because of crowds and about 8 per cent because of finding products. But of course there are other reasons why people don’t like shopping. They are parking, not enough time, carrying it, inconvenient opening hours, cost or pricing, packing or unpacking and so on.

To my mind these problems can be overcame. Firstly, retailers can place a big parking near their shops. It is very convenient for customers, because they can economize their free time instead of looking for a place for their car. Secondly, retailers can improve the service. Because sometimes shop assistants don’t execute their duties. For example, from time to time they are very rude or they can leave their job earlier. It seems to me that it will be very good if retailers offer a special service such as home delivery.

As for me I like shopping especially when I buy presents for my close friends and relatives. Shopping gives me some energy and raises my mood.

Don’t look a gift horse in the mouth.

But nevertheless you should know bout recommended gifts, gifts to avoid, good and bad colours for wrapping paper in some countries. And of course it will be very good if you will know how present a gift to individuals and groups.

Gift Giving

Japan:

- Gift-giving is an important part of Japanese business protocol.

- An expensive gift will not be a bribe.

- Present gifts with both hands.

- Gifts are opened in private, because if the gift turns out to be a poor choice, “loss of face” will result.

- Before accepting a gift, it is polite to modestly refuse at least once or twice before finally accepting.

- Ensure that your gifts are wrapped. The safest gift-wrapping choices are pastel-colored papers, without bows.

Gifts to Avoid:

- Lilies, lotus blossoms, and camellias are associated with funerals. White flowers of any kind should be avoided.

- Giving four or nine of anything is considered unlucky.

- Red Christmas cards should be avoided, since funeral notices are customarily printed in this colour. There is also a superstition that potted plants encourage sickness.

China:

- Today, official policy in Chinese business culture forbids giving gifts; this gesture is considered bribery, an illegal act in this country. In many organizations, however, attitude to gifts are beginning to relax.

- The Chinese will decline a gift three times before finally accepting, so as not to appear greedy.

- If possible, have your gifts wrapped in red paper, which is considered a lucky colour.

- Wrapping in yellow paper with black writing is a gift given only to the dead.

Gifts to Avoid

- Numbers such as ‘73′ meaning ‘the funeral’ and ‘84′ meaning ‘having accidents’ are to be avoided.

- Scissors, knives, or other sharp objects

- The following items are to be avoided as they are associated with funerals: handkerchiefs, gifts or wrapping paper in white, black, or blue

The following items are to be avoided as they are associated with funerals: clocks, four of any item [the Cantonese word for “four” sounds similar, in the same language, to “death”]

India:

- Gift giving is customary in India, and is seen as a sign of friendship.

- It is advisable not to give expensive gifts, unless you are very close to the person.

- Normally, gifts are not opened in the presence of the giver. However, sometimes your Indian host may insist on your opening the gift, and would expect appreciation for his/her choice.

- Alcohol is culturally not accepted in most parts of India.

- Be cautious in giving a leather item as a gift. Since many Indians are vegetarians, they may not appreciate items made of leather.

Spain:

- In ordinary Spanish business culture, however, gifts are usually given only at the conclusion of successful negotiations.

- If you receive a gift, you should open it immediately and in front of the giver.

- When offering any gift, you should ensure that it is a high-quality item [perhaps a brand-name] and that it is finely wrapped.

- You should not give anything too extravagant as your generosity may be perceived as a bribe.

France:

- French business etiquette dictates that you don’t include your business card with a gift.

McDonald’s is launching the first lunar franchise. At first sight it looks like a joke. Whom to serve on the Moon? How to deliver the food ingredients? Who will work there?… These and many other questions appeared in my mind immediately after I’ve read that information.
 

Certainly, they can’t consider this as a profitable project. As I understand they can’t even think about getting their investment back within the next dozens of years. But as I understand they are thinking about indirect benefits.
 

The first unquestioning benefit is promotion and advertising. That idea is enough interesting and strange for many journalists to write about it. People will discuss it too… At the same time the idea gives rise to positive emotions. Just listen to your emotional reaction when reading the following:
“The famous astronaut is lending the Moon and he has only 2 hours to meet his sweetheart. They meet at the McMoon. The stars are surrounding them. They can see the Earth through the window…A robot in a traditional uniform is serving them… ”
 OR
“A small space ship flies up to the McMoon using the special corridor. Two strange aliens are ordering 4 BigMacs and 2 Colas. It’s a “McMoon drive”…” 
Is it funny? Yes! Fantastic? Sure! But I bet that you’ve smiled while reading this. That’s what I meant while speaking about positive emotions. And what will you say about Ronald McDonald in the rocket?…
 

The second benefit for the company concerns costs. According to the official information, because of the high cost of providing living space and life support technologies, all food preparation, serving, cashier duties and maintenance will be performed by a crew of specially designed robots. And if everything works OK they will start using the same technology in some terrestrial restaurants! As a result this can help saving thousands in annual labor costs (certainly if trade unions will not lobby a law to forbid it).
 

I hope I managed to prove that this idea is not so strange and stupid as it seems from the first sight.