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Economics-5
Economic
Changes incurred on various types of taxes in the tax system have specific influences on the economy in any country. Personal tax can influence price levels in a given economy whereby a reduction in such kind of tax leads to a reduction in the general price level on most of the consumer goods. This is mainly done to favor the general public. Taxation adjustments could be done alongside policy adjustments as a way of attempting to reduce tax. While this is done to favor the consumers in the economy, there are certain implications on the economy as well as on individual firms. Deducing tax in favor of the public has implications on firms’ productivity and their general performance.
A firm’s manager has the obligation of addressing any changes in the tax policies especially when the personal tax system is changed. Policy adjustment in the tax system should be addressed after they are made effective so that employees adjust accordingly (Robert, 2000). Personal tax reduction is known to increase the net income of employees. The increase in personal taxes could mean that employees are highly motivated to an extent that their productivity may increase (Robert, 2000). This could be used by the management as a factor behind their immediate response to make it clear on the prevailing tax policies. It may however seem difficult to address the issue when the tax policy change is on a personal tax increment. Increasing taxes has a direct effect of influencing motivational behavior of employees. This happens because their buying power reduces making it more difficult to afford all goods and services they used to afford before the policy change.
Reduction or increment in the personal tax policy has an impact on the price level in an economy. The effect on price level is never direct by is a problem initiated by the changes in consumer buying behavior. Consumers would respond to personal tax deduction by buying more of the goods and services they used to buy. The increase in demand is reflected to the increase in personal tax. In this case, of increased net income, every affected consumer in the market would now turn into a buying behavior in which they would choose larger baskets of goods or services (Gerald, 2008). This is done while every consumer tries to go higher on his or her indifference curve where the utility level is higher as well. Unfortunately, this hardly holds for long since consumers turn to the cheaper baskets whose utility level is less than initially when the price level starts to shoot up. They finally find themselves in an indifference curve lower than their initial indifference curve but this comes as the market forces of demand and supply resists the increased demand so that the market restores back to equilibrium (Robert, 2000).
Once the utility level of consumers is lower, consumers’ demand for goods and services becomes low as well. The market has its unique demand and supply forces in which people resist from purchasing goods at elevated prices while suppliers marked by various firms resist selling their goods and services at price lower than at a certain level. These two levels from both the consumer and supplier sides bring about the market equilibrium (Robert, 2000). Any adjustments on either of the two sides create a change in the market equilibrium and the productivity by firms.
In this case, study personal tax creates an increase in the net income of employees who turn out to be consumers of products and services from various firms including those firms they work in. The first implication is an increased productivity initiated by employees’ motivation from the increment in their net incomes. This holds for a while and could be strengthen by an increased demand since people now have higher income than before (Gerald, 2008). The firm in this case would increase its productivity in order to meet the prevailing demand. The increased demand is created by consumers as they try to maximize their utilities by buying more goods and services.
The other effect on the economy that subsequently creates effect on firm’s productivity is the increased money supply in the economy. This is a condition whereby people have more money than they used to have before and hence demand more of goods and services. To respond to the increased demand, the firm in this case, together with other suppliers would increase their supply through increased productivity of goods and services. Since the demand is high, suppliers sell their supplies at higher prices thereby increasing the price level in the economy. This creates conditions of prices failing to fall back once the demand decreases (Robert, 2000). The reduced demand comes in because of a reduction in the real income of consumers. Prices are flexible upwards but sticky downwards an indication that, firms are not ready to cut down the prices for their goods and services. This also happens to the firm in this case study and under such situations, the firm would respond by cutting on its productivity. Cutting down productivity is done to avoid unnecessary losses arising from excess supply over the prevailing demand. Cutting down the firm’s productivity is done up to a point where the marginal productivity is equal to the marginal revenue of the firm (Robert, 2000). This condition may bring about many adjustments within the firms including resource utilization and labor structure.
The structure of the firm would have to be adjusted once the policy creates a low demands because of increased price level in the economy. The capital of the firm may be fixed to an extent that any adjustments done affect the labor side of the firm. A reduction in productivity would imply that resources are underutilized by the firm. The management has to come up with an effective way of dealing with the inefficiency created (Robert, 2000). The best option is to substitute labor for capital so that the firm would be more capital intense than labor intense but only if the capital is fixed to an extent that the firm can hardly run without much of capital than labor. Decrease in productivity causes the marginal productivity of labor to decrease. In this case, much of the labor would be less beneficial to the firm. Given the firm would be more interested on quality than on quantity, capital intensity would be more important than labor intensity. The goal is to capture more consumers at a higher price to maintain the firm’s level of profitability.
The firm in this case study and its general business environment would be affected to a certain extent by both internal and external factors. Internal factors affecting the firm’s business environment would include issues revolving around labor and capital, both financial capital and human capital. On the other hand, external factors include external forces including government regulations, competition from other firms, economic conditions, and the geographical environment. Labor and capital are internal factors and determine the quality and quantity produced and supplied in the market. Poor management strategies in substitution labor for capital or substituting capital for labor would require high skills as part of the human capital (Robert, 2000). In this case, since productivity freezes as the market demand goes down, some workers do not add to the marginal productivity of the firm while capital remains constant. The excess labor should be suspended. Bringing this condition causes an adjustment from quantity focusing to goal setting on quality improvement. Poor or inadequate skills could also lead to poor strategic management and underprivileged decisions on productivity and marketing. Skills are always upgraded to keep employees and management up to the prevailing technologies. Technology here comes in as both an internal factor influencing the firm’s business environment and an external factor having an influence on the same. As an internal factor, technology is part of the human resources that is initiated to improve on capital productivity.
Incorporating advanced technologies would make the firm operate better on more capital intense condition than on labor intense condition. Quality products and services because of technology favor the firm’s business environment. Higher technologies from competitors bring down the firm’s performance within its business environment. The firm also has to observe other external forces such as the government regulations and policies like the case of tax deduction or increment (Robert, 2000). There should be a way of projecting on the future negative outcomes and create strategies that would save the firm from such effects. When the government generates policies in favor of the general public or consumer, there would be a positive impact and a negative impact from the policy. It is good to aim at maximizing benefits from the positive side of the policy but still generate mechanisms that would curtail and negative effects on the firms especially if the effect is realized in the long run. The same caution has to be applied on the effects of the firm’s business environment by environmental factor. Every good aspect of environmental factor influencing the firm’s business environment should be observed as well for the firm to maximize on the related benefits. The firm would only advance under bad business and economic conditions given that all good aspect of both its internal and external environments are utilized with mitigation measures be taken on any foreseen negativities.
References
Gerald Auten, R. C. (2008). The 2001 and 2003 Tax Rate Reductions: An Overview and Estimate of the Taxable Income Response. National Tax Journal, Vol. 61 No.3 , 345-364.
Robert Carroll, D. H.-E. (2000). Income Taxes and Entrepreneurs: Use of Labor. Journal of Labor Economics, Vol.18 No.2 , 324-351.
Simulation Of A Socially Innovative Enterprise Globalisation A Goldmine For Corporates
Simulation Of A Socially Innovative Enterprise: Globalisation A Goldmine For Corporate
Contents
TOC o “1-3” h z u 1.0 Introduction PAGEREF _Toc376342405 h 12.0 Brief Overview of the Article PAGEREF _Toc376342406 h 13.0 Evaluation of the Article Using Systems Thinking Theory PAGEREF _Toc376342407 h 24.0 Evaluation of the Article Using Corporate Social Responsibility Concept PAGEREF _Toc376342408 h 45.0 Conclusion, Reactions and Recommendations PAGEREF _Toc376342409 h 5
1.0 Introduction
A socially innovative enterprise draws on the strengths of its immediate community to create solutions to organisational, social, and environmental challenges. Such approach to solving societal challenges draws on the systems thinking theory which posits that organisations forma crucial part of the broad system, the universe, where several parts/components work in concert and interact amongst themselves to make the world a better place to live in (Ackoff, 2010). In essence, the systems thinking theory forms a strong basis on which the social theory that houses the concept of corporate social responsibility is anchored (Adam, 2004). The gist of the systems thinking theory as approached through the corporate social responsibility lenses is that, each element, that forms the broad system, the universe, must show some advanced level of care to other elements, must work in unison with other elements, and most importantly, must build strong relationships and structures to address the dynamism that characterise the universe (Gharajedaghi, 2005). Unlike the traditional thinking approach that lends itself to simplicity, isolation, statics, and specificity (Ackoff, 2010), the systems thinking approach attempts to reshape the human face, by creating an atmosphere of hope and prosperity for everyone.
This essay analyses an article titled “globalisation a minefield for corporate(s)” written by Andrew Hammond and published in the New Zealand Herald on May 29, 2013. The essay employs core theories such as the systems thinking approach and social corporate responsibility to explain how multinational corporations operating in foreign countries can employ social innovation practices to solve social issues such as unemployment, poor wages, poor healthcare systems, and poverty.
2.0 Brief Overview of the Article
In his scathing corporate governance article, Hammond (2013) contends that globalisation of commerce has opened Pandora’s Box for corporate entities. Pushed by the long-term strategic plans to maximise profit margins, large multinational corporations find the alternative path presented by globalisation attractive in their quest for building empires. Yet, Hammond feels that most multinationals rush to make a mark in foreign markets without undertaking an objective analysis of their core competencies and capabilities related to the sensitive area of foreign policy. While using the example of Google “diplomatic” row that drew perennial rivals, Israel and Palestine, Hammond shows that Google’s inadvertent decision to change its name on its “Palestine territories” homepage to “Palestine” has opened a new turning point for business decisions. Though Hammond acknowledges the fact that Google, and in extension, any other multinational for that matter, is not a diplomatic entity, the company has a duty to maintain friendly ties with the host nation governments. The gist of the article blurs the otherwise traditional thinking that business entities should not take part in charting the path for political, human rights and even legal matters.
Hammond links this turn of events to globalisation and technological innovations. He also draws on the example of the Egyptian revolution where multinational companies played a central role in shaping the developments that led to the protracted demonstrations and the subsequent ouster of Hosni Mubarak. Specifically, Google and Twitter collaborated in creating a forum that allowed demonstrators to express their frustrations and communicate amongst each and to the world in real time. Such direct involvement by the business community cannot be restricted to technological companies because companies representing mining, energy, and fast moving consumer goods have joined hands too to end abuse of basic human rights. However, these multinational corporations lack what Hammond boldly describes as “corporate foreign policy”, a receptive strategic framework that defines and packages their external affairs activities such as media relations, government affairs, corporate social responsibility, risk management, and operational planning, into one framework.
In a nutshell, Hammond believes that multinational corporations must embrace sound foresight and horizon scanning capabilities in order to accurately anticipate opportunities and threats in the social, economic and political environments in the host countries. Further, Hammond is convinced that multinational corporations, especially those in the fast moving goods and those operating in countries with prone to civil crises or even those with weak democratic structures, must formulate clearer internal guidance structures to aid in decision-making, delivering value to stakeholders, and to complying with conventional corporate governance standards.
3.0 Evaluation of the Article Using Systems Thinking Theory
Hammond (2013) offers a bold and sweeping analysis of the challenges that multinational corporations go through in foreign markets. He however contends that though these multinational corporations can choose to mitigate the challenges if they adopt receptive corporate foreign policies. Arguably, this way of mitigating diplomatic challenges lends itself to the systems thinking approach. The systems thinking approach acknowledges that components that make the universe or a society must work in concert with each other (Ackoff, 2010). Unlike the traditional approach, the systems thinking theory contends that components making a system interact and influence each other in making the system work well (Skyttner, 2006). For example, an organisation is made of many functions such as marketing, human resource, finance, and operations, many stakeholders such as suppliers, customers, employees and the community, and processes such as procurement, recruitment, distribution and product development. Arguably, these components interact with each other to help the organisation achieve its long-term profitability goals. According to Hammond (2013), a systems thinking approach, or an approach where multinational corporations package the component of their strategic plans in a receptive framework help them (multinational corporations) to align these functions, stakeholders and processes with best practices as part of collective efforts to mitigate risks. In nutshell, and as Skyttner (2006) posits, systems thinking approach considers a business enterprise to be only one of the many components that make the broader system, the universe, and therefore business enterprise must work in concert with other components such as the community, government agencies, and environmentalists.
Organisations must demonstrate a fine grasp of the implications of their actions no matter the situation. Hammond (2013) shows that organisations must be guided by the actions of its employees must demonstrate a fine grasp of issues that make up the broad system within which it operates. Hammond postulates that organisations must scan their horizons well, gather and process raw data into information, interpret information to create knowledge and ultimately convert that knowledge into wisdom. It is this wisdom that underlies broad decisions and policies that characterise organisational culture and activities (Tsoukas and Vladimirou, 2001). These broad decisions involve making a distinction “within a collective domain of action, based on an appreciation of context or theory, or both” (p.979). For example, Hammond (2013) shows that Google and Twitter made a broad decision to launch the “tweet to speak” initiative to encourage Egyptians to protest against bad governance during the Egyptian revolution that culminated in the ouster of the long-serving Egyptian leader, Hosni Mubarak. Arguably, this bold decision was as a result of Google and Twitter’s ability to objectively analyse the situation. The decision was bold because another mobile telephony company, France Telecom was forced by the regime to shut its network. Arguably, and while drawing from Ackoff (2010) F-Laws of management, the bold decision by Google and Twitter was advised by the realisation that oppressive regime was hindering the smooth interaction of other components of the Egyptian social, economic, and political system.
4.0 Evaluation of the Article Using Corporate Social Responsibility Concept
Corporate social responsibility entails the commitment to the tenets of sustainable economic development. These tenets entail working closely with employees, their families and the communities in general to enhance the quality of life experiences (Wei, 2011). Arguably, enhancing the quality of the lives of the masses can only be achieved by developing solutions for addressing societal challenges such as unemployment, poverty, disease, and ignorance. In his article, Hammond (2013) is convinced that multinational corporations can meet their corporate responsibility obligations by rolling out responsive corporate foreign policies that will chart their long-term sustainability development goals. In essence, multinational corporations must develop friendly ties with their host nation governments, civil society agencies, and community based organisations. These friendly helps to reduce duplication of efforts because they will result in wise prioritisation of corporate social responsibility programmes (Sacconi, 2004). However, Hammond (2013) is quick to clarify that such friendly ties must be charted within the provisions of the 1st and 2nd principles of the United Nations Global Compact. These principles require business organisations not to take part in human rights abuses and to respect and protect the internationally recognised human rights principles (Fialka, 2006). Both Israel and Palestine have been accused by the global community for perpetrating human abuses and therefore Google’s change of name only served to heighten the tensions between the two countries.
Multinational corporations must show a sense of awareness of the implications of their actions to the host countries. According to the United Nations Global Compact, multinational corporations must employ social innovations to solve social issues such as abuse of human rights and reduce the run-away unemployment issue that characterise most developing nations. Hammond (2013) reasons that in a technological age where large media houses such as CNN and Aljazeera work closely with community-based and environmental-watch organisations such as transparency international and Greenspan, there is every reason that multinational corporations should show care to the environment and the communities in which they do business. This is in tandem with the 7th, 8th, and 9th United Nations Global Compact principles which requires business entities to support environmental conservation initiatives, be environmentally responsible, and develop environmentally friendly technologies (Totikidis & Heenitigala, 2008). Though reservedly, and as Hammond (2013) reasons, Google and Twitter joint initiative to create a platform for the demonstrating Egyptian to share their experiences could be perceived to be an act of corporate social responsibility. In essence, the initiative could be described as socially beneficial to the Egyptians given the foregoing circumstances where the Hosni Mubarak regime was perpetuating human rights abuses.
Best corporate social responsibility and corporate governance practices require multinational corporations to structure their strategic plans around the United Nations Global Compact principles, especially the last principle on corruption. This principle requires that business enterprises must ensure that their operations are transparent and free from all forms of corruption, extortion and bribery (Wei, 2011). Most importantly, multinational corporations must promote social progress, must enhance standards of living and human rights (Fialka, 2006). This is in tandem with strong sentiments made by the former United Nations secretary general, Kofi Anan, who decried the increasing levels of ills perpetuated by business enterprises. According to the United Nations Global Compact (2013), Anan said that the world must choose between pursuing short-term profitability goals and adopt a human face, between condemning the human race to starvation and giving everyone an opportunity to realise their maximum potential in a safe environment, and most importantly, between an egocentric free-for-all business approach where losers are left to fend for themselves and a situation where the strong and the successful in the society conduct their activities in a responsible manner demonstrating sound leadership and care for the environment.
5.0 Conclusion, Reactions and Recommendations
In recommendation, Hammond (2013) reasons that multinational corporations can mitigate the challenges posed by diplomatic standoff between nation states at the international market arena by embracing dialogue and collaborate with stakeholders. As a matter of fact, Hammond quotes an example where Barry French then Nokia Siemens Networks appealed to members of the European Parliament to intervene so as to lift a ban European companies barring export of surveillance technology to Iran, following the country’s disputed elections in 2009. Nokia Siemens was already facing challenges doing business in Iran and was therefore appealing to European Union to consider resolving the diplomatic deadlock with Iran. The fact that this appeal was made in a human rights and new information technologies hearing convened by the European Parliament in June 2010 (Hammond, 2013), underscores the need for adopting sound corporate governance practices that recognises and respects the right of human beings to accessing modern information technology gadgets.
This is in tandem with the systems thinking approach where components making a system must interact with each other, consult each other and work in concert with each to allow for easy execution of the system goals (Ackoff, 2010). There should be a close exchange of ideas between organisations and other components that make the host country social, economic, and political system (Gharajedaghi, 2005). In a nutshell, multinational corporations operating in foreign markets must deploy systems thinking and corporate social responsibility theoretical assumptions to develop sustainable business practices.
References
Ackoff, R.L. (2010). Systems thinking for curious managers. Triarchy Press.
Adam, V. (2004). Systems thinking as a major skill of business students: A new teaching concept at the University of Zurich, Switzerland. Journal of Systemics, Cybernetics and Informatics, 2(6), 43-47.
Fialka. J. (2006). Politics & Economics: Big businesses have new take on warming; some companies move from opposition to offering proposals on limiting emissions. Wall Street Journal. pg.A.4.
Gharajedaghi, J. (2005). Systems thinking: Managing chaos and complexity – a platform for designing business architecture. Butterworth-Heinemann.
Hammond, A. (2013). Globalisation a minefield for corporate(s). The New Zealand Herald, 29 May: A.32.
Sacconi, L. (2004). A Social contract account for CSR as extended model of corporate governance (Part II): Compliance, reputation and reciprocity. Journal of Business Ethics, No.11, pp. 77–96.
Skyttner, L. (2006). General systems theory: Problems, perspective, practice. World Scientific Publishing Company.
Totikidis, V. & Heenitigala, K. (2008). Corporate social responsibility in a troubled world: Keeping sight of local and global community problems. Poster presented at: Managing in the Pacific Century: The Australian and New Zealand Academy of Management 22nd Annual Conference. The University of Auckland Business School. 2–5 December 2008.
Tsoukas, H. & Valdimirou, E. (2001). What is organizational knowledge?” Journal of Management Studies, 38: 973-993.
United Nations Global Compact (2013). The ten principles. UNGC, [Online], Available at: http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/index.html (Accessed September 06, 2013).
Wei, J. (2011). Corporate social responsibility – A comparison between Vietnam and China, International Journal of Governance, Vol. 1, No.1.
Simulacra and Simulation
Simulacra and Simulation
A simulacrum refers to an image or representation of something or someone. Baudrillard refers to this image as a “reflection of a profound reality, as what masks and denatures the profound reality, or masks the absence of a reality or as having no relation to reality at all”. In that case, the image would be its own simulacrum (Baudrillard 6). On the other hand, simulation is the process of using a model to develop conclusions about the behavior of real elements in the world (McHaney 2). Computer simulation requires the use of programming to create this model.
Computer simulation falls in the unique category of science fiction. Some people view it as a discipline in applied mathematics that involves the creation of programming languages. From Baudrillard’s perspective, science fiction represents a state of imagination where things that seen naturally impossible become possible. Winsberg says that computer simulation is one of the applications of science. He argues that computer simulation questions issues like the nature of scientific evidence, the nature of scientific explanations and issues of scientific realism (Winsberg 2). Computer simulations create and justify claims of scientific knowledge. Unfortunately, these claims often involve applications or programming languages installed in the computer. This begs the question of whether the claims in computer simulations are real or simply simulacra. It then follows that since these claims are a combination of arithmetic figures and calculations, they are a representation of man’s image. The only problem is that man is unable to complete these same calculations and arrive at the exact same conclusions without the help of computers.
The complex nature of computer simulations often proves that the end result often differs from the theoretical basis for the simulation. This difference proves that computer simulations cannot be an image since they do not reflect the theory. On the other hand, computer simulation is an image because it denatures reality and exists as an image on its own, that is, a simulacrum (Winsberg 6). Computer simulation credits its existence to people’s desire to take out the risk in making decisions (McHaney 15). Computer simulations make it possible to calculate probabilities and consequences of various options in a given situation. People are able to pick the option with the best probability without thinking too much. This creates a situation where individuals live in an imaginary world filled with numbers and possibilities instead of real people. It is Baudrillard’s ideal world, where the unnatural is natural. This is a world that is devoid of the constructs built by culture, media and attitude (Baudrillard 126). It is the world of fiction, image that exists in itself and thus is a reality.
Burdea et al says that virtual reality is a “most powerful human-computer interface.” This is because a go between for humans and computers (Burdea et al 1). Virtual reality is a kind of simulation that uses computer graphics to create a realistic-looking world. It is a synthetic world that responds to its user’s input (Burdea et al 2). In virtual reality, a computer builds a new environment that is filled with information and allows the mind to work from another atmosphere. Hemn defines it as an entity that is real in effect but not in fact (108). Simulation has the ability to make something real when it is in fact not real. This is exactly what Baudrillard was trying to explain in his work. The essence of virtual reality borrows from interaction, artificiality, simulations, immersion and networked communications. It constitutes various realities that create an entity. This is what Baudrillard refers to as simulacrum. It is the existence of something that is not necessarily a fact. It is very difficult to understand how virtual reality exists because it includes the human senses like reality and yet it is not reality. This existence allows human beings to question fundamental beliefs like God. Is he merely an image since he has no physical body and or is his existence a reality because of lack of a better explanation (Baudrillard 4).
The piece on Simulacra and Simulation is a topic of debate in digital media because it belittles the quest of reconciling human beings with computers. This is because the idea of computer simulation questions whether it is possible to arrive at the same decisions without using computers. This piece also shows a relationship between simulations and diverse area of study, for example technology and science fiction. The idea of artificial environments questions our view on reality. This makes it a very popular topic because it questions the fundamentals of reality and existence (Heim, 109). This is like bait to the curious mind of human beings. The piece makes it possible to question the constructs in place and push towards what once seemed impossible and unrealistic. This makes it a popular topic for discussion. It is an area that gives ethical activists a very hard time. This is because it is unethical to deny the reality of virtual reality and the impact of computer simulations, and yet, it is also unethical to support creation of artificial realities. It is a challenge to put boundaries to this research because of the inherent need for information (Downes 6).
Work Cited
Baudrillard, Jean. Simulacra and Simulation. Ann Arbor: University of Michigan Press, 1995. Print.
McHaney, Roger. Computer Simulation: A Practical Perspective. San Diego: Academic Press, 1991. Print.
Winsberg, Eric B. Science in the Age of Computer Simulation. Chicago: University of Chicago Press, 2010. Print.
Burdea, Grigore, and Philippe Coiffet.Virtual Reality Technology. Hoboken, N.J: J. Wiley-Interscience, 2003. Print.
Heim, Michael. The Metaphysics of Virtual Reality. New York: Oxford University Press, 1994. Internet resource.
Downes, Daniel M. Interactive Realism: The Poetics of Cyberspace. Montreal: McGill-Queen’s Univ. Press, 2005. Print.