Entrepreneurial Blog

“Technology and globalization go hand-in-hand. Globalization unleashes technology, which in turn drives firms to plan production and sales on a global basis. Technology changes the work we do and in nearly all cases, the jobs created by it demand more education and training. It also changes the way business operates by transforming relationships between suppliers, producers, retailers and customers.” (Ross, 1993, p. xii)

Throughout history the introduction of new technology has brought changes in the job force from one sector to another.  In the 1800’s from farming labor to the labor to produce farm equipment as new farm equipment technology has emerged.  As airplane technology was developed there were fewer jobs in transatlantic cruises and more jobs for air travel personnel.  As production technology increases jobs in manufacturing and transportation decrease, but other jobs are created over time.  They might not be for the displaced workers but created new job designs in the service, clerical, finance, shipping/warehousing, sales and marketing fields.

“As technology advances, new, faster, better goods and services are available and in demand. To fulfill consumer demand, there is another shift in the labour market toward workers who are trained in the skills that can provide such goods and services.”   Through technology innovations more jobs are created throughout societies.  Many international companies have a larger staff due to international selling.  The internet, one major technology has opened up small nations to world markets.  People in America can offer micro loans to entrepreneurs in India so they can start their own businesses.

The four phases of globalization saw a rise in technology that helped international selling.   The first phase of globalization was from 1830 to its peak in 1880.  This first phase saw the introduction of railroads and ocean transportation causing a rise in manufacturing and the cross-border trading of commodities.  Also during this first phase the first working telegraph was introduced in 1837; this cased an increase in telegraph operators and a decrease in pony express riders and messengers.  As railroads were built goods could travel across the country and across borders.  Then Alexander Graham Bell in 1876 successfully transmitted speech creating the telephone.  The use of the telephone enhanced order taking, order processing, material ordering, and operations for businesses.  Business could more easily communicate and transport their product globally with this new technology.

The second phase of globalization was form 1900 to 1930 with the rise of electricity and steel production.  “The open hearth process also allows for the production of larger batches of steel … and the recycling of scrap metal.”   “The mass production of cheap steel, made possible by the discoveries described above (and many others not mentioned), has revolutionized our world.  Consider a brief and incomplete list of the products made possible (or better or more affordable) by cheap, abundant steel: railroads, oil and gas pipelines, refineries, power plants, power lines, assembly lines, skyscrapers, elevators, subways, bridges, reinforced concrete, automobiles, trucks, buses, trolleys, refrigerators, washing machines, clothes dryers, dishwashers, nails, screws, bolts, nuts, needles, wire, watches, clocks, canned food, battleships, aircraft carriers, oil tankers, ocean freighters, shipping containers, cranes, bulldozers, tractors, farm implements, fences, knives, forks, spoons, scissors, razors, surgical instruments, ball-bearings, turbines, drill bits, saws, and tools of every sort.”  European business began established foreign manufacturing plants by the 1900’s.  BASF, a German company, began conducting business in North America.  Nestlé, a Switzerland company, opened operations in United States, Britain, Germany and Spain by 1905.  In Europe and North America there was an emergence of multinational enterprises.

The third phase of globalization is from 1948 to the 1970’s with the formation of the General Agreement on Tariff and Trade (GATT), the end of World War II and the development of the Marshall Plan to reconstruct Europe.  GATT of 1947 was created to reduce international barriers for the improvement of trade and investment.  When World War II ended there was a demand for consumer products and a need to rebuild Europe and Japan.  The Marshal Plan was to reconstruct Europe after WW II.  This plan was to increase European economies, “the Marshall Plan has also long been seen as one of the first elements of European integration, as it erased tariff trade barriers and set up institutions to coordinate the economy on a continental level.”  The Marshal Plan helped European non-communists countries to re-import goods back into their country.  The main supplier for these imports was from the United States.  “The years 1948 to 1952 saw the fastest period of growth in European history. Industrial production increased by 35%. Agricultural production substantially surpassed pre-war levels.”

The fourth phase of globalization began in the 1980’s and continues until today.  With the advances in technology, communications, manufacturing, and information; emerging markets are seeing remarkable growth.  Cross border trade and investments are growing.  The personal computer, the internet, and advances in communication.  48 thousand personal computers were sold in 1977, in 2001 the sales of personal computers topped over 125 million.  Technology advancement has allowed just about every household to have two personal computers.  Many different businesses have emerged with the advent of the personal computer.  Hardware manufacturers including; chip, processors, ram, hard drives, disk drive, cd/dvd drives, printers, monitors, components, and more.  Software companies have also evolved to take advantages of the faster processing speeds.  In the 1990’s the Internet went from University/Government use only to mass commercialization.  “As of 2009, an estimated quarter of Earth’s population uses the services of the Internet,” according to Wikipedia.    With the world wide spread use of the Internet many businesses can have a worldwide presence.  Developing communications has also helped business’s globalization.  Skype and Vonage allow businesses to communicate very inexpensively worldwide.

Thomas L. Friedman author of Dueling Globalizations: DOS capital, Foreign Pol’y, says “globalization has “brought down the many walls that limited the movement and reach of people.” Friedman argues that as the world is wired into networks, there will be “more direct power to individuals than at any time in history.” Overall, the author posits that the integration of technology is the clearest and most precise method of characterizing globalization.”

Without technology the globalization of products and markets with international selling would not have been as effective.  Through technology borders are coming down and more people are able to be reached.  eBay sells products from people all over the world and sells to people all over the world.  Several years ago my husband was looking for a watch to complete his Disney Villains watch collection.  We were able to find a company in London, through the internet.  As a buyer we purchased with the CHERNABOG Disney Villain Watch because of the use of technology; the internet, international selling, cross Atlantic shipping services, etc.  Without this technology and globalization of this product I would have not been able to complete my husband’s Disney Villain watch collection.

References

Cavusgil, S. Tamer, Knight, Gary, Riesenberger, John R. (2008). International Business: Stragety, Management, and the New Realities. New Jersey: Pearson.

“History”. Nestle. Retrieved April 26, 2011 http://www.nestle.com/AllAbout/History/HistoryList.htm

“Innovations in Technology and Globalization: Introduction to the Information Era”.  Making Career Sense of Labor Market Information.  Retrieved April 26, 2011 http://workinfonet.bc.ca/lmisi/making/chapter2/TANDG1.HTM

“Internet”. Wikipedia.  Retrieved on April 26, 2011 http://en.wikipedia.org/wiki/Internet

Personal Computer”.  Wikipedia.  Retrieved on April 26, 2011 http://en.wikipedia.org/wiki/Personal_computer

Spoerl, Joseph S. “A Brief History of Iron and Steel Production” Retrieved April 26, 2011 http://www.anselm.edu/homepage/dbanach/h-carnegie-steel.htm

“Technology & Globalization”. The University of Iowa Center for International Finance and Development. Retrieved April 26, 2011 http://www.uiowa.edu/ifdebook/issues/globalization/readingtable/technology.shtml

“Telephone History”. Privateline Telecommunication Expertise. Retrieved April 26, 2011 http://www.privateline.com/mt_telephonehistory

Thomas L. Friedman, “Dueling Globalizations: DOS capital, Foreign Policy”. Retrieved April 26, 2011 http://findarticles.com/p/articles/mi_m1181/is_1999_Fall/ai_56750484

What are the pro’s and con’s of JIT inventory control?

JIT is Just-in-Time production is a coordinated processing system where goods are produced and serves are rendered just when they are needed, achieving a smooth flow of goods through the system.  The pros of JIT are eliminate disruption, make the system flexible, and eliminate waste.  In the JIT system there is a minimal amount of inventory, there can be small and many deliveries, there can be small lot sizes, the vendors can partner with the manufacturer, and the workers/employees are assets to the company thus having high quality, flexibility, reduced lead times, and increased productivity.

Eliminating disruptions is a cost saying feature of JIT.  Without disruptions the work can flow smoothly keeping the employees time effective.  With JIT changes can easily be made to the system since it is very flexible.  With JIT a uniform constant work load helps to reduce waste.  Having vendors partner with the manufacturing can reduce inventor and put quality assurance on the shoulders of the vendors.  Along with a close working relationship with vendors and set up times being reduced smaller lot sizes can be produced along with smaller deliveries.  There is an increased productivity when workers/employees are treated as assets.

The cons of JIT are that suppliers may resist committing resources, a partnership with a vendor one might have delays in materials,  the vendor might increase the cost of their products since they would be proprietary, and the quality of control shifts towards the suppliers.   If a company wanted to change their processing to JIT their suppliers may balk at the idea.  If one could not get their suppliers on board then other more costly supplies may need to be sought.  Since most JIT supplier relationships are with one vendor, if the vendor has a interruption in service this could drastically harm the company’s production.  Since there is usually one vendor that vendor could charge a premium to the determent of the company they partnered.  With JIT the quality of control shifts to the vendor and this quality of control might not be up to the manufacturing company’s vision.

Explain the four C’s of credit. Which is the most important and why?

Character – integrity is very important in determining the creditworthiness of an individual.  Past performance on other debts should be considered.  A credit score that determines credit worthiness by tracking late payments, over credit limit usage, past due accounts, total debt, and available credit.

Capacity – the debtor having sufficient cash flow to cover all their expenses and debt.  The ability to generate income to pay back the debt.

Capital – net worth of the individual.  Net worth is your current assets (assets convertible to cash within one year) less your current liabilities (liabilities due within one year).  Having sufficient capital to cover your debt is a major requirement to extending credit.

Collateral – assets to pledge for the debt.  Collateral is the assets or cash used to secure the debt.  If the credit extended goes  in default then the collateral will be forfeited to pay for the debt.

Collateral is the most important because is you have sufficient and the proper collateral to cover the debt and the debt goes into default then you can recover your losses by applying the collateral to your outstanding credit with the debtor.

Describe three kinds of credit accounts which a company can use to support its credit sales?

The three kinds of credit accounts which a company can use to support its credit sales are revolving agreement, charge agreement, and installment agreement.

Revolving Agreement:

In a revolving credit agreement you are charged interest on the amount of the balance that was not paid at the end of the period due.  If you pay for your purchases in full at the end of each period then you will not be charged any interest.  If you make a partial payment then the unpaid balance will be charged interest until paid in full.  If you make no payment then the unpaid balance will accrue interest until paid.

Charge Agreement:

In a charge credit agreement you agree to pay in full at the end of the period for all purchases.  Since there are no outstanding balances at end of the period there will be no finance charges.

Installment Agreement:

In a installment credit agreement you agree to pay a certain amount equally over a specific time with a fixed amount of interest.  Your periodic payment is applied to the interest accrued and pay down of principle balance until the total balance is zero.

Describe three methods for limiting the risk for a company that extends credit to its customer?

Three methods for limiting risks for a company that extends credit to its customers is to have each customer complete and update annually a credit application, check its customers credit worthiness with reference checks and credit score checks, and only offer small credit balances.

Credit Applications:

Each customer whom wishes to have credit with your business must complete a credit application to include: contact info, Federal Identification Numbers, personal guarantee of owners with social security numbers along with acceptance to check credit scores.  These credit applications must be kept on file and updated annually.

Check Credit Worthiness:

Each credit application should be reviewed for accuracy and credit worthiness should be checked.  Credit references should be obtained and updated annually.  Credit score should be obtained and received annually.

Keep Small Credit Balances:

Limit the amount of credit available to customers.  Keep balances small, if credit limit is not used reduce yearly or if needed increase.  Maintain a equilibrium with past performance.  Account receivable balances should be reviewed periodically and be kept within terms.  The minimum number of days in accounts receivable is preferable.

How does the extensive use of credit cards by their customers affect small businesses?

The extensive use of credit cards by their customers affect small businesses in the increased chances of fraud by the customer, the increased fees in credit card processing, and the increased chances of credit card theft.

Fraud by Customer:

If protocols are not in place to protect from credit card fraud then a small business can be a victim of fraud.  A fraudulent credit card could be used for purchases in a storefront or online store.  If used in a storefront then the product or service will have been given to the customer right away, if in a online store then the product would be shipped to the customer.  The small business owner might not discover the fraud until a month or two later, when the appropriate person opens their credit card statement to see the fraudulent charge.  Once victim of credit card theft disputes the charges then the credit card company takes the appropriate money from the small businesses account. The small business will lose the income from the sale as wells as have already lost the product or service with no way to recover the loss.

Increase Credit Card Processing Expense:

For a small business there are no fees involved when accepting cash for products or services.  If a small business accepts credit cards then there are fees involved.  These fees include monthly statement fees, percentage fees per dollar amount of transaction, and fee per transaction.  These fees are an added expense for the small business as well as reducing the profits of the small business.

Increase Chance of Credit Card Theft:

When taking credit cards from customers to process there is a chance that your customers could obtain those credit card numbers for fraudulent purposes thus exposing your small business to risk.

Explain the scope of fraud and why it impacts small businesses to a greater extent than large businesses. What should the owners or managers do to prevent fraud from occurring in the first place?

Fraud impacts a small business to a greater extent that large business in that there are not enough safe guards in place to protect the small business.

Cash Theft:

In a small business if there are many people handling the cash transactions then it could be easier for cash theft.  There should be oversights in place to check for cash theft loss.  Each cashier should have their own secure registers and at the end of the shift another person, either a supervisor or business owner should tally the receipts against the cash to see if there are any overage or shortages and problems should be immediately corrected.  A surveillance system with camera should be in place covering each cash register.

Credit Card Number Theft:

In a small business customers’ credit cards should be securely handled without keeping the full credit card number on receipts.  The customer’s credit card numbers should be x’ed out to prevent others from using the credit card for fraudulent purposes.  A surveillance system with camera should be in place covering each credit card transaction.

Credit Card Fraud:

A customer could use a fraudulent credit card to make transactions.  The small business should have safe guards in place to prevent this.  Checking identification so that it matches the credit card holder is one way to prevent fraud.  Keeping name, address, and phone numbers of customers can also help in preventing fraud.  Also a noticeable surveillance system with camera should be in place covering each transaction will also help to prevent fraud..

Inventory Theft:

Periodic planned and sporadic inventory reconciliation should be performed.  This will reduce the amount of inventory theft.  A surveillance system with camera should be in place covering all inventory locations.

Employee Time Abuse:

Employees in a small business may overstate their hours easier than in a larger firm.  An electronic time clock with individual personal employee codes could be used to minimize employees overstating their hours.  A surveillance system with camera should be in place covering all time clock locations.

What are the pros and cons of doing business entirely online without a physical storefront or presence? Consider this question from the perspective of selling a tangible product.

The pros of doing business entirely online without a physical storefront or presence include less overhead costs, less personnel costs, and less startup funds.  When a business is entirely online there is not any additional overhead costs for managing a storefront; including, rent, utilities, property taxes, and costs for furniture and fixtures.  The only overhead costs would be for a warehouse and not the additional overhead costs of a storefront.  One could set up the personnel in the warehouse to follow sales.  If one finds that they only make online sales at specific times, certain days, or certain seasons then personnel at the warehouse could follow this schedule but if one also had a store front then this would need to be manned more hours on the off chance that a customer might walk in the store.  Since one would not also have to purchase furniture and fixtures, pay deposit for a storefront as well as a warehouse then the start up costs would be lower.

The cons of doing business entirely online without a physical storefront or presence include potential for fraud, less customer loyalty, and some providers will not sell to a business that does not have a physical presence.  Customers could purchase your product with a fraudulent credit cards which you might not discover until after you have shipped the product.  The chances of using a fraudulent credit card at s storefront is minimized since you could ask to see identification with each credit card purchase.  When a customer gets to know a business owner and can come in to  a storefront for personalized attention then that customer has a greater likelihood of becoming a repeat customer.  This personalized service is lost with an online marketplace and it would be harder to inspire customer loyalty.  Some providers refuse to sell to a business with only an online presence, they require a storefront in order to purchase from them.  This could drive your costs of goods sold up if you could not purchase from the wholesaler and had to purchase from an intermediary.

Why are large firms so slow to change? Think about the reward systems in place in such firms, as well as organizational issues.

Large firms are slow to change in that there are many departments and people that make decision for the firms and this lead to many many meetings and discussions about changes.  Sometime the entire personnel in the company may need to be involved to decide on which changes would best suit the company.  Some people in the company may try to thwart the change which will also slow the process.  With the greater number of deciders finial decision take the greater amount of time.