Tuesday, May 31, 2016

Management Report on Governance and Regulation

Management Report on Governance and Regulation

            Law, government, and economics has an effect on the value creation of all businesses. The law provides organizations with many business entities to enter into, such as a sole proprietorship, partnership, corporation, or a limited liability corporation (Bagley, C.E., 2008). These business structures are selected by the organization in order to suit their business strategy. Government regulates business activities in very different ways according their industry specific needs.  The IRS, Department of Revenue, Department of Transportation, Department of Health, FDA, EPA, and the FCC are regulatory bodies that create standards for business operations.  The market and the economy also have substantial influences on businesses and their value creation.

The Law’s Influence on Value Creation

            Creating a viable business entity is one of the most important activities an organization takes in the first steps of starting a company.  The organization must decide whether they should become a corporation, a limited liability corporation, a partnership, or even to be a sole proprietor. The ramifications of taxation and liability are different for each entity and the variety of business entities created must align with the goals, mission and vision of business (Bagley, C.E., 2008).  Laws are not just meant to bind organizations they also help to create business opportunities (Bagley, C.E., 2006).  The enforcement of contracts and laws such as antitrust laws, intellectual property rights, information technology, environmental regulations, product safety standards, and legal recourse all help to create independent business practices (Bagley, C.E., 2006).  The enforcement of contract law promotes interdependence and cooperation among businesses (Bagley, C.E., 2006).  These laws help to not only protect the business entity from undue fines or litigation, but also helps to create financial and economic opportunities.  The opportunities arise from the competitive advantages created from holding intellectual property rights, licensing, and contracts.

            Economic Value Creation

            The laws help to create a level playing field for businesses within the market and within industries.  The market is in effect created by organizations, buyers, sellers, and customers are held contractually through agreements (Bagley, C.E., 2006).  When businesses are subject to the same regulations they are forced to create the means for their own competitive advantages in order to be profitable.  The economy has a major impact on business activities.  When the economy is low businesses tend to tighten up and go to lean production methods to control costs and reduce waste.  When economies are bustling businesses strive to keep up with demand.  Corporate strategies must take these economic times into consideration when formulating their practices in order to remain profitable. 
            The global economy is no different.  The global market has made financial integration among other countries reality (Walter, A., & Sen, G., 2009).  It is these economic results that create political connotations that change opinions and power (Walter, A., & Sen, G., 2009).  One political connotation is that economic policies create change in the distribution of wealth (Walter, A., & Sen, G., 2009).  The economic value of trade policies and exchange rates are what, economists claim, maximizes national and global welfare through trade agreements (Walter, A., & Sen, G., 2009).  Organizations and stakeholders must consider the global ramifications of their actions along with their personal and organizational goals.

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Governmental Factors of Value Creation

            The government has a large role that affects the business environment (Bagley, C.E., 2006).  The lobbying activities made by corporations, interest groups, and organizations such as; the National Restaurant Association, the Tavern League, the National Rifle Association, and AARP advocate what legislation helps their interests.  Each industry group aims to get legislators to hear their troubles and through financial support the lobbyists go up against governmental legislation and regulatory bodies to make laws that create efficient markets and economic prosperity (Bagley, C.E., 2006).

Economics and Value Creation

            AARP’s mission statement is reported by Hastley as being “dedicated to enhancing quality of life for all as we age, leading positive social change, and delivering value to members through information, advocacy, and service” (2011, para. 16).  It is special interest groups such as these that lead to policy change.  Walter, A., and Sen, G. state that “economic policies are almost invariably politicized because different choices have different effects on the distribution of wealth” (2009, pg. 2).  These changes result in economic and political connotations that change opinions and lead to creating power (Walter, A., & Sen, G., 2009).  Economics affects trade policies and exchange rates.  The global market has made financial integration among countries possible (Walter, A., & Sen, G., 2009).  Economists claim that using the comparative advantage theory is what maximizes national and global welfare through free trade agreements (Walter, A., & Sen, G., 2009). 
            Value creation sometimes comes at a cost.  For example, agribusiness lobbyists have supported bills that help to regulate food labeling objectives (Hastley, G., 2011).  At a cost to manufacturers regulations like this have been created to be a check and balance for maintaining truth in advertising and informing the public of the contents of their product.  These legislative initiatives have created a level playing field for organizations in their industry to differentiate themselves from others in the industry.  Some industries, like the oil industry, lobby for less regulations and governmental intervention in order to create value for themselves within their industry at a cost to the environment.  It is political strategies like this example that creates competitive advantages for industry giants like big oil.  In cases like this one can see how laws liberate organizations (Bagley, C.E., 2006).

Ethical Ramifications

            Keith, Pettijohn, and Burnett believe that ethics is not just based “societal implications” but also is “based on their economic and business implications” (2008, pg. 83). Unethical activities not only creates a less profitable business but it also creates a negative image (Keith, N.K., Pettijohn, C.E., & Burnett, M.S., 2008).  Together this also hampers employee relations, job performance, and job satisfaction of the employees (Keith, N.K., et. al., 2008).  The perception of a company is what influences behaviors, so in order to change the perception of an organization an organization can advertise.  Advertising serves many purposes.  It displays companies in a positive light to sell their goods or services (Murphy, P.E., 1998).  Advertising also serves the agencies creating the ads. Their creative differentiation attracts new customers and retains current customers (Murphy, P.E., 1998).  Advertising also serves the media through the payment for ad placements this supports their business of entertainment and educating society (Murphy, P.E., 1998).
            It is this web of connectedness that builds customer trust (Snyder, W.S., 2008).  Advertising needs to have truth, fairness, taste and decency (Snyder, W.S., 2008). The advertising industry is a $200 billion industry that is estimated to support 21 million jobs nationwide (Snyder, W.S., 2008).  Ethics is vital to an industry of this size.  Advertising is what helps to shape attitudes, behaviors, and priorities of society (Srivastava, V., & Nandant, T., 2010).  Snyder defines ethics as “the moral standards and principles, against which behavior is judged” (2008, pg. 62).


            The findings conclude the intricacies of how governance, regulations, laws, transparency, and ethical standards work together to shape the economic potential for industry and the entire marketplace.  Organizations drive the forces that determine standard practices and regulations in order to improve their economic livelihood. In doing so they help to form and shape social standards, attitudes, and perceptions.  The costs involved change both the economic and physical market environments.  The ramifications are seen in societal measures of what is considered ethical and just, and also in what determines the shape and extent of a global marketplace.
Bagley, C.E. (2006). What’s law go to do with it: A systems approach to management. Harvard Business School. Retrieved from: https://www.hbs.edu/faculty/Publication%20Files/06-038.pdf.
Bagley, C. E. (2008). Winning Legally: The Value of Legal Astuteness. Academy Of Management Review, 33(2), 378-390. Retrieved from: http://eds.b.ebscohost.com.lib.kaplan.edu/eds/pdfviewer/pdfviewer?sid=01485bb3-9114-4d60-9dc5-7c8c28d0ad2d%40sessionmgr106&vid=3&hid=119
Hastley, G. (2011). 10 of the biggest lobbies in washington. Business Pundit. Retrieved from: http://www.businesspundit.com/10-of-the-biggest-lobbies-in-washington/
Keith, N. K., Pettijohn, C. E., & Burnett, M. S. (2008). Ethics in advertising: Differences in industry values and student perceptions. Academy Of Marketing Studies Journal, 12(2), 81-96. Retrieved from: http://eds.a.ebscohost.com.lib.kaplan.edu/eds/pdfviewer/pdfviewer?sid=27da467b-7fe5-49ce-92bf-b14d7ebca51a%40sessionmgr4004&vid=2&hid=4210
Murphy, P. E. (1998). Ethics in Advertising: Review, Analysis, and Suggestions. Journal Of Public Policy & Marketing, 17(2), 316-319. Retrieved from: http://eds.a.ebscohost.com.lib.kaplan.edu/eds/detail/detail?vid=5&sid=27da467b-7fe5-49ce-92bf-b14d7ebca51a%40sessionmgr4004&hid=4210&bdata=JnNpdGU9ZWRzLWxpdmU%3d#AN=1376193&db=bth
Snyder, W. S. (2008, March). The Ethical Consequences of Your Advertisement Matter. Journal of Advertising Research. pp. 8-9. Retrieved from: http://eds.a.ebscohost.com.lib.kaplan.edu/eds/pdfviewer/pdfviewer?sid=27da467b-7fe5-49ce-92bf-b14d7ebca51a%40sessionmgr4004&vid=12&hid=4210
Srivastava, V., & Nandan, T. (2010). A Study of Perceptions in Society Regarding Unethical Practices in Advertising. South Asian Journal Of Management, 17(1), 61-69. Retrieved from: http://eds.a.ebscohost.com.lib.kaplan.edu/eds/pdfviewer/pdfviewer?sid=27da467b-7fe5-49ce-92bf-b14d7ebca51a%40sessionmgr4004&vid=14&hid=4210
Walter, A., & Sen, G. (2009). Analyzing the Global Political Economy. Princeton, N.J.: Princeton University Press. Retrieved from: http://eds.a.ebscohost.com.lib.kaplan.edu/eds/ebookviewer/ebook/ZTAwMHhuYV9fMzU1MDUwX19BTg2?sid=b3e04d35-0057-448b-9ce2-1b0791a86cee@sessionmgr4001&vid=10&format=EB&rid=91

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