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POBTECHNOLOGY AND THE GLOBAL BUSINESS ENVIRONMENTBusiness technology - business purposes, such as the achievement of economic and organisational refers to applications of science, data, engineering, and information for goals. The main element of technology is the idea of change, and how it can affec...

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POB TECHNOLOGY AND THE GLOBAL BUSINESS ENVIRONMENT

Business technology - refers to applications of science, data, engineering, and information for business purposes, such as the achievement of economic and organisational goals. The main element of technology is the idea of change, and how it can affect business and society. Role of technology in business: ICT is considered to be all uses of digital technology that exist to help individuals, businesses and organisations use information. So ICT is concerned with the storage, retrieval, manipulation, transmission or receipt of digital data. Importantly, it is also concerned with the way these different uses can work with each other. Ways in which technology has influenced banking and commerce: 

Through the introduction of Automatic Teller Machines (ATMs) and Automated Banking Machines (ABMs) which facilitate the deposit and withdrawal of funds, as well as other services without having to go into a bank to access teller services. The location of ATM machines in hotels, petrol stations, malls and supermarkets adds to the convenience of customers who can transact business without having to wait in line at a bank.



The practice of on-line banking which enables customers to access their accounts from home and other locations using personal computers. This facility enables customers to check their balances from the comfort of their homes and permits easy and convenient payment of utility and other bills. Customers with more than one account can also use this facility to transfer funds from one account to another.



Through electronic commerce (ecommerce). Using the internet, individuals and businesses are now able to make business transactions via the World-wide web, without having to visit a physical brick and mortar store. E-commerce has given rise to many online stores which permit customers to browse for products and pay for them electronically.

Types of technology: Traditional 

Productivity tools, for example: -



Word 1



Excel

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Database software: Access



Presentation software: PowerPoint, Prezi;

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Graphics software: Adobe Photoshop

Specialist applications: 

Accounting: QuickBooks.



Computer Aided Design (CAD).



Management Information Systems.

Digital communication technologies: Internet and mobile.

E-Commerce and E-Business: In both cases, the e stands for "electronic networks" and describes the application of electronic network technology - including Internet and electronic data. E-commerce covers outward-facing processes that touch customers, suppliers and external partners, including sales, marketing, order taking, delivery, customer service, purchasing of raw materials and supplies for production and procurement of indirect operating-expense items, such as office supplies. It involves new business models and the potential to gain new revenue or lose some existing revenue to new competitors. interchange (EDI) – to improve and change business processes. E-business includes e-commerce but also covers internal processes such as production, inventory management, product development, risk management, finance, knowledge management and human resources. E-business strategy is more complex, more focused on internal processes, and aimed at cost savings and improvements in efficiency, productivity and cost savings.

Ways in which technology can improve business:

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(i) Speed and time; (ii) Easier storage; (iii) Improved sharing of information; and, (iv) Automation. Benefits of technology to business: 

Reach more potential customers, develop a business relationship with potential customers;



Streamline operations, reduce costs, improve efficiency, maximise profit, minimise waste, devote talent to core business instead of overhead;

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Provide better service to customers;

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Support better relationships with key partners; and,

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Allow customers to better guide the business.

Consequences of unethical use of ICT: 

Security;

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Privacy;

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Intellectual property infringement;

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Impact on humans; and,

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Distraction. NATIONAL INCOME ACCOUNTING & INTERNATIONAL TRADE AND THE BALANCE OF PAYMENTS (Social Accounting and Global Trade)

Factors that determine a Country’s Standard of Living The standard of living is defined as the level of wealth experienced by a county which is indicated by the average disposable income of the population, ownership of capital equipment, 3

the level of research and access to modern technology and the quality and quantity goods and services enjoyed by citizens. 

Level of goods and services available: goods and services are needed to satisfy the needs and wants of a society.



Average disposable income: per capita GNP reveals the average amount of earnings of each person in an economy.

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Ownership of capital equipment: Capital goods/investment goods are used to create consumer goods and services locally and for export.

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Access to modern technology: countries with a high standard of living must have access to modern technology to remain competitive maintain a high productivity level.

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Research and technology leads to innovation and increases production.

Difference between the standard of living and quality of life Whereas the standard of living is measured by physical quantity (tangible), a country’s quality of life is determined by the quality of goods and services enjoyed by citizens (intangible). These include: safety (low crime rates), good diet and nutrition, environmental quality, quality of health and educational facilities, life expectancy, rate of infant mortality and the access to public utilities such as water. Also the standard of living is mainly determined by the per capita income while the quality of life is determined by intangible subjective factors. Alternative measures of the Standard of Living 

The Human Development Index (HDI) (Per capita income, literacy rates, inflation)

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Physical quality of Life (infant mortality rate, literacy rates, life expectancy)

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Measure of Economic Welfare (NI + merit goods – demerit goods)

National Income The national income of a country is the total income earned by that country from the production of goods and the provision of services in a given year after deducting depreciation. It therefore measures the level of economic activity of a country within a year. Note depreciation of assets is taken into account when measuring national income. It can also be defined as the total money value of goods and services produced by a country over a year.

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Circular Flow of Income Businesses produce and households consume. Households owns the factors of production (land, labour capital and enterprise). Firms must purchase these factors of production to produce. Wealth flows from one form to another as follows:

Income = Expenditure = Output Gross Domestic Product (GDP) GDP is the total money value of all output produced within a country over a year. The word ‘domestic’ refers to income earned from local production only. Gross National Product (GNP) GNP is the total money value of all output produced over one year, both within a country and from its overseas investments. Therefore GNP = GDP + overseas earnings by nationals (Net Income from Foreign Assets) Net Income from Foreign Assets- also called Net Property Income from Abroad. This is calculated by subtracting payments to foreigners owning local assets from income received from assets held abroad by citizens. This figure can be positive or negative. Net National Product (NNP) or National Income (NI)

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NB: The definition for national income includes adjustments for depreciation (reduction in capital stock). National Income (NI) = GNP- depreciation Since GNP figures do not accurately measure the standard of living, the following indices may be used. Per capita GNP This is calculated by dividing a country’s GNP by its total population. That is, GNP Total population Thus if a country’s GNP is $40,000,000 and its total population is 5,000, its per capita GNP would be $8,000. 40,000,000 = 8,000 5000 Thus each citizen enjoys on an average $8,000 worth of goods and services.

Impact of National Income on Standard of Living and Quality of Life An increase in National Income is usually due to increased output of goods produced, increased incomes or increased expenditure. These are all indicators of positive growth in the economy hence giving an increase in the standard of living. If the incomes are not evenly distributed then the standard of living of the population will be uneven. Additionally an increase in the incomes of the population does not mean that their quality lives have improved as access to clean water, health care and education may have received little or no investment. THERE ARE THREE METHODS OF CALCULATING NATIONAL INCOME 1. Expenditure Method

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•

The total expenditure incurred by the society in a particular year is added together to get that year’s national income.

•

Components of Expenditure: – personal consumption expenditure – net domestic investment – government expenditure on goods and services, and – net foreign investment

The equation for NI using this approach is: C: Household spending +

I: Capital Investment spending

+

G: Government spending

=

GNP (at market prices)

+

Exports of Goods and Services

-

Imports of Goods and Services

=

GNP (at factor cost)

-

Depreciation

=

National Income

2. The Income Method: adding factor incomes •

The net income received by all citizens of a country in a particular year, i.e. total of net rents, net wages, net interest and net profits. (GDP at factor cost).

•

It is the income earned by the factors of production of a country.

•

Add the money sent by the citizens of the nation from abroad and deduct the payments made to foreign nationals (individuals and firms) (GNP at factor cost) or Gross National Income (GNI). 7

Here GDP is the sum of the incomes earned through the production of goods and services. This is: Income from people in jobs and in self-employment +

Profits of private sector businesses +

+

Rent income from the ownership of land

=

Gross Domestic product (by factor incomes)

+

Net Property Income from Abroad

=

GNP

-

Depreciation

=

National Income

We can also add income from Government Activities. Only those incomes that come from the production of goods and services are included in the calculation of GDP by the income approach. We exclude: 

Transfer payments e.g. the state pension; income support for families on low incomes; the Jobseekers’ Allowance for the unemployed and welfare assistance, such housing benefit.

 

Private transfers of money from one individual to another. Income not registered with the Inland Revenue or Customs and Excise. Every year, billions of pounds worth of activity is not declared to the tax authorities.

3. Product (or Output) Method The market value of all the goods and services produced in the country by all the firms across all industries are added up together. GDP

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•

+

Exports

-

Imports

=

GNP

-

Depreciation

=

National Income

Process – The economy is divided on basis of industries, such as agriculture, fishing, mining and quarrying, large scale manufacturing, small scale manufacturing, electricity, gas, etc. – The physical units of output are interpreted in money terms – The total values added up. (GDP at market price) – The indirect taxes are subtracted and the subsidies are added. (GDP at factor cost) – Net value is calculated by subtracting depreciation from the total value (NDP at factor cost). Economic Growth and Development

Economic growth is the expansion of national income. The rate of expansion is usually measured from one year to the next. Economic growth can be achieved if countries increase their capacity to produce. It is a quantitative increase in production. Economic growth can be generated by: 

The discovery of new resources

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The more efficient use of existing resources

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Improvements in technology

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Improved labour efficiency

Negative Growth – This situation exists when there is a fall in productive capacity from one period to another. It may also describe a failure of the economy to expand production.

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Growth without Development- Economic growth can occur without development. While the economy expands and the National Income increases the poverty and unemployment rates has increased as well due to unequal distribution of income, corruption and fraud. Economic Development- This describes qualitative changes in the economy. It refers to improvements in the standard of living, human capital development and the enjoyment of freedoms. It is sustained economic growth accompanied by policies that bring about structural changes such as increase in exportation, decrease in importation, lesser dependence on foreign aid and important infrastructural development. These changes will allow for higher levels of national income. Measures of economic development include: Human Development Index, Infant mortality rate, literacy rates.

Role of Education or Human Resource Development (HRD) In Economic Growth and Development Investment in education is important for a country’s economic growth and development. Education increases productivity as individuals who are trained and knowledgeable will be more efficient which leads to increased output and increased economic growth. Education is the process of imparting knowledge, skills, beliefs and cultures to empower and influence behaviour. The long-term returns to investments in human capital such as; on the job training, coaching, mentoring and e learning will reduce poverty. International Trade International trade consists of exports and imports between countries, which should cause an improvement in people’s living standards through the principle of comparative advantage. Comparative advantage is the idea that countries benefit from specializing in the production of goods at which they are said to be more efficient. It is an advantage for countries to be self-sufficient, but there are reasons why trade must take place between nations. Absolute Advantage The capability to produce more of a given product using less of a given resource than a competing entity.

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For example, consider again Country A and Country B. The opportunity cost of producing 1 unit of clothing is 2 units of food in Country A, but only 0.5 units of food in Country B. Since the opportunity cost of producing clothing is lower in Country B than in Country A, Country B has a comparative advantage in clothing. Thus, even though Country A has an absolute advantage in both food and clothes, it will specialize in food while Country B specializes clothing. The countries will then trade, and each will gain. Absolute advantage is important, but comparative advantage is what determines what a country will specialize in. Reasons for International Trade 

Lack of certain natural resources to produce essential goods. Oil which is important to economic life must be imported into countries that do not possess that natural resource.

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Lack of capital, technology and specialist labour to manufacture certain goods on a large scale. For example, Caribbean countries import machinery equipment and vehicle.

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Differences in climatic conditions, e.g. many tropical countries import grapes and strawberries as these produce need cool climates to survive.

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Differences in the cost of production between countries. This reason is based on the principle of comparative advantage which states that benefits will be gained from trade if countries produce goods in which they have a relative advantage. Therefore, if two countries both produce cars and coffee but each is more efficient at producing or produces either at a lower opportunity cost either car or coffee, then trade can take place. The country that is more efficient at producing coffee should put all its resources into coffee and import cars from the other country that is efficient in producing cars.

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To earn foreign exchange to pay for imports.

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Promotes necessary political connections between countries 11

Advantages of Int. Trade

Disadvantages of Int. Trade

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Increase utilization of productive capacity for export

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Protection required by local firms

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Increased employment for increased output

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Dumping of goods by developed countries

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Improved standard of living due to increased variety of goods

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Underdeveloped local industries

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Increased quality of goods due to competition

REGIONAL AND GLOBAL BUSINESS ENVIRONMENT Stages of Economic Integration 1. Preferential trading area – a free trade area or trading bloc giving preferential access to goods from different countries eg. Tariffs 2. Free trade area – a group of countries eliminate barriers between each other eg. Tariffs and quotas and may have different policies with members outside the area eg. increased tariffs. 3. Customs Union- free trade area with a common external tariff for non-members. 4. Common Market- a Customs Union with agreeing to adhere to the same product regulations and freedom of movement of the factors of production. This is also called the single market when licences, entry permits and taxes have been removed from trading. 5. Economic Monetary Union – a Single Market with a common currency. 6. Complete Economic Integration- final stage of economic integration; complete merging of policy making with group decisions made on matters concerning all member countries.

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Economic Institutions and Systems Caribbean Community Common Market (CARICOM) A common market is an association of countries that have joined together to bring about the harmonious development, continuous economic expansion and increased stability of the countries involved. CARICOM was formed in July 1973 when Barbados, Trinidad and Tobago, Jamaica and Guyana signed the treaty of Chaguaramas. Since then the following Caribbean countries have joined: Antigua and Barbuda, Belize, Dominica, Barbados, Suriname, Grenada, Montserrat, St. Kitts & Nevis, St. Lucia, St. Vincent and the Grenadines and Bahamas and Haiti. Associate members of CARICOM are Anguilla, Bermuda, British Virgin Island and Turk and Caicos. Objectives of CARICOM 

Improved standard of living.

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Expansion of trade.