1.

You want to start a hotel business in town what are the factors in the environment that you would have to scan and why? 2) Internal Environment Competitors Every business has external peers that perform similar functions within their professional discipline. These peers are considered competitors and they are rival producers of goods or services. These competitors contribute to the overall industry by their ability to deliver goods and services of high caliber at competitive prices. Competition is good from a market perspective as it gives consumers choices and provides the businesses and opportunity to create a niche. Customers Customers are an essential part of any business, without the customer there would be no need for the business. Regardless of the product or service provided, a business must be able to leverage their marketing and production to ensure they satisfy consumer demand. A new opportunity is found in that chasm that separates individuals and organizations. In it lies the key to a new economic order with vast opportunities. Companies that learned to change with their customers will benefit from expanding consumer confidence and increased buying. Suppliers The role of the supplier is similar to that of the creditor in that the business is relying on a third party to supply customer demand. In the case of the supplier an organization could be procuring parts, services or other tangible goods to create or enhance a product or service for sale. Bargaining power of suppliers affects their ability to raise prices. Suppliers are likely to be powerful if: they have few competitors, each individual purchase represents only a small amount of their companys sales, there are not good substitutes of the product purchased, and the product or service is unique. Suppliers play a key role in such transactions; poor production or planning could devastate the sale of a business. External Environment

Social how consumers, households and communities behave and their beliefs. For instance, changes in attitude towards the environment, this is because I would like to understand the people around my business and their cultures plus know how to run my hotel since it is a public hotel. Legal the way in which legislation in society affects the business. E.g. changes in employment laws on working hours. This is to ensure no assumptions are taken even involving staff and that we follow all legal requirements. Economic how the economy will affect my business in terms of taxation, government spending, general demand, interest rates, exchange rates. This is good for me to know how stable the economy of the country im investing in is, are they developing by looking through how the government is spending and budgeting. If things are not well economically then I also may not be able to meet my financial targets. Political how changes in government policy might affect the business e.g. a promoting tourism would be positive for me as I would get customers. Again the political stability of a country is as important no one wants to stay where there is war e.t.c Technological how the rapid pace of change in production processes and product innovation affect a business. Ethical what is regarded as morally right or wrong for a business to do. For instance should it trade with countries which have a poor record on human rights 2.Identify the most fluid environment factors in the world today.

A fluid business environment typically suggests a high level of uncertainty. Great care has to be taken to ensure that investments into products and technologies are at the right level. Incremental changes to the prevailing products may not be sufficient to achieve competitive advantage. The

following are the most fluid environment factors; Technological development and innovations such as

Brand Protection & Intellectual Property Due Diligence Litigation Support Competitive Intelligence Supply Chain and Loss Control Forensics network intelligent applications

3.Debate for or against government intervention in business with justification. Reasons for government intervention in business

Government intervention in the market sets out to attain two goals: social efficiency and equity. Social efficiency is achieved at the point where the marginal benefits to society for either production or consumption are equal to the marginal costs of either production or consumption. Issues of equity are difficult to judge due to the subjective assessment of what is, and what is not, a fair distribution of resources.

Externalities are spillover costs or benefits. Whenever there are external costs, the market will (other things being equal) lead to a level of production and consumption above the socially efficient level. Whenever there are external benefits, the market will (other things being equal) lead to a level of production and consumption below the socially efficient level.

Public goods will be underprovided by the market. The problem is that they have large external benefits relative to private benefits, and without government intervention it would not be possible to prevent people having a free ride and thereby escaping contributing to their cost of production.

Monopoly power will (other things being equal) lead to a level of output below the socially efficient level. It will lead to a deadweight welfare loss: a loss of consumer plus producer surplus.

Ignorance and uncertainty may prevent people from consuming or producing at the levels they would otherwise choose. Information may sometimes be provided (at a price) by the market, but it may be imperfect; in some cases it may not be available at all.

Markets may respond sluggishly to changes in demand and supply. The time lags in adjustment can lead to a permanent state of disequilibrium and to problems of instability. In a free market there may be inadequate provision for dependants and an inadequate output of merit goods. Taxes and subsidies are one means of correcting market distortions. Externalities can be corrected by imposing tax rates equal to the size of the marginal external cost, and granting rates of subsidy equal to marginal external benefits.

Taxes and subsidies can also be used to affect monopoly price, output and profit. Subsidies can be used to persuade a monopolist to increase output to the competitive level. Lump-sum taxes can be used to reduce monopoly profits without affecting price or output.

Taxes and subsidies have the advantages of internalising externalities and of providing incentives to reduce external costs. On the other hand, they may be impractical to use when different rates are required for each case, or when it is impossible to know the full effects of the activities that the taxes or subsidies are being used to correct.

An extension of property rights may allow individuals to prevent others from imposing costs on them. This is not practical, however, when many people are affected to a small degree, or where several people are affected but differ in their attitudes towards what they want doing about the problem.

Laws can be used to regulate activities that impose external costs, to regulate monopolies and oligopolies, and to provide consumer protection. Legal controls are often simpler and easier to operate than taxes, and are safer when the danger is potentially great. However, they tend to be rather a blunt weapon.

Regulatory bodies can be set up to monitor and control activities that are against the public interest (e.g. anti-competitive behaviour of oligopolists). They can conduct

investigations of specific cases, but these may be expensive and time consuming, and may not be acted on by the authorities.

The government may provide information in cases where the private sector fails to provide an adequate level. It may also provide goods and services directly. These could be either public goods or other goods where the government feels that provision by the market is inadequate. The government could also influence production in publicly owned industries.

Government intervention in the market may lead to shortages or surpluses; it may be based on poor information; it may be costly in terms of administration; it may stifle incentives; it may be disruptive if government policies change too frequently; it may not represent the majority of voters interests if the government is elected by a minority, or if voters did not fully understand the issues at election time, or if the policies were not in the governments manifesto; it may remove certain liberties.

By contrast, a free market leads to automatic adjustments to changes in economic conditions; the prospect of monopoly/oligopoly profits may stimulate risk taking and hence research and development and innovation, and this advantage may outweigh any problems of resource misallocation; there may still be a high degree of actual or potential competition under monopoly and oligopoly.

There are two views of social responsibility. The first states that it should be of no concern to business, which would do best for society by serving the interests of its shareholders. Social policy should be left to politicians. The alternative view is that business needs to consider the impact of its actions upon society, and to take changing social and political considerations into account when making decisions. This is good business.

Reasons against government intervention in business Good for the environment Free trade enables production to occur in places where it is most environmentally appropriate.

For similar reasons, most aluminium is produced in places where there is abundant hydroelectric power, which is less resource intensive than gas or coal. Thus the gains from trade are environmental as well as economic. Hurting poor producers Most trade barriers, whether tariffs, quotas, or subsidies, hurt producers in poor countries most. A tariff has two effects: it reduces the amount of the product sold (people usually buy less of any product when it is more expensive) and it reduces the amount that is received by the people making the product (part of the sale price is removed in the form of taxation). The primary beneficiaries of such taxes are the government and the domestic producers (in this case, of nuts), whilst both the export producers (in this case, the nut harvesters) and the consumers in the importing country lose out. Quota puzzle An import quota directly reduces the quantity of a product that is imported and indirectly reduces the amount of money that the export producers receive. The primary beneficiaries of quotas are the importers, whose profits are increased, and the domestic producers, who face less competition. Again the consumer and the foreign producers lose out. Quotas seem to be even less fair than tariffs because it does not matter how cheap the foreign producers make their goods, they simply cannot sell into the market more than the quota allows. A subsidy artificially reduces the costs of production, thereby increasing production in that country. This artificially lowers world market prices, reducing the amount that producers in other countries receive for their goods.

1)

Show how business interacts with various internal environments.

An organization's internal environment is composed of the elements within the organization, including current employees, management, and especially corporate culture, which defines employee behavior. Organizational mission statements. An organization's mission statement describes what the organization stands for and why it exists. It explains the overall purpose of the organization and includes the attributes that distinguish it from other organizations of its type.

A mission statement should be more than words on a piece of paper; it should reveal a company's philosophy, as well as its purpose. This declaration should be a living, breathing document that provides information and inspiration for the members of the organization. Company policies. Company policies are guidelines that govern how certain organizational situations are addressed. Just as colleges maintain policies about admittance, grade appeals, prerequisites, and waivers, companies establish policies to provide guidance to managers who must make decisions about circumstances that occur frequently within their organization. Formal structure. The formal structure of an organization is the hierarchical arrangement of tasks and people. This structure determines how information flows within the organization, which departments are responsible for which activities, and where the decision-making power rests. Organizational cultures. The organizational culture is an organization's personality. Just as each person has a distinct personality, so does each organization. The culture of an organization distinguishes it from others and shapes the actions of its members. Four main components make up an organization's culture:

Values Heroes Rites and rituals Social network

Organizational climates. A byproduct of the company's culture is the organizational climate. The overall tone of the workplace and the morale of its workers are elements of daily climate. Worker attitudes dictate the positive or negative atmosphere of the workplace. The daily relationships and interactions of employees are indicative of an organization's climate. Resources. Resources are the people, information, facilities, infrastructure, machinery, equipment, supplies, and finances at an organization's disposal. People are the paramount resource of all organizations. Information, facilities, machinery equipment, materials, supplies,

and finances are supporting, nonhuman resources that complement workers in their quests to accomplish the organization's mission statement. Managerial philosophies. Philosophy of management is the manager's set of personal beliefs and values about people and work and as such, is something that the manager can control. McGregor emphasized that a manager's philosophy creates a self-fulfilling prophecy. Theory X managers treat employees almost as children who need constant direction, while Theory Y managers treat employees as competent adults capable of participating in work-related decisions. These managerial philosophies then have a subsequent effect on employee behavior, leading to the self-fulfilling prophecy. As a result, organizational philosophies and managerial philosophies need to be in harmony. Managerial leadership styles. The number of coworkers involved within a problem-solving or decision-making process reflects the manager's leadership style. Empowerment means delegating to subordinates decision-making authority, freedom, knowledge, autonomy, and skills. Fortunately, most organizations and managers are making the move toward the active participation and teamwork that empowerment entails.

5)

Distinguish between a general patner and a limited patner

A general partnership is a business arrangement where two or more people are owners of a business. Unlike a corporation, you do not need to file any documents with the state to make your business a partnership. A partnership is created by default, unless the business is specifically formed as some other type of business entity, such as a corporation, a limited liability company, or a limited partnership. A general partnership is one in which all of the partners have the ability to actively manage or control the business. This means that every owner has authority to make decisions about how the business is run as well as the authority to make legally binding decisions. Unless the partners have a partnership agreement, each partner will have equal authority.

Partners in a general partnership don't have any limit on their personal responsibility for the debts of the business. This means that the partner could lose more than just his investment in the business personal assets would have to be used to pay business debts if necessary. Each partner in a general partnership is also jointly liable for debts of the business. Joint and severable liability means is that each partner is equally liable for the debts of the business, but each is also totally liable. So if a creditor can't get what he is owed by one or more of the partners, he can collect it from another partner, even if that partner has already paid his share of the total debt. If someone sues your partnership and obtains a large judgment, and your partner doesn't have the money to pay his share of it, you will have to pay the entire amount. A limited partnership is different from a general partnership in that it requires a partnership agreement. Some information about the business and the partners must be filed with the appropriate state agency (usually the secretary of state). Additionally, a limited partnership has both limited and general partners. A limited partner is one who does not have total responsibility for the debts of the partnership. The most a limited partner can lose is his investment in the business. The trade off for this limited liability is a lack of management control: A limited partner does not have the authority to run the business. He is really more or less an investor in the business. A limited partnership must have at least one general partner. The general partner or partners are responsible for running the business. They have control over the day-to-day management of the business and have the authority to make legally binding business decisions. The partnership agreement will specify exactly which partner or partners have certain responsibilities and which have certain authority. General partners are also subject to unlimited personal liability for the debts of the business. The general partners of a limited partnership are also jointly and severably liable for the debts of the business, just like partners in a general partnership. 6) Examine the appropriate scenario where each form of business ( e.g Sole

proprietorship e.t.c) discussed would apply Sole proprietorship

Also referred to as single proprietorship, a sole proprietorship is the simplest form of business and the easiest to register. It is owned by an individual who has full control/authority of its own and owns all the assets, as well as personally answers all liabilities or losses. The fact that it is run by the individual means that it is highly flexible and the owner retains absolute control over it. The problem, however, is that a sole proprietor has unlimited liability. Creditors may proceed not only against the assets and property of the business, but also after the personal properties of the owner. In other words, the law basically treats the business and the owner as one and the same. This uniform treatment also has important tax implications. Partnerships and corporations may lessen their tax liability through a myriad of business expenses and other tax avoidance techniques. These tax deductions may not be applicable to a sole proprietorship. Also, the potential growth and reach of a sole proprietorship pale in comparison with that of a corporation. Partnership A partnership consists of two or more persons who bind themselves to contribute money or industry to a common fund, with the intention of dividing the profits among themselves. The most common example of partnerships is professional partnerships, like in the case of law firms and accounting firms. A partnership, just like a corporation, is a juridical entity, which means that it has a personality distinct and separate from that of its members. A partnership may be general or limited. In a general partnership, the partners have unlimited liability for the debts and obligation of the partnership, pretty much like a sole proprietorship. In a limited partnership, one or more general partners have unlimited liability and the limited partners have liability only up to the amount of their capital contributions. Unlike a corporation, which survives even when a member/stockholder dies or gets out, a partnership is dissolved upon the death of a partner or whenever a partner bolts out. Corporation

A corporation is a limited liability business that has a separate legal personality from its members. Corporations can be either government-owned or privately-owned, and privatelyowned corporations can organize either for-profit or not-for-profit. A for-profit corporation is owned by shareholders who elect a board of directors to direct the corporation and hire its managerial staff. A for-profit corporation can be either privately held or publicly held.

It must be created by or composed of at least 5 natural persons (up to a maximum of 15), technically called incorporators. Juridical persons, like other corporations or partnerships, cannot be incorporators, although they may subsequently purchase shares and become corporate shareholders/stockholders. The liability of the shareholders of a corporation is limited to the amount of their capital contribution. In other words, personal assets of stockholders cannot generally be attached to satisfy the corporations liabilities, although the responsible members may be held personally liable in certain cases.. The biggest businesses take the form of corporations, a testament to the effectiveness of this business organization. A corporation, however, is relatively more difficult to create, organize and manage. Unless you own sufficient number of shares to control the corporation, youll most likely be left with no participation in the management. Cooperative: Often referred to as a "co-op", a cooperative is a limited liability business that can organize for-profit or not-for-profit. A cooperative differs from a for-profit corporation in that it has members, as opposed to shareholders, who share decision-making authority. Cooperatives are typically classified as either consumer cooperatives or worker cooperatives. Cooperatives are fundamental to the ideology of economic democracy.

7)

Describe a franchise and identify its advantages and disadvantages

A franchise is a right granted to an individual or group to market a company's goods or services

within a certain territory or location. The franchisor (the company owner) sells the rights to the franchisee and then typically receives a fee for ongoing support, therefore having a vested interest in the success of each franchise.

Franchising began back in the 1850's when Isaac Singer invented the sewing machine. In order to distribute his machines outside of his geographical area, and also provide training to customers on the use of the machines, Singer began selling licenses to entrepreneurs in different parts of the country. Today many such franchise opportunities are advertised via the Web and other media.

Advantages: There is a higher likelihood of success since a proven business formula is in place. The products, services, and business operations have already been established. Bankers usually look at successful franchise chains as having a lower risk of repayment default and are more likely to loan money based on that premise. The corporate image and brand awareness is already recognized. Consumers are generally more comfortable purchasing items they are familiar with and working with companies they know and trust.

Franchise companies usually provide extensive training and support to their franchisees in effort to help them succeed. Many times products and services are advertised at a local and national level by the main franchise companies. This practice helps boost sales for all franchisees, but individual franchisees don't absorb the cost. Disadvantages:

Franchises can be costly to implement. Also, many franchises charge ongoing royalties cutting into the profits of franchisees.

Franchisors usually require franchisees to follow their operations manual to a tee in order to ensure consistency. This limits any creativity on the part of the franchisee. Franchisees must be very good at following directions in order to maintain the image and level of service already established. If the franchisee is not capable of running a quality business or does not have proper funding, this could curtail success.

8)

Detail the basic steps that must be taken to start a company in your country Name search: It goes without saying. You need a name. This part takes two days and costs under less than $5.

Prepare Memorandum and Article of Association: These documents describe the objectives, rules, subscribers and authorised share capital of your company.

Pay Stamp Duty: The amount of money that you pay depends on your declared nominal capital. You begin by collecting four forms from the Kenya Revenue Authority at Times Towers. Two copies go to the Lands Registry, one is retained by you and the other by the bank.

Declaration of compliance: A commissioner of oath must sign this form on your behalf. File Deeds at Registrars office: You then need to file your documents at Companies Registry.

This includes your memorandum and articles of association. There is a varied fee attached to this.

o Register for a Personal Identity Number, VAT & PAYE: This takes a day to register at Times Tower and is free. o Register for NHIF: NHIF stands for National Hospital Insurance Fund. This is mandatory medical contribution for your employees. o Register at the NHIF building.

o Register for NSSF: NSSF stands for National Social Security Fund. It is mandatory to contribute to your employees retirement fund. Registration is done at the NSSF building at the bottom of Valley Road. o Register for a Business Permit: This application is made to the City council. You will need office space prior to submitting this application.

Get your Company Seal. This is the last bit. You can get good quality company seals from Seal Honey Stationers in Nairobi.

9)

Explain why it may be difficult for a partnership to go public

The transition from partnership to public can be a turbulent time, radically changing the business structure, management approach and culture of the firm. But the growth opportunities make it something for them to consider. Pros of a partnership Partnerships can be collegiate, flexible and professionally liberating environments. While they can also be haphazard, inefficient and desperately political, they are some of the most successful business models the world has ever seen. Firms like Mckinsey, Deloitte, Clifford Chance and Bane earn many millions of pounds in many parts of the globe from first-rate work. Many earn two to three times the net margins of the clients they serve; and have been doing so for nearly a century. Their success seems to lie in the individual practices, which, like cells in a living organism, evolve and respond to changes because they are run directly by an owner of the business. They can even adjust when the leadership of the firm makes fundamental errors of strategy or management. They are, perhaps, one of the business worlds few self-righting organisational structures. Public liability company profits boost productivity Yet despite the flexibility and reputation of leading partnerships, public liability companies do have competitive advantages to deploy against them. For example, partnerships are reluctant to use current profits to invest (because there is pressure to distribute it among partners). Public

liability companies, on the other hand, routinely review capital investment, setting aside large funds for projects that will enhance productivity. They can therefore gain an edge over any professional partnership with which they compete by using their capital budgets to improve productivity through technology, process and systems improvements. It makes them much more efficient and streamlined than rival partnerships. Public liability companies also have to report to the financial markets and account to, largely anonymous, shareholders for their use of funds. This introduces the relentless drive for process improvement, cost reduction and innovation natural to competitive organizations. Over the long term, they adopt an unarticulated drive for productivity improvement in response to pressure from shareholders, customers, competitors and public commentators. This, in turn, introduces various disciplines into any professional-services firm that becomes one or is bought by one. For example, client-service staff are required to forecast business accurately, giving tight income forecasts to the City on a quarterly basis. Public companies prime competitive weapon in the professions, though, is their ability to employ top talent using share options. As shares are valued by the capital markets on different criteria than current performance, it means senior people can be employed at lower salary costs than in a partnership. So, in markets where public liability companies are in direct competition with partnerships, they are able to penetrate the market with high-quality work at lower cost and lower prices. For instance, in Australia, a plc owns an accountancy chain, WHK Greenwoods, which has been buying up private practices and creating a nationwide network. They now rival the big four in terms of volume, able to offer comparable quality at a lower cost. Different management styles Another fundamental difference lies in the nature of leadership and governance. Partnerships work through mutual consent and consensus. Managing partners are, often reluctantly, elected by their peers and frequently continue to practice while managing the firm. As partners are owners of the firm, they rightly feel that they should contribute to direction and that their views should be heard. Leaders have to carry their peers with them, even when they comprise 2,000 partners

working in many countries around the world. Aggressive or insensitive leadership is only tolerated for a short time, as partnerships can bring about change if it becomes abhorrent. As a result, leaders solicit the views of their partners much more extensively than the CEO of a plc would. In fact, seeking consensus on most issues is second nature to leaders of partnerships. Therefore, there is often surprisingly little direct decision making. Initiatives are more often created by a wide consultation or buy in process, which creates a momentum for the idea. Providing no one strongly disagrees with the initiative, it will become, more or less, common practice within the firm. Corporate firms, however, are very different. Management responsibility is delegated down a hierarchy from the shareholders and there is both regulation and law to guide conduct. Individuals have clear accountability within a distinct area of responsibility, whether it is for a management function or for client service; and they are expected to focus on that. Client-service staff are not encouraged to contribute to strategy or management but ensure that their billable time is as high as possible. Nor are they allowed to create their own programmes and recruit their own support people. As the CEO of one plc running a professional-services firm commented: When we first buy a practice, professionals want to spend time telling me how the business ought to develop. They waste time in debate and presentations. I have to settle them down and make them comfortable with the knowledge that this is not their responsibility. Their job is to serve the clients, not run the business. By this he meant that they simply do not have a voice on these issues and are not included in debate, planning or policy formulation. With a public liability companies, there is usually a clear management structure with delegated authority to run any functions within agreed budget and strategy parameters. Management is able to create and execute programmes to meet the firms goals. In short, they are not running after different partners rushing into tactical, sometimes whimsical, activities, or continually adjusting their decisions to suit the views of different people. Leaders in these firms can expect specialisation, investment and the ability to get on with the job.

10) Recommend the best form of business to your five friends who want to build an apartment complex and are not concerned about limited liability Corporations It must be created by or composed of at least 5 natural persons (up to a maximum of 15). A corporation chartered by the state in which it is headquartered is considered by law to be a unique entity, eparate and apart from those who own it. A corporation can be taxed, it can be sued, and it can enter into contractual agreements. The owners of a corporation are its shareholders. The shareholders elect a board of directors to oversee the major policies and decisions. The corporation has a life of its own and does not dissolve when ownership changes. The most common type of corporation or company is one that is limited by shares. The shareholders hold shares in the company and therefore own it. Shareholders have limited liability; that is, their obligation is limited to the amount, if any, unpaid on their shares. Beyond this, the shareholder is not required to contribute to satisfying the debts of the company. The company has a separate legal identity and it can sue and be sued; the shareholders cannot be sued. Advantages of a Corporation:
Shareholders

have limited liability for the corporation's debts or judgments against the

corporations.
Generally,

shareholders can only be held accountable for their investment in stock of the

company. (Note however, that officers can be held personally liable for their actions, such as the failure to withhold and pay employment taxes.)
Corporations A

can raise additional funds through the sale of stock.

corporation may deduct the cost of benefits it provides to officers and employees. elect S corporation status if certain requirements are met. This election enables

Can

company to be taxed similar to a partnership.

References 1. Dommen, Arthur & Carl Mabbs-Zeno. 1989. Subsidy Equivalents: Yardsticks of Government Intervention in Agriculture for the GATT. United States Department of Agriculture: Washington D.C. 2. Federal Money Retriever. 1998. U.S. Federal Funding Numbers/ By Subject Terms. http://www.fedmoney.com/fs-subj2.html 3. Kaz. 1998. How the Government Spending Creates Jobs. http://hotbot.lycos.com/director.asp?target=http%3A%2F%2Fwww%2Esmart%2Enet %2F%7Ekaz%2Fspending%2Ehtml %3Fpt&id=10&userid=4EvOxepkQhws&query=MT=government 4. Ringer, Robert J. 1979. Restoring the American Dream. Harper & Row: New York. 5. Robbins, Lord. 1976. Political Economy: Past and Present. Columbia University Press: New York. 6. The Family Education Network. 2000. Laissez-faire. http://www.infoplease.com/ce5/CE029401.htmlWolfgang Kasper, Australias Economic and Industrial Structures, in Growth, Trade and Structural Change in an Open 7. Australian Economy, ed. Wolfgang Kasper and Thomas G. Parry (Kensington: Centre for Applied Economic Research, 1978), p. 105. 8. Milton Friedman, From Galbraith to Economic Freedom (London: Institute of Economic Affairs), occasional paper 49.