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    14 business analysis questions: free trade, business forms,

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    1. In your own words describe the purpose for developing free trade agreements? Explain how the establishment of free trade areas represents both a threat and an opportunity for global corporations

    2. How and why have the forms of business organization used to manage business commerce changed over time

    3. A pharmaceutical company has developed a cure for cancer. They put it on the market and cure thousands of people. Their ongoing research, however, shows that it is not universally effective and that some who could be receiving other kinds of treatment, die as they wait to see if the drug will work. Also, as many as 7% of those who take the drug will die from adverse allergic reactions. Give an argument in favor of leaving the drug on the market or removing it from the market based on a utilitarian law, a moral rights law, and a justice rule. How would you advise the CEO of this company and why?

    4. What is the relationship between ethics and the law? Can an action be unethical but not illegal? If so, explain how and give an example.

    5. Explain the agency problem. How can stock option programs work to lessen the agency problem?

    6. Why should a company be concerned about the organizational socialization process?

    7. What is a flexible work team? How would the job descriptions of employees on flexible work teams differ from those in a mass production setting?

    8. Explain the two work situation contingencies in the contingency theory of leadership and the importance of each in selecting a leadership approach.

    9. Explain goal setting theory and why goal-setting increases motivation

    10. Analyze and explain the collective bargaining process and the steps available to settle disputes when the parties cannot agree on a solution. Does the mediator have formal authority to impose a solution in a labor dispute? If mediation fails what actions will typically follow?

    11. What is product positioning? Give an example of how each of the four components of the marketing mix could be used to position a new minivan for the well educated, young, middle income family with two or more children

    12. List and explain the impacts of the three major factors impacting the selection of a company's distribution mix

    13. Explain the functions of financial and managerial accountants and explain how their reports are used by companies.

    14. Analyze and explain the relationship between risk and return in financial markets. As an investor what would some of your expectations be with regard to a high risk investment and low risk investment?

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    Solution Preview

    Answer 1:
    Free trade agreement is a trade policy which exists among most countries in the world today. If free trade agreements exists between two countries trade can be transacted with limited government interventions. Some of the key purposes of having free trade agreements are summarized below:

     Trade can be transacted without tariff and taxes and regulations are also limited
     There is free access to market, market information, easy financing and support from government
     There is also limited restriction on movement of key financial components such as labor and capital
    With the evolution of free trade between most countries global corporations have been facing lot of threats and opportunities.

    Some of the threats and opportunities are discussed below:
     With less regulation on trades with foreign countries various domestic small scale industries in developing countries have been facing lot of challenges
     The concept of anti dumping has been evolved significantly globally over the last few years.
     The dependency on local supplies for raw material has decreased significantly and most manufacturers have been able to have global market for both raw material and finished products.
     There has been lot of economic development opportunities available to the developing nations as a result of globalization of business.

    Answer 2:
    The form of organization in which business is conducted has evolved over last few decades. With the oldest method on barter system which was operated individually which then converged into sole proprietorship and then tom partnership before taking the current and the most advanced for of business organization which is corporate form. One of the most important reasons for evolution of new types of business organization was the urge for people to divide risk. With the evolution of partnership, co-operatives and company form of business the primary purpose of sharing the business risk has been achieved.

    We will discuss below the three main form of business organization and also highlight how and why they have changed:
    Sole Proprietorship evolved in Partnership: The sign of business and commerce trace four to six thousand years back and since then this form of business organization has been in place in the human civilization. With growing business this form was replaced by partnership form. Some of the key limitations of Sole Proprietorship, which resulted in evolution of partnership form of business, were limited capital and no sharing of risk.

    Partnership evolved into Corporate form: In case of partnership the owners and managers were the same persons and therefore there could be conflict of interest. Also with the globalization of business this form of organization was facing difficulties in terms of raising capital. With the evolution of corporate form of business better management of the operation happened and this was done by professionals and not owners. Also for public companies it was easy to raise capital both in the form of equity and debt.

    Answer 3:
    Most countries have very stringent process in approving any drug before it hits the market. There are however, different rule set for unmet diseases where a drug can be declared as orphan drug (a process where a drug can be made available in the market by testing it on a reduced number of patients). In the given case the drug has already been able to cure thousands of people but with ongoing research there could be a significant % of people for whom it may not work or even work negatively. Following are some of the laws based on which we can analyze the situation:

    Utilitarian law: This law determines the overall utility of any action. In the given scenario if there is no other drug available which can cure cancer, a failure rate of 7% will be very much acceptable to the society. However, if there are other drugs available which are more effective than the one developed by the Company, they should recall the drug immediately.
    Moral rights law: These are those rights which are not contingent or dependent on other laws or customs. In terms of the current scenario the information on chances of failure must be made available to the public in clear terms and then the public needs to take decision if they wants to go for the drug or not. In this context the drug should be there in the market and the patients can decide if they want to have it or not.

    Justice rule: The courts of countries can ban the medicine from sale in their countries and in that case the company will have to withdraw its stock from the country.

    Answer 4:
    Law is the power established by an authority to punish and to compel any person to pay the compensation for the loss.
    Ethics are the principles of right conduct. It is based on the standard of doing a thing correctly or wrongly in terms of rights and obligations.

    Law is designed to protect the society. Without an ...

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