Economic Systems

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While there are some basic types of economic systems in the world only a few countries today practice only one economic system. All the other countries practice a system that is mixed; consisting of the principles of different economic systems.

COMMAND ECONOMY
While there are some basic types of economic systems in the world only a few countries today practice only one economic system. All the other countries practice a system that is mixed; consisting of the principles of different economic systems.

FEATURES OF A COMMAND ECONOMY
1. PUBLIC OWNERSHIP : All economic resources are publicly owned.
  • All types of capital are owned by the state.
  • Private ownership is limited.
  • In order to distribute income and wealth equally resources are publicly owned.
  • Personal income cannot be derived from the ownership of property.
2. PLANNED PRODUCTION: A national plan is made for all the economic activities that needs to be carried out.
  • Government directives are allocated to distribute resources.
  • Economic questions are answered by the state.
3. PRICE :  Prices are fixed by the government.
  • Prices do no change in response to changes in demand and supply.
4. AIM OF PRODUCTION: Production is carried out for the welfare of the people rather than to maximize the profit. 

Below are some advantages and disadvantages of a command economy.

Advantages
Disadvantages
Because the ruling government makes a plan for the economic activities that needs to carried out these activities are free from instability.
Less variety of products since only a limited range of good and services are provided.
Income and wealth are equally distributed.
The quality of the products are low since no competition exists in the market.
The ruling nation has command over its economic activities.
Lack of innovation and invention because the profit motive is taken away by the government.

FREE MARKET ECONOMY

Briefly free market economy is a system in which economic questions are answered by the price mechanism. Price mechanims is the fluctuation in supply and demand for good and services provided.

FEATURES OF A FREE MARKET ECONOMY
1. PRIVATE OWNERSHIP: Individuals have the right to own property or assets also having the right to get income from the asssets.
2. FREEDOM OF CHOICE: 
  • Individuals have the freedom to establish businesses themselves.
  • Producers have the freedom to change their products according to customer preferences.
  • Workers have the freedom to get employed and resign.
  • Consumers has the freedom to spend their income however they please.
3. SELF INTEREST: An economy which encourages individuals to do what is right for them.
  • Firms are established to maximize profits.
  • Workers have the freedom to maximize their earnings.
  • Consumer try to maximize their satisfaction.
4. PROFIT MOTIVE: The main objectives of a free market economy is to maximize profit.
5. CONSUMER SOVEREIGNTY: In a free market economy the consumers are considered as kings since the producers will only produce those products which the consumers want.
 6. LIMITED ROLE OF THE GOVERNMENT: Since the economic questions are answered by the price mechanism the role of the government is limited to maintaining defense and justice in the country.

Below are some advantages and disadvantages of a Free market economy. 

Advantages
Disadvantages
Prompt response to the wants of consumers sine they influence the production.
Due to the ample amount of freedom received by the producers some people may have excess amount of market power leading to inequalities on the distribution of income and wealth.
A wide range of products are in the market since producers are encourage to produce products which the consumer wants through the price mechanism and freedom of enterprise.
Since price mechanism plays a huge role in what to be producer the lower class may not have the goods and service they require since they lack the purchasing power.
More freedom of choice to both the producers and consumers
Encourages the consumption of harmful goods. For example : drugs and alcohol.
The government interference is low in the areas of economics thus making it easier for foreign investors to invest in the economy.
Market is dominated by huge firms therefore its limits the competition and consumers are exploited due to the high prices.

MIXED ECONOMY
Mixed economy is described as a system in which both private and public sector operates for the welfare of the people. 

FEATURES OF A FREE MARKET ECONOMY
1. Existence of both public and private sector: The private sector encourages the freedom of choice, private ownership, price mechanism and profit motive. The public sector maintain law and order ensuring the economic stability of the economy.
2. Co-ownership of industries:  Some organization are owned by the government with an aim to maximize profit.
3. Reduction of economic inequalities: When the government introduce taxes and subsidies they are able to balance income and wealth amongst the economy.

Below are some advantages and disadvantages of a Mixed economy.

Advantages
Disadvantages
Price mechanism allows for resources to be allocated in a good manner.
Conflicts between the sectors creates difficulty to operation the system.
Effective planning leads to effective use of the economic resources.
It allows for corruption and black markets.
Economic efficiency is increase due to the freedom of choice, profit motive and competition.
If the government poses too much control over the private sector individuals will be discourages as well as organizations.

TRANSITIONAL ECONOMY
Transitional economy is described as an economic system that is changing from being one under the control of the government to being a market economy. 

FEATURES OF A TRANSITIONAL ECONOMY
1. Inefficiency in the allocation of resources: : Prices of the products does not reflect the scarcity of the products thus with low prices there is shortage of resources. 
2. Production inefficiency: The government attitude to be self-sufficient and avoiding trade with other countries results in productive inefficiency. 3. Rising inflation: Since the prices of the products does not have control; does not depend on the scarcity of the product or other price control mechanisms it rises inflation.
4. Corruption: Due to the neglect of the government towards adopting a sophistical legal system no right are protected and regulated which allows entrepreneurs to exploit their position to get higher profits by increasing the prices. 

Below are some advantages and disadvantages of a Transitional economy.
Advantages
Disadvantages
Due to the neglect of the government towards adopting a sophistical legal system no right are protected and regulated which allows entrepreneurs to exploit their position to get higher profits by increasing the prices.  Opportunity for trade agreements during the transition period which enables the government to pay for the technology and improvements in infrastructure.
Open the doors for dramatic inflation during the transition.
Open immigration policies allows people to travel to other countries to seek job opportunities.
Lack of entrepreneurship and skills.
The government has total control over the means of production.
Economic transitions leads to a massive inequality amongst citizens. Rises the chance for traders to exploit their position.


Maslow’s Hierachy of needs model

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Although it seems that the hierachy has a fixed order, Maslow suggest that it is no neccesarily a fixed order. Which means that for a person physiological needs might not be as important as having self esteem. Maslow explains that the hierachy is universal howerver differs depending on the level of motivation in an individual. This intention of this theory cannot be contrasted with the priorties that has to be given by economic systems to allocated their resources. Tamra orr in her book understanding the econmic systems explain the three main criteria by which economic systems defined themselves. They are: 
  1. The methods used in producing, distributing and consuming of goods and services. How to produce?, What to produce? And for whom to produce?
  2. The ownership of the factors of production ( Land, Labour, Capital and entreprenueur).
  3. The level of control the government has over the economy. 

TEAM WORK

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A quote by Andrew Carnegie, a Scottish industrialist about team work states that “Teamwork is the ability to work together towards a common vision. The ability to direct individual accomplishments towards organizational objectives. It is the fuel that allows common people to attain uncommon results.” In order for an organization to be successful in accomplishing an objective it is vital for that organization to have employees who are as equally motivated towards achieving that objective. Diversity or individuality among the employees is a major asset it can use to obtain maximum productivity and quality products and service. This is the reason why multi-billion dollar companies such as Google are working towards a more diverse work environment. Data released by Google as of Jan 2015 shows that woman holds 30% of Google’s jobs. White employees account for 60% of the work force while Asian account for 31%, Black 2% and Hispanic 3%.

While diversity brings the advantage of a pool of ideas it also brings disadvantages such as racial, religious disputes among the employees. To not have such disputes would make it easier for a leader to inspire them to work as a team. It is evident that in order to become a successful entrepreneur you must have the ability to build and inspire a team. 

TYPES OF TEAMS
From a very young age we are introduced to the notion of team work and how it will help us as well the people who we interact with. When we go to the playground to play or when a task is given by the teacher in school, we are advised to do the activities together and share the tools that we use as well as our knowledge among our colleagues. In the playground the teacher gives the choice to take initiative among the students as the leader of a team to select other members of the team for a football match. We select our closest friends and also that one kid who is really good at playing soccer. In this way gradually our skills are tested and improved. As a leader or a member we have become a part of several teams, mostly for a short term interaction. We may have been a member of a team joined together to celebrate a birthday party or to celebrate New Year. We may have also been a leader or a member of a team in a company where a specific problem was presented to be taken care of or a part of a pool of people from different departments of the same company to introduce a product. Below are the 3 common types of teams.

Functional
Also known as departmental teams, functional teams are those group of people who meet on a regular basis from the same work place or department.
Cross-functional
A group of people consisting of different skills from different departments or jobs.
Special Purpose
This type of team is temporary and lasts for as long for the task that is to be completed is done. For example the government appoints a special task force to carry out necessary work.

The other characteristic that distinguish one team from the other is the size of the team. There are small teams that consist of 2 to 4 members and larger teams that consist of 12 or more members. Below are some advantages and disadvantages of having a small or large team. 

Small team
Large team
Advantages
A leader can focus more time on each member of the team.
More ideas will be shared.
Discussions can be carried out easily therefore there will be fast decision making.
Decision will be made based on majority therefore there will be more acceptance of decisions made.
Since communication is more effective, each member of the team will collaborate and therefore produce a shared vision (Nagele, 2005).
Can carry out a bigger plan that requires more skills, knowledge and man power.
Disadvantages
Compared to a larger team a small team would have limited amount of skills and knowledge to share.
Have to deal with more conflicts due to differences in opinion.
When many tasks have to be done, when shared among a small team, it will be very stressful.
Decision making takes more time.
Difference in comfort zones may result in one person having to dirty their hands more than 
everyone else.
Risk of the formation of sub groups as well as individuals taking on the leader role that would result is disputes with the members and leader.

BENEFITS OF TEAM WORK
For an individual who is working towards success in his or her career, being a team player plays an important role. Below are some of the skills a person will require to be a team player. 
  1.  Ability to work with others.
  2. Ability to work towards a common objective.
  3. Resourceful.
  4. Able to build trust among colleagues.
  5. Negotiation skills.
  6. Able to take criticism in an amicable manner.
Having team players in a work group would make it easier for the leader to assign work and get it done in due time. Also it will help the team to get motivation from each other as well. Being a reliable team player will not only help the team to achieve its objectives but also will help the person to develop his or her skills. Self-awareness, enthusiasm and problem-solving skills can be obtained by working as a team. 

Business and Ethics

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Business ethics is describes by many writers are very broad. Ethics in simple terms means the moral principles that govern the behavior of a person or the conducting of an activity. Businesses conduct ethics management programs in order to establish the right and wrong amongst its employees. In a diverse environment where employees comes from different cultures and religion it is very important to establish fair grounds in which the employees should be treated equally. Inequality in a workplace can lead to arguments amongst employees. Also demotivate the ones who are not involved since they feel that the environment is not suitable for them. It is one of the main factors an employee or a customer looks for when deciding to become loyal to an organization. How organization treat their employees is vital to a healthy relationship which would contribute to the quality and productiveness of the employees work. From the recruitment process to training and promotions and employees and the employer has duties to be fulfilled in order to work towards the objective of the organization. 
The ethics of a business does not apply only to how the organization treats its employees but also the customers, suppliers, distributors and competitors. For example, marketing and selling, fair competition and incentives. These actions from the organization have various benefits. Some of the benefits are:
  1. Improvement of the society with the realization of the importance of establishing laws and regulations for the safety of the workers. 
  2. It enables a strong teamwork and productivity. In a friendly fair environment there will be more support for each other in the work place therefore more team work thus improving the productivity. 
  3. It improves the public image of the organization. When it comes to recruitment the organization will highly benefit from having retired staff who would speak of the good ways the organization treat its employees. This would help them to get more candidates to the posts they need. 
Building a good ethics framework in a business will save the business from having to pay huge fines. This is due to the breaking of the environmental and ethical laws. It is considered by some that since the fined amount to the organization outweighs the money made by the organization its results in the lack of business ethics. However organization would not prefer to have angry customers or pressure groups on the backs all the time. To conclude, to conduct ethical principles in an organization it does not have to be labeled profitable or unprofitable. It’s simply the right thing to do. To be environmentally and socially responsible the organization can show its willingness to cooperate with the laws and regulations of the country and show its respect for ethics in business by treating all its stakeholders fairly. 


The above figure is described by Laurie J. Mullins in his book Management and organization behavior as follows “A useful model that describes ethical business circles which views the companies various activities as occurring within a series of expanding circles moving out from the center”. He further goes on to explain the inner most circle to the outermost circle. The innermost circle shows the internal working of the business and the way individuals and colleagues are treated. The second circle defines the ethics of customer relations and marketing also the pricing and advertising of goods and services. The third circle focus on relations with other companies. Finally the fourth circle shows how the company relates to the local community. 


Responsibilities of organizations

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Organizations play a vital role in our day to day lives. Apart from our work place, every day we come across different types of organizations and have transactions with them. McShane S.L., 2000, States that organization are as old as the human race. It further goes to explain how archaeologists have discovered temples dating back 3500 B.C which can be built only by a group of organized individuals. These structures represents not only that organizations existed but that people in them cooperated with each other. In order to achieve the goals of an organization they have to cooperate with not only the people who are working with them but also the community that surrounds their establishment.

By obeying the rules and regulations by the governing bodies and respecting the culture, ethics of the society the organization must change the way it operates its activities, the products offered and how the services are provided accordingly to come to common grounds with the community. Due to the growing pressure for environmental groups organizations must comply with not only the interests of the money; to make profit but to find ways to satisfy the need for the safety of the environment and that of the investors of the organizations. 

STRATEGIES EMPLOYED TO MEET THEM
Every business needs to have a strategy and this strategy must comply with the changing environment. The survival of the organization is dependent upon the exchanges between the organization and the environment. The changes will bring challenges to the organizations but also opportunities. An effective strategy is that which in cooperates both risks and opportunities for the business.

SOCIAL RESPONSIBILITIES 
 The chief executive for United States and senior managing director for North America of the company Accenture describe the purpose of a company as “it is most powerful when it aligns with the potential for greater social impact. As we help clients achieve high performance, we strive to make a measurable sustainable difference in our communities”. Today it is widely understood by organizations the growing importance of social responsibility of organizations. While striving to achieve the objectives of the organization it cannot however achieve autonomy from the influences of its environments. Profit is not necessarily the increase in revenue but profit is also the growing reputation of a business in the community. 

The society requires good and services created and supplied by the organization. The organization needs the factors of production and other facilities of the society. In this cycle of giving and receiving the organization and the society get opportunities for growth. The government and other legal bodies identify the importance of social responsibilities of organizations thus, introducing laws and regulations such as:
  • Employment Protection Laws.
  • Company Acts.
  • Consumer Laws.
  • Laws Regarding the safety of the environment.
Below are some social responsibilities of an organization.
  • Responsible to operate in accordance to law and regulations of the country.
  • Should avoid any activities that are harmful to the community.
  • Avoid the manipulation of information presented to the community.
  • Should not use its political power to influence the changes in laws according to their needs.
  • Participate in donations and charitable events in support of the interests of the community.
ENVIRONMENTAL RESPONSIBILITIES
Today many organizations are adapting their operations to the changes in the environment. Due to changes in climate there has been an outcry by many pressure groups as well as the general public to introduce renewable resources and minimizing its consumption. Businesses have come to the realization that acting in environmentally responsible manner is not only legal duty but its affects the survival of the business and long term success as well. In short, there is no point in having a business if there is no planet to have it on. Some of the environmental responsibilities include:
  • Investing in clean technologies.
  • Using energy from renewable sources such as solar energy.
  • Minimizing waste and promoting recycling.
  • Switching to environment friendly machinery and product that are used in this organizations.
  • Making sure the organization comply with restrictions on the storage and use of hazardous substances.
  • Complying with the various environment legislation of the government. 
  • Consider the damages to the environment when starting a new business venture or project. In some cases the damages are imminent however the organization should anticipate and minimize the damage.
  • Equipment that needs maintenance, servicing has to be done regularly. For example refrigerators and air conditioners.
  • Introduce guidelines indicating waste and recycling policies of the company and make sure they are strictly followed by all the employees of the organization.
  • Avoid damaging habitats of endangered animals, water contamination and projects that involved a great risk to the human health.
  • If such an incident occurs it should not be let at bay but should inform the authorities responsible to find a solution as soon as possible. 
MANAGEMENT RESPONSIBILITIES
It is believed by some employees of an organization that the management is responsible only to meet the needs of its owners. But we understand through analyzing the stakeholders within a business that in order to grow the organization must also meet the interests of the other stakeholders within the organization as well. They include:
  1. Employees.
  2. Customers.
  3. Suppliers.
  4. Competitors.
  5. The community.
  6. Government.
1. RESPONSIBILITIES TO EMPLOYEES

Employees are essential to an organization. Employees need the organization as well. This employer and employee relationship is what strengthens the organization on the inside. Organizations battle in the pursuit of finding hardworking loyal employees on a regular basis. But in order to find them and make sure they remain loyal, employees demand more than just the employment in the firm and work recognition certificates. With the changing world people have higher expectations from their employer. Some of the management responsibilities to achieve these goals are:
  1. Fairness in treating all employees.
  2. Improving the working environment with technological developments.
  3. Making sure the working environment is safe, giving assurance that the company will take measures necessary for the treatment of the employee if an incident were to occur in the work place. For example if a staff gets injured while using machinery provided by the organization, they have to pay for his treatment.
  4. With the advancement the employees need training.
  5. Introducing leisure activities.
  6. Create a friendly working environment.
  7. Provide effective personal and employment relation policies.
2. RESPONSIBILITIES TO CUSTOMER

A bad review by a customer can affect the organization to an ample amount; to the revenue as well as the reputation. Organization has to regard and take into consideration various other ways they can keep the customers satisfied. Some responsibilities to achieve the satisfaction include:
  1. Providing good value for money.
  2. Provide durable and safe products.
  3. Prompt attention to complaints and queries.
  4. Practice fairness amongst all customers regardless of race or cultural differences.
  5. Providing valid information to the customers.
3. RESPONSIBILITIES TO SUPPLIER

In order to have a good relationship with the supplier the organization must ensure of the following responsibilities. They are:
  1. Complying with the terms and agreements of the transactions.
  2. Prompt payments.
  3. Maintaining a long term relationship.
  4. Keeping the transaction carried out between the organizations and supplier confidential.
4. RESPONSIBILITIES TO COMPETITORS
The competitor the organizations have to deal with is one of factors that differentiate firms from one another. A competitor of an organization in the field of technology is different to competitors of an organization that deals with groceries and other food items. Some organizations have to deal with fierce competition while others have to deal with less intense competition. When faced with intense competition some organizations seek to find loop holes in the law and find ways to manipulate it get profit. However organizations must practice morality when dealing with competition for the sake of their image amongst the customers as well as the competitors. Below are some responsibilities of organizations to its competitors.
  1. Obeying the laws and regulations put forth by the government.
  2. Compete ethically and honestly.
  3. Do not attempt to get trade secrets of competitors improperly.
5. RESPONSIBILITIES TO COMMUNITY

The community is the place where organizations get the factors of production to produce the goods and services needed. Organizations have a responsibility to respect the environment and avoid activities that may disrupt the lives of the people in the community. Some such responsibilities of organization to the community include:
  1. Avoid the usage of hazardous products that brings danger to the environment.
  2. Avoid activities that may create noise pollution.
  3. Transportation policies must be placed in a way it does not damage nor bring difficulty to the people.
  4. Participate in events, gathering and charities organized by the community in order to show your support for the good cause.
  5. Helping the community in times of crisis. 
6. RESPONSIBILITIES TO GOVERNMENT

To be in line with the government is one of the factors that contribute to the easy operation of the organization. If the organization opposes the laws and regulation put forth by the government it will face threats to its survival and growth. Some of these responsibilities include:
  1. Paying taxes. Example: Incomes tax, GST.
  2. Complying with import / export laws of the country.
  3. Complying with the legal steps given by the government to establish business ventures.
  4. Assisting the government in solving social problems.
  5. Limiting the extent of political involvement that may interfere with the works of the government.