Management in Third World Countries

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Table of Contents

INTRODUCTION1

THESIS STATEMENT1

DISCUSSION1

The Cost of Doing Business1

Non-Monetary Obstacles to Growth3

Transaction Costs and Business Growth4

Internal Transaction costs and Other Non-Monetary Factors Affecting Labor Hiring5

Lack of honesty and reliability among Workers6

Attitudes towards work7

Legal Risks and Costs8

Limited Skills and Training9

CONCLUSION9

Introduction

In 2007, economic crisis accentuated the decline of the international business. The collapse of consumers spending, credit crisis, and the mismatch between different nations spending and savings were at the base of international trade downward spiral. The negative effect is seen both in the global demand and global supply sides. This paper describes the business management in third world countries. Moreover, it deals with the problems and their possible solutions. Three main factors culpable to the decrease in the international businesses are identified and discussed in detail: economic health of countries involved in the trading process, trade imbalances, and political environment of various countries.

Thesis Statement

Culture and Economic differences are a huge hindrance in starting up a new business in any third world country.

Discussion

The Cost of Doing Business

When speaking of business costs, economists subdivide costs into a series of categories. For example, direct costs include the actual expenses on raw materials, labor, and business services employed by the business. These costs can be paid either in money or in goods or services. Non-wage direct labor costs include, for example, thefts, wastage of materials, or social benefits paid to the workers. Indirect costs are those that derive from other investment decisions but are not involved in the actual production of the product; e.g., administrative costs or the cost of the space needed to house more employees. There are also transaction costs which may be monetized (e.g., credit card fees) or non-monetized, which involve expenditure of time and energy to complete a transaction; and social costs which are used here to refer, for example, to loss of self-esteem or social standing with the family(Lotz,2008,pp167).

The emphasis of microenterprise programs has been primarily in giving micro entrepreneurs the opportunity to reduce their direct costs by providing them with credit to buy material in bulk (and thus at lower cost) or to increase access to capital inputs. The focus has been on monetized costs. Although in the end money can help solve most business problems, the amounts required are usually beyond the monetary thresholds that can be reasonably assumed by informal micro entrepreneurs. For example, transportation problems would be resolved by buying a car or taking a taxi; however the amount of money required is so great that it is beyond the reach of most micro entrepreneurs. Similarly, a lack of space may be resolved by renting a larger place, but the possibilities of doing so may be minimal(Leicht,2007,pp875).

Thus, although problems of transportation or space are monetary problems for micro entrepreneurs, the problems translate primarily into transaction costs, i.e., into the amount of time and energy in addition to money that a micro producer needs to invest to transport goods to market or buy ...