Discuss about Transforming company strategy to closed joint…………..
TABLE OF CONTENTS
Many companies today are seeking to spread their exposure to risks in order to enhance their survival in the ever changing business environment. We are witnessing many business acquisitions, mergers and even join ventures. This is done mainly to preserve their market share and ensure competitive advantage over their rivals. They also do this to ensure they meet their targets in making profits and also meeting the associated costs of the business like purchase of raw materials, maintenance of machinery and staff development and remuneration.
The decision by the company to move from sole proprietorship to closed joint brings with it many advantages and disadvantages to the employees.
The company on becoming a closed joint enterprise gives it a separate legal existence. This means that the company will be recognized as a legal person and can sue and be sued before a court of law. This gives the employees more bargaining power because they can become members of a trade union affiliated to the activities of the company (Gregory, 2007). The employees will be able through their representatives to have collective bargaining agreements that will bind the company to implementing good salary award schemes and workplace ethics that are in line with the industry. This was not possible when the company was operating as a family business.
The company will also have more capital that will be injected by the new shareholders. This capital will be invested in various expansion programs that will guarantee good profits in the future. These profits will also be invested in improving the working environment for the employees. The company will be able to offer staff training programs that will enhance the skills and knowledge of the employees in their respective areas of specialization. This will make them more marketable.
Due to the separation of ownership from management, there will be more transparency and professionalism in the running of the affairs of the company. This will motivate the employees and their productivity will increase. As a result, the company will be able to offer the employees more fringe benefits like interest free staff loans, job upgrades and motivational and bonding tours.
Due to the high levels of professionalism, there will be less victimization of workers at the company. Any disciplinary actions will be guided by the company’s code of conduct and the labor laws. This enhances more fairness in the settlement of disputes between employees and their employer (Moyes, 2000).
The company also being a legal person will be assumed to be in perpetual succession. The employees’ jobs will be guaranteed as long as the company will be in existence. This will be enforced by the other regulations that require the company’s accounts to be audited by certified personnel and publishing of the results. This will ensure transparency in the company’s operations. Therefore any actions of mismanagement that may jeopardize the job security for the workers will be known in good time and the stakeholders like the board of directors, management, labor unions and the government will take requisite measures to avert their occurrence (Stephen, 1999).
The transition of the company may take long due to the legal procedures involved. This may hamper the operations of some departments which may force reorganization in the company leading to job losses to some employees.
The company upon transition will be required to comply with various government regulations in the industry (Karen, 2010). These regulations will cost the company money which may reduce the capital available for investment activities. This will affect the production processes in the company and may in some cases lead to layoffs.
The decision making process in the company will be long. This will involve the board of directors who are not workers in the company and they may schedule very few meetings in a year. Policy decisions affecting the workers may take a long time to be deliberated and agreed upon. This will affect their welfare as by the time they come to be implemented they may be time barred.
Most companies nowadays are diversifying their ownership in order to cope with the risks involved in the market. When they spread their risks through join ownership, they ensure they have enough capital base to carry out any invest procedures that will guarantee a more presence in the market. They will also be able to invest in research and development projects that will instill more skills and knowledge in their workforce. In so doing they will be able to cope with the inflationary pressures that are in the market. The availability of more capital enables the company to hedge against inflation through control of its purchases and sales procedures. However, the company will also be required to comply with the various government regulations that govern the public sector. They will be expected to comply with many laws like those that require them to publish their annual performance reports and to also disclose the interests of the directors. This public scrutiny will come with related costs and the company must comply.
Gregory, A (2007). Labor Enactments. London. Pearce Books Ltd, P.19
Karen, B (2010). “Structures in the corporate sector” (Online) Available from http://www.blurtit.com/q893836.html (Accessed on 5th May 2012)
Moyes, P (2000). Risk Assessment in the Corporate Sector. Vienna. Bierd Printers, P.30
Stephen, T (1999). Forms of Company Ownership. Dublin. Ace Books, P.82
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