Monday, September 30, 2019
The healthcare system is composed of different individuals who are aiming to provide quality healthcare services to achieve optimum health among their patients. One of which are nurses. It is said that the role of the nurses are very important in the health care delivery as they are the ones who are directly involved in the care of the patients. The core services of the nurses include health promotion, health protection and illness prevention (Backe, 1996). However, in this contemporary world, the role of the nurses are not only limited in the caring of the patients, but also in changing the public health system to ensure that they provide quality and standard health care services among people. Accordingly, the public health is the core of a quality heath care system and is considered as the most cost-efficient method for the prevention of disease and improvement of health (Avila & Smith, 2003). The public health is also known as the first line of defense of the nation as their response to the threat of bioterrorism and in line with disaster preparedness. With years of negligence and erosion in financial budget, the capability of the public health system has been compromised in performing their core functions effectively. In this regard, such issue has become critical in sustaining a long-term stable funding source for the health of the public. With the continuous threats of bioterrorism, pandemic flu, and natural disasters it is important that public health system must be improved to cope with these challenges. As a nurse, I can say that I also have the capability of changing the public health system in various ways. One of these is by being more observant to what is happening around me. Being a nurse, my responsibility should not be bounded by merely practicing all the things that I have learned from the books and from the years of studies at nursing school. In order to make changes in the public health system, I must become more observant to my environment specifically in terms of knowing what policies provided by healthcare authorities are still suitable for the current trends in delivering quality healthcare services and which policies should be modified or revised to meet the changing needs of the people. In addition, I can say that as a nurse, I can change the public health system by knowing directly from the people what they need and coordinating it with the proper authorities for them to make changes and improvement to meet the needs of the public. In addition, I can also help by providing assistance in assessing the needs of the public and helps in providing effective intervention programs. Through my sufficient knowledge and skills not only with hands on activities but also in research and development since evidence are necessary in planning and implementation of appropriate public health system, especially in the remote and sub-urban communities. I can also say that as a nurse, I also have the ability to change the public health system and provide significant impact in terms of improving the public health through both the population-based health approaches, evidenced-based health strategies and interventions with individuals and families. Recent studies have shown that the crucial role of nurses play in the enhancement of evidenced-based nursing practice and their influence on the public health system (Manley & Webster, 2006). Furthermore, I can also say that I can help in changing the public health system by my distinctive knowledge based on my experience as a public nurse. As strategists, clinical experts as well as collaborators, I can say that I also have the unique ability to interpret the essentialities of health and illness contexts so as to advocate families, populations and clients to healthcare planners and policy making bodyÃ¢â¬â¢s at all public levels of the healthcare system. Since I have worked in various roles within a wide spectrum of the public health system in various work environment and settings, I can say that I have enough information on what the public health system should be improved and enhanced (HRSA, 2005). Through my nursing practice expertise, I can also become an instrument to enable the public health authority to identify which intervention strategies is suitable for a specific need of the people as well as to help in overcoming the problems and issues faced by the public health system in order to continuously provide quality health care to the patients, especially in the rural communities. All in all, I can say that my role as a nurse is not only limited to the clinical practice and expertise. My role is to become an effective instrument of bridging the long distance between the people and the authorities who are trying to safeguard their health and help them in preventing diseases that would threaten them for having quality health care living. Reference Avila, M. and Smith, K (2003). Ã¢â¬Å"The reinvigoration of public health nursing: methods and innovations.Ã¢â¬ Journal of Public Health Management Practice 9(1): 16-24. Backe, H. (1996) Public Health Nursing Services in Rural and Northern Regional Health Authorities: Policy Options for Boards. Unpublished Paper. Winnipeg. Heath Resources and Services Administration. (2005). Public health workforce study. Bureau of Health Professions: Rockville, Maryland. Manley, K. & Webster, J. (2006). Can we keep quality care alive? Nursing Standard 21(3): 12-15.
Sunday, September 29, 2019
Topics to Stimulate Class Discussion 1. Why are MNCs affected by exchange rate movements? 2. Why did exchange rates change recently? 3. Show the class a current exchange rate table from a periodicalÃ¢â¬âidentify spot and forward quotations. Then show the class an exchange rate table from a date a month ago, or three months ago. The comparison of tables will illustrate how exchange rates change, and how forward rates of the earlier date will differ from the spot rate of the future date for a given currency. 4. Make up several scenarios and ask the class how each scenario would, other things equal, affect the demand for a currency, the supply of a currency for sale, and the equilibrium exchange rate. Then integrate severalÃ scenarios together to illustrate that in reality other things are not held constant, which makes the assessment of exchange rate movements more difficult. Critical Debate: The currencies of some Latin American countries depreciate against other currencies on a consistent basis. How can persistently weak currencies be stabilized? Proposition: The governments of these countries need to increase the demand for their currency by attracting more capital flows. Raising interest rates will make their currencies more attractive to foreign investors. They also need to insure bank deposits so that foreign investors who invest in large bank deposits do not need to worry about default risk. In addition, they could impose capital restrictions on local investors to prevent capital outflows. Opposing view: The governments of these countries print too much money because they make too many promises to the electorate that would otherwise have to be funded by higher taxes or borrowing at high interest rates. Printing money is the easy way out; but prices rise, exports decrease and imports increase. Thus, these countries could relieve the downward pressure on their local currencies by printing less money and thereby reducing the money supply and hence inflation. The outcome is likely to be a temporary reduction in economic growth and business failures. Higher interest rates would merely increase inflation. Reply: Solutions that cause riots are not very clever. With whom do you agree? Which argument do you support? Offer your own opinion on this issue. ANSWER: There is no perfect solution, but recognize the tradeoffs. The proposal to raise interest rates is not a good solution in the long run, because it will cause higher loan rates, and may slow down the economies in the long run. Effective anti-inflationary policies are needed to prevent further depreciation. However, the elimination of inflation that is caused by a wage-price spiral may cause some pain among the workers in the country,Ã as some form of wage controls may be needed. The government has various means of reducing inflation, but all of them can have adverse effects on the economy in the short run. As intimated in the question, inflation is a form of taxation, another way in which governments can raise money and inevitably reduce the value of ones earnings. Where governments are corrupt or have a poor control over the economy, inflation may be the only reliable way of Ã¢â¬Å"taxingÃ¢â¬ . In terms of economic welfare, the question is perhaps who suffers from inflat ion and a depreciating currency, perhaps not so many as long as the inflation is predictable. Answers to End of Chapter Questions 1. Percentage Depreciation. Assume the spot rate of the US dollar is Ã £0.54. The expected spot rate one year from now is assumed to be Ã £0.51. What percentage depreciation does this reflect? ANSWER: (Ã £0.51 Ã¢â¬â Ã £0.54)/Ã £0.54 = Ã¢â¬â5.55% Expected depreciation of 5.55% percent 2. Inflation Effects on Exchange Rates. Assume that the UK inflation rate becomes high relative to euro inflation. Other things being equal, how should this affect the (a) UK demand for euros, (b) supply of euros for foreign currency, and (c) equilibrium value of the euro? ANSWER: Demand for euros should increase (euro prices cheaper), supply of euros for sale should decrease (Ã £ prices more expensive), and the euroÃ¢â¬â¢s value should increase (supply and demand). 3. Interest Rate Effects on Exchange Rates. Assume euro interest rates fall relative to British interest rates. Other things being equal, how should this affect the (a) euro demand for British pounds, (b) supply of pounds for sale, and (c) equilibrium value of the pound? ANSWER: Demand for pounds should increase, supply of pounds for sale should decrease, and the poundÃ¢â¬â¢s value should increase. 4. Income Effects on Exchange Rates. Assume that the income level in the euro area rises at a much higher rate than does the UK income level. Other things being equal, how should this affect the (a) euro area demand for BritishÃ pounds, (b) supply of British pounds for sale, and (c) equilibrium value of the British pound in terms of the euro? ANSWER: Assuming no effect on interest rates, demand for pounds should increase, supply of pounds for sale may not be affected, and the poundÃ¢â¬â¢s value should increase. 5. Trade Restriction Effects on Exchange Rates. Assume that the Japanese government relaxes its controls on imports by Japanese companies. Other things being equal, how should this affect the (a) UK demand for Japanese yen, (b) supply of yen for sale, and (c) equilibrium value of the yen? ANSWER: Demand for yen should not be affected, supply of yen for sale should increase, and the value of yen should decrease. 6. Effects of Real Interest Rates. What is the expected relationship between the relative real interest rates of two countries and the exchange rate of their currencies? ANSWER: The higher the real interest rate of a country relative to another country, the stronger will be its home currency, other things equal. 7. Speculative Effects on Exchange Rates. Explain why a public forecast about the future value of the euro and about future interest rates by a respected economist could affect the value of the euro today. Why do some forecasts by well-respected economists have no impact on todayÃ¢â¬â¢s value of the euro? ANSWER: Interest rate movements affect exchange rates. Speculators can use anticipated interest rate movements to forecast exchange rate movements. They may decide to purchase securities in particular countries because of their expectations about currency movements, since their yield will be affected by changes in a currencyÃ¢â¬â¢s value. These purchases of securities require an exchange of currencies, which can immediately affect the equilibrium value of exchange rates. If a forecast of interest rates by a respected economist was already anticipated by market participants or is not different from investorsÃ¢â¬â¢ original expectations, an announced forecast does not provide new information. Thus, there would be no reaction by investors to such an announcement, and exchange rates would not be affected. 8. Factors Affecting Exchange Rates. What factors affect the future movementsÃ in the value of the euro against the dollar? ANSWER: The euroÃ¢â¬â¢s value could change because of the balance of trade, which reflects more U.S. demand for European goods than the European demand for U.S. goods. The capital flows between the U.S. and Europe will also affect the U.S. demand for euros and the supply of euros for sale (to be exchanged for dollars). 9. Interaction of Exchange Rates. Assume that there are substantial capital flows among the United Kingdom, the United States, and the Euro area. If interest rates in the United Kingdom declines to a level below the U.S. interest rate, and inflationary expectations remain unchanged, how could this affect the value of the euro against the U.S. dollar? How might this decline in the United KingdomÃ¢â¬â¢s interest rate possibly affect the value of the British pound against the euro? ANSWER: If interest rates in the UK decline, there may be an increase in capital flows from the UK to the U.S. In addition, U.S. investors may attempt to capitalize on higher U.S. interest rates, while U.S. investors reduce their investments in UKÃ¢â¬â¢s securities. This places downward pressure on the pondÃ¢â¬â¢s value. Euro investors who previously invested in the UK may shift to the U.S. Thus, the increased demand for dollars by euros may increase the value of the dollar in relation to the euro. 10. Trade Deficit Effects on Exchange Rates. Every month, the UK trade deficit figures are announced. Foreign exchange traders often react to this announcement and even attempt to forecast the figures before they are announced. a. Why do you think the trade deficit announcement sometimes has such an impact on foreign exchange trading? ANSWER: The trade deficit announcement may provide a reasonable forecast of future trade deficits and therefore has implications about supply and demand conditions in the foreign exchange market. For example, if the trade deficit was larger than anticipated, and is expected to continue, this implies that the UK demand for foreign currencies may be larger than initially anticipated. Thus, the pound would be expected to weaken. Some speculators may take a position in foreign currencies immediately and could cause anÃ immediate decline in the pound. b. In some periods, foreign exchange traders do not respond to a trade deficit announcement, even when the announced deficit is very large. Offer an explanation for such a lack of response. ANSWER: If the market correctly anticipated the trade deficit figure, then any news contained in the announcement has already been accounted for in the market. The market should only respond to an announcement about the trade deficit if the announcement contains new information. 11. Comovements of Exchange Rates. Explain why the value of the British pound against the dollar will not always move in tandem with the value of the euro against the dollar. ANSWER: The euroÃ¢â¬â¢s value changes in response to the flow of funds between the U.S. and the countries using the euro or their currency. The poundÃ¢â¬â¢s value changes in response to the flow of funds between the U.S. and the U.K. As the UK economy is different from the euro economy, economic events will have a different impact, the events themselves may also differ. Assuming that the market is efficient and that the exchange rates do move according to relevant information the fact that the relevant information sets differ justifi es a less than perfect correlation of movements. That they are similar is understandable as although different, the differences are not that great. 12. Factors Affecting Exchange Rates. In the 1990s, Russia was attempting to import more goods but had little to offer other countries in terms of potential exports. In addition, RussiaÃ¢â¬â¢s inflation rate was high. Explain the type of pressure that these factors placed on the Russian currency. ANSWER: The large amount of Russian imports and lack of Russian exports placed downward pressure on the Russian currency. The high inflation rate in Russia also placed downward pressure on the Russian currency. 13. National Income Effects. Analysts commonly attribute the appreciation of a currency to expectations that economic conditions will strengthen. Yet, this chapter suggests that when other factors are held constant, increased national income could increase imports and cause the local currency to weaken. In reality, other factors are not constant. What other factor is likely to be affected by increased economic growth and could place upwardÃ pressure on the value of the local currency? ANSWER: Interest rates tend to rise in response to a stronger economy, and higher interest rates can place upward pressure on the local currency (as long as there is not offsetting pressure by higher expected inflation). 14. Factors Affecting Exchange Rates. If the Asian countries experience a decline in economic growth (and experience a decline in inflation and interest rates as a result), how will their currency values (relative to the British pound) be affected? ANSWER: A relative decline in Asian economic growth will reduce Asian demand for UK products, which places upward pressure on Asian currencies. However, given the change in interest rates, Asian corporations with excess cash may now invest in the UK or other countries, thereby increasing the demand for pounds. Thus, a decline in Asian interest rates will place downward pressure on the value of the Asian currencies. The overall impact depends on the magnitude of the forces just described. 15. Impact of Crises. Why do you think most crises in countries (such as the Asian crisis) cause the local currency to weaken abruptly? Is it because of trade or capital flows? ANSWER: Capital flows have a larger influence. In general, crises tend to cause investors to expect that there will be less investment in the country in the future and also cause concern that any existing investments will generate poor returns (because of defaults on loans or reduced valuations of stocks). Thus, as investors liquidate their investments and convert the local currency into other currencies to invest elsewhere, downward pressure is placed on the local currency. 16. How do you think weaker economic conditions would affect trade flows in a Developing Country? How would weaker conditions affect the value of its currency (holding other factors constant)? How do you think interest rates would be affected? ANSWER: Weak world economic conditions would result in a reduced demand for foreign products, wh ich results in a decline in the demand for foreign currencies, particularly the currencies of developing countries that rely on exports. Taking the US as the dominant economy there would thereforeÃ be downward pressure on currencies relative to the dollar (upward pressure on the dollarÃ¢â¬â¢s value). The lower U.S. interest rates that accompany weaker economic conditions should reduce the capital flows to the U.S., which place downward pressure on the value of the dollar. Advanced Questions 17. Measuring Effects on Exchange Rates. Tarheel Co. plans to determine how changes in UK and euro real interest rates will affect the value of the British pound. a. Describe a regression model that could be used to achieve this purpose. Also explain the expected sign of the regression coefficient. ANSWER: Various models are possible. Based on the model above, the regression coefficient is expected to have a negative sign. A relatively high real interest rate differential would likely cause a weaker euro value, other things being equal. An appropriate model would also include other independent variables that may influence the percentage change in the pesoÃ¢â¬â¢s value. b. If Tarheel Co. thinks that the existence of a quota in particular historical periods may have affected exchange rates, how might this be accounted for in the regression model? ANSWER: A dummy variable could be included in the model, assigned a value of one for periods when a quota existed and a value of zero when it did not exist. This answer requires some creative thinking, as it is not drawn directly from the text. 18. Factors Affecting Exchange Rates. Mexico tends to have much higher inflation than the United States and also much higher interest rates than the United States. Inflation and interest rates are much more volatile in Mexico than in industrialized countries. The value of the Mexican peso is typically more volatile than the currencies of industrialized countries from a U.S. perspective; it has typically depreciated from one year to the next, but the degree of depreciation has varied substantially. The bid/ask spread tends to be wider for the peso than for currencies of industrialized countries. a. Identify the most obvious economic reason for the persistent depreciationÃ of the peso. ANSWER: The high inflation in Mexico places continual downward pressure on the value of the peso. b. High interest rates are commonly expected to strengthen a countryÃ¢â¬â¢s currency because they can encourage foreign investment in securities in that country, which results in the exchange of other currencies for that currency. Yet, the pesoÃ¢â¬â¢s value has declined against the dollar over most years even though Mexican interest rates are typically much higher than U.S. interest rates. Thus, it appears that the high Mexican interest rates do not attract substantial U.S. investment in MexicoÃ¢â¬â¢s securities. Why do you think U.S. investors do not try to capitalize on the high interest rates in Mexico? ANSWER: The high interest rates in Mexico result from expectations of high inflation. That is, the real interest rate in Mexico may not be any higher than the U.S. real interest rate. Given the high inflationary expectations, U.S. investors recognize the potential weakness of the peso, which could more than offset the high interest rate (when they convert the pesos back to dollars at the end of the investment period). Therefore, the high Mexican interest rates do not encourage U.S. investment in Mexican securities, and do not help to strengthen the value of the peso. c. Why do you think the bid/ask spread is higher for pesos than for currencies of industrialized countries? How does this affect a U.S. firm that does substantial business in Mexico? ANSWER: The bid/ask spread is wider because the banks that provide foreign exchange services are subject to more risk when they maintain currencies such as the peso that could decline abruptly at any time. A wider bid/ask spread adversely af fects the U.S. firm that does business in Mexico because it increases the transactions costs associated with conversion of dollars to pesos, or pesos to dollars. 19. Aggregate Effects on Exchange Rates. Assume that the United Kingdom invests heavily in government and corporate securities of Country K. In addition, residents of Country K invest heavily in the United Kingdom. Approximately Ã £10 billion worth of investment transactions occur between these two countries each year. The total pound value of trade transactions per year is about Ã £8 million. This information is expected to also hold in the future. Because your firm exports goods to Country K, your job asÃ international cash manager requires you to forecast the value of Country KÃ¢â¬â¢s currency (the Ã¢â¬Å"krankÃ¢â¬ ) with respect to the pound. Explain how each of the following conditions will affect the value of the krank, holding other things equal. Then, aggregate all of these impacts to develop an overall forecast of the krankÃ¢â¬â¢s movement against the pound. a. UK inflation has suddenly increased substantially, while Country KÃ¢â¬â¢s inflation remains low. ANSWER: Increased UK demand for the krank. Decreased supply of kranks for sale. Upward pressure in the krankÃ¢â¬â¢s value. b. UK interest rates have increased substantially, while Country KÃ¢â¬â¢s interest rates remain low. Investors of both countries are attracted to high interest rates. ANSWER: Decreased UK demand for the krank. Increased supply of kranks for sale. Downward pressure on the krankÃ¢â¬â¢s value. c. The UK income level increased substantially, while Country KÃ¢â¬â¢s income level has remained unchanged. ANSWER: Increased UK demand for the krank. Upward pressure on the krankÃ¢â¬â¢s value. d. The UK is expected to impose a small tariff on goods imported from Country K. ANSWER: The tariff will cause a decrease in the United KingdomÃ¢â¬â¢ desire for Country KÃ¢â¬â¢s goods, and will therefore reduce the demand for kranks for sale. Downward pressure on the krankÃ¢â¬â¢s value. e. Combine all expected impacts to develop an overall forecast. ANSWER: Two of the scenarios described above place upward pressure on the value of the krank. However, these scenarios are related to trade, and trade flows are relatively minor between the UK and Country K. The interest rate scenario places downward pressure on the krankÃ¢â¬â¢s value. Since the interest rates affect capital flows and capital flows dominate trade flows between the UK and Country K, the interest rate scenario should overwhelm all other scenarios. Thus, when considering the importance of implications of all scenarios, the krank is expected to depreciate. 20. Speculation. Blue Demon Bank expects that the Mexican peso will depreciate against the dollar from its spot rate of $.15 to $.14 in 10 days. The following interbank lending and borrowing rates exist: U.S. dollar Mexican peso Lending Rate 8.0% 8.5% Borrowing Rate 8.3% 8.7% Assume that Blue Demon Bank has a borrowing capacity of either $10 million or 70 million peos in the interbank market, depending on which currency it wants to borrow. a. How could Blue Demon Bank attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy. ANSWER: Blue Demon Bank can capitalize on its expectations about pesos (MXP) as follows: 1. Borrow MXP70 million 2. Convert the MXP70 million to dollars: MXP70,000,000 Ãâ" $.15 = $10,500,000 3. Lend the dollars through the interbank market at 8.0% annualized over a 10-day period. The amount accumulated in 10 days is: $10,500,000 Ãâ" [1 + (8% Ãâ" 10/360)] = $10,500,000 Ãâ" [1.002222] = $10,523,333 4. Repay the peso loan. The repayment amount on the peso loan is: MXP70,000,000 Ãâ" [1 + (8.7% Ãâ" 10/360)] = 70,000,000 Ãâ" [1.002417]=MXP70,169,167 5. Based on the expected spot rate of $.14, the amount of dollars needed to repay the peso loan is: MXP70,169,167 Ãâ" $.14 = $9,823,683 6. After repaying the loan, Blue Demon Bank will have a speculative profit (if its forecasted exchange rate is accurate) of: $10,523,333 Ã¢â¬â $9,823,683 = $699,650 b. Assume all the preceding information with this exception: Blue Demon Bank expects the peso to appreciate from its present spot rate of $.15 to $.17 in 30 days. How could it attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy. ANSWER: Blue Demon Bank can capitalize on its expectations as follows: 1. Borrow $10 million 2. Convert the $10 million to pesos (MXP): $10,000,000/$.15 = MXP66,666,667 3. Lend the pesos through the interbank market at 8.5% annualized over a 30-day period. The amount accumulated in 30 days is: MXP66,666,667 Ãâ" [1 + (8.5% Ãâ" 30/360)] = 66,666,667 Ãâ" [1.007083] = MXP67,138,889 4. Repay the dollar loan. The repayment amount on the dollar loan is: $10,000,000 Ãâ" [1 + (8.3% Ãâ" 30/360)] = $10,000,000 Ãâ" [1.006917] = $10,069,170 5. Convert the pesos to dollars to repay the loan. The amount of dollars to be received in 30 days (based on the expected spot rate of $.17) is: MXP67,138,889 Ãâ" $.17 = $11,413,611 6. The profits are determined by estimating the dollars available after repaying the loan: $11,413,611 Ã¢â¬â $10,069,170 = $1,344,441 21. Speculation. Diamond Bank expects that the Singapore dollar will depreciate against the euro from its spot rate of 0.48 euros to 0.45 euros in 60 days. The following interbank lending and borrowing rates exist: Lending Rate euro Singapore dollar 7.0% 22.0% Borrowing Rate 7.2% 24.0% Diamond Bank considers borrowing 10 million Singapore dollars in the interbank market and investing the funds in euros for 60 days. Estimate the profits (or losses) that could be earned from this strategy. Should Diamond Bank pursue this strategy? ANSWER: Borrow S$10,000,000 and convert to euros: S$10,000,000 Ãâ" 0.48 = 4,800,000 euros Invest funds for 60 days. The rate earned in the euros for 60 days is: 7% Ãâ" (60/360) = 1.17% Total amount accumulated in 60 days: 4,800,000 euros Ãâ" (1 + .0117) = 4,856,160 euros Convert euros back to S$ in 60 days: 4,856,160 /0.45 = S$10,791,467 The rate to be paid on loan is: .24 Ãâ" (60/360) = .04 Amount owed on S$ loan is: S$10,000,000 Ãâ" (1 + .04) = S$10,400,000 This strategy results in a profit: S$10,791,467 Ã¢â¬â S$10,400,000 = S$391,467 Diamond Bank should pursue this strategy. Blades plc Case Study As the chief financial officer of Blades plc Ben Holt is pleased that his current system of exporting Ã¢â¬Å"SpeedosÃ¢â¬ to Thailand seems to be working well. BladesÃ¢â¬â¢ primary customer in Thailand, a retailer called Entertainment Products, has committed itself to purchasing a fixed number of Speedos annually for the next three years at a fixed price denominated in baht, ThailandÃ¢â¬â¢s currency. Furthermore, Blades is using a Thai supplier for some of the components needed to manufacture Speedos. Nevertheless, Holt is concerned about recent developments in Asia. Foreign investors from various countries had invested heavily in Thailand to take advantage of the high interest rates there. As a result of the weak economy in Thailand, however,Ã many foreign investors have lost confidence in Thailand and have withdrawn their funds. Ben Holt has two major concerns regarding these developments. First, he is wondering how these changes in ThailandÃ¢â¬â¢s economy could affect the value of the Thai baht and, consequently, Blades. More specifically, he is wondering whether the effects on the Thai baht may affect Blades even though its primary Thai customer is committed to Blades over the next three years. Second, Holt believes that Blades may be able to speculate on the anticipated movement of the baht, but he is uncertain about the procedure needed to accomplish this. To facilitate HoltÃ¢â¬â¢s understanding of exchange rate speculation, he has asked you, BladesÃ¢â¬â¢ financial analyst, to provide him with detailed illustrations of two scenarios. In the first, the baht would move from a current level of Ã £0.0147 to Ã £0.0133 within the next 30 days. Under the second scenario, the baht would move from its current level to Ã £0.0167 within the next 30 days. Based on HoltÃ¢â¬â¢s needs, he has provided you with the following list of questions to be answered: 1. How are percentage changes in a currencyÃ¢â¬â¢s value measured? Illustrate your answer numerically by assuming a change in the Thai bahtÃ¢â¬â¢s value from a value of Ã £0.0147 to Ã £0.0173. 2. What are the basic factors that determine the value of a currency? In equilibrium, what is the relationship between these factors? 3. How might the relatively high levels of inflation and interest rates in Thailand have affected the bahtÃ¢â¬â¢s value? (Assume a constant level of UK inflation and interest rates.) 4. How do you think the loss of confidence in the Thai baht, evidenced by the withdrawal of funds from Thailand, affected the bahtÃ¢â¬â¢s value? Would Blades be affected by the change in value, given the primary Thai customerÃ¢â¬â¢s commitment? 5. Assume that ThailandÃ¢â¬â¢s central bank wishes to prevent a withdrawal of funds from its country in order to prevent further changes in the currencyÃ¢â¬â¢s value. How could it accomplish this objective using interest rates? 6. Construct a spreadsheet illustrating the steps BladesÃ¢â¬â¢ treasurer would need to follow in order to speculate on expected movements in the bahtÃ¢â¬â¢s value over the next 30 days. Also show the speculative profit (in pounds) resulting from each scenario. Use both of Ben HoltÃ¢â¬â¢s examples to illustrate possible speculation. Assume that Blades can borrow either Ã £7 million or the baht equivalent of this amount. Furthermore, assume that the following short-term interest rates (annualized) are available to Blades: Currency Dollars Thai baht Lending Rate 8.10% 14.80% Borrowing Rate 8.20% 15.40% Solution to Continuing Case Problem: Blades. 1. How are percentage changes in a currencyÃ¢â¬â¢s value measured? Illustrate your answer numerically by assuming a change in the Thai bahtÃ¢â¬â¢s value from a value of Ã £0.0147 to Ã £0.0173. ANSWER: The percentage change in a currencyÃ¢â¬â¢s value is measured as follows: % S St St 1 1 where S denotes the spot rate, and St 1 denotes the spot rate as of the earlier date. A positive percentage change represents appreciation of the foreign currency, while a negative percentage change represents depreciation. In the example provided, the percentage change in the Thai baht would be: = 17.69% Ã £0.0173 Ã¢â¬â Ã £0.0147 Ã £0.0147 That is, the baht would be expected to appreciate by 17.69%. 2. What are the basic factors that determine the value of a currency? In equilibrium, what is the relationship between these factors? ANSWER: The basic factors that determine the value of a currency are the supply of the currency for sale and the demand for the currency. A high level of supply of a currency generally decreases the currencyÃ¢â¬â¢s value, while a high level of demand for a currency increases its value. In equilibrium, the supply of the currency equals the demand for the currency. 3. How might the relatively high levels of inflation and interest rates have affected the bahtÃ¢â¬â¢s value? (Assume a constant level of UK inflation and interest rates.) ANSWER: The baht would be affected both by inflation levels and interest rates in Thailand relative to levels of these variables in the UK. A high level of inflation tends to result in currency depreciation, as it would increase the Thai demand for UK goods, causing an increase in the Thai demand for dollars. Furthermore, a relatively high level of Thai inflation would reduce the UK demand for Thai goods, causing an increase in the supply of baht for sa le. Conversely, the high level of interest rates in Thailand may cause appreciation of the baht relative to the dollar. A relatively high level of interest rates in Thailand would have rendered investments there more attractive for UK investors, causing an increase in the demand for baht. Furthermore, UK securities would have been less attractive to Thai investors, causing an increase in the supply of dollars for sale. However, investors might be unwilling to invest in baht-denominated securities if they are concerned about the potential depreciation of the baht that could result from ThailandÃ¢â¬â¢s inflation. 4. How do you think the loss of confidence in the Thai baht, evidenced by the withdrawal of funds from Thailand, affected the bahtÃ¢â¬â¢s value? Would Blades be affected by the change in value, given the primary Thai customerÃ¢â¬â¢s commitment? ANSWER: In general, a depreciation in the foreign currency results when investors liquidate their investments in the foreign currency, increasing the supply of its currency for sale. Blades would probably be affected by the change in value even though its Thai customerÃ¢â¬â¢s commitment, as the sales are denominated in baht. Thus, the depreciation in the baht would have caused a conversion of the baht revenue into fewer pounds. 5. Assume that ThailandÃ¢â¬â¢s central bank wishes to prevent a withdrawal of funds from its country in order to prevent further changes in the currencyÃ¢â¬â¢s value. How could it accomplish this objective using interest rates? ANSWER: If ThailandÃ¢â¬â¢s central bank wishes to prevent further depreciation in the bahtÃ¢â¬â¢s value, it would attempt to increase the level of interest rates in Thailand. In turn, this would increase the demand for Thai baht by UK investors, as Thai securities would now seem more attractive. This would place upward pressure on the currencyÃ¢â¬â¢s value. However, the high interest rates could reduce local borrowing and spending. 6. Construct a spreadsheet illustrating the steps BladesÃ¢â¬â¢ treasurer would need to follow in order to speculate on expected movements in the bahtÃ¢â¬â¢s value over the next 30 days. Also show the speculative profit (in dollars) resulting from each scenario. Use both of Ben HoltÃ¢â¬â¢s examples to illustrate possible speculation. Assume that Blades can borrow either Ã £10 million or the baht equivalent of this amount. Furthermore, assume that the following short-term interest rates (annualized) are available to Blades: Currency Dollars Thai baht Lending Rate 8.10% 14.80% Borrowing Rate 8.20% 15.40% ANSWER: (See spreadsheet attached.) Depreciation of the Baht from Ã £0.0147 to Ã £0.0133 1. Borrow Thai baht (Ã £10,000,000/0.0147) 2. Convert the Thai baht to pounds 680,272,109 bahtÃâ" Ã £0.0147). 3. Lend the pounds at 8.10% annualized, which represents a 0.68% return over the 30-day period [computed as 8.10% Ãâ" (30/360)]. After 30 days, Blades would receive (Ã £10,000,000 Ãâ" (1 + .0068)) 4. Use the proceeds of the dollar loan repayment (on Day 30) to repay the baht borrowed. The annual interest on the baht borrowed is 15.40%, or 1.28% over the 30-day period [computed as 15.40% Ãâ" (30/360)]. The total baht amount necessary to repay the loan is therefore (680,272,109 Ãâ" (1 + .0128)) 680,272,109 10,000,000 10,068,000.00 688,979,592 5. Number of pounds necessary to repay baht loan (688,979,592 bahtÃâ" Ã £0.0133) 9,163,429 6. Speculative profit (Ã £10,068,000 Ã¢â¬â Ã £9,163,429) Ã £904,571 Appreciation of the Baht from Ã £0.0147 to Ã £0.0167 1. Borrow pounds. 2. Convert the pounds to Thai baht (Ã £10 million/Ã £0.0147). 3. Lend the baht at 14.80% annualized, which represents a 1.23% return over the 30-day period [computed as 14.80% Ãâ" (30/360)]. After 30 days, 10,000,000.00 680,272,109 Blades would receive (THB 680,272,109Ãâ" (1 + .0123)) 4. Use the proceeds of the baht loan repayment (on Day 30) to repay the dollars borrowed. The annual interest on the dollars borrowed is 8.20%, or 0.68% over the 30-day period [computed as 8.20% Ãâ" (30/360)]. The total dollar amount necessary to repay the loan is therefore (Ã £10,000,000 Ãâ" (1 + .0068)) 5. Number of baht necessary to repay dollar loan (Ã £10,068,000.00/Ã £0.0167) 6. Speculative profit (THB688,639,456Ã¢â¬â THB602,874,251) 7. Dollar equivalent of speculative profit (THB 85,765,205Ãâ"Ã £0.0167) 688,639,456 10,068,000.00 602,874,251 85,765,205 1,432,278 Blades would be ill advised to speculate in this way as it is not a specialist in the financial markets and does not have specialist abilities or information to use. These actions are thyerfore little better than gambling and are highly ill advised. Small Business Dilemma Assessment by the Sports Exports Company of Factors That Affect the British PoundÃ¢â¬â¢s Value 1. Given JimÃ¢â¬â¢s expectations, forecast whether the pound will appreciate or depreciate against the euro over time. ANSWER: The pound should depreciate because the British inflation is expected to be higher than the euro. This could cause a shift in trade flows that would place downward pressure on the poundÃ¢â¬â¢s value. The interest rate movements of both countries are expected to be similar for both countries. Therefore, there should not be any adjustment in the capital flows between the two countries. 2. Given JimÃ¢â¬â¢s expectations, will the Sports Exports Company be favourably or unfavourably affected by the future changes in the value of the pound? ANSWER: The Sports Exports Company will be unfavourably affected, because depreciation in the British pound will cause the pound receivables to convert into fewer euros.
Saturday, September 28, 2019
Classic Airlines in an airline company that has been in business for over 25 years and has gained great success within the airline industry. In the 25 years since its creation the company has grown to over 32,000 employees and has generated 10 billion dollars worth of business. Although the company has seen great success, it also is subjected to the many challenges that other airlines companies face in todayÃ¢â¬â¢s market. Classic airlines must be able to market its product so that customers will pick there product over competitors within the industry (University of Phoenix, 2012). There are several marketing concepts that Classic airlines have applied and are using in their business. The first marketing concept that Classic airlines use is the needs, wants, and demands concept. This concept is applied by understanding the needs, wants, and demands of the customer. The way Classic airlines have done this is create a rewards program for the customer. This feels the need for a customer to get something for a reduced price. If the customer has enough miles they can upgrade to first class or stay at a Classic airlines hotel partner for a free night (Kotler & Keller, 2006). The second concept that Classic airlines have applied to their business strategy is offering and brands. This concept is applied by a firm by offering benefits to a customer that fills needs and using brands that are a known commodity. The Classic airlines rewards program is a perfect example of this marketing concept. The airline offers if a customer signs up for the rewards program they will gain points which can be redeemed for free or reduced items. Although in the reading it does not state what hotel companies are partners of Classic airlines they should make sure that these hotels are name brand hotels such as Marriott or the Hilton so customers feel they are getting a premium brand (Kotler & Keller, 2006). The third marketing concept that Classic airlines applies is value and satisfaction. The concept is successful if it delivers value and satisfaction to the customer. The customer must be able to choose between different options to determine what the best value is for them. Classic does this with the rewards program. It gives customers options on what value they use once they earn a certain number of miles. This is a great marketing ploy for Classic airlines because it allows the customer to feel as they have the power in the situation and they are able to pick what option is best for their situation. All three of the above marketing concepts are used by Classic in some way through the rewards program. They are very smart because they use a combination of these concepts to create the rewards program. Classic knows that they are successful as long as the customers are happy. The rewards program allows the customer to receive benefits for staying loyal to Classic airlines(Kotler & Kelle r, 2006).
Friday, September 27, 2019
Taxation Law - Essay Example It also works with appropriate departments on policy matters relating to tax and excise. The ATO has the responsibility for administering a range of tax and superannuation legislation is vested by Parliament in the Commissioner of Taxation. The Commissioner's authority to administer each levy is written into the law relating to that levy, as are his general responsibilities, discretionary powers and rights (The Commissioner of Taxation, (n.d.), accessed 25.10.05). In Australia, the Tax Office generally asks the taxpayers to co-operate with it voluntarily and to disclose full information completely and honestly. But Additionally, it has specific information- gathering powers for some taxpayers who should insist that the Tax Office exercise those powers, even where there is no suggestion of tax avoidance - in particular a professional should not voluntarily disclose confidential information to the Tax Office but insist upon its exercise of these powers. To avoid tax evasions, the Tax Office has right of full and free access to all buildings, books and documents for the purpose of the Income Tax Assessment Act, and is allowed to require any person to give it such information, as it requires or to attend and give evidence before it. The Act also states that the occupier of a building or place entered or proposed to be entered by the Tax Office shall provide the Tax Office with all reasonable facilities and assistance for the exercise of its powers. Once an audit commences the taxpayer may want to know how to interact. Just because it is necessary to assist the Tax Office doesn't mean one is subservient to it. How much information should be provided, or withheld because it is protected may be issues, particularly if the matter may end in court. At conclusion of the audit the taxpayer may undertake a Freedom of Information Act search to find out just what the Tax Office thinks of it. Many taxpayers will find that they have underpaid primary tax and, as a result, apart from having to pay that tax, will be subject to penalties. Their solicitor can document payment arrangements with the tax Office and perhaps prepare mortgages and other charges to secure such payments (Rockliffs Solicitors & Barristers, accessed 25.10.05). The Australian Tax Office is responsible to ensure that that nobody steals public money through tax fraud and for this purpose, it has auditors to carry out the investigations but it does not have powers to take tax criminals to the courts. Once it detects a fraud, then it refers the matter to the Federal Police. The Taxation Bill 2002 provides the Australian Tax Office with a broad range of powers to obtain comprehensive information on the administration of the tax laws. The Inspector-General of Australian Tax Office is able to invite submissions from the public or from particular groups of taxpayers or tax professionals, and may receive submissions in confidence. The Inspector-General is also able to hold meetings with taxpayers, tax professionals or their representatives. The Bill also endows the Inspector-General with investigative powers, including the power to compel disclosure of documents and examine witnesses so that the Inspector-Gen
Thursday, September 26, 2019
Operation management - Essay Example There has been increasing competition in the market place and organisations are looking for different methods to improve and enhance the overall productivity and performance.The output or final results are dependent on the efficiency and effectiveness of the operations. In this paper, an attempt has been made to understand the business operations and processes with the help of a case study. By exploring and analysing the business operations of the company presented in the case study it will become easy to understand the practical implications of the operations management tools and techniques and at the same time it will be easy to comprehend the different issues and challenges which are being faced by the organisations in the quest of improving the overall operations and activities of the organisation. Operations Management is the field of business which deals with managing the resources of the business that will be used to produce the output of the business (Schemenner, 1984). This field deals with the creation of a transformation system which takes the business inputs and uses the business process to produce the business output (Schonberger and Knod, 1991). This field also produces the controlling protocols for the transformation process (Gaither, 1984). These protocols consist of: layout strategy, operations strategy, and design strategy, which are augmented by a planning stage. Examples of most common operations include: retail operations, banking operations, manufacturing operations and etc (Flint, Larsson, Gammelgaard, and Mentzer, 2005). Operations management also help the company in the planning of the following aspects of the business (Chase and Aquilano, 1977): Capacity Inventory Supply Chain Quality Failure Prevention and Recovery By helping the company answer questions related to these domains, operations management enable the company to become more productive and effective in its operations and resource utilisation. Thereby, enhancing the companyÃ¢ â¬â¢s chances of survival in its marketplace and later go on to strengthen it place in its market (Fugate Mentzer, and Stank, 2010). One important element in this regard is of the planning and control. It is important for the organisations to carefully plan and control all operations and materials input in order to make sure that the final output or result is according to the demand and requirements in the market (Fitzsimmons, and Fitzsimmons, 2007). ANALYSING THE OPERATIONS OF A FROZEN VEGETABLE FACTORY: Business Analysis: Overview of the Company and Market: The company is operating in the frozen vegetable industry; it is backed by a strong specialist food group. As the group philosophy suggests that it focuses on speciality food segments, the factoryÃ¢â¬â¢s operations are consistent with this philosophy. The factory produces a range of frozen vegetables like: carrots, cauliflowers, beans, peas, petit poiÃ¢â¬â¢s, broccoli, and sprouts. Most of the factoryÃ¢â¬â¢s output cons ists of peas, which undergoes a very tedious process before a final version for the customers is available. The peas market is highly competitive and is dominated by five players. One of the players in this market is privately owned and is most of the time involved in changing the dynamics of the competition. It does this by reducing its profit margins, and thereby price, which leads to an increase in the number of customers going to this supplier of peas. However, major variables which influence the demand for peas include the quality and size of the harvest. The price of a
Performance Art - Essay Example This paper shall focus on performance artists and how they have been affected by various incidents and happenings. It shall highlight performance artists Marina Abramovic, Yoko Ono, and Stuart Brisley. This paper is being carried out in order to review the impact of performance art on art itself, and how these artists have impacted on the evolution and development of art in general. Each artistÃ¢â¬â¢s personal and professional history will first be presented, followed by a description of their significant work or performance art. Their more significant work/s shall then further be described or discussed in relation to significant incidents in their lives. Body Performance art refers to a performance which is exhibited to an audience; the performance may or may not be scripted, or it may also be carefully orchestrated or even spontaneous (Carlson, 1996, 3). In some cases, it may be performed live or taped with the performer being absent or present. It may include the situation which involves the four basic elements: time, space, performanceÃ¢â¬â¢s body or presence in a media, and the relationship between the performer and the audience (Carlson, 1996, 4). It can happen anytime at any venue for any period. The performance of the artist exhibits the artistÃ¢â¬â¢s particular work of art. Three performance artists who have had a significant impact on art and on performance art shall be depicted in this essay. Marina Abramovic was born in Belgrade, and is based in New York as a Serbian performance artist (Stiles, et.al., 2008, 3). Her career first started in the 1970s and since then, she has been active in the arts for more than three decades. She has mostly been known for her performance art, exploring the relationship of the performer and the audience, the possibilities of the mind, as well as the limitations of the human body (Stiles, et.al., 2008, 5). She is considered to be the Ã¢â¬Ëgrandmother of the performance art.Ã¢â¬â¢ In one of her earliest perfor mances, she sought to evaluate rituals and gestures, using knives and tape recorders, jabbing the knives between her fingers and each time she cut herself, she would use a different knife (Stiles, et.al., 2008, 4). In this performance, she was able to review the mistakes of the past and her previous attempts. In this performance, she sought to understand the state of consciousness of a performer and how it was actually possible to push him into actions which he could never normally do (Stiles, et.al., 2008, 6). In her next work, she considered how to create the energy caused by extreme body pain. In this performance, she cut off her nails, toenails, and hair and tossed it into a flaming star (Richards, 2009, 6). She considered these acts of purification as against the political traditions of her past; with the star representing the communism that dominated her home country for many years. To culminate her performance, she leapt across the flames into the centre of the burning star. She however passed out from lack of oxygen, but it took a while for her audience to realize such unfortunate circumstance (Richards, 2009, 7). This incident implied how physical limits can also limit performance; in this case, her passing out limited and curtailed her performance and what she wanted to convey in her art. For the years that followed, she also attempted to test the state of consciousness and whether it could also be made part of a performance (Westcott, 2010, 18). In her performance, she took a pill used by catatonic patients. This pill caused her to go into seizures and other uncontrollable movements (Westcott, 2010. 13). She recalls that while she did not have any control over her body, her mind was clear and lucid and she could observe what was actually
Wednesday, September 25, 2019
Human nature is not cruel - Essay Example Whereas, KittyÃ¢â¬â¢s case has been subjected to several inaccuracies and misrepresentations, many other similar cases have been reported recently. Clearly, then, the Ã¢â¬Å"bystander effectÃ¢â¬ can have a strong impact, especially on social behavior, leaving people asking why exactly does it occur? And why do people not assist others when they are part of a crowd? More and more people are starting to pay attention and consider such kind of events as these. What leads people to become more apathetic, immoral or even cruel? Is human nature cruel? Human beings are not born cruel. A baby is always naÃ ¯ve and pure, they are not intentionally cruel to others. I believe that humans are not always cruel depending on certain circumstances surrounding an individual. Furthermore, MilgramÃ¢â¬â¢s experiment is all about obedience to authority.Ã ItÃ found thatÃ 65 percentÃ of participants deferred to the authority of the experimenter and administered the final 450 volt "shockÃ¢â¬ . The other 35 percent refused to continue with the experiment. This experiment tells us that people always obey authority. I donÃ¢â¬â¢t believe the 65 percent of subjects were cruel just because they completed the experiment. They wanted to stop the experiment, but the experimenter kept emphasizing things such as Ã¢â¬Å"the experiment requires that you continue, go on please, the shocks are painful but they are not harmful.Ã¢â¬ It made participants very nervous and confused, meaning that the experimenterÃ¢â¬â¢s authority pushed them to be cruel and even hurt innocent people. In brief, MilgramÃ¢â¬â¢s experiment is not enough proof that human nature is cruel, but people will be cruel under certain circumstances. Any normal person, usually, will not easily hurt others just for the sake of it. And if they do hurt someone they will definitely feel guilty. Someone however could be wondering that, if human nature is not cruel, then why are there so many murderers in the world? I believe murdering someone is cruel, but
Tuesday, September 24, 2019
Global health priorities - Coursework Example This spreading dissatisfaction will certainly hamper hospital administration as it attempts to implement solutions to the nursing shortage (Buchan andÃ Aiken 2010). The current global nursing shortage will also increase a gap between current healthcare administration solutions and efforts nurses believe hospital administrators are making. Prioritized solutions on the medical staffÃ¢â¬â¢s list will differ more with those on the hospital administrationÃ¢â¬â¢s list. This difference will occur in spite of research attempts to understand and close this gap. One way to entice future students to consider nursing professions is to prioritize personal time over compensation as nurses today value personal time more than pay (Buchan andÃ Aiken 2010). Dynamism at work and home is another solution, as students would not want to spend more time in one role over the other. Future nursing students can be told of almost assured promotions in the profession that leads to an emerging superclass of hospital workers. Incorporated personal and professional lives are aspects of future nursing that students can learn about and admire because they lower the stress of overseeing oneÃ¢â¬â¢s professional and personal life (Buchan andÃ Aiken
Monday, September 23, 2019
Business Ethics Case Study - Research Paper Example He had aided the false representation of Enron inflated profits and pressed for dubious accounting practices plus fraud, with the intention of enriching himself and other executives. However, in spite of foreseeing the coming demise of Enron, Kenneth Lay lied to the public, the corporation investors and Enron workers to buy the company stocks, even as he and other senior executives were cashing in on the shares and bailing out. Some of the stakeholders affected by Lay actions include the company shareholders most of whom were pensioners who had invested their life savings in stocks that eventually amounted to almost nothing as they lost their personal investments plus pensions. Secondly, his actions had a lasting impact on most of Enron former employees, who not only lost their source of income and livelihood, but also lost their savings in terms of personal pension fund and stocks Discussion Shareholders Through a consequentialism approach Lay should have mentally examined the conse quences of his decision to allow false representation of the company financial position and other actions, since he owed the shareholders the duty to provide them with better and accurate information. He owed them the trust to make sure that the company is operated with their benefits in mind, and that it seeks to bring value to their investment. The shareholders needed intelligible disclosures which could be understood by even a lay person without the use of any specialized expert, or possession of an advanced degree as it is the duty of the chairman to make sure that they get such kind of information (Brenkert & Beauchamp, 2010). A consequentialist approach would have enable Lay to make significant ethical decision that would not have seen the shareholders value crumple. Notably, he owed them the duty to come up with adequately-designed controls measures, and provision of attentive oversight that would have stopped some of his employees from pushing the limits of their investments . Lay should instead have provided the shareholders with information that could help them to maximize their payback and at the same time minimize harms. He had the duty to net balance good outcomes over the bad consequences for the shareholders. If he had shared earlier what he knew, then the shareholders could have come up with decisions which possibly could have saved Enron, even if those decisions could have tuned out to be detrimental to his position in the company. Perhaps he may have lost his job and trust of the shareholders, but telling the shareholders the truth about the status of Enron could have helped them to seek solutions that would have at least save part of their investments (Brooks & Dunn, 2009). Based on non-consequentialism theory, Ken Lay had a fiduciary obligation to progress Enron shareholders interests exclusively. Lay obligation to shareholders was to avoid and avert harming their investment in the company by observing pertinent laws of the company and regul atory standards. As a leader entrusted by the shareholders to oversee the operations of Enron, he had the obligation of adding value to the corporation and contributing to the ethical success of Enron. Instead, Lay negated on his priority of re-establishing investor confidence (Mulgan,
Sunday, September 22, 2019
The chosen organization that shall be analyzed is Thringstone Supermarket Essay The chosen organization that shall be analyzed is Thringstone Supermarket, a well run, off license/newsagent located in a village called Thringstone, based in Small Heath. The organisation is owned by a married couple named Mr and Mrs Varu who are the sole proprietors. They sell a variety of products and ensure that customer needs and wants are met. Thringstone Supermarket has many regular customers, as this is one of the main Supermarkets as you enter in to the village. The supermarket is one of the local stores that are recognized by its entire local people as it offers a great variety of products. Within the Supermarket many products are sold including: Groceries Confectionary Newspapers, Magazines Ã Cards Stationary Alcohol Foods such as dairy products Ã Frozen foods Automated Teller Machine (ATM) 2.0 DESCRIPTION OF THE SERVICE CONCEPT The service concept is the way in which the customer perceives the organizations services (Johnston and Clark 2001). There are four key elements that form the service concept: Ã ¯Ã ¿Ã ½ The Service Experience Customers encounter different experiences which may vary from time to time when using a particular service. Mr. and Mrs. Varu can contribute to the service concept by delivering a friendly customer service experience, to make customers feel welcomed, this is what they expect. The customers want to do their shopping in a stress free, friendly environment and this is what Mr and Mrs Varu aim to achieve. Customers also like the noise level to be kept to a minimum when shopping so that they are not easily distracted and so that they can talk amongst themselves. Ã ¯Ã ¿Ã ½ The Service Operation Mr. and Mrs. Varu and the staff have a personalized basis with there customers, they recognize the majority of there customers and are on a first name basis. There is a trusting relationship between the customers and Mr. and Mrs. Varu and staff, therefore can guarantee that they can ask for assistance when needed without any negative attitude, therefore Mr. and Mrs. Varu provide assistance when required in a friendly manner to help deliver the service successfully. Ã ¯Ã ¿Ã ½ The Service Outcome This is the result the customer has received from the service provided. Mr. and Mrs. Varu aim to provide customers requirements by delivering there service and products successfully without any problems i.e. queues, no stock available, therefore customers can tell their friends and family by word of mouth that they received high quality service at Thringstones. Ã ¯Ã ¿Ã ½ The Service Value Shoppers value the experience and outcome in any organization, therefore the value must be cost effective otherwise customers will go elsewhere. Mr. and Mrs. Varu need to ensure that there customers are receiving a value for money service. Mr. and Mrs. Varu ensure that no out of date stock is displayed because customers only want to purchase goods that are to date and having out-of-date stock will give Thringstones a bad reputation which will send customers elsewhere because they are not receiving value for money products. Also, as they are situated in a village, and its miles to the nearest town centre, there ATM must be working at all times so customers can access their money easily instead of having to make journeys into town. The design elements for Thringstone Supermarket is available in appendix 1 3.0 The Servicescape An organizations servicescape describes the physical and informational surroundings of the delivery of the service provided. To secure strategy advantages from the servicescape, the needs of ultimate users and the requirements of various functional units must be incorporated into environmental design decisions. (Bitner 1992). * The physical appearance can determine where all products are kept. This can be identified as the process layout, where all similar products are put together, i.e. freezer foods are kept in one place. * The physical appearance of Thringstones also creates an impression to the customers. The letterhead is in white lettering with a red background. This makes Thringstones stand out and therefore inviting due to the bright and bold letters. * Customers require baskets to out there shopping in to, which allows the customers to shop comfortably and without difficulty. * Thringstones is located in a small village, which is easily accessible to customers; therefore the physical location of Thringstones is ideally suitable for customers. * The layout of the shop can help customers, access products easily. The aisles are kept clear and clean at all times in order for customers to gain access to products. * Health and Safety for customers is very important, i.e. if there is a wet floor, a wet floor sign is there for customers. Mr. and Mrs. Varu ensure that security cameras are placed around and outside the shop. * Mr. and Mrs. Varu use an automated stock control system which informs them when stock is low. This can keep control on the availability of products in stock. 3.1 Influencing customer behavior Mr. and Mrs. Varu believe customers behavior can be determined by the servicescape. * The freshness, clarity, and lightness influences customers behavior in the way they shop at Thringstones . If Thringstones has boxes of goods and baskets around the store this will influence the customer to shop in another place. * Products are neatly presented at Thringstones so that they are attractive to look at. Special displays are set out for the best presentation. A messy environment will make customers think twice about where to shop. * Availability of goods is always there i.e. if customers require a certain product that is not in stock, Mr. and Mrs. Varu can make sure that he orders it in so that it is made available for the customer the next time round. * Long queues will make customers uncomfortable, especially if they are in a hurry. Mr. and Mrs. Varu could loose money due to this. 4.0 Process Mapping The service process map combines the insights of flowcharting the service delivery process with the power of multivariate data analysis techniques (Collier 1991). The design of the service is important because the customer is directly and immediately involved in the delivery transaction. The customer is present and involved and they may even serve themselves. Appendix 2 provides a service process map for Thringstones. 4.1 Analysis of Process Map A method for analyzing the process map is by answering a set of questions to derive maximum advantage from it, these questions are obtained from Johnston Clark (2001). * Does the process support the strategic intention? Mr. and Mrs. Varus main objective is to provide a high quality service for there customers. Therefore, Mr. and Mrs. Varu must ensure all customers are able to purchase the relevant stock by firstly checking there stock availability and secondly by ensuring there shelves are fully stocked otherwise delays will be caused by staff having to get the stock from the back office. * Does each activity provide added value? At Thringstones added value activities are existent such as providing baskets, carrier bags and freezer bags. If these were not available customers would have to use there hands to carry their shopping, therefore Mr. and Mrs. Varu would be losing a lot of money due to customers purchasing limited goods. * Who owns and has responsibility for the process? Mr. and Mrs. Varu as well as the customers are responsible for the service process. Without either of them the process would not exist. Appendix 4 identifies the roles and responsibilities for the staff and customers. * How can the process be improved? Mr. and Mrs. Varu must ensure that stock is available at hand for customers, in order to meet there requirements. To maintain that customers can continue to shop in a clean and relaxing environment To ensure staff are fully trained to provide high quality customer service, and are able to deal with all types of customers in the correct manner i.e. difficult customers. If customers are waiting in long queues then Mr. and Mrs. Varu must realize that a new till may be required so delays will not take place. To provide a service where another member of staff packs the customers goods, this will speed the process up in the queues. * How efficient is the process? The process is very efficient as it aims the meet the organizations objectives. However this can only be achieved by ensuring that there is a continuous customer flow without any delays. Delays cause inefficiencies, which lead to dissatisfied customers, therefore Mr. Mrs. Varu are not fulfilling there business objective, which could cause a loss in profits. 5.0 The Service Quality Gap Model The service quality is the gap between a customers expected service and perceived service. A service quality gap model for Thringstones is available in appendix 3, and appendix 3.1 provides an analysis of the Service Quality Gap Model. 6.0 Job Design Mr. Mrs. Varu empower there staff for them to obtain the initiative to make decisions without consulting them first. Empowerment makes employees feel recognized and motivated as empowerment increases employees morale. Therefore empowering there staff will increase there productivity, reputation and provide a better service encounter. Appendix 4 provides the five dimensions to empowerment for Thringstones 7.0 Suggested improvements/recommendations Overall Mr. and Mrs. Varus Supermarket is an operation, which is customer orientated, like any other business operation he wishes to make as much profit as possible and at the same time keep customers satisfied by meeting their requirements. However, like any other business there is still, room for improvement and with the help of such policies and strategies, productivity and profit can be achieved for his business. This can be implemented in three was: 1. Increasing the number of tills in the shop 2. By introducing a Computer Bar coding system 3. Staff can be trained to be multi-skilled By increasing the capacity of tills, by adding in a further till can help in reducing the queuing system. As capacity is linked to time, many customers are not prepared to wait and maybe forced to shop elsewhere, this will lead to a reduction in sale and profit. Therefore by adopting this approach Mr. and Mrs. Varu can result in happier customers, and increase in productivity and even profits maybe achieved. Another area for improvement could be that a barcode system could be implemented, because at present Mr. and Mrs. Varu are running on a manual tilling system whereby they type in the price by hand and this is also another indicator of time wasting, thus leads to frustration for customers. This bar coding system could be implemented by scanning products through a computer which informs them what stock is in and it can also speed up the process dealing with all the customers without them having to waste time in queues. By using the computer bar code system this can help implement the Just In -Time Process. Instead of Mr. and Mrs. Varu going to the cash and carry, he can check on the computer of the goods, which are running low, and have them delivered by the cash and carry, this will result in less money being held in stock and also lead to extra space saved by not having unwanted stock, which can instead be converted into extra shop floor space. Thirdly, staff are to be trained so that they are multi-skilled. This will enable them to carry out a variety of jobs rather than just the ordinary replenishing of stock. For example, if they are till trained then the delivery system will be faster and this will lead to customer satisfaction. Overall, Mr. and Mrs. Varu can have competitive advantage over other newsagents in the area, as they will be using the more traditional approach and therefore by saving storage space, they can convert the back office area into shop floor space, which means they can sell extra products and will mean that customers are happy with the delivery of the service. Bibliography Books: Johnston, R and Clark, C (2001), Service Operations Management, Financial Times Prentice Hall Galloway, L, Rowbotham, F and Azhashemi, M (2000), Operations Management in Context, Butterworth Heinemann Oxford Lecture Notes: Lecture Two Job Design in Services Lecture Five the Design of Service Operations Journals: Bitner, M.J., Servicescapes: The impact of physical surroundings on customers and employees, Journal of Marketion, vol.56, April 1992, pp. 57-71. Gurdarshan Mudhar P01070281
Saturday, September 21, 2019
My Inspirational Leader An Effective Leader Management Essay Whilst considering someone who is an effective leader I researched well-known historical individuals such as Churchill, Gandhi or Napoleon all of which had completely different personalities and attitudes. After careful consideration I then decided to focus my attention on Sir Winston Churchill (Churchill) his unique story of success provides an excellent example of someone who is an effective leader. During Churchills years in politics he developed his leadership skills and mental abilities and at the beginning of the Second World War these matched the requirements of the situation better than those of his political contemporaries. During the 1930s Churchill spoke out vigorously on the rise of the Nazi party. This ensured that when conflict between Britain and Germany unsurprisingly occurred, Churchill stood out as a statesman who had fought against the threat of Nazism for many years while other politicians had tried to appease Adolf Hitler. At this point in time Neville Chamberlain, the Prime Minister of the time, lost the confidence of Parliament and resigned and new national support was given to Churchill the British public felt that he was a politician who understood the situation and someone who could be trusted to lead the country in a difficult time, it was clear at that point that Churchill had the skills and spirit to unite and lead the nation. Churchill used his personal skills and patriotism to motivate and inspire the British public to endure the hardships they faced with good humour, strength and resourcefulness. Churchill also used his extensive diplomacy and communication skills to forge alliances between nations with differing political and social philosophies, such as the communist Soviet Union and the capitalist United States. Churchill played a major role in the outcome of the Second World War, he had confidence in himself and was able to handle the crisis and he fully trusted his leadership abilities. He knew that would solve the problems, (Kotter, J. P., 1990), and so also will lead the people who trusted him. There is no doubt that his central leading style (Kotter, J. P, 1990) was nothing but excellent. One of the main properties Churchill had as a leader was the capability of inspiring people, regardless of the circumstances; he challenged people to make a unified effort.Ã Let us go forward together (Churchill 1940) this was his favourite slogan. Churchill had a skill of inspiring people to delivery and contribute above their limits, making them deliver more to a situation. Churchill constantly demonstrates enthusiasm, determination and optimism. Churchill used his personality to encourage individuals to work hard and excel in the jobs they were given. An effective leader accepts that challenge is a corporate asset and they have a legitimate responsibility to their followers (Howell and Shamir, 2005). When challenge is met with appropriate leader responsibilities the appropriate meaning leaders just need to get the job done, but in a way that encourages vision and considers cultural values (Kouzes-Posner, 2007). Winston Churchill was a man of immenseÃ courageÃ andÃ creativity,Ã these and his other qualities shaped the war during Britains darkest hour without such a strong leader results could have been very different. Question 1b Forms of Leadership There are two forms of leadership:Ã Firstly, transformational leadership (Burns, J.M., 1978) that focuses on what a leader delivers rather than on their personal characteristics and their role within the team. Secondly, transactional leadership (Burns, J.M., 1978) demonstrated by leaders this involves directing followers motivating them motivating to appeal to their own self-interest. Transactional leaders often comes from formal responsibility in a company. The main goal of the follower is to carry out the instructions of the leader. Churchill encouraged people to find a way to win the world war and created an environment that persuaded thinking and instinct. He also emphasized methodical problem solving, rethinking, and gave careful reasoning rather than giving unsupported opinions (Kouzes-Posner, 2007). Churchill made a big change for Britain by saving the nation that almost had no chance to win the war against Germany. Transformational leaders are inspiring because they expect the best from team members as well as themselves. This approach to leadership often leads to high productivity and commitment from everyone in their team. The drawback of transformational leadership is that while the leaders enthusiasm is passed onto the group the leader needs to be supported by people as a result often transactional and transformational leadership styles are used. Transactional leaders ensure that routine work is carried out reliably, whereas transformational leaders look after initiatives that develop and add enhancements to a situation. Transformational leaders appeal to followers higher sense of morality, ethics and vision. Typically a Transformational leader must encourage the same motivational values they believe and allow followers to share similar beliefs. Churchill motivated followers to action by encouraging people to shared values and by satisfying their aspirations and expectations. Transactional leadership is based an exchange of something of value in which the leader possesses or controls in substitution for the followers return for their services, i.e. jobs for votes, subsidies for campaign contributions. The transactional style is typically what happens in a contracting scenario. In contrast, transactional leadership is a more conventional style in which work is exchanged for resources. A transactional leader influences subordinates by rewards in exchange for their efforts, follows workers closely and takes corrective actions when required. Transactional leaders ensure that routine work is done reliably, while transformational leaders look after initiatives that add new value to a situation. Word count: 910 My Progress as a Leader Question 2a Inquiries and Opportunities My inquiries to date have been focused around my part-time job in Tesco. Since TMA01 I have received feedback from my manager about my performance since joining the team and my efforts are being recognised and are helping me to progress further within the company. I have been working with Tesco for two months now and since starting I have been working for all of the different departments, this is now giving me the experience I need to achieve my goal as a Team Leader. Lots of my time has dealing directly with customers, often working very long hours and sometimes weekends. I am currently working with five people and I plan to apply for the team leader role within the next few months. My career goals of becoming a team leader will require strong management practices as well as strong leadership practices. My current activities and interests will help to educate myself and become a stronger leader. I will monitor the competition as well as the industry changes and if changes are made in the company I will understand why because I will have the knowledge of what is going on in the market sector. I will integrity inspire people with a shared vision of the future, set clear goals and motivate people towards them, manage delivery, communicate well w ith a teams (Kouzes-Posner, 2007).Ã If promoted I will continue to make decisions based on what is best for the company and customers. When making these decisions I will make sure they will coincide with our companys vision and values along with the companys strategy. When change is necessary I will ensure that I am proactive about making the change as well as positive about the change to minimise resistance. Question 2b Aspects of Leadership Leadership is ultimately about getting things done. It is the ability to influence, motivate and provide support others so that they can best contribute towards the successful attainment of the goals of their community or organisation. Productive inquiry is about taking action (Ramsey 2010). Recently I moved to another area within the company focusing on customer service, since moving I soon realised that there were many things that could be done much better. I quickly adapted to the environment, decided on taking corrective actions; helped developed operational goals and daily objectives to measure our success. The first item I noticed was that the morale was very low, people were pointing fingers and the productivity was awful, people were spending lots of time complaining rather than focusing on ways to improve the situation. Straightaway I implemented some changes after observing what was going on and after two weeks colleagues attitudes started to change and morale has become much better. I feel that by using all the practices of leadership and management described above I will excel in my current position as well as leverage myself into a better position within my company. Word count: 491
Friday, September 20, 2019
The Strategic Analysis Of Adolph Coors Beer is the oldest alcoholic beverage in the world. It has produced in an artisanal setting for thousands of years, dating back to around 3500 BC (History, 2010). As developments in agriculture and technology occurred, beer production shifted to industrial manufacturing. Beer is produced using a process called brewing. The brewing process involves variable amounts of time in which a source of starch, usually hops, is fermented to produce alcohol. The process can produce countless types of beer, with variable concentrations of alcohol, varying flavors, and appearances. These beverages are packaged into either kegs, glass bottles, or aluminum cans. A building or organization dedicated to this process is known as a brewery. The brewing industry today is a global business that is made up of several dominant companies. As of 2010, the key players in the industry are MillerCoors and Anheuser-Busch. Anheuser Busch is the largest brewing company in the United States with 32 breweries globally, 12 of which are located in the United States. In late 2007, SABMiller and Molson Coors Brewing Company joined forces in order to better compete with Anheuser-Busch. These major brewing companies make up the largest segment of the brewing industry. There are also thousands of smaller regional breweries often referred to as microbreweries which make up a second segment. Finally, a very small percentage of homebrews and domestic production occur. This analysis will focus almost exclusively on the segment that consists of the multinational conglomerates such as MillerCoors and Anheuser-Busch. The US beer market produced total revenues of $78.8 billion in 2008. Lager sales account for $28.2 billion of the total (Datamonitor, 2009b). Beer accounts for 52.9% of the alcoholic drink industry in the US, with spirits at 29.4%, and Wine at 17.7% (Datamonitor, 2009a). *A stipulation to this analysis is that it will be based primarily on the Harvard case study Adolph Coors in the Brewing Industry. Outside information will be incorporated where necessary for a complete analysis. *In the absence of specific statistics from past years, current numbers are substituted. *Brevity is highly valued for this analysis, though not at the expense of a thorough analysis. PEST The PEST model is a framework which is used to analyze the macroenvironmental factors that companies within an industry must take into account. This PEST analysis will examine the political, economic, social, and technological factors in relation to the brewing industry. Political and Government regulation There are significant rules governing general alcohol consumption. First, drinking in public places such as streets or parks is prohibited. Second, the minimum age of consumption is 21 years old in the United States. There are also restrictions related to the manufacturing, sale and possession of alcohol. In the United States, the sale of alcoholic beverages is controlled by individual states. Finally, the production of spirits is taxed and requires a permit to operate a plant (TTBGov, 2010). Economic The brewing industry benefits from having commodity-based inputs. There is little variance in the raw materials necessary for the brewing process, as they are mainly agricultural commodities. Price elasticity of demand for beer is low, ensuring steady demand. Social-cultural Consumer preferences are important in the brewing industry. Consumers have varying tastes, and prefer to be able to choose among the varying types of beer. However, alcohol consumption can have adverse affects on human physical health. Beer is high in carbohydrates, and it can be argued that high consumption can cause weight gain, or even liver-disease. There are also benefits of alcohol consumption. The age of the consumer affects the industry. As baby boomers reach the legal drinking age, the number of beer drinkers rose, and also the amount consumed (Ghemawat, 1992). Additionally, more and more Americans drink more beer at home, whereas they had traditionally had it in bars and restaurants (Ghemawat, 1992). Technological Brewing techniques affect the brewing industry heavily. Post WWII developments would allow for less time needed for the aging process. The pasteurization process would allow beer to last up to six months unrefrigerated (Ghemawat, 1992). Capacity and efficiency are highly based on technology of both the brewing, and packaging machinery. Also, the switch from glass bottles to aluminum cans was a large technological development. The technology surrounding television and web marketing have changed, giving firms easier methods for greater exposure, and also shipping and transportation costs fluctuate, affecting value-added (Ghemawat, 1992). III. Porters Five Forces A. Threat of New Entrants (LOW) The following elements will help determine the level of threat from new entrants. 1. Economies of scale Economies of scale are significant for the brewing industry. This represents a high barrier to entry for potential competitors. Large, established firms such as MillerCoors and Anheuser-Busch have enormous brewing capacity, and are able to realize economies of scale that come from mass production and larger contracts. As of 1985, doubling the scale of a brewery cut unit costs by 25% (Ghemawat, 1992). During the rising demand that the industry experienced during the 1960s and 1970s, both Anheuser-Busch and Schlitz, major players at the time, added large breweries to help cope with the demand, and to benefit from economies of scale (Ghemawat, 1992). This allows existing firms to decrease their cost per unit produced. Any new entrant would have to invest a large amount of capital in production facilities. This makes the industry unattractive. 2. Working capital requirements The cost of operating a brewery is significant. A significant implication of the brewing process is that it takes time. A major development in the brewing process after WWII allowed brewers to cut the aging time from 30 days to 20 (Ghemawat, 1992). Even with this decrease, it is still costly not only to facilitate the brewing process, but to maintain locations in which the beer can be aged. This serves as a deterrent for small firms who wish to enter. 3. Proprietary product differences Coors, like many most brewers, has a unique taste associated with its beverages. Little information was available as to the nature of the Coors recipe, however, it would not difficult for any knowledgeable entrant to the industry to imitate the taste of the varying Coors lines. Coors does age its product for 70 days, rather than the industry average of 20-30 (Ghemawat, 1992). Imitation of the Coors brewing process would also be easy, and therefore, threat of entrants is increased. 5. Brand identity Brand identity is important in the brewing industry. For Coors, their marketing expenses as a percentage of sales increased from 3.3% in 1973 to 10% in 1985 (Ghemawat, 1992). This decreases the threat of entrants, as it takes significant investment to establish brand recognition. 4. Absolute Cost Advantages As stated above, Coors and its major competitors can take advantage of economies of scale, which gives lower manufacturing costs, and also cheaper access to raw materials. Coors produces its own malt through long-contracts with farmers (Ghemawat, 1992). These connections are likely exclusive to large firms, and decrease the threat of entrants. 6. Access to distribution Coors products reach the market primarily through retailers and wholesalers. As of 1985, Coors distribution network consisted of 569 wholesalers, and 5 additional Coors-owned wholesalers. Coors also has its own trucking subsidiary, which takes on a large amount of its transportation needs. This decreases the threat of entrants (Ghemawat, 1992). The threat of new entrants is low. The capital requirements for starting a brewery, and quickly achieving the necessary economies of scale is a large barrier. Access to distribution networks takes time, and also contracts to obtain necessary shelf-space to sell product. These factors make the industry unattractive for new entrants. B. Suppliers (LOW) 1. Supplier concentration The main suppliers in the brewing industry consist of malted grain and hops for the fermentation process, and bottles or barrels for storage and transportation. Supplier power is weak because of their size, relative to the brewers, and also because farming operations are numerous (Brewing Industry US). 2. Presence of substitute inputs The presence of substitutes in the brewing industry varies. If aluminum cans are considered a substitute for bottles and barrels, then this factor is an issue. Also, lower quality hops might be substituted for higher quality, more expensive, flavorful hops. 3. Differentiation of inputs Since ingredients required for brewing have little qualitative differentiation, supplier power is lowered. 4. Importance of volume to supplier There are few other uses for hops, especially commercially, than brewing beer. The brewing industry purchases a significant percentage of the total hop production, which diminishes supplier power. However, there are alternative uses for barley, which can be integrated in the brewing process, but isnt as common. This slightly boosts overall supplier power (Brewing Industry US). 5. Impact of inputs on our cost or ability to differentiate Agricultural inputs account for 20-25% of total raw materials costs for major brewers. The remainder is allocated for packaging (Ghemawat, 1992). This increases supplier power, as the price of their product affects the final product. 6. Threat of forward or backward integration Since suppliers are small in comparison to breweries, forward integration is uncommon. However, there is evidence of backwards integration by large brewers. For example, Coors acquired a grain-processing plant as well as other operations to protect itself from price fluctuations (Ghemawat, 1992). 7. Access to labor As of 1985, Coors was the only major brewer that was not unionized (Ghemawat, 1992). The implication is that the brewing industry is unionized. During a strike in 1977, a strike caused Coors to have to shift employees within the company. The production levels were quickly returned to normal, indicating that skilled workers are not necessary (Ghemawat, 1992). Labor supplier power is low. Supplier power is low because of unfavorable supplier concentration. Suppliers of the brewing industry need the brewing industry as there are little other uses for their products, and their products are considered commodities. C. Buyers (MODERATE) 1. Buyer concentration Buyers in this market are highly concentrated. In 1985, 4,500 independent wholesalers existed in the United States (Ghemawat, 1992). Larger buyers are able to negotiate contracts effectively (Datamonitor, 2009b). 2. Buyer switching costs Buyers do not have particularly high switching costs. Many buyers are willing to switch brands based on price and differentiation. The lack of buyer switching costs increases buyer power, making the brewing industry more unattractive (Datamonitor, 2009b). 3. Threat of backward integration There is no indication that buyers are backward integrating, and producing their own product to sell, making the industry more attractive. 4. Pull through Pull through exists in the brewing industry because brand identity is important. Advertising expense as a percentage of sales over time for the brewing industry has been trending upward. As of 1973, advertising expenditures were 3.3% of sales. That amount increased to 10% of sales by 1985 (Ghemawat, 1992). Therefore, the brewing industry has power over the buyers, making it more attractive. 5. Price sensitivity The brewing industry is able to pass cost increases on to the buyer as indicted by the existence of multiple beer segments. End consumers are willing to pay more for quality beer. Brewers are not able to pass on shipping costs however, reducing attractiveness (Ghemawat, 1992). Buyer power is moderate. There are more buyers than firms in this industry, and pull-through from brewers creates power. There are shipping costs and other aspects that the breweries cannot pass on to their customers. D. Substitute Products (MODERATE) Substitute products for beer consist of wine, liquor, as well as imported beer. These products constitute a moderate threat. In 2008, Beer had a 52.9% share of the alcoholic drinks market, with spirits at 29.4%, and wine at 17.7% (Datamonitor2009a). 1. Relative price/performance relationship of substitutes The per-unit-volume price is often affected by alcohol content, which is higher in liquor and spirits. Also, shelf space is more expensive for items such as beer, which must be refrigerated (Datamonitor,2009a). The threat of substitute products is increased. 2. Buyer propensity to substitute Projections for the industry indicate that consumers may switch away from beer to other alcoholic beverages as consumers become more confident and begin spending their discretionary income. Consumers who may normally drink higher priced alcoholic drinks tend to switch to lower priced beer during a recession (Ibisworld, 2010). This effects the buyers of the brewing industry as their demand will fluctuate. The threat of substitute product is moderate because of end-user propensity to switch away from beer when possible financially. Other forms of alcoholic drinks are often more potent, making them a better deal for the consumer, depending on their intentions or desires. E. Rivalry (HIGH) 1. Degree of concentration and balance among competitors The brewing industry is highly concentrated, and unbalanced. In 1985, the six major players in the industry controlled 75% of market share. In 2009, this number had changed to the two major players controlling 79.2% of the market share. Anheuser-Busch controls 50.1%, and MillerCoors, the remaining 29.1%. This heavy rivalry makes the industry unattractive (Ibisworld, 2010). 2. Diversity among competitors Anheuser-Busch and MillerCoors are following similar strategies. Both companies are focusing on promoting their largest brands, expanding their geographic reach, and increasing efficiency (Ibisworld, 2010). This makes the industry unattractive. 3. Industry growth rate (past and projected) The brewing industry is experiencing maturity, growth rates have been slow, and consolidation frequent. From 2010 to 2015, the industry has experienced a -0.3% growth rate. However, it is projected to grow 1.3% by 2025 (Ibisworld, 2010). The industry is unattractive. 4. Fixed costs to value added Fix costs are high and economies of scale are possible in the industry. Value-added trended upward until its high point in 2003 of $25,924.3 million, but has since fallen to just over $23,038 million. The industry is at maturity and rivalry has increased, making the industry unattractive (Ibisworld, 2010). 5. Intermittent overcapacity As of 1985, the 6 major competitors in the brewing industry were operating at an average of 83% capacity. The brewing industry has been plagued with overcapacity issues in the past (Ghemawat, 1992). Rivalry is increased. 6. Product differentiation Firms differentiate their products in this industry through advertising, segmentation, and packaging. Advertising helps firms reach critical thresholds of exposure, while segmentation increases market share (Ghemawat, 1992). Brewers can differentiate their products by segments, but also can use brand, ingredients, and style. The degree of differentiation makes the attractive (Datamonitor, 2009b). 7. Growth of foreign competition To what extent are foreign firms able to penetrate the US market? If there is a growth in foreign firms penetration, this increases rivalry making the industry unattractive. It also shows that US firms are not being globally competitive. 8. Corporate stakes As of 1985, 84% of Coorss revenues came from its brewing division (Ghemawat, 1992). This increases rivalry, making the industry unattractive. 9. Exit barriers Firms in this industry could exit by converting operations to another product, or as shown by the consolidation of the industry, exit through merger or acquisition. Rivalry in this industry is high. Since the brewing industry is so highly concentrated and unbalanced, the major firms in the industry have very similar strategies and compete for similar niches. This makes the overall industry attractiveness low. IV. Conclusion After analysis of the items above, conclusions can be drawn about the brewing industry. A. Critical Success Factors There are a number of critical success factors for this industry: Economies of scale are a necessity to be profitable in the industry. Firms must have production facilities that are large enough to spread the fix costs of production out of millions of barrels of product. These facilities must also have high capacity to deal with demand fluctuations. Second, firms must have strong, differentiated brands that fit into multiple segments. Finally, a strong distribution network is imperative to obtaining sales levels. B. Prognosis Entering into the brewing industry would be a uncertain venture. There are many barriers to entry for small firms such as microbreweries, such as economies of scale and capacity. The brewing industry is projected to contract, but the major players will continue to jockey for market share (Ibisworld, 2010). Competitive forces have contributed to consolidation in the past and likely will in the future, as smaller firms merge with larger ones, in order to better compete in the industry. Part II: Firm Analysis I. Current Situation A. Brief firm history Adolph Coors brewery was founded in Golden, Colorado in 1873. After surviving the prohibition era of the 1920s, Coors would become very successful. After the repeal of Prohibition, Coors sold 90,000 barrels of beer. It also began expansion with its introduction of wholesalers outside of Colorado, in Arizona, and eventually 9 other states. The size of the company would increase exponentially. By 1960, Coors sales volume reached 1.9 million barrels, 7.3 million by 1970, and finally 12.3 million by 1974. In 1975, the Coors family offered non-voting stock to the public (Ghemawat, 1992). More recently, the Adolph Coors Company became the parent company through a merger with Molson, a Canadian brewing giant. Coors would begin numerous ventures and partnerships, most notably, a joint venture with Miller Brewing to form MillerCoors in June of 2008 (Datamonitor: Coors). Today, the company operates 18 breweries and distribution centers over 30 countries. The US segment operates 8 major breweries with a capacity of 85 million barrels annually. The brands sold in the US are Coors, Coors Light, the Blue Moon line, Killians, Keystone, and Molson among others. Molson operates Coorss Canadian operations with 6 breweries. Coors also sells around 9 million barrels in the UK (Datamonitor, 2009c). MillerCoors currently controls 29.1% of market share, behind industry-leader Anheuser-Busch with 50.1%. Coors broad portfolio of over 40 brands allows it to reach a wide range of market segments (Ibisworld, 2010). B. Strategic Posture The current vision of MolsonCoors is to be a top four global brewer in profitability, fueled by our people who are committed to delivering exceptional results and creating extraordinary brands (Molson, 2010). The mission statement was not stated anywhere. The first portion, to be a top four global brewer in profitability is quantifiable through revenue. The last 2 parts are more difficult to measure, though Coors does have a large portfolio of successful brands. II. External Environment (Opportunities and Threats) The findings of the above industry analysis apply specifically to Coors in the following manner: A. General Environmental Factors The issues that affect Coors more heavily are the issues of product differentiation to meet consumer needs, and also the capacity and efficiency factor. The opportunity to market their products more extensively is important to Coors. B. Task Environment The Rivalry factor is currently affecting the level of competitive intensity within the brewing industry. Coors faces strong rivalry from Anheuser-Busch. They currently pursue very similar strategies, making competition strong. Currently Anheuser-Busch controls over 50% of the market share. As they compete for the same markets niches, it will be important for Coors to maintain competitive levels of advertising. Also, Coors has been efficient in their production capacities in the past, but as demand grows, they may need to make changes to keep up. III. Internal Environment (Strengths and Weaknesses) A. Management The Coors board consists of nine members, four of which are members of the Coors family. As of 1985, the Coors family continued to hold all of the voting stock (Ghemawat, 1992). Peter Coors became president of Coors in 1985. There was some dissent between the younger members of the board, including Peter, suggesting that had a differing vision for the direction of the company. It is implied that he thought it was necessary to add effective marketing skills to the manufacturing skills that the company already had (Ghemawat, 1992). B. Marketing Coors operates in every segment except for the low-price popular segment. In1985, Anheuser-Busch had a particularly strong product mix, much as Coors had, though Anheuser-Buschs market share was much larger. The most notable major competitors products were Anheuser-Buschs Budweiser, with 25.8% of market share, and Millers Lite beer, and High Life which together accounted for 17.5% of market share (Ghemawat, 1992). Coors pricing is appropriate for the market. There are no strong indicators that Coors pricing strategy is not competitive. In 1985, domestic producers supplied barrels at $67 each. Distribution is a major issue for Coors. In 1985, all of the major competitors except Coors functioned in all 50 states, but only had a median shipping distance of 300-400 miles. Coors was shipping their product 1,500 miles. Beyond this, their inefficient trucking system added 10-15% additional cost (Ghemawat, 1992). Finally, Coors launch of new products called for an increase in advertising. Coors silver bullet campaign proved successful, as Coors Light had become the 2nd best-selling light beer (Ghemawat, 1992). Coors spends less than the industry average for its promotional efforts. There is also statistical evidence that 90% of the effect of advertising is lost within one year (Ghemawat, 1992). Coors has not marketed itself as heavily as some of its competitors, which puts it at a disadvantage. It likely has much to do with the smaller size of Coors market share. C. Operations/Production Productivity improvement has been extremely important to Coors in its history. In 1985, Coors capacity utilization was above that of both the top players in the industry at 92%, which is high. The issues Coors is facing pertaining to distribution, and whether or not to open a new brewery would be a result of the firms re-invention. Growth through product development is important to Coors. It has six product lines in varying segments, indicating it is emphasizing product development within the brewing industry. At some points in its history, it was diversified outside of the brewing industry, but decided to focus on core competencies (Ghemawat, 1992). Coors benefits from high historical efficiency in production, and also strong brands that it can use to differentiate itself. D. Human Resource Management Unions have historically had little effect on the operations of Coors in particular, but they are present in almost every other firm in the industry. A strike during 1977, illustrated Coors lack of vulnerability to this threat (Ghemawat, 1992). E. Management Information Systems This section is not applicable. IV. Critical Success Factors This section will briefly outline how Coors is managing the critical success factors in its industry. Economies of scale are a necessity to be profitable in the industry. Coors Golden Colorado brewery is the largest in the industry, capable of producing 25-30 million barrels a year (Ghemawat, 1992). This production facility has allowed them to take advantage of economies of scale and spread the fix costs of production out of millions of barrels of product. Coors brewing facilities have historically had high capacity to deal with demand fluctuations, but future demand may prompt changes. Second, Coors has strong, differentiated brands that fit into multiple segments. Coors broad portfolio of over 40 brands allows it to reach a wide range of market segments (Ibisworld, 2010). Finally, a strong distribution network is imperative to obtaining sales levels. This is the aspect in which Coors is the weakest. Economics would dictate that an in-house operation would increase value-added, but Coors distribution network is not strong enough for them to realize financial benefit. V. Strategic Problem Management has failed to ensure the longÃ ¢Ã¢â ¬Ã term survival of Coors because they have neglected the importance of strong distribution networks, and shipping expenses associated with proximity to markets, and of refrigeration needs. If Coors wants to successfully compete on a national level, like its competitors, it will need to boost the efficiency of its distribution network. VI. Strategic Alternatives Option 1 Construct an additional brewery in the eastern United States such as the location in Virginia. This brewery would serve the eastern United States, and add additional capacity to Coors overall. The pros of this option are as follows: It would reduce costs associated with shipping from the Golden Colorado site. Coors estimates a $2.50 saving per barrel if it would not have to ship its entire product the average 1500 miles. Although the brewing industry is not projected to grow, it would not hurt Coors to have more resources and capabilities, and not have to base their entire operation on the single brewery. The cons of this option are as follows: It would take a large investment to establish a new brewery, and maintain its production. A 5-million barrel brewery would cost $200-$250 million (Ghemawat, 1992). Option 2 A second option would be to begin focusing heavily on marketing. The numbers show that Coors is considerably behind their competitors in advertising spending as a proportion of sales. The company has strong brands that could perform better with additional promotion. The pros of this option are as follows: Increased brand awareness, and information about the varying brands that Coors produces will result in additional sales volume. Targeting advertising about certain product lines to certain target markets could increase penetration into market niches, and result in additional market share. The cons of this option are as follows: The additional costs of a national advertising effort will be high. ROI may be low because of statistical data from studies indicating that advertising in this industry does not create lasting impressions (Ghemawat, 1992). VII. Recommendation After weighing the alternatives and their pros and cons, it would be most beneficial for Coors to select strategic option one, and construct an additional brewing facility. If they were to select strategic option 2, and the effects of their marketing campaign were favorable, they may not be able to keep up with demand which would be disastrous for the company. It may take them too long to make the necessary expansions in time to capture the additional market share. Constructing another brewery would also serve to drastically lower shipping costs. VIII. Implementation There are a number of strategic steps that will need to be implemented. Coors will need to ensure that it has the necessary funds for completion of the project. If they do not have the necessary funds, they will need to be acquired through efficient channels. Second, the site will have to be purchased. Any local environmental or social regulations or preferences will need to be planned for. Construction of the brewery will begin. Finally, the project will need to be completed on time to meet projections of needed capacity from the brewery to satisfy the demand needs of the east coast. Necessary sunk costs will need to be maintained to aid in startup of the facility including provisions for raw materials and machinery, as well as beginning the brewing process. Finally, Coors distribution network will need to smoothly integrate the new site into the existing framework. The brewery will allow for additional production of all of Coors product segments, using the existing brand recognition and perceived quality that Coors brands have. The costs associated with shipping will be reduced drastically. Coors has an opportunity to further expand its capacity. Coors position within the industry is currently strong, but the company will need to take the necessary steps to facilitate growth. Fierce competition from Anheuser-Busch, the industry leader will only get tougher if Coors does not take a proactive rather than reactive stance. If the company follows the strategic recommendation above, it puts them in a good position to market themselves additionally, but only after they have the necessary capabilities. IX. Bibliography Datamonitor, Inc. (2009a). Alcoholic Drinks in the United States: Industry Profile. New York, NY. Retrieved April 19, 2010, from the Datamonitor Company Profiles Authority Database. Datamonitor, Inc. (2009b). Beer in the United States: Industry Profile. New York, NY. Retrieved April 19, 2010, from the Datamonitor Company Profiles Authority Database. Datamonitor, Inc. (2009c). Molson Coors Brewing Company: Company Profile. New York, NY. Retrieved April 20, 2010, from the Datamonitor Company Profiles Authority Database. Ghemawat, P. (1992). Adolph Coors in the Brewing Industry. Boston, MA: Harvard Business School. (Original work published 1987) History of Beer Brewing. (2010). Wine Making | Beer Brewing. Retrieved April 21, 2010, from http://www.winemakingbeerbrewing.com/history/history-of-beer-brewing IBISWorld, Inc. (2010). IBISWorld Industry Report 31212: Beer Production in the U.S. Washington, DC: Areeb Pirani. Molson Coors Brewing Company.