Conditions That Can Give Rise to the Use of Power or Political Behavior in Organization

Authoritative governmental issues is seen as a typical way to deal with get power through questionable methods other than righteousness or legitimacy. Hierarchical legislative issues is a characteristic marvel coming about because of the way that individuals see things contrastingly and act in an unexpected way. This diverseness makes a strain that must be settled through political methods. In some other sense, it could be contended that governmental issues is utilized essentially to accomplish power.Advertising We will compose a custom paper test on Conditions That Can Give Rise to the Use of Power or Political Behavior in Organization explicitly for you for just $16.05 $11/page Learn More Power then again alludes to the ownership of controlling impact normally utilized as a way to complete things. It is the fundamental vitality to start and support activity making an interpretation of goal into the real world; the quality with which pioneers can't lead†¦power is on the double the most important and most doubted component critical to human advancement. In a perfect world, it is the capacity to execute maintainable plans. In numerous events specialists use power when either there are clashing perspectives or when the choice to be embraced is commonly needy (Pfeffer, 1993). Interdependency involves a beneficial interaction relationship where the two gatherings gain profits by one another. Force and impact are applied when the people with whom there exists a reliant relationship have an alternate perspective. This happens particularly in gatherings or groupings where a choice must be made, and each party’s commitment is similarly significant, yet by the day's end an agreement must be shown up at. Association could results from the manner by which errands are composed in a firm. For example, in a grid structure, workers need to answer to more than one administrator. In the event that an engine vehicle fabricating organization, for example, General engi nes organization chooses to concoct another half and half vehicle model, it might result to convey a portion of its designers to the task , this choice is essential as it would influence the quantity of building work force accessible to be dispatched to different fields. The supervisors would accordingly need to examine and concur on the issue. Inevitably this would require those designers doled out to the undertaking , report to both the activities chief and furthermore to their building departmental director hence coming about to some degree of interdependency between the two offices because of the sharing of assets. Moreover, the more prominent the level of errand specialization in the association, the higher is the opportunity that contradictions will happen. This is just on the grounds that, when work is isolated into various claims to fame and units, all things considered, the association will have individuals whose distinctions in foundation and preparing will make them take various perspectives on the circumstance. For an organization managing creation of shopper products, the choice must be made subsequent to talking with all significant authorities.Advertising Looking for article on political theories? How about we check whether we can support you! Get your first paper with 15% OFF Learn More The exploration office needs to complete attainability concentrates on the suitability of the choice, the money office will determine if the organization is in a situation to deal with the use; the showcasing office needs to concoct promoting procedures, etc. With such an enormous number of individuals included it is barely astounding that distinctions of sentiment will rise. The more significant the choice, the more the individuals in question and for choices of moderate noteworthiness, less individuals will be included, along these lines the connection among's interdependency and the quantity of individuals included is brought out unmistakably. Methods and Pro cedures That Can Be Used To Assess and Determine the Political or Powerful Units or People in an Organization as to associations, to assess power appropriation in a firm, vital sub divisions or subunits should be recognized. A unit typically alludes to an office. These sub units should then be positioned dependent on their impact over the association. A few subunits have a more profound relationship with asset streams accordingly better positioned to limit vulnerability levels in different subunits. Such subunits are all the more remarkable in an element (Pfeffer, 1993). Changes in possibilities confronting the association frequently change with subunits having this force. Regions can be drawn by work, geological area indicating where different workplaces and sub areas were found. People would thus be able to be named as ground-breaking by excellence of instructive foundation and preparing, the places that they hold, their capacity to impact others either through formal or casual as sociations among others. They may likewise be named as ground-breaking regarding their political associations and social height of their related. In this respects an organization like Cadbury that is the main maker of chocolate items, it would consider its creation office in Cote de Ivoire as the most significant to every one of its areas of expertise since its it biggest supplier of its crucial crude material that is the cocoa beans, along these lines without the beans no business would be completed even with all its substantial capital and types of gear. Sources that an Organization Unit or Person can use to Gain or Maintain Power in an Organization From an organization’s perspective, power is a significant persuasive factor to people and many will go the additional mile to accomplish it, and among the wellsprings of capacity to be demystified hereunder is from formal position or the formal organization’s position. In this unique situation, force will be for the most part vested in the situation of ‘departmental heads,’ where many will endeavor to reach. The intensity of an administrator incorporates however not restricted to settling on the organization’s significant choices based or guided by the firm’s mission, dreams and methodologies to be executed (Pfeffer, 1993).Advertising We will compose a custom paper test on Conditions That Can Give Rise to the Use of Power or Political Behavior in Organization explicitly for you for just $16.05 $11/page Learn More Therefore, when one is in such a situation to deal with such errands he/she feels prevalent. A supervisor will likewise have a few subordinates under him and all the more regularly he will practice assignment of power to them, and they should answer to their bosses on a periodical premise, so the director can be at standard with the recent developments that are occurring in the organization. The proper authority as portrayed by a hierarchical structure involves t hat choices, particularly for a brought together association are to be made by the administration rather than the subordinates. The intensity of certain individuals will in this way be diminished while that of others will win in overseeing how choices are made, for instance by requiring agreement or senior †director signoff, where in a venture, the partners will have some contribution through commitments however the administration will later meet to survey them, assess the upsides and downsides and alter where vital before controlling an official conclusions, a genuine indication of intensity as the figure †leaders of the specific association. Since the administrator is in charge of the association, it is subsequently broad information that he will be the leader of the association structure of the conventional association. This is set up by the reason, strategic, and different goals of the association. The chief consequently is the banner carrier and it is his commitment t o lead the subordinates into the powerful acknowledgment of such. A company’s achievement is credited to the top administration while its terrible showing is ascribed to the equivalent, accordingly the management’s position is significant in the association structure, and the supervisor will regularly utilize it to keep up his capacity (Pfeffer, 1993). A model would be concerning Virgin Atlantic carriers where by Steve Ridgway the current Chief official would be exceptionally respected by the individuals from general society and furthermore by his group of workers because of the position that he holds, access to urgent data and furthermore his cozy relationship with Richard Branson the proprietor of the aircraft organization. The second wellspring of intensity that one may take advantage of is the utilization of casual associations. We have just perceived how noteworthy the proper association is, in any case, a few people will lean toward an increasingly aberrant appro ach.Advertising Searching for article on political theories? We should check whether we can support you! Get your first paper with 15% OFF Find out More The utilization of casual associations include relational partnerships or systems, and for one to have impact on such he/she should be beguiling, willing and obstinate a model would be the administrators of the shell organization oil mammoth taking a day out to collaborate with its representatives and client at the corner stores and attempt to help the confidence of the staff simultaneously observe the issues that they might be confronting direct, that data of which may never arrive at their work area (Pfeffer, 1993). These gatherings frequently initiate a feeling of conviction emerging based on what is ordinarily alluded to as ‘group action’ in that people will feel secured and protected by being in a gathering. An association can't exist without casual groupings, and in some sense they resemble a stream streaming inside the association and controlling it is a significant wellspring of intensity and of keeping up the equivalent. List of sources Pfeffer, Jeffrey. Making do With Power; Politics and Influence in Organizations, MA; Boston, Harvard Business School Press, 1993. Print This exposition on Conditions That Can Give Rise to the Use of Power or Political Behavior in Organization was composed and presented by client Jed1d1ah to help you with your own investigations. You are allowed to u

Key Events in the Space Race Essay Example for Free

Key Events in the Space Race Essay The 60s were scandalous for some, quickly changing viewpoints relating to various subjects at that point. The subject of room was one not to be abandoned. This decade would be one of the world’s brilliant times of extraterrestrial research and each occasion during this time would be recorded into history. In a period the vast majority know as the ‘Space Race’, the Soviet Union (USSR) and the United States (USA) would vie for matchless quality in space investigation. Most occasions happened in this decade, yet the time of the ‘Space Race’ itself kept going from the 1957 to 1975. Sputnik 1, the world’s first counterfeit satellite, was propelled on October fourth, 1957 by the USSR. Sputnik itself was a cleaned metal circle, 23 in. in measurement, with four outer radio reception apparatuses to communicate radio heartbeats. It was sent into a circular, low-Earth circle and gave researchers data. Its motivation was to quantify the thickness and arrangement of the upper environment, just as estimating sun powered radiation, attractive fields, grandiose beams, and so on. It went at around 18,000 mi. every hour, taking 96. 2 minutes to finish each circle. Signs kept on arriving at Earth for 22 days until the transmitter batteries came up short on vitality on October 26, 1957. Sputnik wrecked on January 4, 1958 as it tumbled from circle after reemerging Earths climate. It went at around 43. 5 million miles and spent an aggregate of 3 months in circle. In spite of the fact that life had been sent into space previously, Yuri Gagarin would be the principal human to exit Earth’s air. He was conceived on March 9, 1934 out of a little town in the Soviet Union called Klushino. The cosmonaut boarded onto Vostok, a specialty that comprised of a round drop module, 2. meters in distance across, which housed the space explorer, instruments, get away from framework, and a conelike instrument module, containing charge and the motor framework. Upon reemergence into the Earth’s climate, the cosmonaut would launch from the art at around 7,000 m. what's more, dive through parachute, while the container would land independently. Gagarin’s strategic circle the Earth on April 12, 1961 went on for 1 hour and 48 minutes. He was just 27 years of age at that point and that was the first and last time he went into space, since he was too esteemed to even consider sending on a hazardous crucial. Gagarin may have been the principal human in space, yet Alan Shepard turned into the main American to exit Earth’s climate. He was conceived on November 18, 1923 in Derry, New Hampshire. Despite the fact that the flight was initially planned for October 1960, delays by impromptu preliminary work implied this was deferred a few times, at first to March 6, 1961 lastly to May 5. On April 12, 1961, Soviet space explorer Yuri Gagarin had become the principal individual in space and to circle the Earth. On May 5, 1961, Shepard guided the Freedom 7 strategic turned into the subsequent individual, and the primary American, to go into space. The suborbital flight just kept going an insignificant 15 minutes, however the dispatch was seen live by millions. While the USSR was showering in notoriety and wonder, in front of the US in the ‘Space Race’, America’s President John F. Kennedy announced the sensational and driven objective of sending a resident securely to the Moon before the decade's end on May 29, 1961. This was declared before a unique joint meeting of Congress. This choice would before long change the world everlastingly in 1969. The Soviet Union left the United States in the residue again when they sent Alexey Leonov, a Russian cosmonaut, to turn into the principal human to direct a spacewalk on March 18, 1965. He was conceived on May 30, 1934 in Listvyanka, Kemerovo Oblast, USSR. His stroll in space was initially to have occurred on the Vostok 11 crucial, this was dropped, and the memorable occasion occurred on the Voskhod 2 trip. He was outside the shuttle for 12 minutes and nine seconds, associated with the specialty by a 5. 35 m. tie. America was embarrassed by and by in mid 1966 as it viewed the USSR effectively land the world’s first rocket to accomplish a delicate arriving on the Moon. Luna 9 was propelled on January 31, 1966 and arrived on the Moon’s surface on February 3, 1966. Its crucial to land securely on any planetary body other than Earth and to transmit photographic information back. Signs went on for 6 days until the keep going transmission was sent on February 6, 1966. The spotlight was moved from the Soviet Union onto the US for once when the nation propelled the Apollo 11 crucial, occasion that would everlastingly change history. The essential target of Apollo 11 was to finished a national objective set by President John F. Kennedy on May 25, 1961: play out a maintained lunar landing and come back to Earth. The group comprised of Neil Armstrong as the Commander, Michael Collins as Command Module Pilot, and Edwin Buzz E. Aldrin, Jr. as the Lunar Module Pilot. Apollo 11 was propelled on July 16, 1969 and effectively arrived on the Moon on July 20, 1969. A great many American viewed the occasion live on TV. Armstrong set foot on the moon and pronounced â€Å"That’s one little advance for man, one mammoth jump for humankind. † A couple of moments later, Aldrin went along with him. Together they gathered soil tests and took photos. They remained on the moon for 21 hours. Numerous investigations were tried and 22 kilograms of lunar examples were gathered. On July 24, the space explorers got back on board the order module Columbia, arriving in the Pacific Ocean. On August 13, they rode in marches in their respect in New York, Chicago, and Los Angeles. For sure, the hour of the ‘Space Race’ is one not to be overlooked by the world. The Soviet Union and United States must be very much recognized for all the exertion spent on the investigation of room alone. While the USSR won a few fights, the US won others. That, notwithstanding, will never change the way that they affected the world, science, and history today.

Write Your Own College Admission Letter

Write Your Own College Admission LetterIf you are looking for a way to make the admissions process easier and quicker, consider writing your own college admission letter. The contents of this letter could be anything from writing a personal essay about your interests, to detailing your academic achievements, to describing how your parents and their past educators encouraged you.Of course, there is some 'personal background information' required. Many college admission committees require that you show evidence of high school grades or letters of recommendation. However, if you are asking to submit a college admission letter, do not provide this information in your own words.If you want to write your own college admission letter, then what you must provide in your college application should mirror your own personality. Any questions that you may have about being accepted into an online college should be included in your admission letter. For example, if you have been in a relationship before marriage, then include a summary of the relationship. If you need special equipment, such as a new computer or a printer, mention this at the top of your admission letter.When describing your life, do not emphasize your family too much. If your parents provide financial support, mention this on your college admission letter. Also, mentioning your parents in your admissions letter will help to demonstrate how well you are able to take care of yourself financially.Do not attempt to make your letter sound like someone else's. Be your own writer. If you have someone else's name as your pen name, such as by using 'Emily Doe'John Doe,' use your own name for the main component of your admission letter. Similarly, mention your mother's maiden name and not just your father's name, even if you are in a same-sex relationship.A college admissions letter that describes yourself may be another example of giving too much information. If you go too personal, it may be difficult to answer que stions if they are specific to your personal background, including for example whether you were a member of the Boy Scouts or a member of the Girl Scouts.The length of your admissions letter should also be reasonable. You may want to mention where you went to school, for example, but do not mention every little detail.College admission letters can be very detailed, but they are not a statement of who you are. As long as you follow these tips, you should be able to write your own college admission letter.

Optimal Hedge Ratios - Free Essay Example

Sample details Pages: 13 Words: 3757 Downloads: 6 Date added: 2017/06/26 Category Finance Essay Type Essay any type Did you like this example? Estimation of Optimal Hedge Ratios (hedging strategies): Naà ¯ve or one-to-one hedge assumes that futures and cash prices move closely together. In this traditional view of hedging, the holding of both the initial spot asset and the futures contract used to offset the risk of the spot asset are of equal magnitude but in opposite direction. In this case the hedge ratio (h) is one-to-one (or unit) (-1) over the period of the hedge. Don’t waste time! Our writers will create an original "Optimal Hedge Ratios" essay for you Create order This approach fails to recognize that the correlation between spot and futures prices is less than perfect and also fails to consider the stochastic nature of futures and spot prices and resulting time variation in hedge ratios (Miffre, City University). The beta hedge recognizes that the cash portfolio to be hedged may not match the portfolio underlying the futures contract. With the beta hedge strategy, his calculated as the negative of the beta of the cash portfolio. Thus, for example, if the cash portfolio beta is 1.5, the hedge ratio will be -1.5, since the cash portfolio is expected to move by 1.5 times the movement in the futures contract, where the cash portfolio is that which underlies the futures contract. The traditional strategy and the beta strategy yield the same value for h (Butterworth and Holmes 2001). Minimum Variance Hedge Ratio (MVHR) was proposed by Johnson (1960) and Stein (1961). This approach takes into account the imperfect correlation between spo t and futures markets and was developed by Ederington (1979). According to him, the objective of a hedge is to minimize the risk, where risk is measured by the variance of the portfolio return. The hedge ratio is identified as: h*= ?S,F / ?2F (1) Where, ?S,F is the variance of the futures contract and ?S,F is the covariance between the spot and futures position. The negative sign mean that the hedging of a long stock position requires a short position in the futures market. The relation between spot and futures can be represented as: St = ? + h*Ft + et (2) Eq. (2), which is expressed in levels, can also be written in price difference as: St – St-1 = ? + h*(Ft – Ft-1) + ?t (3) or in price returns as: St – St-1 / St-1 = ? + h*(Ft – Ft-1 / Ft-1) + ?t (4) Eq. (4) can be approximated by: logSt – logSt-1 = ? + h*(logFt – logFt-1) + ?t (5) Eq. (6) can be re-written as: RSt = ? + h*RFt + ?t (6) Where, RSt and RF t are returns on spot and futures position at time t. Equation (2) and (3) assume a linear relationship between the spot and futures while eq. (4)-(6) assumes that two prices follow a log-linear relation. Relative to equation (2)-(3), the hedge ratio represents the ratio of the number of units of futures to the number of units of spot that must be hedged, whereas, relative to eq. (4), hedge ratio is the ratio of the value of futures to the value of spot. (Scarpa and Manera, 2006) Eq. (2) can easily produce auto correlated and heteroskedastic residuals (Ederington, 1979; Myers and Thompson, 1989: cited in Scarpa and Manera, 2006). Due to this reason, some authors suggest the use of eq (3)-(6), so that the OLS classical assumption of no correlation in the error terms is not violated. Empirically, optimal hedge ratio h* can be obtained by simple Ordinary Least Square (OLS) approach, where the coefficient estimates of the futures gives the hedge ratio. This is can only be done when there is no co-integration between spot and futures prices/values and conditional variance-covariance matrix is time invariant (Casillo,XXXX). Even though application of MVHR relies on unrealistic assumptions, it provides an unambiguous benchmark against which to assess hedging performance ( Butterworth and Holmes, 2001). Error Correction Model (ECM) approach for determining optimal hedge ratio takes in to account the important role played by the theory of co-integration between futures and spot market, which is ignored by MVHR (Casillo,XXXX). The theory of co-integration is developed by Engle and Granger (1981), who shows that if two series are co-integrated, there must exist an error correction representation that permits to include both the short-run dynamics and the long-run information. ECM approach augments the standard OLS regression used in MVHR by incorporating error correction term (residual) and lagged variables to capture deviation from the long run equilibriu m relationship and short-run dynamics respectively (XXXXect). The presence of the efficient market hypothesis and the absence of arbitrage opportunity imply that spot and futures are co-integrated and an error correction representation must exist (Casillo,XXXX) of the following form: i=1 j=1 ?St = ?et-1 + Ft + ? ?i?Ft-i + ? ?j?St-j + ut (7) Where, ? is the optimal hedge ratio and et-1 = St-1 – ?Ft-1 All the above mentioned approaches employ constant variance and covariance to measure hedge ratio, which have some problems. The return series of many financial securities exhibit non-constant variance, besides having a skewed distribution. This has been demonstrated by Engle 1982, Lamoureux and Lastrapes 1990, Glosten, Jagannathan and Runkle 1993, Sentana 1995, Lee and Brorsen 1997 and Lee Chen and Rui 2001 (Rose, et al.,2005). Non-constant variance, linked to unexpected events is considered to be uncertainty or risk, and this uncertainty is particularly importa nt to investors who wish to minimize risks. In order to cope with these problems, Engle (1982) introduced the Autoregressive Conditional Heteroskedasticity (ARCH) model to estimate conditional variance. It takes into account changing variance over time, by imposing an autoregressive structure on the conditional variance. Bollerslev, Engle and Wooldridge (1988) expanded the univariate GARCH described above to a multivariate dimension to simultaneously measure the conditional variance and covariance of more than one time series. Thus, the multivariate GARCH model is applied to calculate a dynamic hedge ratio that varies over time based upon the variance-covariance between time series. (Rose, et al.,2005) Finally, other researchers have proposed more complex techniques and some special case of the above techniques for the estimation of the OHR. Among these we mention the random coefficient autoregressive offered by Bera et al. (1997), the Fractional Cointegrated Error Correction mod el by Lien and Tse (1999), the Exponentially Weighted Moving Average Estimator by Harris and Shen (2002), and the asymmetric GARCH by Brooks et al. (2002). (Casillo,XXXX) Despite the existence of massive literature on all the above approaches, no unanimous conclusion has been reached regarding the superiority of a particular methodology for determining the optimal hedge ratio. However, it would be wise to suggest that the choice of a strategy for deriving optimal hedge ratio should be based on the subjective assessment to be made in relation to investor preferences (Butterworth and Holmes, 2001). Development of Research: Figlewski (1984) conducted the first analysis of hedging effectiveness of stock index futures in US. He examined the hedging effectiveness for Standard and Poors 500 stock index futures against the underlying portfolio of five major stock indexes for the period June 1, 1982 to September 20, 1983. All five indexes represented diversified portfolio, however they were different in character from one another. Standard and Poors 500 index and New York Stock Exchange (NYSE) Composite included only the largest capitalization stocks. The American Stock Exchange composite (AMEX) and the National Association of Securities Dealers Automated Quotation System (NASDAQ) index of over-the-counter stocks contained only small companies which somewhat move independently of the Standard and Poors index. Finally, the Dow Jones portfolio contained only 30 stocks of very large firms. Return series for the analysis included dividend payments as risk associated with dividends on the portfolio is presumably one of many sources that give rise to basis risk in a hedges position. However, it was found that their inclusion did not alter the results. Consequently, and given the relatively stable and predictable nature of dividends, subsequent studies have excluded dividends. Figlewski used beta hedge and minimum variance hedge strategies and showed that the latter can be estimated by Ordinary Least Square (OLS) approach using historical data. He found that for all indexes hedge performance using minimum variance hedge ratio (MVHR) was better than beta hedge ratio was used. MVHR resulted in lower risk and higher return. When MHHR was uses, risk was reduced by 70%-80% for large capitalization portfolios. However, hedging performance was considerably reduced for smaller stocks portfolios. Also, hedging performance was better for once week and four week hedges when compared with overnight hedges. Figlewski (1885) studies hedging effectiveness of three US index futures (SP500, NYSE Composite and Value Line Composite Index (VLCI)) in hedging five US indices (SP500, NYSE Composite, AMEX Composite, NASDAQ and DJIA). Data was collected for 1982. He analyzed the hedging effectiveness for the holding period ranging from one day to three weeks using the standard deviation of the hedged position, divided by the standard deviation of the un-hedged position, as a measure of assessing hedging effectiveness. Hedge ratios were derived using beta strategy and MVHR. Assuming constant dividends, the weekly returns of each of the five indices were regressed on the on the returns of the indices underlying the three futures. Daily data was used to compute ex post risk-minimizing hedge ratios. In nearly every case, risk-minimizing hedge ratio outperformed the other in terms of hedging effectiveness, for both types of hedge ratio it was found that the hedges under a week were not very effective. It was also found that hedging was more effective for the SP500, NYSE Composite and the DJIA th an for NASDAQ and AMEX Composite. In other words, once again, portfolios of small stocks were hedged less effectively than were those comprising large stocks. Junkas and Lee (1985) used daily spot and futures closing prices for the period 1982 to 1983 for three US indices: SP500, NYSE Composite and VLCI. They investigated the effectiveness of various hedging strategies, including the MVHR and the one-to-one hedge ratio. This was done for each index using data for a month to compute the hedge ratio used during that same month in hedging the spot value of the corresponding index. MVHRs were computed by regressing changes in the spot price on changes in the futures price. The average MYHR was 0.50, whike the average effectiveness, as measured by variance of un-hedged position minus variance of hedged position divided by variance of un-hedged position (HE), was 0.72 for the SP500 and the NYSE Composite, and 0.52 for the VLCI. The effectiveness of the one-to-one hedge ratio was poor, leading to an increase in risk for the VLCI and the NYSE Composite, and an effectiveness measure of 0.23 for the SP500. In other words, MVHR was found to be most effective in reducing the risk of a cash portfolio comprising the index underlying the futures contract. There was little evidence of a relationship between contract maturity and effectiveness. Peters (1986) examined the use of SP500 futures to hedge three share portfolios; the NYSE Composite, the DJIA and the SP500 itself. MVHR and beta hedge strategy was applied to the data for the period 1984 to 1985. For each of the portfolio, MVHR gave a hedged position with a lower risk that did beta. Graham and Jennings (1987) were first to examine hedging effectiveness for cash portfolios not matching an index. They classifies US companies into nine categories according to their betas and dividend yield. For each beta-dividend yield category, ten equally weighted portfolios of ten shares each were constructed. Weekly returns w ere computed for each portfolio for 1982-83. They then investigated the performance of SP500 futures in hedging these portfolios for periods of one, two and four weeks. Three alternative hedge ratios were uses: one to one, bets and MVHR. The MVHR produced hedged positions with returns that were about 75% higher than for the other two hedge ratios. The measure of hedging effectiveness HE ranged from 0.16 to 0.33. For the one and the two week hedges, the MVHR hedge was more effective, that is, had a higher HE value. Morris (1989) investigated the performance of SP500 futures in hedging the risk of a portfolio of the largest firms in the NYSE. The data was monthly from 1982 to 1987. The MVHR was estimated using data for the entire period, and gave a HE value of 0.91. Lindhal (1992) investigated hedge duration and hedge expiration effects for the MMI and SP 500 future contract. Results showed that MVHR increased towards unity with an increase in the hedging duration. For SP 500 he dge ratios were found to be 0.927, 0.965 and 0.970 for one, two and four week hedge duration, respectively. It was concluded that hedge ratio and hedging effectiveness increase as duration increase. Lindhals examination of the hedge expiration effect is based on the fact that future prices converge towards spot prices as expiration approaches. According to him MVHR can be expected to converge towards the naà ¯ve hedge ratio if future prices also exhibit less volatility when approaching expiration. It was concluded that there was no obvious pattern in terms of risk reduction in relation to time to expiration. Unlike previous studies which only investigate ex post hedging effectiveness, Holmes (1995) became the first individual in UK to examine the hedging effectiveness of FTSE-100 stock index futures contract using Ex Ante Minimum Variance Hedge Ratio strategy. The cash portfolio being hedged mirrored FTSE-100 stock index. Data for spot and future series was collected for the per iod July 1984 to June 1992 for hedging duration of one and two weeks. The results also demonstrated the superiority on MVHR over beta hedges and showed that ex ante hedge strategy resulted in risk reduction of over 80%. Greater risk reduction was also shown to be achieved by estimating hedge ratios over longer periods. Holmes(1996) examined the ex post hedging effectiveness for the same data and return series used in the earlier study (1995) and showed that the standard OLS estimated MVHR provided the most effective hedge when compared to beta hedge strategy, error correction method and GARCH estimation. Results also suggested increase in hedging effectiveness with increase in hedging duration. This can be explained as variance of returns increases with an increase in the duration, resulting in the reduction of the proportion of the total risk accounted for by the basis risk. Butterworth and Holmes (2001) provided an unprecedented insight in to the hedging effectiveness of inv estment trust companies (ITCs) using Mid250 and FTSE100 stock index futures contract ,the former being introduced in February 1994 with an aim to provide better hedging for small capitalization stocks. Analysis is based on daily and weekly hedge durations for the cash and future return data of thirty-two ITCs and four indices for the period of February 1994 to December 1996. FTSE100 index futures and FTSE Mid250 index futures are used to hedge cash positions. Apart from well established OLS approach, consideration is also given to Least Trimmed Squares (LTS) approach for estimation which involves trimming of regression by excluding the outliers. Four hedging strategies including traditional hedge, beta hedge, minimum variance hedge and composite hedge were compared on the basis if within sample performance. Composite hedge ratio was generated by considering returns on synthetic index futures formed by weighted average of returns on FTSE100 and FTSE-Mid250 contracts. Results demonstr ated that traditional and beta hedge performed worst. MVHR strategy for daily and weekly hedges using Mid250 contracts outperformed the same strategy using FTSE100 contacts in terms of risk reduction for ITCs. However the superiority of Mid250 over FTSE100 is significantly less for cash portfolios based on broad market indexes. The composite hedge strategy demonstrated only minor improvements over results of the Mid250 contract. The LTS approach suggested similar results as OLS. Seelajaroen (2000) attempted to investigate the hedging effectiveness of All Ordinance Share Price Index (SPI) to reduce price risk of All Ordinary Index (AOI) portfolio in the Australian financial market. Hedging effectiveness was investigated for one, two and four week hedge duration. Hedge ratios were generated by using Workings model and the Minimum variance model and their effectiveness was determined by comparison with naà ¯ve strategy. Data for the analysis consisted if daily closing prices of the SPI and API for the period January 1992 to July 1998. Minimum variance model consisted of both ex post and ex ante approach. Results demonstrated superiority of both Workings model and Minimum variance model over naà ¯ve hedge strategy. Workings strategy was found to be more effective in long run, however, in short run the strategy is more sensitive to basis level used in the decision rule. Minimum variance strategy was also found to be highly effective, as even the standard use of the hedge ratio derived from past data was able to achieve risk reduction of almost 90%. Also, longer duration hedges were found to be more viable than short duration hedges and finally effects of time expiration on hedge ratio and effectiveness was found be ambiguous. DATA METHODOLOGY: This paper examines the cross hedging effectiveness of five of the worlds most actively traded Stock Index Futures to reduce the risk of KSE100 index. The 5 stock index futures include SP500, NASDAQ100, FTSE100, HANG SENG and NIKKEI 225. All 5 stock index futures and KSE100 index are arithmetic weighted indexes, where the weights are market capitalization. Analysis is based on daily and weekly hedge durations by using spot and futures return data for the period commencing from 1st January 2003 to 31st July 2008. Due to problems of sample size hedge durations of more than one week are not considered. Each daily return series consists of 1457 observations, out of which last 157 (from 1st January 2008 to 31st July 2008) are used to calculate out of sample (ex ante) hedging performance. Each weekly series consists of 292 observations, out of which last 31 (from 1st January 2008 to 31st July 2008) are used to measure ex ante hedging performance. The return series for each index is calcu lated as a logarithmic value change: Rt = logVt – logVt-1 (2) Where, Rt is the daily or weekly return on either the spot or futures position and Vt is the value of the index at time t. Value is the daily or weekly closing value of all 6 indexes. All data was obtained from Datastream. Two hedging strategies are considered. First, is the MVHR, and the second, is an extension of the first strategy by applying the theory of co-integration, formally known as Error Correction Model. MVHR is estimated by regressing spot returns (KSE 100 in this case) on futures returns using historical information: RSt = ? + bRFt + et (3) Where, RSt is the return on KSE100 index in time period t; RFt is the return on the futures contract in the time period t; et is the error term and ? and b are regression parameters. Value of b is obtained after running the above regression in e-views, which is the hedge ratio h* shown earlier in equation 1. This hedge ratio is used in furt her calculation for determining risk reduction. Effectiveness of minimum variance hedge is determined by examining the percentage of risk reduced by the hedge (Ederington, 1979; Yang, 2001). Consequently, hedging effectiveness is measured by the ratio of the variance of the un-hedged position minus the variance of the hedged position, divided by the variance of the un-hedged position (Floros, Vougas 2006). Var(u) = ?2s (4) Var(h) = ?2s + h2?2F – 2h?S,F (5) Hedging Effectiveness (HE) = (Var(u) Var(h)) / Var(u) (6) Where, Var(u) is the variance on un-hedged position (KSE100); Var(h) is the variance on the hedged position; ?S ?F are standard deviation on spot (KSE100) and futures returns respectively; h is the value of hedge ratio (b in equation 3); and ?S,F is the covariance between spot and future returns. Error Correction Model (ECM) approach requires testing for co-integration. The return series are checked for co-integration by following a simple two step a pproach suggested by Engle and Granger. Consider two time series Xt and Yt, both of which are integrated of order one (i.e. I(1)). Usually, any linear combination of Xt and Yt will be I(1). However, if there exists a linear combination (Yt – ?Xt) which is I(0), then according to Engle and Granger, Xt and Yt are co-integrated, with the co-integrating parameter ?. Generally, if Xt is I(d) and Yt is I(d) but their linear combination (Yt – ?Xt) is I(d-b), where b0 then Xt and Yt are said to be co-integrated. Co-integration conjoins the long-run relationship between integrated financial variables to a statistical model of those variables (XYZ,200N). In order to test for co-integration, it is essential to check that each series is I(1). Therefore, the first step, is to determine the order of integration of each series. Order of integration is determined by testing for unit root by using Augmented Dickey Fuller (ADF) test. A variable Xt is I(1), if it requires differenc ing once to make it stationary. The null of unit root is rejected when probability is less than the critical level of 5%. Then the following OLS regression is estimated: RSt = ? + bRFt + et Where, variables are same as equation 3. Empirical existence of co-integration is tested by constructing test statistics from the residuals of the above equation. If two series are co-integrated then et will be I(0). This is found by testing the residuals for unit root by using ADF test. The null of unit root is rejected if probability is less than 5%. Once it is established that the series are co-integrated, their dynamic structure can be exploited for further investigation in step two. Engle and Granger show that co-integration implies and is implied by the existence of an error correction representation of the series involved. Error correction model (ECM) abstracts the short- and long-run information in modeling the data(XYZ,200N). The relevant ECM to be estimated for generation of the optimal hedge ratio is given by: j=1 i=1 RSt = ?et-1 + ?RFt + ? ?iRFt-i + ? ?jRSt-j + ut (7) Where, et-1 is the error correction term and n and m are large enough to make ut white noise; ? is the hedge ratio. The appropriate values of n and m are chosen by the Akaike information criterion (AIC) (Akaike1974). In short, returns on KSE100 are regressed on futures returns and residuals are collected by using OLS. ECM with appropriate lags is estimated by the OLS in the second stage. Next phase is to determine the superiority of the two models MVHR and ECM, which were used to obtain the hedge ratios b and ? respectively. This is achieved by conducting Wald Test of Coefficient on model (7). If anyone of the lags in model 7 turn out to be significant, then optimal hedge ratio obtained through model (7) will be superior then hedge ratio obtained through model (3). Hence, signaling the superiority of ECM over MVHR. The significance is tested by a hypothesis, where: Ho= C(1)=C(2)†¦=C(i)=0 H1 = C(1)=C(2)†¦=C(i)?0 The null is rejected if the probability of Chi-square statistic is less than the critical value of 5%. Lastly, the superior hedge ratio will be used to determine ex ante performance. The hedging effectiveness of the superior hedge ratio will be based on the measure of risk reduction achieved through equation (6).

Value chain analysis - Free Essay Example

Sample details Pages: 24 Words: 7282 Downloads: 1 Date added: 2017/06/26 Category Statistics Essay Did you like this example? 2. Literature Review This section provides a broad picture of the dissertation that includes setting up the arameters and limits to the field of inquiry going into the research. Its aim is to identify key ideas, marketing theories applicable and marketing case studies that impinge upon the area of this investigation. It makes an effective starting point leading into the introduction and the background of the dissertation. 2.1 Macro Environment Analysis of McDonalds The analysis is done using a top down approach where first the Macro Environment and then the Micro environment has been examined, in which McDonalds operates. Don’t waste time! Our writers will create an original "Value chain analysis" essay for you Create order 2.1.2 Internal Anlaysis Internal Analysis is done using Value Chain analysis. The term value chain was used by Michael Porter (1985) in his book competitive advantage; creating and sustaining superior performance. Brown (1997),described value chain as a tool to disaggregate a business in to strategically relevant activities. In McDonalds case, the key value adding activities are inbound logistics, operation, outbound logistics, marketing sales and service. McDonalds logistics function is to buy food on behalf of its operator (franchisee) and arrange delivery in to their restaurants. McDonalds logistics includes; the procurement and shipment of raw materials in to suppliers, the procurement and shipment of finished goods between the suppliers and the distribution centres, together with the warehousing at each distribution centre, the ordering and the delivery to restaurants of all food, packaging and operating supplies. To improve its logistics operation, McDonalds combines a number of food-processing plants dedicated to its operation only. The establishment of food towns consisting of a distribution centre and a bakery, a meat plant, a sauce plant and a chicken plant, gives McDonalds competitive advantage. The supporting activities that can be identified are procurement, human resources development and technology. McDonalds uses electronic procurement system. It had set logistics trends for restaurants with its online ordering system. It was noted that more than 12% of McDonalds franchisees ordered food supplier electronically. Revamping its supply chain with software and technology made it easy to respond quickly and efficiently to customers needs. With the online ordering system, McDonalds had a return on investment of 23.2% in 2008. However, the human resource development at McDonalds is excellent. McDonalds uses a high-engagement approach to improving both their operations, leadership pipeline and employee satisfaction with their career growth. Every management staff at McDonalds receives training at one of the regional training centres and at the national centre, Hamburger University in East Finchley. Training all employees to work in one best way (quick-service culture) made McDo nalds to gain customers loyalty continuously leading to a competitive advantage. 2.1.3 External Anlaysis PEST analysis is applied for an in depth understanding of macro environment in fast food industry where McDonalds operated. Kotler (1998) claims that PEST analysis is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations. POLITICAL The operations of McDonalds are affected by the government policies on the regulations of fast food operation. Currently government are controlling the marketing of fast food restaurant because of health concern such as cardiovascular and cholesterol issue and obesity among the young and children in the country. Governments also control the license given for open the fast food restaurant and other business regulation need to follow such as for a franchise business. Good relationship with government in giving mutual benefits such as employment and tax is a must for the company to succeed in any foreign market. McDonalds should also protect its workers by ensuring all the hiring, compensation, training or repatriation is according to UK and European Labour Law and the Middle Eastern Labour Laws as stipulated. ECONOMICS As a business entity, McDonalds need to face a lot of economic variables outside its company or its macro environment. Dealing with international sourcing for its material McDonalds should be aware on the global supply and currencies exchange. Remember, McDonalds import most of its raw material such as beef and potatoes due to local market cannot supply in abundant to meet the demand of its product. Any upside of currencies especially dollar will be impacting its cost of purchase. Working on the local country, McDonalds must face government regulations on tax of profit where it gains from the operation and other tax such as entertainment and restaurant service tax. Each country may have different scale or types of tax available and McDonalds should follow the regulation if it wants to continue the operation. As a franchise, McDonalds should also pay certain percentage of the revenue to the parent company in United States. The economic condition and growth of the country also is an important indicator to the demand of products that McDonalds offered. As the food priced slightly above normal foods, not many people will have the income range to consume the products. Moreover if the economy is bad and income percapita is affected, the demand of McDonalds product will certainly going down. On the other hand the good economy also means disposable income is more and people can spend more on more expensive food at fast food restaurant. SOCIAL/CULTURAL The changing lifestyles of Malaysia due to development of Malaysian economy should be also taking into consideration. While more people are able financially to eat at more expensive outlet such as fast food restaurant, they have higher expectation. They want to have quality in services and more conveniences that can differentiate one restaurant from another. Young urban consumers want technology in their life and facilities such as credit card payment, wireless internet, cozy and relaxing ambient place, and other attraction for their hangout and eating. All these needs should also be taken into consideration. There is not much difference between cultural and the purchase of products in a single country but for different countries cultural sensitivity should be upheld. For example in India people (Hindu) do not take beef, Muslim countries do not take pork, German like beers, Finnish like fish type of food menu, Chinese like to associate food with something good (for ex ample prosperity), Asian like rice and Americans eat in big-sized menu. So far McDonalds has shown good efforts in localization of its menu to suit local taste but it should constantly survey and learn about local culture to better understand and design the best product for them. TECHNOLOGY For a fast food restaurant, technology does not give a very high impact on the company and it is not a significant macro environment variables. However McDonalds should be looking to competitors innovation and improve itself in term of integrating technology in managing its operation. For example in inventory system, supply chain management system to manage its supply, easy payment and ordering systems for its customers and wireless internet technology. Implementation of technology can make the management more effective and cost saving in the long term. This will also make customer happy if cost savings results in price reduction or promotional campaign discount which will benefits them from time to time. LEGAL As a certified fast food operator, there are many regulations and procedures that McDonalds should follow. For example is the Halal certification that becomes a concern to Muslim consumers. McDonalds should protect its integrity and consumer confidence by ensuring all materials and process are as claimed or must followed. Other legal requirement that the business owner should follow as stipulated in laws are such as operating hours, business registration, tax requirement, labor and employment laws and quality environment certification (such as ISO) in which the outlet has been certified. The legal requirement is important because the offenders will be fined or have their business prohibited from operating which can be disastrous. ENVIRONMENT As one of world largest consumer of beef, potatoes and chicken, McDonalds always had been critics for world environmentalist. This is because high consumption of beef causing the green house effect by methane gasses coming from the cows ranch. Large scale plantation has effect the environment and lost of green forest opening for plantation activities. Vegetarian environmentalist criticizes the fast-food giant for cruelty to animals and slaughtering. In Japan, once McDonalds want to introduce whale burger causing uproar because whales are endangered species. Before using paper packaging, once McDonalds also had been criticized for being insensitive to pollution because using polystyrene based packaging for its foods. Imagine millions of people purchase from fast food operator and how is the impact to world environment by throwing away those hard to recycle packaging. Our world is getting concern on environment issue and business operating here should not just care for prof it, but careful usage of world resources for sustainable development and care for environment safety and health for our future generation. Critics and concern from all public or activist should be review and support if necessary to ensure we play our social responsibility better. 2.2 Market Position McDonalds is operating in a very competitive market. In order to maintain on the top position of the competition, it is important to understand the companys industry environment to be prepared for actions. Porters 5 Forces is a useful model for analysing the industry environment, it identifies five competitive forces that shape every single industry and market. Supplier Power If suppliers have strong bargaining power, competitive pressure will be greater (Pearce and Robinson, 2004). McDonalds works in partnership with most of their suppliers to protect the quality of their foods and minimise the bargaining power of suppliers. Buyer Power Consumers buying power in the food market is high. With the continuously changes in tastes and the increased concern in healthy eating, companies in the food market has to make changes and improvements to satisfy its customers. Otherwise there is a high possibility in getting bad publicity and lost in profit. Threat of Substitute The threat of substitute is high in the fast food market due to the strong competition and the increasing amount of ready to eat foods. Customers have many choices other than McDonalds, and ready to eat meals are cheaper and convenient. Competition The competition in the fast food market is very high. McDonalds has to compete with strong competitors like Burger King, Pizza Hut, Wendy and KFC. Threat of Entry The threat of new entrant is low in the fast food industry because of the amount of competition with the big players in the market. New entrants will not likely to win due to lack ok economic of scale. The fast food industry is highly competitive. Taking one step further from the internal analysis, in this chapter, external analysis was done so as to determine where McDonalds I positioned in the market, given the intensive rivalry. PESTLE is used to gather data for completion of this analysis. From the data using PESTLE, swot analysis is done to determine how McDonalds strong market position as the largest foodservice and fast-food retailing chain in the world is bolstered by robust all-round growth witnessed by the company. By analyzing PEST and SWOT an understanding of overall of the companys power and how it can grow, is established. This was done keeping the focus on Western European Market and the Middle east. Hence the impact of European Regulations and turbulence caused by ter rorism and Iraq war is also taken as a significant point as part of analysis. Porters five forces model is used as the tool to analyse the market competition in the European and the middle east market. The existing rivalry in the industry is already strong although McDonalds is in a dominant market position. The above analysis helps to conclude MCDonalds competitive advantage and its uniqueness to gain broad target in the aforementioned markets. 2.3 : Marketing Strategy and Mix Every organisations need to identify their strategic aims to be able to have a direct focus of what and when to achieve it within a given time. This is usually based on the organisations limited resources and capabilities. As (Barney 1991), stated an organisation could extend their limited resources and capabilities through organisational learning, sharing, generation of knowledge, redeployment of existing resources in an effective and efficient ways. In this section, the strategic aim of McDonalds is discussed. This is used for evaluating the way it has implemented its objectives and the effectiveness of the global and local marketing strategies. This was important to fully understand its market and environment in order to evaluate its right marketing plans and the adopted strategies. After analysing the market and environment of McDonalds, this chapter focuses on the plans and strategies adopted by the company to overcome its weaknesses and avoid the threats. It uses various survey results to determine the effectiveness of its marketing mix. In the year 2003, when, McDonalds had been having problems on losing market share, reducing profit and bad publicity, the company started aligning their global system around a common mission with a common set of customer focused goal oriented actions. It was called McDonalds Plan to Win which was to put the companys concentration on the five drivers of exceptional customer experiences Product, People, Place, Promotion and Price. This plan was aimed to increase profits by improving its services to increase customers. These 5 variables are also known as the Retail Marketing Mix or the 5 Ps. They are the variables that marketing managers can control in order to best satisfy customers in the target market. This chapter discusses and evaluates the way McDonalds has established its revitalisation plan in the European and the Middle East markets. While doing the research on the five Ps, McDonalds relationship marketing is also examined, that is viewed as an asset and the companys marketing goal is to attract, maintain, and enhance customer relationships. Then there is an argument on whether the combination of five Ps with the relationship marketing is enough to stay on the competition or is there any other areas to be focussed as well. In the aspect of marketing sales McDonalds adopted the concept of 7ps of marketing mix formulated by McCarthy (1975) and Gilligan Fifield (1996). These 7ps includes; product, place, price, promotion, people, process, physical. With these 7ps McDonalds was able to create a uniformity of items that taste the same in different countries. McDonalds realises that although there is cost savings in standardisation but success can be achieved by being able to adapt to a specific environment. It has a pricing strategy that enables it to cope with a particular market. In setting price, McDonalds looks at the elasticity of demand for its product in response to price. Considering the diverse range of culture, custom in different countries, McDonalds has localised its marketing communication strategy using different promotion and advertisement. For instance McDonalds uses the England footballer Alan Shearer as a logo to advertise its hamburgers in the UK and in France its uses Fabien Barthez, t he French international goalkeeper. Obviously, McDonalds uses a number of styles to attract customers. After analysing the market and environment of McDonalds, this chapter will be focusing on the plans and strategies adopted by the company to overcome its weaknesses and avoid the threats. In the past few years, McDonalds has been having problems on losing market share, reducing profit and bad publicity. In the year 2003, the company have aligned their global system around a common mission with a common set of customer focused goal oriented actions. It is called McDonalds Plan to Win which was to put the companys concentration on the five drivers of exceptional customer experiences Product, People, Place, Promotion and Price. This plan was aimed to increase profits by improving its services to increase customers. These 5 variables are also known as the Retail Marketing Mix or the 5 Ps. They are the variables that marketing managers can control in order to best satisfy customers in the target market. (Please refer to appendix 2 for further information on the 5 Ps) Product The following are the strategies applied by McDonalds on their Products: To satisfy customers desire for premium products at affordable prices. More choices on the Happy Meal such as fruit options and milk for the kids. To address the desire for foods that fit into todays lifestyle. McDonalds has added new choices like meal-size salads, fruit options and sandwiches in order to fit the increased concern on health eating. McDonalds is controlling the quality of the foods by working in partnership with its suppliers and to work closely with food experts to ensure the quality is in the highest standard. People The following are the marketing strategies adopted by McDonalds on its People: Speeding up service by simplifying the restaurant environment for their staff and customers. Ensuring the restaurant staffs are focused on being friendly, as well as fast with hospitality training. Providing cost-efficient, relevant training for their world-wide workforce. There are more than 1.6 million people worldwide working for McDonalds. McDonalds has placed emphasis on the training and development of its employees, aiming to provide career opportunities for people to achieve their potential. McDonalds has five commitments to their employees, which are: Respect and Recognition Values and Leadership Behaviours Competitive Pay and Benefits Learning, Development and Personal Growth Resources to Get the Job Done Place McDonalds has over 30,000 restaurants in 119 countries. It opens in places where has high consumer flows such as high street, shopping malls, train station, airports, retail parks, gas stations, and even schools. Freestanding restaurants are positioned so that customers are never more than a few minutes away by foot in the city or by car. The following are McDonalds strategies on Place: To make the environment the gold standard for cleanliness. They have recalibrated their standards and are consistently enforcing them. McDonalds has added additional service to customers by providing Wi-Fi accessibility in some of the restaurants so customers can stay connected to the internet while enjoying their foods. Giving customers more reasons to visit McDonalds by adding more products offering such as coffee and to locate in the right place. Relocating, renovating and rebuilding some of the restaurants to give McDonalds a fresh edge. Promotion Every year McDonalds spent huge amount of money on promotion. The company has been trying to maximise the impact of the advertising spending and broaden their reach through public relations and by placing adverts in media well beyond the traditional prime-time network television format. The objective of spending so much money on promotion is to build brand loyalty and bonds of trust. The following are the strategies: The new creative brand direction Im Lovin It! is designed to connect with customers around the world, especially young adults, moms and kids. It has became McDonalds signature brand voice in 119 countries, generating awareness figures as high as 96% in some parts of the world. Appealing to young adults with relevant advertising. McDonalds is bringing top creative teams from around the world to gather ideas, study trends and find inspiration to create world-class advertising. Price McDonalds has a rigorous pricing process that is used to determine the price for that particular market in each country. The reason is to be able to offer affordable prices to customers and also to be profitable for the company. The following are the process which sets out the basic framework that allows the company to set localised pricing: Selecting the price objective Determining demand Estimating costs Analysing competitors costs, prices and offers Selecting a pricing method Selecting a final price (www.mcdonalds.com) 2.4 : Performance Measurement Quality is an important issue in services due to the features of inseparability, intangibility and perishability. That which can not be stored and is intangible cannot be checked for defects before delivery to customers. In addition each individual involved in the exchange process brings with them varying levels of expectations and levels of satisfaction in addition to the unpredictable nature of human beings. It is this dominant role of human interaction in services that shape customers expectations and create difficulties in understanding and implementing quality initiatives (Behara Gundersen (2001)). Officially McDonalds names three elements in their strategy to be the worlds best quick service restaurant: People (being the best employer), Customers (providing them excellence) and System Growth (for owners/operators, suppliers and company). McDonalds has always been a franchising Company and has relied on its franchisees to play a major role in its success. McDonalds remains committed to franchising as a predominant way of doing business. Approximately 70% of McDonalds worldwide restaurant businesses are owned and operated by independent businessmen and women, our franchisees. Usually, McDonalds offers franchises to poor performing restaurants in order to sustain profitability. Advertising is used to differentiate McDonalds products from competitors and as a means of branding: Advertising Spend in 2001 amounted to  £39m (KFC:  £14m, Burger King:  £8.6m, Pizza Hut:  £7.4m). Furthermore, McDonalds is involved in various high profile sponsorship schemes (e.g. major Sponsor of FIFA World Cup, gold sponsor and official restaurant of the Olympic Games) that secures them favourable PR. Recently McDonalds acquired Boston Market Chicken restaurants, the Donatos pizza chain and Chipotle Mexican Grill. In the UK, it purchased the Aroma coffee chain and 33% of Pret A Manger. This demonstrates that McDonalds has diversified into other segments of the fast food/ convenience /take away market. McDonalds is the worlds largest food service organisation. It has the greatest market share of the breakfast, lunch and dinner market and holds 67% of the UK Burger Market. McDonalds golden arches are the worlds biggest brand with higher awareness than Coca-Cola. McDonalds is constantly introducing new products, usually for a limited period of time. This is because management recognise that consumers like variety as well as a continuation of good products such as Big Macs and Cheeseburgers. Also, they are well aware that if McDonalds has too many products running at the same time then the speed of customer service will deteriorate. However, McDonalds has not introduced healthier products in response to growing concerns about obesity. It is difficult to evaluate the extent to which McDonalds fulfils customers demands. In the 2001 consumer survey conducted by Sandelman Associates, McDonalds was ranked as last out of 60 chains for taste. Statistics that describe McDonalds cleanliness are not available and therefore the achievement of this objective is difficult to examine, but anecdotal evidence suggests that suitable policies are in place to meet that objective. Customer service quality is difficult to assess but it is renowned for being quick. 2.5 : Ethical Criticism Ethical behaviour has come up as one of the most important aspect of any organisation. By Doing the right thing internally and externally, businesses created a good working atmosphere, while also benefiting society and the environment. However many ethical issues are subjective and based on ones values and beliefs. As a result, they are often difficult to enforce and easy to neglect. The result of this is that when the costs are added up, the social balance sheet contains enormous debts to society (McEwan, 2001). This chapter discusses the ethical issues that McDonalds have been facing over a period of time and how effectively it addressing its corporate social responsibility. The 2008 corporate social responsibility report has been critically evaluated and based on that it is determined, whether much of its efforts are just descriptive or has been realistic. It uses various results from the data set based on the primary and secondary research to determine the effectives. It is the notion of an organizations debts to society, which led to the branch of ethics known as corporate social responsibility. This refers to the economic, legal, ethical, and philanthropic expectations placed on organizations by society at a given point in time (Carroll and Buchholtz, 2000). This theory of responsibility to society is based around two headings, stated by Wells (1998). Social Responsibility deals with the purposes for which companies should act (Wells, 1998), and Corporate Responsibility is the liability attached to a company for actions done in its name (Wells, 1998). On 2002, McDonalds published its first Corporate Responsibility Report and this was followed up with an updated version in 2004. Neverthless many critics of McDonalds still believe that this, like many Corporate Responsibility Reports, is simply a medley of generalities and assumptions, that do not provide hard metrics of the company, its activities or its impacts on society and the environment (Hawken, 2002), and is peripheral to the core interests of an organization (Strategic Direction, 2002). Consequentially, there is a need to analyse the claims made towards McDonalds, and whether they have been resolved within the two Corporate Responsibility Report. The incident which has done the most damage to McDonalds ethical reputation was the McLibel trial, where the company expected a quick conclusion to its action against activists who had distributed a pamphlet, Whats Wrong with McDonalds?. Instead it ran for two and a half years and became the longest ever English trial, upon its com pletion in June 1997 (McSpotlight.org: The McLibel Trial, 2005). One of the main ethical criticisms consistently faced by McDonalds over the last 30 years relates to the food offered in its stores. Critics claim that McDonalds is a major contributing factor to the ver-increasing levels of obesity in the UK and European countries. Medical studies show that waistlines are expanding faster in the UK than in any other European countryà ¢Ã¢â€š ¬Ã‚ ¦with 1 in 5 adults dangerously overweight (Walsh, 2003), while in 2001 it was reported that 300,000 deaths a year in the U.S. are related to obesity compared to 400,000 through cigarette smoking (McMans Depression and Bipolar Weekly, 2004). McDonalds contribution is a result of the unhealthy nature of fast food. For example, a meal of a Big Mac and medium fries would provide you with 910 calories, as well as 46g of fat, 13g of which are saturated (McDonalds.com, 2005). Considering the fact that this is half the Recommended Daily Allowance for a female adult, it is clear that McDonalds does not meet U.S. die tary requirements. Apart from obesity, diabetes, high blood pressure, heart disease and some forms of cancer are related to a diet high in fat, saturated fat, salt and sugar (Inside the McLibel trial, 1995). The impacts of a McDonalds diet were clearly shown in Morgan Spurlocks controversial film Super Size Me, where he ate nothing but McDonalds for one month. Although this was an extreme example, the impacts on Spurlock were dramatic. Spurlock gained 25 pounds, raised his cholesterol by 60 points, dropped his libido and turned his liver into pate (McMans Depression and Bipolar Weekly, 2004). He also experienced headaches and depression, and actually became addicted to the products. The impact of a McDonalds diet on children is also a major ethical concern, as an increasing number of children are faced with obesity problems. Every month, 90 percent of the children between 3 and 9 in America visit a McDonalds (Schlosser, 2001). McDonalds has been criticised for exploiting children wi th advertising. They have traditionally aimed themselves towards children with collectable toys in Happy Meals, as well as colorful advertising campaigns and promotions in schools. Most criticized is the use of the Ronald McDonald clown character, which has been seen as a cynical exploitation of children to use a clown to drum up business (Inside the McLibel trial, 1995). These marketing tactics contribute to the increasing unhealthy diet of many children. Stakeholders in a corporation may not only be human because animals are also seen as an important part of society and deserve the same treatment as humans. McDonalds has been criticized for the way it treats animals before they are killed and turned into fast food. The corporation is the worlds largest promoter of meat-based products, the largest user of beef and the second largest user of chicken (McSpotlight.org: McDonalds and Animals, 2005), and thus is faced with the usual claims aimed at slaughterhouses. It is claimed that ch ickens were crammed into sheds with less than one square foot of space per bird and no daylight (Inside the McLibel trial, 1995). As a result, 44% had leg abnormalities and other health problems (Inside the McLibel trial, 1995). This treatment was not just reserved for chicken but also other animals involved in McDonalds fast food products. 40% of piglets were held in indoor breeding units, and half had tails docked for no apparent reason (Inside the McLibel trial, 1995). Ethical criticism is also aimed at the methods for killing the animals. 14% of chickens received pre-stun shocks, which caused undue stress, while 1% (1,350 per day) were decapitated before being stunned (Inside the McLibel trial, 1995). As well as social ethical issues, corporations must also consider environmental ethics, which means treating natural resources not just as commodities, but as part of the ecological whole. It is important because it affects the image of the company and consumers perceptions. For example, a Wall Street Journal poll in 1991 claimed that 53% of people avoided purchasing a product because of environmental concerns about a product or manufacturer (Hawken, 2002). The most famous environmental issue is the suggestion that McDonalds has destroyed hundreds of acres of Brazilian rainforest to make way for large-scale cattle ranching. This not only removes a valuable natural resource, but also has an impact on global warming, as the rainforest is an essential mechanism for the absorption of Carbon Dioxide in the atmosphere. McDonalds also annually produces over a million tons of packaging used for just a few minutes before being discarded (McSpotlight.org: Environment, 2005). Traditionally a number of ozone depleting gasses were used in polystyrene foam packaging. In the 21st century, McDonalds uses almost all recycled packaging. However, the company still faces criticism due to the amount of waste it produces. Each of McDonalds US restaurants produces 238 pounds of waste per day and each of its U.S. regional distribution centres disposes of another 900 pounds of waste per day (Svoboda and Hart, 1995). This is not only expensive to dispose of, but also difficult when considering that similar quantities of waste are being produced around the world. McDonalds also experiences internal ethical issues related to the working conditions and treatment of employees. McDonalds employs over 1 and a half million people worldwide, over half of them under 21 years old (McSpotlight.org: McDonalds and Employment). McD onalds has adopted age differentials between adult and younger workers, meaning that they pay most of their employees less than the normal adult minimum wage (Transport and General Workers Union, 2004). For example, McDonalds pays some 16-year olds as little as $6.80 an hour. McDonalds employees also experience poor working conditions with discrimination, illegal working hours, and poor safety conditions. There is little that can be done about this due to the absence of trade unions, within McDonalds, to represent staff. If Milton Freemans theory of stakeholders is adopted, the needs and expectations of staff are just as important as those of customers. The range of ethical criticisms leveled at McDonalds throughout the world has been well-publicized. However, many of these issues were first raised in the 1970s before tighter regulation was imposed and unethical behavior became a hot topic. After 30 years of criticism, it is important to look at what measures McDonalds has taken to improve its ethical conduct and how far this has been successful. McDonalds claims that being a good citizen has been inherent in the company since its inception (Schlosser, 2001). Ray Kroc believed McDonalds had an obligation to give back to the community that gives so much to us. This was rooted in his founding principles of Quality, Service, Cleanliness and Value. Since 1955, McDonalds has continually made statements about its conduct to try and reassure shareholders and stakeholders. However, nothing was said or published about what attempts were actually being made to do the right thing. This finally changed in 2002 with the release of McDonalds firs t Social Responsibility Report. The report was composed of 46 pages, which began with McDonalds core values and then looked at the impact of McDonalds in different areas, such as community and the environment. It showed that McDonalds has invested in the Ronald McDonald housing program to house families with seriously ill children, and documented the efforts made to reduce McDonalds impact on the environment. For example, there was a commitment to spend $100 million annually on the use of recycled materials, especially in the building and renovation of its restaurants (Svoboda and Hart, 1995). Overall, the report was a clear statement of intent about its future works in this area (Wood, 2002). Although it was an attempt at social reporting, the 2002 report was a low-water mark for the concept of sustainability and the promise of corporate social responsibility (Hawken, 2002), and its generality, as well as its vague nature meant it was simply a walk around the issues (Wood, 2002). It was seen by many as a PR stunt, which was created to appear like McDonalds was meeting the requirements of an increasingly demanding society. The content of the report was criticized because it focused on issues and areas where McDonalds had been successful, but did not mention well-publicized issues, such as obesity. Similarly, it neglected to mention a number of the companys major environmental impacts. For example, the report talked about water use at the outlets, but failed to note that every quarter-pounder requires 600 gallons of water (Schlosser, 2001). This distinct lack of transparency enabled McDonalds to cover up any bad issues and only show what they wanted the public to see. The k ey problem with the 2002 Responsibility Report was that due to its decentralized nature, McDonalds was unable to provide any of the data that is looked for as core information in their report (Wood, 2002). In its report, McDonalds stated how much money it had provided for social improvements, but no figures on what impact these improvements had. Similarly, there was very little information related to the measurement of environmental impacts and improvements. This meant that the report was written as a narrative, rather than a social report. The effectiveness of the report was also reduced by the fact that there was no comparative data on past and present performance (Strategic Direction, 2002). The final nail in the coffin for the report was the fact that there was no independent verification (Strategic Direction, 2002), which meant that stakeholders could not even have a guarantee of the accuracy of the report. These negative factors meant that the first McDonalds Social Responsibi lity Report was was an impressive statement of intent, but it recognised that the company was not yet ready to report progress (Wood, 2002). Despite the criticisms of the report, McDonalds was satisfied with the result, believing it portrayed the company in a good light and showed stakeholders that McDonalds met societies needs. However, in the 2 years following the reports release, McDonalds experienced its worst financial results in almost 20 years. This was a result of increasing criticism from publications and documentarys, such as Super Size Me, as well as an increase in lawsuits from over weight teenagers in America, who blamed McDonalds for health problems. The result was the second McDonalds Social Responsibility Report in 2004, McDonalds current source of ethical information for stakeholders, which introduces a new accountability structure (Cochran, 1994). The colorful report is double the size of the 2002 edition, with 88 pages, and is a significant improvement, addressing many of the ethical issues which have shadowed McDonalds for the last 30 years. The report says that being responsible is one of our greatest competitive advantages, even though the issues it tackles are growing ever more complex (Allen, 2004). The 2002 report made little mention of McDonalds food, and failed to recognize the ethical concerns associated with it. However, in the current report, food takes top billing (Allen, 2004), with the first 12 pages of the main analysis allocated to Food. The company highlighted efforts to offer healthier options, including salads on its menu, and revealed how they had brought in a full time nutritionist to alter the menu. Possibly the most poignant move was to phase out the Super Size option in all restaurants. McDonalds have also added new options to Happy Meals for children, so fries can be substituted for healthy alternatives like apple slices (Allen, 2004), and offers milk, fresh orange and water instead of soda. McDonalds new stance also involved promoting the importance of exercise (Allen, 2004). On page 8 of the report there is a picture and statement by a professor of exercise at Leeds Metropolitan University, who reinforces McDonalds stance, aimed at helping children lead healthier lives. The section on the environment is also more substantial, with a variety of figures on packaging and waste. For example, McDonalds achieved a 3.2% reduction in packaging during 2003 (McDonalds Corporate Responsibility Report, 2004). This is combined with a section, which shows McDonalds commitment to improving the environmental performance of suppliers. This includes a statement that McDonalds will not purchase beef from rainforests or recently deforested rainforest land (McDonalds Corporate Responsibility Report, 2004), acknowledging one of the specific ethical criticisms aimed at McDonalds. McDonalds also shows its commitment to reducing animal cruelty from suppliers by increasing supplier accountability and conducting nearly 500 audits at beef, pork and chicken processing facilities around the world (McDonalds Corporate Responsibility Report, 2004). The content of this report shows that the company is beginning to acknowledge and account for the unethical stories recounted by critics. A key example of this is the website Super Size Me: The Debate, which was set up by McDonalds to show how they have made improvements in their menu and give advice to customers on products. The Corporate Responsibility Report is written by McDonalds Corporate Responsibility Committee, who ensure that all the political and social requirements are met by the corporation. This is supported by a code of business conduct, which has been in place and updated regularly over the last 35 years. This is the main framework for employee ethics and it is used to ensure that the internal ethical requirements are met, such as a safe working environment, equal opportunities and employee rights. There is also a code of conduct for the board of directors, which shows their commitment to ethical practices (McDonalds Corporate Responsibility Report, 2004). The 2004 Corporate Responsibility Report, and codes of business conduct are all written in a similar style, with emphasis throughout on Responsibility. This word is used numerous times to show that McDonalds doesnt feel it is an obligation, but that it is their responsibility given to them by virtue of being in a powerful position. This word can be applied not only to show external shareholders that the company appreciates it is responsible for their well being, but also to reinforce the notion to staff internally that they must be responsible for ethical conduct in all aspects of their work.] Despite the marked improvements in ethical conduct, there are still criticisms that can be leveled at McDonalds. The 2004 Corporate Responsibility Report is still limited by the fact that it is qualitative, rather than quantitative. It does have some statistics, but there is a need for more, particularly when looking at improved performance. The employee section is dominated by claims of diversity, but little is said about how conditions have been improved or pay structure and age breakdown of staff. As noted in the Lampe-Finn model, it is little more than a means to maintain the status quo while creating images of ethical behaviour (Lampe and Finn, 1992). The report uses bright colors and external partners to emphasize its importance, but really it is merely another piece of corporate propaganda designed to satisfy the majority of stakeholders with minor concerns. It attempts to portray itself as being a corporate citizen, but without the transparency that is necessary to achieve this view. The only parts of the company which society gets to see are those chosen by executives to support their opinion of how the company should be portrayed. There is still an absence of evidence to prove to strong opposition that change is really occurring. This is probably a result of the fact that McDonalds does not have an ethics department or ethics officer. It simply has codes of conduct, which are produced at the top level by directors. The result of this is that because the directors are not experts in ethical conduct, many of the ethical issues are simply covered over by well-publicized, but unsuccessful schemes, and many of the needs of stakeho lders are not met. Over the last 10 years, McDonalds appears to have successfully met its social responsibilities. Its vibrant 2004 Corporate Responsibility Report shows that the menu has been enhanced with healthy options, which reinforce McDonalds public aim to increase the healthiness of its customers. The company has increased recycling and reduced waste in stores across the world, while attempts have been made to improve the standards of its suppliers. This has led to McDonalds taking top position in marketing firm GolinHarriss second annual citizenship survey. The most amazing fact is that this has been done in a way that also meets Friedmans requirement of meeting needs of shareholders by increasing profits. However, when looking deeper into McDonalds attempts to improve its ethical conduct, it becomes clear that McDonalds has offered progressive rhetoric but not changed its internal practices or impact on society and the environment (Hawken, 2002). Much of its attempts are d escriptive and based around meeting future goals. This has a lot of potential, but very little is said about what has been achieved at the moment. The absence of statistical figures means that most of McDonalds attempts at ethical behaviour can and will be questioned by numerous books, documentaries and websites. It is important to remember that McDonalds publicly embraces sustainability as long as it can make money (Hawken, 2002) and many of its ethical attempts are aimed at persuading the public that the business is ethical, rather than ensuring that it is. McDonalds success looks set to continue into the future. This has been achieved despite facing constant pressure from critics about its operating practices. As a result, it seems very unlikely that McDonalds methods of publicizing ethical attempts will change, especially considering the money which would be required. If there was a shift towards full corporate social responsibility, there is a need for an ethical officer and et hics department, comprised of experts who can subjectively analyze the performance of the company and set accurate objectives. There is also a need for full transparency so that the public can be assured that the company is ethical. It would need to reveal the externalities born by other people, places and generations (Hawken, 2002). Until any radical internal changes are made, the poet Henry Thoreau best describes McDonalds corporate initiative: Improved means to an unimproved end. (Hawken, 2002). This also helped in understanding how best McDonalds can work on its feasibility without compromising on the marketing strategies. 2.6 : Developments and Changes for Future Based on the audit of the environment and competition, recommendations are made for McDonald in the fast-food industry the maturity market. Recommendation is made based on the analysis carried out on tactical practices to optimize its marketing situation that includes : 1. If the new diversified possible marketing strategy is supposed to be used to support and communicate its brand values, rather than to detract from its original burger business? 2. Can the long-term goal extend the business and brand by leveraging physical assets, retail know-how and brand strength to innovate and develop new business concepts? 3. Should the company better rebuild marketing team, making sure they have the right person to do the right thing? 4. Should the company stop aggressive expansion worldwide, instead, consolidate their burger business by developing more options in their menu? Satisfying more customers, more often by delivering superior quality, service, cleanliness and value should be the foundation of McDonalds history success and an imperative for capturing growth opportunities in the future. 2.7 : Conclusion This chapter literally concludes the dissertation, giving a brief account of its main points within each chapters.

The Impact Of Applying The 20 % Deduction On Various...

The Table 1 above can justify the impact of applying the 20% deduction on various salary levels, with more adverse effect for those graduates who will be earning FJ$18,000 or less. A graduate with salaries level of FJ$10,000 and/or FJ$12,000 will basically earn FJ$95.08 and/or FJ$39.69 below poverty line, respectively. Whereas graduate students with salary level of FJ$15,000 and FJ$18,000 will manage to earn a marginal FJ$43.38 and FJ$121.08 above the poverty line. One critical factor that we need to find, upon the availability of data is what is the proportion of students currently taking programs that will fall into these income levels category of FJ$18,000 and below?. According to FNU Strategic Plan 2020, on average 87.5% of their graduates from the period 2010-2013 were from the certificates and diploma programs, and this is expected to continue towards the TELS program period. Therefore, Fiji TELS program repayment ratio is deem cumbersome in the sense that a standard 20 percent will be deducted from any graduates who began working, irrespective of their salary levels. 4.8.2 Loan Recovery The question of how much will be recovered from this TELS program, can only be available once the data is available, but it highly likely that rate of recovery will be low, given the current high rate of unemployment. As stated by Johnstone (1986), the financial sustainability of any loan program, usually depend on the size of the recovery ratio, in terms of the extent in which theShow MoreRelatedRicher Sounds3383 Words   |  14 Pagestheir approach is. 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