Wage Determination in Perfect and Imperfect Markets

Wage determination in perfect and imperfect markets Perfect competition In perfect labor markets, everyone is wage taker – both the employee and the employer. On the one hand, the employer and his firm cannot control the market as there are too numerous firms and the firm is price taker on the product market and labor market. On the other hand, the workers cannot control their wage as they have no economic power to do so or they are of a clearly definite type. In perfect competition there is a free movement of labor. Everyone can enter the labor market or to switch jobs. Moreover, both workers and employers have enough information on the labor market state – wages, demand, productive level of workers etc. The most common thinking in labor markets is that all workers in the same position are equally There are two driving forces concerning the supply of hours by an individual worker – while working, the worker sacrifices its leisure time and the work may be unpleasant. The worker experiences marginal disutility of work, which tends to increase as work hours increase. To deal with the marginal disutility of work, a wage could be raised. This would lead to people willing to work more hours in order to have a greater income and they are ready to sacrifice their leisure time or in other words the substitution effect appears. Still, with higher wages people tend to work less in order to have more leisure, which is the income effect and as a result we meet the backward-bending supply curve of labor. What determines wage rates in perfect competition is the number of qualified people, the wages and non-wage benefits in alternative jobs and the non-wage benefits or costs of the jobs. The wage of a worker is measured by the interaction of demand and supply in the labor market. A very useful tool for calculating the wage rate is the marginal productivity theory. As long as firms are concerned, they will try to maximize profit by employing workers until the marginal cost of employing a worker is equal to the marginal revenue the worker’s output earns for the firm. In other words, the wage should be equal to the marginal cost the firm has occurred by employing the last worker. According to time some differentiations might be made. In the short run expanding industries will be able to pay higher than contracting industries. In the long run there are wage differentials because workers have different abilities and they are not perfectly mobile. In conclusion, the low paid will be those whose labor is in low demand or high supply, they possess few skills or are unfit, work in contracting industries, do not want to move from the area etc. Highly paid are workers whose labor is in high demand or low supply, they have certain skills or talents or work in expanding industries. Wage determination in imperfect markets In the real world, firms or workers, or both, usually have the power to influence wage rates. This is the case with monopsony – this is a market with a single buyer or employer. Another option to determine prices is when the workers are part of a labor union, which can be a monopolist or part of an oligopoly. Monopsonist are wage setters or wage makers as they are represent all the workplaces. What is interesting about monopsonist is that if a firm wants to hire more workers, it has to pay a higher wage rate to attract workers away from other industries. The wage it pays is the average cost to the firm of employing labor and the marginal cost of hiring one more worker will be above the wage rate. To maximize profit, a monopson equalizes marginal cost of employing labor with marginal revenue product. Union monopoly or oligopoly has market power and can influence wages. The scope of this power depends on the market concerned. However, the higher the wages, the less the workplaces. Moreover, unemployed might undercut the union wage by forcing the firm to employ non-unionised labor. The only way to increase wages and not reduce the level of employment is by increasing the productivity of labor. Another form of imperfect labor market Is bilateral monopoly. It means that a union monopoly faces a monopsony employer. In this case the wage rate and the level of employment depend on the relative bargaining strengths and skills of unions and managers. As a matter of fact, my facing a single powerful employer it might be easier for the union to increase wage rates. In bilateral monopoly the union can threaten the industry with strikes and consequently economic losses which gives unions more power. It often happens both sides – union and management, to gain from the carried negotiations. This is called collective bargaining. In this form of agreement there are various threats or promises made by both sides. Examples of union threats are – picketing, working to rule and such of employers can be lock-outs, plant closures etc. The government can also influence the collective bargaining. It can try to set an example, or set up arbitration or conciliation machinery. Another possibility is to use leglislation, e. g. set a minimum wage rate or prevent discrimination. To change the perspective, a higher wage might also be profitable for the firms. The reason behind this lies in the fact that productivity rises with wage rates. Moreover, by investing in training of the personnel, a firm will meet significant loss in the absence of the better-trained workers. High wage rates motivate workers as well. Other imperfections of labor markets can be the inadequate information workers or employers receive. In addition, wages may respond very slowly to change in demand and supply, causing disequilibrium in labor markets. The last factor in determining wages we are going to examine is discrimination. It might take many forms – race, sex, age, class etc. In economics, discrimination means that workers of identical ability are paid different because of the aforementioned characteristics.

What is digital television?

Digital television offers a superior format by broadcasting sharper pictures and clearer sound. Also, digital television is versatile and can be used for a variety of purposes. Furthermore, with digital television, there is an efficient use of the spectrum for a variety of essential services such as police departments, emergency services, delivery companies, etc. This is because digital signals free up bandwidth and provide space. Jerome Adda and Marco Ottaviani write that, â€Å"Digital compression technology allows roughly six times as many channels to be broadcast with the same amount of spectrum used by one analogue channel.† (169)Digital television is a new advanced technology which is used to send and receive broadcast signals (both picture and sound). Digital television supports the following services: subscription TV programming, computer software distribution, data transmissions, teletext, interactive services and audio signals. Digital television is superior to analo g television because it is more accurate, versatile and compatible with other electronic media such as computers, satellites, mobile phones, etc. Digital television has certain technical specifications which set it apart.Joel Brinkley writes that these qualities of digital television have made it very popular and attractive. These are as follows: progressive scanning, square pixels, enhanced frame rates, added lines per frame, different aspect ratios, different aspect ratios, and clearer sound. Progressive scanning is a better technical format than interlaced scanning. The former allows for smooth sequence of video frames. With this, progressive scanning which is used in digital television allows for compatibility between digital television and computers.With square pixels, digital television has 1920 pixels per line and a total of 1080 lines per frame. This gives pictures on digital television a sharper resolution. With the enhanced frame rates digital television allows more frames per second. As a result motion portrayed on digital television is more realistic- the more frames per second, the more realistic motion will be. The aspect ratio for digital television is 16:9. This aspect ratio of digital television gives larger pictures and makes viewing more natural. Digital television produces clear sound because it uses five channels of discrete compact disc quality audio.Apart from the aforementioned, digital television presents a number of advantages which hitherto were unavailable with analog television. With digital television there is a wider choice of programs available for the audience to choose from. Digital television presents a large number of channels and this does not affect the quality of any the programs on the channels. Furthermore, on digital television, the audience is able to engage in other activities such as electronic shopping, betting, etc. Digital television is also a channel for reaching the audience with information services because th e medium is not restrictive.With digital television, the audience is able to browse the Internet. Also, digital television also provides telephone services and is compatible with computers and mobile phones. The technology of digital television is very compatible with many other digital devices. This ability makes it possible to achieve a high level of interactivity on digital television. Viewers are able to vote on digital television using remote controls, as well as achieve two way communication with the mother station for various purposes.In terms of income generation, digital television offers an efficient way of monitoring subscriptions and ensures that only people who pay receive the service. In this way digital television is very useful to manager so broadcast stations. From this time on, there has been steady growth in digital television. Toward this end, there has been a deadline set to ensure a transition from analog broadcasting to digital broadcasting in the United State s. Other developed countries of the world have also set dates for this transition. Origin of digital television.Although digital television is often perceived as a recent phenomenon, the journey to where it is now began a long time ago. According to Alexander B. Magoun the first digital television system originated between 1956 and1961. It was started by Richard Webb, an ex RCA engineer, who was working on contracts for encrypted video communication contracts required by the military and National Security Agency in the United States of America. Magoun writes that Richard Webb was able to obtain digital signals when he â€Å"converted the analog brightness data from a monochrome video signal into a binary bitstream.†This binary bitstream was encrypted by the digital computers used by the US Military at the time. Webb based his work on the knowledge and experience of other engineers from other companies. Webb found the modulation technique of Frank DeJager (an engineer from Phi llips) very useful. Originally this modulation technique was used in sound recordings. Using the modulation technique, Webb and his team in Colorado encoded the relative brightness of each pixel (they did not encode the absolute brightness). In doing this, they saved significant bandwidth and created a single channel for data transmission.Thus digital television came into being. The first digital television station was established in the White house when President Dwight Eisenhower was in office. This system remained in place in the white house till 1979. What is Analog Television? Analog television encodes pictures using varying single voltage and radio frequencies. Analog television receives and displays broadcast signals that are transmitted using the radio waves. Alexander B. Magoun notes that in analog television, the video component is transmitted using amplitude modulation (AM) while the audio component is transmitted using frequency modulation (FM).Analog television is ineff icient because it is subject to interference. When this interference happens, the pictures become grainy and picture quality is greatly diminished. The quality of analog signals is dependent on the distance between the receiver and the transmitting station. On analog television, the broadcast signal continues to weaken as distance increase from the broadcast station to the receiver. When this happens, the pictures which appear on the analog television become ghosty with grains (it appears to be snowy). This is often referred to as a snowy, fuzzy or ghosted picture.However, digital television is able to overcome this shortcoming which plagues analog television. With digital television, distance does not matter. No matter how far the broadcast station is from the receiver, the picture quality does not diminish. As long as the digital signal is still being received, the picture quality remains the same. Digital television does not suffer from ghosting or noise that arises from weak sig nals. The converter boxes which are used by digital tuners receive numeric information from the antenna. This eliminates the possibility of interference in digital signals.Analog television signals are transmitted using and interlaced format. In this interlaced format, the odd number lines are transmitted first before the even number lines. Each of these sets of lines are referred to as fields. These two fields make up one picture frame, i. e. the video image. In a sense, analog television is restrictive. On the other hand digital television provides an opportunity for datacasting which enhances interactivity. In this modern age there is need to establish a two way relationship with the audience and this is what digital television ensures.The era of delayed feedback is no longer the case. Audience reaction can be measured with ease. However, it is important to state that analog television has been used before the advent of digital television. Although the former has its shortcomings it has served many uses in society to date. In the early days, according to American television standards, there the analog television was operated at 30Hz frames per second. This was in contrast to the 24 frames per second in the early days of motion pictures. However, with the introduction of color television there was a slight adjustment to 29. 97Hz frames per second.

Corporate Governance Essay

ABSTRACT This paper examines whether the remuneration of the Chief Executive Officer position in Hong Kong public firms is affected by board composition, given the influence of family control on the boards of many Hong Kong companies. It is hypothesized that I) in family-controlled boards, Chief Executive Officers receiver higher compensation and II) Chief Executive Officers in family-controlled boards serve as Chief Executive Officer positions longer. In family-controlled boards, corporate governance is of very high importance as the independent non-executive directors can exert less influence over the board, compared to non-family-controlled boards (â€Å"dispersed boards†). Keywords: Board composition, Remuneration, Corporate Governance. 1.INTRODUCTION The economic turmoil in Asia in 1997 has led to a wider recognition of the importance of corporate governance. In line with global trends towards higher standards of corporate governance, the duties and liabilities of the directors of the listed companies have therefore become more stringent. It follows that many corporate governance mechanisms designed to monitor board members may be less effective for family-owned and family-controlled firms. However, to attract outside investors, family-owned and family-controlled firms tend to encourage greater independence and monitoring from the board. For the purposes of the study, family-owned and family-controlled are used interchangeably. The reason is that actual family ownership is difficult to ascertain due to various shareholdings and special purpose vehicles that are used, and cannot be deduced from annual reports. Thus, in this study we classify family-control and family-ownership when the board is made of a majority of related family members as a â€Å"family-controlled board†. When it is not, we classify it as a â€Å"dispersed board†. In practice, there are instances where the family owns the majority of a company but comprise of a minority of the board, and it is possible that the family is able to exert influence via other avenues, however, this study will not be examining such. Family-owned firms are common throughout Asia. Studies show that, family-owned firms hold more than 20 percent of the equity of listed companies in Asia, and more than 60 percent of the listed companies have connections with family-owned groups (Bebchuk & Fried, 2006). Family-owned businesses represent the predominant form of listed companies in Hong Kong (Standard & Poor’s, 2002). Such family ownership structure implies the strong influence of dominant shareholders and provides limited voice for minority shareholders. Compared to the Anglo-American environment, where ownership blocks are less concentrated but institutional investors are more prevalent, in Hong Kong, there is less of a culture for non-executive directors or minority shareholder activists to challenge. Variations in ownership structure may lead to differences in the nature of agency conflicts, the roles of directors may vary in accordance to the ownership structure. For family-owned firms, Shleifer and Vishny (1997) argue that the primary agency conflict is between a family owner and non-family owners. Meanwhile, for widely held firms, Berle and Means (1932), and, Jensen and Meckling (1976) argue that the primary agency conflict is between executives and shareholders. As a consequence, tying remuneration to performance of executives may prove the most efficient way to mitigate this agency conflict. To date, a vast of literatures published in recent years show the growing recognition of influences of family-owned firms and executive remuneration on corporate governance. Many studies have tended to focus on the use of remuneration contracts to align interests of executives with owners in family-owned firms. The rise in executive remuneration in recent years has been the subject of public criticism, which further intensified corporate governance scandals. Therefore, the question whether a correlation exists between remuneration and family-control in board composition at Hong Kong-listed companies. 2.OBJECTIVES In 1994, Hong Kong Exchanges and Clearing Limited introduced rules that require listed firms to disclose the remuneration of directors. Before 2004, there was no requirement to disclose the names and remuneration of directors (Cheng & Firth, 2005). The Disclosure of Financial Information rule under Hong Kong Exchanges and Clearing Limited’s Listing Rules was amended on 31 March 2004 to require full disclosure, on an individual and named basis, of directors’ fees and any other reimbursement or emolument payable to a director. In addition, Hong Kong Financial Reporting Standard 2 requires listed firms to disclose directors’ share-based remuneration. The Code on Corporate Governance Practices forms part of the Listing Rules and came into effect on 1 January 2005. According to the Code on Corporate Governance Practices, Hong Kong’s listed firms should be overseen by an effective board, which should assume responsibility for the leadership and control of the listed firm, and the members of which should be collectively responsible for promoting the success of the firm by directing and supervising its affairs. Directors should make decisions objectively in the best interests of the firm. In regards of remuneration policy for firms’ directors, the Code on Corporate Governance Practices requires the disclosure of information related to the firm’s directors’ remuneration policy and other remuneration-related matters. There should be a formal and transparent procedure for setting policy on executive directors’ remuneration. The Chief Executive Officer, a director in the board of company, will hence have his/her full remuneration disclosed. It is recommended that remuneration should be set at a level sufficient to attract and retain directors of the caliber required to run the company successfully, but companies should avoid paying more than is necessary. However, it is argued that many corporate governance mechanisms designed to monitor board members may be less effective for family-owned firms. However, to attract outside investors, family-owned firms tend to encourage greater independence and monitoring from the board. In Hong Kong, there are quite a number of listed companies have a high concentration of family ownership. It is common for the top executives of family-owned firms in Hong Kong to be family members. The rise of remuneration of family executives in family-owned firms has been the subject of public criticism. Recognizing this, the purpose of this research is to find out whether there is any relationship between family-board-control of firms and remuneration of Chief Executive Officers. To summarize, this study revolves around the following major objectives. †¢ To test whether there are significant differences in Chief Executive Officers’ remuneration for family-controlled and non-family-controlled firms (specifically firms with family-controlled boards and firms without family-controlled boards); †¢ To find out whether â€Å"Family Chief Executive Offices† (cases where the Chief Executive Officer are family members of the family-controlled boards) are awarded excessive compensation, compromising standards of corporate governance; †¢ To examine the tenure of Chief Executive Officers for family-controlled firms vs non-family-controlled firms, given that there may be differences in the board’s ongoing approval and demand of the results delivered by the Chief Executive Office; and †¢ To test whether there are significant differences in corporate governance structure of family-controlled and non-family-controlled firms. 3.LITERATURES REVIEW, HYPOTHESIS DEVELOPMENT 3.1 Agency theory It is commonly acknowledged that ownership structure, the basis of corporate governance, is important to the overall performance of firms. While there are a large number of literatures discussing ownership structure, agency theory is frequently cited as a foundation. In modern corporations, the separation of ownership and control leads to agency conflicts that can be alleviated through various corporate governance mechanisms (Fama and Jensen, 1983). As one such mechanism, compensation schemes are designed to provide incentives that align the behavior of agents to act on behalf of principles (Jensen and Meckling, 1976). This relationship between executive compensation and firm performance has received considerable attention from the general public and academics. One of the issues in the field of management is the impact of family influence (Mishra et. al., 2001; McConaughy et. al., 1998) and corporate governance on the value of a firm (Khatri et al., 2001; Kwak, 2003; Black et al., 2003). There are various studies in diverse areas like accounting, economics, finance, law and management have been conducted to study such impact (Mishra et al., 2001; Kwak, 2003; Blacket al., 2003; Andersen and Reeb, 2003). These studies have resulted in interesting and useful observations. According to Alchian and Demsetz (1972), the principal agent problem comes from hidden action due to asymmetric information. The essence of a firm is that, it permits people to work as a team. It is the cooperation of a team that leads to a firm’s output. Thus, the agency problem inevitably arises in corporate governance. According to Jensen and Meckling (1976), agent problem arises from the conflict of interests between shareholders as the principals and the executives as the agents. Consequently, residual control rights fall into the hands of management instead of the residual cash flow claimants. As a result, the sum of monitoring expenditures be incurred by the principal, bonding expenditures incurred by the agent, and the value of the lost residual borne by the principal are included as the cost of agency. In general, when ownership of a firm becomes more dispersed, the agency problem will be deteriorated due to the inability of the relatively small shareholders to monitor the behavior of management. The monitoring of managers by shareholders is also weakened by free-rider problem. To mitigate the problem of agency, Ang (2000) and Denis and Sarin (1999) suggested the shareholding of management to be increased in order to make the executive a significant claimant. An inverse correlation exists between the dispersed ownership and firm performance (Berle and Means, 1932), because executives’ interests do not coincide with the interest of shareholders so that corporate resources are not used for the maximization of shareholders’ wealth. This view has been supported by many scholars. Shleifer and Vishny (1986), McConnell and Servaes (1990), and Zingales (1995) found a strong positive relationship between ownership concentration and corporate performance. In transitional economies, Xu and Wang (1999) and Chen (2001) found a positive relationship between actual firm performance and ownership concentration for a sample of listed Chinese companies. 3.2Ownership Structure It is common in Hong Kong, that ownership structure is characterized by single dominant owners (Chau & Leung, 2006). A report of the Corporate Governance Working Group of the Hong Kong Society of Accountants in 1995 indicated that a high concentration on family-controlled listed firms is highly entrepreneurial and opportunistic in their business strategies, however, the report also indicate that these firms with single dominant owners lack resources and corporate culture to maintain strong internal corporate control. The 2001 Review on Corporate Governance by the Hong Kong Standing Committee for Corporate Law Reform, as well as a report from Standard & Poor’s, indicated that family ownership structures present particular challenges. Theoretically, there is a major puzzle regarding the role of family in large firms (Bertrand & Schoar, 2006; Villalonga & Amit, 2006). In family-controlled firms, threatening factors may negatively influence the firms’ value (Demstez, 1983; Demstez and Lehn, 1985). Table 1 as below lists positive and negative factors affecting the relationship between family control and firm value. It shows that there is still difference of opinion among researchers on this topic of importance. 3.3â€Å"Family† Chief Executive Officers In this study, whether a person belonging to the family acts as a Chief Executive Officer is taken into account. We classify family-control and family-ownership when the board is made of a majority of related family members (â€Å"family-controlled board†). When it is not, we classify it as a â€Å"dispersed board†. Family Chief Executive Officers have substantial stockholdings of 5 percent or more (Daily & Dollinger, 1993), with such given bargaining power, can be expected to influence the size and structure of their remuneration packages to their own benefit. Thus, for the purposes of this study, Chief Executive Officers with stockholdings of less than 5 percent are not counted as â€Å"Family Chief Executive Officers†. There are differing opinions on whether such Family Chief Executive Officers have higher or lower remunerations at such family-controlled firms. Some believe that such Family Chief Executive Officers are receiving above-average compensation due to the family-controlled board, as well as their strong ability to influence remuneration committee. Oh the other hand, others take the opposite view and see that Family Chief Executive Officers should be receiving below-average compensation. There is several reasons for this expectation. First of all, both anecdotal (Applegate, 1994; Kets de Vries, 1993) and empirical (Allen & Pamian, 1982; Gomez-Mejia et al., 2001; Schulze et al., 2001) evidence suggest that incumbents with family ties to owners enjoy high employment security. As argued by Beehr (1997), the Family Chief Executive Officer inherently plays two overlapping and interdependent roles: a work role as steward of the company, and a non-work role as fulfillment of family obligations. In reciprocity for this role duality, the Family Chief Executive Officer is rewarded with a relatively assured job (Allen & Pamian, 1982; Kets de Vries, 1993; Gomez-Mejia et al., 2001). Moreover, some literatures suggested that evaluators are more likely to make positive performance attributions to employees when there are emotional ties between monitoring and those being judged (Cardy & Dobbins, 1993). It is expected that in family-controlled firms, board members in their role as monitors may be less inclined to attribute disappointing results to the Family Chief Executive Officer, giving the benefit of the doubt to the incumbent when interpreting ambiguous performance data. Agency theory suggests that there are inherent conflicts between shareholders and executives. Applying agency theory’s logic, the above scenario suggests that in family-controlled firms, risk adverse agents would trade higher job security for lower earnings if they are related to principals. Family Chief Executive Officers mitigate usual agency costs because of their aligned interests with the owners (Anderson & Reeb, 2003). The information asymmetry problem in agency relationships may also be reduced given the close ties between Family Chief Executive Officers and the owners. Since they hold high ownership stakes, Family Chief Executive Officers have sufficient incentives to place family welfare ahead of personal interests, thus may perform better than firms with non-family Chief Executive Officers. Barney (2001) suggested that appointing family members as Chief Executive Officers may be beneficial. Tradition, loyalty, and bonding relationships determine how resources are deployed in family firms. Family Chief Executive Officers build common interests and identities (Habbershon & Williams, 1999) and play a dual role by being both owners and executives (Chang, 2003; Yiu, Bruton, & Lu, 2005). Through social relationships with managers and employees, Family Chief Executive Officers may help to obtain intangible resources such as goal congruence, trust, and social interactions, providing valuable, unique, and hard-to-imitate competitive advantage (Chu, 2011; Liu et al., 2011; Luo & Chung, 2005). The Code on Corporate Governance Practices recommends remuneration committee to seek advice from the Chief Executive Officer on the matter of directors’ remuneration. Executives in firms controlled by a large shareholder receive more compensation for performance, than executives in firms lacking a controlling owner (Gomez-Mejia et al., 1987). Mehran (1995) examined the relationship between executive remuneration, ownership structure and firm performance. The results indicate that firms, which have more outside directors, have a higher percentage of executive remuneration in equity-based form. Moreover, the percentage of equity-based remuneration is inversely related to the outside directors’ equity ownership, i.e., the executive’s equity-based remuneration rose if the outside directors’ owned less of the company, and vice-versa. Next, Mehran (1995) turned to firm performance, and its relationship to executive remuneration and ownership structure. He used Tobin’s Q and return on assets as measures of firm performance. He found firm performance to be positively related to the percentage of executive remuneration that is equity-based. However, Mehran (1995) no relationship between firm performance and ownership structure. He concluded that the results support the notion that executive remuneration should be tied to firm performance. There is a vast amount of literature on turnover of the Chief Executive Officer position (Furtado and Karan, 1990; Kesner and Sebora, 1994; Finkelstein and Hambrick, 1996; Pitcher et al., 2000). However, according to Finkelstein and Hambrick (1996), the relationship between remuneration and turnover has not been subjected to rigorous empirical examination, even given the emphasis on retention as a justification for high remuneration of Chief Executive Officer. The following hypotheses are framed: Hypothesis 1: In family-controlled boards, Chief Executive Officers receive higher compensation. Hypothesis 2: Chief Executive Officers in family-controlled boards serve as Chief Executive Officer positions longer. 3.4Board Composition The role of the board is expected to represent shareholders, provide strategic guidance to and effective oversight of management, foster a culture of good governance, and promote a safe and healthy working environment within the company. In accordance to Hong Kong Stock Exchange Listing Rule 3.10, the board of directors is required to have at least three independent non-executive directors. The presence of â€Å"truly† independent non-executive directors in the corporate governance regime is seen as one way of mitigating agency problem associated with concentrated family ownership. In family-owned firms, given the influence of family control on the remuneration and performance relationships exists, where the majority of shares are in the hands of family members, under this circumstance, the executive and risk-bearer functions are merged and more of the wealth consequences of the executives’ decisions are internalized. In other words, there is less separation of ownership and control and thus lowering agency costs, which in turn leads to less cost for monitoring by outside directors. Therefore, firms closely controlled and managed by family members are expected to use lower proportion of outside directors compared with firms with disperse ownership. In widely held firms, with ownership dispersed among many investors, investors are often small and poorly informed to exercise even the control rights they actually have. Moreover, the free-rider problem faced by individual investors makes them uninterested in expending effort to learn about the firms they have financed, or even to participate in the governance (Shleifer and Vishny, 1997). As a result, the larger degree of separation of ownership and control in widely held firms leads to greater conflicts. The use of outside directors by widely held firms is expected to be more. 3.5Remuneration Committee In 1999, remuneration committees were uncommon in Hong Kong, with only few firms reporting their existence (Cheng & Firth, 2005). Since 2006, Hong Kong Stock Exchange proposes a rule to require issuers to set up a remuneration committee, with the committee chairman and a majority of the members being Independent Non-executive Directors. In family-owned firms, the positions of the Chief Executive Officer are usually held by family members, who can influence the level of remuneration paid to directors. The Code on Corporate Governance Practices recommends remuneration committee to seek advice from the Chief Executive Officer on the matter of directors’ remuneration. The Code on Corporate Governance Practices recommends that the majority of remuneration committee members be Independent Non-executive Directors. The presence of Independent Non-executive Directors on the remuneration committee is supposed to be used as monitoring mechanism that prevents excessive remuneration for executive directors (Basu et al., 2007), including that of the Chief Executive Officer. The role of independent non-executive directors and large institutional shareholders becomes crucial to curtailing the possible self-serving behavior of top managers (HKSA, 2001). Studies of firms in other countries show conflicting results on the relationship between remuneration and remuneration committee. Some findings show that remuneration committees tend to reduce remuneration, whereas others report the opposite (Conyon & Peck, 1998; Ezzamel & Watson, 1998). However, in practice it is highly likely that the Chief Executive Officer has some influence over the compensation decision (Murphy, 1999). An important question relating to the composition of remuneration committee concerns the ideal combination of outsiders and insiders. Insiders may face distorted incentives due to their lack of independence from the Family Chief Executive Officer (Bushman et al., 2004). 3.6 Components of Remuneration The basic components of remuneration of Chief Executive Officer are similar, however, the relative level and weights on the components differ (Abowd and Kaplan, 1999, and Bryan et al., 2006). Generally, remuneration of Chief Executive Officer can be divided into four basic parts: a base salary, an annual bonus which is tied to some accounting measure of company performance, stock options, and long-term incentive plans, such as restricted stock plans and multi-year accounting-based performance plans. †¢ Base salary: is the fixed part of remuneration of Chief Executive Officer, causing risk-averse executives to prefer an increase in base salary rather than an increase in bonuses. Most components of remuneration are specified relative to base salary. †¢ Bonus: in addition to the base salary, most companies offer their executives an annual bonus plan based on a single year’s performance. The purpose of such bonuses, as well as options, is to align the incentives of the Chief Executive Officer with that of the shareholders. †¢ Stock options: are contracts, which give the owner the right to buy shares at a pre-specified exercise price. Stock options reward stock price appreciation, not total shareholder return, which includes dividends. In this study, stock options are excluded, as full details of such information would not be retrievable from annual reports. †¢ Other forms of compensation: restricted stock to be received by executives, it is restricted in the sense that shares are forfeited under certain conditions, which usually have to do with the longevity of employment. Many companies also have long-term incentive plans in addition to the bonus plans, which are based on annual performance. Top executives routinely participate in supplemental executive retirement plans in addition to the company-wide retirement plans. Most executives have some sort of severance arrangement. Finally, executives often receive benefits in the form of free use of company cars, housing, etc. Based on the various conceptual and empirical evidences presented above, this study aims to understand whether the remuneration of a Family Chief Executive Officer is influenced by the board composition, i.e. whether it is family-controlled or not. This ties into the original Hypothesis 1, thus, the further hypotheses is framed as follows: Hypothesis 3: The higher the proportion of independent non-executive members on the board of directors at family-board-controlled firms, the lower the Chief Executive Officer remuneration.

Business Ethics and Virtue Ethics Essay Example | Topics and Well Written Essays - 1250 words - 1

Business Ethics and Virtue Ethics - Essay Example In this context, it is unfair for a person to embezzle anything material or not to give people what they are privileged to receive. It is also unreasonable if somebody distributes something without a proper reason. "Individuals should be treated the same, unless they differ in ways that are relevant to the situation in which they are involved." For example, if Jack and Jill both do the same work, and there are no relevant differences between them or the work they are doing, then in justice they should be paid the same wages† (Valesquez et al 1990). A virtue like honesty or generosity is not merely doing things that honest or generous manner. It is specific as a â€Å"desirable† or â€Å"ethically valuable† personality attribute. It is, certainly a moral trait—that is, a character which is well established in a person. It also concerns with numerous other aspects as well, with emotion and associated reactions, selection, principles, wishes, perceptions, attitudes, safety, prospects and sensibilities. To be virtuous is to possess certain characteristic traits with a positive complex attitude. â€Å"An honest persons reasons and choices with respect to honest and dishonest actions reflect her views about honesty and truth—but of course such views manifest themselves with respect to other actions and to emotional reactions as well. Valuing honesty as she does, she chooses, where possible to work with honest people, to have honest friends, to bring up her children to be honest† (Virtue Ethics 2003 Para 6). This mainly focuses on how reasonably or arbitrarily one’s actions entail benefits or burden for a specific individual or group. Benefits and burdens may be circulated supported on what an individual requires, deserve, donate, etc., It may also depend on how it series a specific group." By inspecting the GMP’s of the Mattel Inc, it is crystal clear that the

Philosophy 101 Essay Example | Topics and Well Written Essays - 250 words - 1

Philosophy 101 - Essay Example Thus, he began to doubt his beliefs on sense perception, material objects and physical sciences, for these all depend on our senses, which are by nature, deceptive. Furthermore, he doubted mathematics, for the reason that there perhaps may be an evil deceiver that deceives him to fall into error. Herein, Descartes uses this evil deceiver in attaining his permanent truth. I quote: â€Å"Even though there may be a deceiver of some sort†¦ who bends all his efforts to keep me perpetually deceived, there can be no slightest doubt that I exist, since he deceives me; and let him deceive me as much as he will, he can never make me be nothing as long as I think that I am something† (Descartes 82). This is Descartes absolute and certain truth. For, inasmuch as he would doubt all the beliefs he has ever had, there is one thing, which he cannot doubt, i.e. that he exists. For to claim that he cannot tell the difference between a dream and reality, or to claim that an evil deceiver de ceives him to fall into error, is not possible without him existing. In order for doubting to take place, a doubter must exist. In order for Descartes to be deceived to fall into error, he must exist. Therefore, Descartes arrives at his foundational truth: â€Å"I exist.† Works Cited Descartes, R., 1960.

Determining the project charter Assignment Example | Topics and Well Written Essays - 750 words

Determining the project charter - Assignment Example A recent study indicated we pay 20% more than other companies in our health care premium for our employees due to their health issues Our concern is the increased health care costs for providing insurance premiums for our own employees due to their ill health , which not only raises our internal expenditure but loss of man days through absenteeism leads to decreased productivity thus impacting the profitability of our organization. Hence we want to create a Recreation and Wellness Intranet Based Health Monitoring system for our employees where we want to introduce health improving strategies like involving employees in physical fitness programmes like soccer, jogging and other well being programmes during the recess period. Then stress reducing classes , motivating employees to quit smoking, manage Body Mass Index, making diet charts through dietetians and incentivizing those who attend these programmes. The implementation of the project will cost 2,50,000$ but the net savings over a 4 year time period would be around 30,00,000$ with a projected 30$ savings per employee/year considering 25000 employees with an additional profitability of 27,50,000$ in 4 years. Thus the implementation cost is only 10.5% of the profitability. Q4. Creating a mind map is useful rather than deploying task hierarchy because it gives an immediate project design plan and helps to assess the benefits and pitfalls of each step so the backup plans are ready and in times of real system failure can be implemented.

System Analysis and Design course Term Paper Example | Topics and Well Written Essays - 250 words

System Analysis and Design course - Term Paper Example For example, a reader can comprehend words even when each letter of the word is scrambled. This process is referred to as typoglycemia. This demonstrates that as long as the first and last letters are present, people are able to read the words. Therefore, words are often read as whole and not in parts. As such, system analysis looks and focuses on the bigger picture. Moreover, I should recognize myself as complete as a differentiated whole. To model my life professionally as a system analyst, I will employ the waterfall model. This is because the waterfall model is easy to follow and stick to. Primarily, the model is a sequential one. Each stage has to be fully completed before moving to the next stage. Problems have to be tackled at each stage before moving forward. Consequently, there is no progress if the problem at one stage cannot be addressed. Therefore, I will model my life professionally as a system analyst by adopting a sequential analysis method. The model will enhance professionalism as it is unidirectional. Additionally, there is a linear representation of the life cycle. In addition to this, milestones in my personal life are seen and comprehended

The Performance Appraisal System For as President & CEO of A Nonprofit Research Paper

The Performance Appraisal System For as President & CEO of A Nonprofit - Research Paper Example The major responsibilities of CEO and President are abundant and challenging. They are liable for directing an organization through making appropriate decisions. They are in charge of developing strategies and plans which can ascertain and promote the organization’s overall mission and purposes. They delegate responsibilities to the team members and ensure that the organizational objectives are met. CEO and President of a non-profit organization closely perform with other top executives to implement policies, systems, and other internal control mechanisms in order to enhance the operational procedures. Their other responsibilities comprise the recognition of opportunities for national and global expansion of organizational activities. They ensure that the organization is performing according to the set organizational objectives. CEO and President help to establish certain standards as well as measures in order to effectively utilize the organizational resources. Performance ap praisal plays the vital role in the overall management of performance of a non-profit organization. It serves two major objectives for a non-profit organization  it enhances the productivity by helping individuals to realize their complete potentials in order to undertake organizational mission and objectives and secondly, it provides information to the management for making work based decisions. Performance appraisal system is required in an organization as it not only assesses the performance but also helps to motivate the individuals.

A New Line of Organic Products for an Existing Company Assignment

A New Line of Organic Products for an Existing Company - Assignment Example This essay stresses that Auntie Anne’s is regarded as one of the most successful pretzel makers which is recognized in many parts of the world. The company successfully caters to large groups of consumers through its distinctiveness in maintaining quality and freshness of its broad assortment of products. Thus, the theme of this research is to devise an appropriate marketing plan that is to be utilized for launching three different products i.e. Cocoa dusted chickpeas, flavored hazel-nuts and kale chips by Auntie Anne’s. One of the severe challenges that Auntie Anne’s might face is to maintain the freshness and quality of the products while delivering to the consumers. The company specializes in fast packaging of the products. Auntie Anne’s packs food products which are taken out of hot ovens and wrapped almost after 30 minutes following the baking of snacks. This process is followed in a very fast manner as the company focuses not only on packing the prod ucts but also preserving the freshness along with those. This article makes a conclusion that in order to get into a conclusion, a proper marketing plan was designed which reflected the overall strategies that is needed to be undertaken by Auntie Anne’s in order to launch its new organic products in the market. It can be stated that the devised marketing plan would eventually support the company to accomplish its predetermined business targets in terms of successfully introducing new line of organic products in the business markets where it operates. ... The marketing plan can provide a distinct idea about the current business status of the company and it will also help in analyzing the need and demands for new organic products by the consumers. In addition, the plan will prove to deliver great aid in developing a clear picture about the competitors of the company and the current buying behavior of organic products by the consumers. Thus, all these facets will deliver a lot of clarity for launching the products in a diversified manner. With this concern, this paper will consist of designing a marketing plan for introducing as well as promoting a new line of organic products on behalf of Auntie Anne’s that would comprise cocoa dusted chickpeas, flavored hazel-nuts and kale chips. The plan would entail all relevant marketing strategies that will be required to be undertaken by the company for ensuring a proper launch of the aforementioned products in the business markets where it operates. Moreover, efforts will be made to ident ify the potential areas and specific segments where these products could be launched backed up with the formulation of an appropriate marketing plan. The steps that are needed to be undertaken for launching the products will primarily be based upon the product’s characteristics. Evaluation of Current Business Prospects of the Organization The current business prospects of Auntie Anne’s are set to be flowing in a very customer oriented manner. There are numerous prospective factors, which the company is currently working upon. The main factor is that the company is intending to create a level of distinctiveness in order to satisfy the customers by complying with their requirements by a considerable level. The products that manufacture by Auntie Anne’s are

Utopia Essay Example | Topics and Well Written Essays - 1500 words - 1

Utopia - Essay Example The term was introduced by Thomas Moore, who invented the term to describe his imaginary Island where the inhabitants of the island enjoy the perfect social, legal and political system. An Island, where nothing is amiss, nothing is wrong and people lead what we can call a â€Å"Utopian or flawless† form of life. In modern Latin, â€Å"utopia† means â€Å"nowhere†. As years passed by, Thomas Moore’s famous word became an adjective to be used to describe not just his island but any state of perfectness. In the lives that we live every day, from the moment we learn about the terms â€Å"happiness† or â€Å"flawless† we start on a journey to pursue them and turn our own little lives into something that we consider blessed. But, the truth is no one is ever really happy or satisfied. I am not saying it s a crime to be not or dissatisfied but the fact is that Thomas Moore’s word â€Å"utopia† has little space in our lives. â€Å"Richa rd Cory† a short, narrative and meaningful poem that I came across, vindicates my argument substantially. He was gracious, generous, well schooled and wealthy yet at the end of the poem he ends up shooting himself in the head. Herein, we see that even though Richard Cory had all the materialistic possessions that a person needs for his survival, he was not satisfied and his life was not worth living at all. At first it seems almost necessary to describe Mr. Cory’s life as a Utopian life since everything seemed so perfect yet the end of his story makes us think otherwise- How can the term Utopia be used for a state that is nonexistent?

3M case study Essay Example | Topics and Well Written Essays - 500 words

3M case study - Essay Example The firm depends heavily on smaller market research firms for conducting market research for them. Pricing of their product were also not adequate to compete in the international market. The strategies like â€Å"Lead User† was not successful Most of the new products developed consumed too much time and because of the heavy pricing they failed in the market. The 3M management failed to identify experts at the right time to cater the needs of current trends in the international market. Their efforts to modernize the traditional managers were not succeeded enough. The mixing of diverse knowledge and talent to develop a new project: Since most of the employees working in the 3M company were coming from different parts of the world with different skill sets, the careful blending of such talents were a challenging one Innovation tactics: The 3M firm believed that individual love for discovery would drive innovation. The company allowed all staffs to spend 15% of their time to explore new ideas. This tactics also didn’t work for them The managers needed vigorous training to understand the need of scientific management techniques and modern technologies to lead a business successfully. It is always better to adopt â€Å"Follow User† strategy rather than a Lead User strategy for effective marketing of the products. The pricing of the 3M products must be revised in accordance with the international standards to compete in the market. The R&D should be expanded and it should devote its entire time in developing new ideas and product based on the market feedback. Market research must be conducted by 3M employees only. It is not advisable to depend, secondary sources for market research as marketing is one of the core elements in every

Marketing Mix Analysis of iPad Essay Example for Free

Marketing Mix Analysis of iPad Essay Executive Summary Managing and developing marketing mix appropriately is extremely important to firms marketing and success. In order to marketing product successfully, the right product must be exhibited to right people at the right place, right price and right time. If a firm can manage the marketing mix successfully, as a result, it can be a source of competitive advantage for firms. Each element of the marketing mix should be analyzed and if necessary, adapted to ensure that the right balance is achieved to give the product or service the very best chance of success in the market place. Apple is a successful company and its previous product iPod has a high market share in the global market due to its brand perception and image as s high quality innovative brand. In 2010, Apple launched an innovative product – â€Å"iPad† in US, which is a tablet computer with touch screen. Even in the first launching date iPad had been sold 0.3 million units. The product no doubt is getting support of Apple’s brand image and it has changed the way to consumer lifestyle. That is why iPad is thought as a revolutionary who will arouse a wave to electronic industry. Apple’s iPad delivered the value to the customer via marketing mix tools called the 4Ps: * Product looks good and works well. * Right price. * Right place at the right time. * Successful promotion helps to a larger output. Apple followed this by innovation and introducing new products in the market to satisfy consumer’s needs and wants. The current author here will use the theories, concepts of marketing mix to analysis the iPad. The remainder of this essay is structured into five parts. It begins by defining marketing mix and its evolution. Second, it analyse the company, iPad, its competitor and consumer. Third, it illuminates the marketing mix by analysing iPad. Finally it ends with the overall assessment and conclusion. Contents 1.Introduction and Definition3 1.1Definition of Marketing3 1.2Definition of Customer Value and Value Proposition3 1.3Definition of Marketing Mix4 2.Description of Apple iPad4 2.1Brief Introduction of Apple4 2.2Introduction of iPad5 2.3Brief Consumer Profile6 2.4Brief Competitor Profile7 3.Marketing Mix Analysis of iPad7 3.1Product7 3.2Price10 3.3Place12 3.4Promotion14 4.Assessment of Overall Value Delivered16 5.Conclusion16 6.References18 1. Introduction and Definition 2.1 Definition of Marketing â€Å"Marketing is the process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others and forging relationships with customers.† (Philip Kotler, Gary Armstrong, 2009). This definition recognizes the importance of creating a long term relationship with customers and identifies the importance of satisfying customer wants. 2.2 Definition of Customer Value and Value Proposition Customer value is the difference between the values that the customer gains from owning and using a product and the costs of obtaining the product. Put it simply, customer value is created when the perceptions of benefits received from a transaction exceed the costs of ownership. The same idea can be expressed as a ratio (Chiristopher, 1996): Customer value = Perceptions of benefits The definition of customer value proposition is a well defined and persuasive marketing statement related to a specific product or service that details the reasons why a consumer would benefit from purchasing it. A value proposition is the definition of a firms promise to create and deliver customer value (Chapelet and Tovstiga, 1998). Fig 1.2.1 A model of value creation and the marketing process source: Adapted from Kotler Brown Burton Deans Armstrong, (2010), â€Å"Marketing† 8th Edition Figure 1.2.1 shows a typical model of value creation and the marketing process. Put it simple, marketing is a process cycle which consists of 5 simple steps as below: i. Customer buys or potential customer is contacted to understand the marketplace. ii. Finding out how the customer liked the product or what is needed. iii. Analysing these data and creating a plan that includes goals, strategy and its marketing mix. iv. Implement the plan that delivers value to customer which results in the customer’s buying the product and creating customer delight. v. Repeating the cycle starting with step (i) to step (iv) to make a better product sold with a better plan and continuously keeping this cycle going. Hence, create profits and customer equity. 2.3 Definition of Marketing Mix The concept of the Marketing Mix was first created by Neil H. Borden in his article called â€Å"The concept of the Marketing Mix† in 1964. In his article he explained the importance of a market to try to â€Å"mix ingredients† in their process in the market in order to be successful. E. Jerome McCarthy later grouped these ingredients into the four categories that are known as the 4Ps of marketing (Product, Price, Place and Promotion). Product What does the customer want from the product/service? Price What is the value of the product or service to the buyer? Place Where do buyers look for the product or service? Promotion Where and when can get across the marketing messages to target market? 2. Description of Apple iPad 3.4 Brief Introduction of Apple Apple Inc., founded in 1976, is an American multinational corporation which is best-known for its hardware and software products. The hardware products are: Macintosh, iPod, iPhone and iPad. One example of the famous software of Apple is iTunes, a proprietary media player application that works with iTunes store and allows customers to download music and offers other features of consumer electronics. Fortune magazine named Apple as the most admired company in the US in 2008, and in the world from 2008 to 2012. 3.5 Introduction of iPad On January 27, 2010, Apple introduced the much-anticipated media tablet, the iPad (As shown in Fig2.2.1). Fig 2.2.1 Introduction of iPad (source: www.apple.com) The iPad measure 9.7 inch wide screen display with multi touch screen with 1024 x 768 resolutions which is lighter and thinner than any other notebooks or laptops. Its internal 25 watt-hour battery can run up to 10 hours of video, 140 hours of audio playback and one month on standby as Apple claims. Steve Jobs stated that, with the introduction of the iPad, Apple had opened a market for a new class of mobile devices. (As shown in Fig 2.2.2) Fig2.2.2 Apple iPad First Hands-on (source: http://www.ipadforums.net) 3.6 Brief Consumer Profile Consumer market can be defined as â€Å"all the individuals and households who buy or acquire goods and services for personal consumption† and consumer buying behavior can be defined as â€Å"the buying behavior of final consumers, individuals and households who buy goods and services for personal consumption† (Kotler, 2009). Table 2.3.1 shows the analysis of market segmentation for iPad. SEGMENTATION BASE| SELECTEDSEGMENTATION VARIABLES| Geographic Segmentation| Region| West Malaysia, east Malaysia| City size| Major metropolitan areas, cities| Density of area| Urban| Climate| Hot, humid, rainy| Demographic Segmentation| Age| 18-34, 35-49, 50-64| Sex| Male, female| Married status| Single, married, divorced, living together| Income| RM40,000 and over| Education| College, college graduate, postgraduate| Occupation| Professional, white-collar| Psychological| Needs| Sense of self-worth, fashionable| Personality| Extroverts, novelty-seeker, aggressives| Perception| Low-risk| Learning-involvement| High-involvement| Attitudes| Possitive attitude| Psychographic| Lifestyle| Couch-potatoes, outdoor enthusiasts, status-seekers| Cultures| Malay, Chinese, Indian, and other foreigners| Religion| Muslim, buddhism, hinduism, christian, catholic, and others| Social| Middle, upper| Family| Bachelors, young married, full nesters, empty nesters| Use-Rated Segmentation| Usage rate| Heavy users, medium users| Awareness status| Aware, interested, enthusiastic| Brand loyalty| Strong| Use-Situation Segmentation| Time| Leisure, work, morning, night| Objective| Personal, fun, achievement| Location| Home, work, mega mall, restaurant| Person| Self, family members, friends, peers| Benefit Segmentation| Convenience, social acceptance, easy e-book reading, value-for-the-money, service| Table 2.3.1 Market segmentation for iPad From analysis above can see that most of Apple’s users are high-end clients who have the strong purchasing power, easily accept new technology and they are very loyal to Apple. 3.7 Brief Competitor Profile Apple iPad bring threats and impact to PC industry in some way. On one hand, the hot-sell of iPad attracts many PC manufacturers set foot in this field. So the other tablet computers will be the biggest competitor, such as Blackberry’s playbook, this is a tablet computer which located in business person, and it will also attract public’s eyes because of its vast multimedia function. On the other hand, the price advantage of netbook is also a challenge to iPad. After all compared with traditional computer, iPad may not a necessity. To some business and professional people, they will choose the traditional notebook rather than iPad. 3. Marketing Mix Analysis of iPad According to the information that searches from magazines and internet, the author knows many information of iPad. The author here will use the theories, concepts of marketing mix to analysis the iPad. 4.8 Product â€Å"Product means the goods-and-services combination the company offers to the target market. â€Å" (Philip Kotler, Gary Armstrong, 2009). The iPad bridges the gap between smart phone and laptop, it offers equivalent range of features and functions that a computer does. It has internet capabilities running on both Wi-Fi and 3G. Some of the features are discussed previously. Fig 3.1.1 shows its tech specs. Access to Apple Apps Store which has over 300,000 applications and to iTunes are attractive features of iPad. Fig 3.1.1 Tech Specs for Apple iPad (source: http://www.apple.com) Value delivered to customer: 1) Convenient to Carry and Easy to Use Compared to functionalities and performance, it is surprised that iPad weighs only 1.5 pounds. It is very thin and sleek measuring only 0.5 inches. This lightweight iPad is very useful for business trip, making it easy to transport as compared to a laptop. Not only it is easier to carry it around, but also be able to use it to check e-mails, show videos and photos to people instantly whenever required with its long battery life, which at 10 hours is 2-5 times longer than a notebook (As shown in Fig 3.1.2). Fig 3.1.2 E-mail and photo function for iPad (source: http://www.cnbeta.com) 2) Easy for E-Book Reading One benefit that can’t miss is the iBooks Application. Customer can download the favorite e-books to iPad and read while traveling (As shown in Fig 3.1.3). Fig 3.1.3 E-books on Apple iPad (source: http://www.telegraph.co.uk) Retrieving books to read on ibooks application on iPad is simply easy. Browse through the e-bookshelf on the iPad, choose one title wish to read and click, the book opens in front. Customer can view the book in portrait or landscape, and the way the pages flip is awesome flip it with finger and looks just like a real book. 3) Excellent Service for Customer What’s more, the service of iPad is very nice. Apple has its own key service iTunes. Customer can get this value to enjoy the all kinds of internet resources such as music, video and applications (As shown in Fig 3.1.4). Fig 3.1.4 iTunes on Apple iPad (source: http://www.ipadforums.net guardian.co.uk guardia guardia) The iTunes online store makes it incredibly easy to purchase songs and load them onto the devices. When customer wants to watch or listen, they neither need to search from the CDs nor television channels. What they need to do is just opening the iTunes, all they want is in iTunes, it let the media browse much faster, it is easier to sort. 4.9 Price â€Å"Price is the amount of money customers have to pay to obtain the product. â€Å" (Philip Kotler, Gary Armstrong, 2009). The iPad is priced starting from $499 for 16 GB storage to $829 for 64GB storage and 3G connectivity. In detail, tab 3.2.1 shows the price of iPad selling in Malaysia. iPad| 16G| 32G| 64G| Wi-Fi| RM 1, 549.00| RM 1, 849.00| RM 2, 149.00| Wi-Fi + 3G| RM 1, 999.00| RM 2, 299.00| RM 2, 599.00| Tab 3.2.1 Selling price of iPad (source: http://www.apple.com guardian.co.uk guardia guardia) Value delivered to customer: 1) Eco-friendly Device for Environment Protection The iPad is made of recyclable glass and Aluminum and the packaging material is recyclable the packing is efficiently done. It is not using Arsenic, PVC, bromine fire, Mercury as the company has restricted the use of harmful chemicals. With such price, customers are not buying the fashionable device only, more importantly, they are making contribution to environment protection. Fig 3.2.1 shows how green is the iPad. Fig3.2.1 How green is the iPad (source: http://sortable.com) 2) Flexible Price as Actual Needs The iPad price varies according to its storage capacity and the internet access capacity, which leads to reducing the initial cost on the first ever tablets based on customer’s actually needs and application (As shown in Fig3.2.2). Fig3.2.2 Price and configuration of the iPad (source: http://www.apple.com) 3) Cost Saving with Maxis Bundled Package It is available on Maxis bundled packages with a 24-month contract based on different types of iPad internet plan (As shown in Fig 3.2.3). By doing so, the price of iPad has been dropped down from RM450 to RM950. The plan is much more attractive not only for those who can’t afford to pay for the high price, but also for some of the SME to extend their business. Fig 3.2.3 Maxis iPad Bundled Packages (source: http://www.maxis.com.my) 4.10 Place â€Å"Place includes company activities that make the product available to target consumers. â€Å" (Philip Kotler, Gary Armstrong, 2009). Apple started selling the iPad not only from its official websites, but also retail outlets and Apple Store. Value delivered to customer 1) Easy Walk-in Location for Purchase The iPad can be purchased from Apple Store, Apple Premium Reseller and Apple Authorized Reseller located in Malaysia. All shops are conveniently located and beautifully designed, identified by the large backlit Apple logo, such as in most famous shopping mall like Sunway Primary, One Utama, KLCC and Mid Valley in Selangor, even in Melaka, Penang, Sabah and Sarawak. The value is so easy for customer to come and have a journey on iPad (As shown in Fig 3.3.1). Fig 3.3.1 Apple shops in Malaysia In each shop, customer will be able to find dedicated Apple-trained and Apple-certified Mac experts who can come up with the right solution for you. 2) Time-Saving Online Order Apple iPad are also available on internet for the customers on Apple’s website. Online purchase is the easiest and time saving way for most of them (As shown in Fig 3.3.2). Fig3.3.2 Online Apple store for iPad (source: http://www.apple.com) On the website, the Apple explains the number of features and benefits of iPad. This adds the value to the consumers as convenience is a value that people appreciate and for which they will pay more than the actual price. 3) Golden Service for Apple Loyalty When customer are on the go, the Apple Store app is the best way to research, personalize and buy products from Apple and get the most out of customer’s visits to the Apple Retail Store for Apple loyal fans. Fig 3.3.3 shows what can do with the Apple Store app on the iPhone or iPod touch from search to pay. Fig3.3.3 Apple store apps for iPhone and iPod Touch (source: http://www.apple.com) 4.11 Promotion â€Å"Promotion means activities that communicate the merits of the product and persuade target customers to buy it. â€Å" (Philip Kotler, Gary Armstrong, 2009) Apple Company had been promoting the iPad with the help of social media campaigns and multi-channel media strategy. Value delivered to customer: 1) Multiple Channel for Better Understanding of iPad The online promotion by Apple on Facebook, YouTube and other related websites approaches to the consumers added more value to the decision of consumers of buying iPad. Same like in stores all the information is available online for customers. Customers can download brochure from its website for their convenience. When Apple announced the idea of iPad, most fans write blogs and share through internet. Customer will see them and many videos about iPad, some of them are made by Apple and some are made by other people. These blogs and videos are shared by many other people through many ways (As shown in Fig 3.4.1). Fig3.4.1 Video sharing about iPad (source: http://www.9to5iPad.com/) 2) Custom Engraving of iPad Apple had offered free iPad engraving from its online store, allowing customers to add a personal touch to the tablet in time for the holiday seasons (As shown in Fig 3.4.2). Customers are given the option to engrave up to 2 lines of free text on the back of an iPad after selecting an iPad model and any desired accessories from the online store. Fig 3.4.2 Website about iPad engraving (Source: http://store.apple.com/) 3) Free Delivery for On-line Purchase When purchasing the iPad online from Apple’s official website, customer will get the value of free delivery. Just wait for 3-4 business days, the product will be arrived on hand safely. 4. Assessment of Overall Value Delivered Apple has always placed a major emphasis on the marketing and the brand awareness of its products. The iPad’s advantage is that they offer several different features in one product. Converging all the new technology into one product is the route apple is seeking. It’s making life easier for their consumers by being able to conduct many applications in the one product. Apple’s iPad followed all the 4P’s of marketing mix to deliver the high level of value to the customers. The company has manufactured an iPad using strong in-built applications. The gadget permits people to work and entertain anytime anywhere, as a value of experiencing its easy and convenient use. It provides value to customers through a huge number of features which helps in saving time and energy. Adding more to customer value the price of iPad is competitive and flexible in the market as discussed above. It advertised on T.V., newspapers, magazine, radios and also on internet, which makes people have clearer understanding in various channel. It provides value by available at all the apple stores and website. From the iPad’s 4P’s analysis, we can easily see the difference of it, and can answer the question â€Å"why people buy it which seems unnecessary product.† Apple iPad satisfy their needs and this delivers the value as a product and service in terms of features, style performance, durability, quality, reliability and design to the customer. 5. Conclusion Apple iPad is a new product which has made a dent in the history of tablet business domain and the first successful product. This has also ignited the demand for new and improved tablets from Apple and other competitors. Apple has used the 4P’s of marketing in a very efficient and proper manner, so that added the value to the customer’s decisions of purchasing iPad. When Apple introduced iPad, they intended to come across the consumer’s wants and demands which would satisfy to their lifestyles. Apple in future which demands more innovative products and the company still need to adapt to expected changes in iPad which they have already started in their new iPad 2. With their experience, they are able to continue strengthen its position in the industry. 6. References 1. Philip Kotler, Gary Armstrong. (2009). Principles of Marketing. (7th Edition). Australia. Pearson. 2. Kotler Brown Burton Deans Armstrong. (2010). Marketing (8th Edition). Australia. Pearson. 3. Borden, N. H. (1964). â€Å"The concept of the Marketing Mix†. Journal of Advertising Research. Vol II 4. APDGT YAMAMOTO. â€Å"Understanding Customer Value Concept: Key To Success†. pp. 547-552. 5. Chapelet, B. and Tovstiga, G. (1998), â€Å"Development of a research methodology for accessing a firm’s business process-related technologies†, International Journal of Technology Management, Vol. 15 Nos  ½, pp. 10-30. 6. Apple Annual Reports, 2010 7. www.apple.com 8. www.maxis.com.my

Business Management and Change at Billabong (BB)

Business Management and Change at Billabong (BB) HSC Topic One: Business Management and Change Case Study Billabong Management Theory Behavioural Management Theory Creative thinking and innovation are of greater importance than ruthless efficiency. Managers see their roles primarily as motivating staff communicating the companys vision to customers stakeholders. Workers overcame problems and gave input into the way Billabong was run. Primarily to do with business culture and lack of morale caused by inertia of managers their resistance to change BILLABONG Sources of Change * External influences Economic factors: Negative: level of unemployment and growth/interest rates means less people can afford BBs products Rising incomes in East Asia and South America have helped create new markets Social factors: Changing consumer tastes Increasing tastes in sports such as skateboarding and surfing BMX now included at Olympics increases recognition of sport and clothing Political factors: Protectionism and limiting of imports through tariffs has seen BBs product strengthened in the domestic market Gov emphasising and pushing Aus exports, BB has seen improved overseas sales. Geographic: Pollution of beaches discourages people from surfing Influences what products BB have to release Snow gear in countries like Switzerland and surf gear in markets like Hawaii Internal influences  · E-Commerce Positive: Simplifying logistical and organisational difficulties +: Monitoring and tracking sales à  control Internet website greater relationship/interaction with customers  · New Procedures Private à   Public Comply with legal regulations meant à  financial record systems for annual financial report Tighter control over finances so as to increase return for investors  · Business Culture Management team changed in 1998 when Matthew Perrin and Gary Pemberton bought 49% of BB Now comprised of more professional managers with greater business knowledge and procedures than the original surf enthusiasts who established the business Structural responses to change Outsourcing Production to SE Asia and China Response to economic and financial influences Allows company to focus more on design and marketing Lowers costs to maintain competitive advantage in price-sensitive markets Strategic Alliances Cooperated with Channel V Billabong Music Bus Tour Both had similar target markets Increased brand recognition and awareness Reasons for resistance to change Financial Costs Developing new products such as skateboards and sunglasses requires money Acquiring smaller businesses, eg. Honolua Surf Company cost around $20billion Inertia of owners International expansion brings some risk from the financial backers/owners and therefore saw resistance from shareholders Managing change effectively Identifying need for change BB gained an edge over competitors by being one of the first businesses to expand overseas in the early 1980s Diversifying into skateboarding and accessories increased market share Creating culture of change New management team in 1998 acted as ‘change agents achieved growth by constantly observing and pursuing new opportunities Change Models (force field analysis) Driving Forces Restraining Forces à  revenue New opportunities for staff Year round demand (seasons) Costs of production Lack of new designers Need to hire new managers for new departments Change and Social Responsibility Ecological Sustainability Surfrider Foundation Conservation and regeneration of beaches and foreshores Quality of life Encourages team work and a relaxed atmosphere both in the office and in retail stores BB has a strict ‘no child labour policy and regularly inspects overseas production facilities Cultural Diversity Encourages communication between domestic and international stores/offices Employees are encouraged to transfer between international offices to gain new experiences The Nature of Management  · Management Roles -An interpersonal role is one in which the manager deals with people. Proactive- incorporates dynamic action and forward planning to achieve particular objectives -An informational gathers information within the business and supplys it outside the business -A decision-making role involves solving problems and making choices  · Skills of Management -People Skills -Strategic thinking -Vision -Self-Managing -Teamwork Ethical behaviour Responsibilities to stakeholders include: manage change social justice ecological sustainability compliance with the law codes of practice Understanding Business Organisations with Reference to Management theories  · Contingency Theory  · Classical-Scientific Planning, Organising, Controlling Division of labour, chain of command, autocratic leadership style meaning the manager tends to make all the decisions in the business.  · Behavioural ability to understand and work with people from a variety of backgrounds and different expectations Leading, Motivation, Communication Flatter organisational structure democratic leadership style where managers consult employees to ask suggestions and take them into account when decision making.  · Political encourages the formation of coalitions to promote different points of view. Power and Influence within a business can have both a positive and negative effect. It can be sued to intimidate (negative) or empower others (positive). Legitimate power due to status or position of the person in the firm e.g management Expert power due to a result of a persons skills and expertise Referent power from a persons individual characteristics (personality and charisma) Reward Power to the rewards or compensation a manager distributes Coercive power controls individuals by the actions or words of the manager Negotiating and Bargaining, Stakeholder views, Coalitions Managing Change  · Nature and Sources of Change in Business External Changing Nature of Markets, Economic Influences, financial, geographic, social, legal, political, technological Internal Effects of decelerating technological change, e-commerce, new systems and procedures, new business cultures Structural Response to Change -Outsourcing Flat Structure Strategic alliances Networks  · Reasons for Resistance to Change Financial Costs Inertia of managers and owners Cultural incompatibility in mergers and takeovers Staffing Considerations de-skilling, acquiring new sources, loss of career prospects and opportunities. * Managing Change Effectively Identifying need for change- SWOT anaysis and balance sheets Setting Achievable goals mission statements and company goal Culture of Change Change Models Force-Field Analysis Unfreeze/Change/Refreeze Change and Social Responsibility Social Responsibility is the awareness of a businesss management of the social, environmental and human consequences of its actions. Customers eventually find out which businesses are acting responsibly and which are not. Ecological Sustainability Quality of Working life Technology E-Commerce Globalisation and Managing Cultural Diversity HSC Topic Two Financial Planning The Role of Financial Planning * Strategic role of Financial Planning strategic plan Organisational goals and objectives Managing financial resources * Objectives of Financial management Liquidity -pay debts in the short term (less that 12 months) Profitability ability to maximise profit Efficiency -manage its assets to maximise profits with the lowest possible level of assets Growth increase its size in the long term Return on capital -profit returned to owners or stakeholders as a % of their contribution * The planning Cycle Addressing present financial position e.g revenue, p l statements, budgets Determining financial elements of the business plan Developing budgets Cash Flows Financial reports Maintaining record systems Planning financial controls Financial Markets Relevant to business financial needs * Major Participants in Financial markets Banks Financial companies -provide loans to individuals and businesses e.g personal and secured Insurance companies -loans to the corporate sector through insurance premiums Merchant bks (investment bks) -services such as borrowing and lending to the business sector. Superannuation/Mutual funds provide funds to the corporate sector through the investment of funds received from superannuation contributions The Reserve bank of Australia (Government) -acts as a banker and financial agent for the federal government * The Role of the Australian Stock Exchange (ASX) as a primary Market The ASX is the major financial exchange in the country. It comprises the largest primary and secondary markets for companies and individuals wishing to create and exchanges financial assets in the economy * Influences on Financial Markets domestic markets e.g change in inflation, demands for funding, changes in government policies. Companies can be positively and negatively affected. Overseas influences such as world events, foreign exchange rates, tax regulation for foreign operations * Trends in Financial Markets Technology has allowed markets to become more competitive and grow allowing financial transactions all the time. Globalisation will also give overseas investors access to Australian companies and increase opportunities for Australian investors and international markets. Management of Funds * Sources of Funds Internal Owners Equity Retained Profits External Short-term borrowing Bank Overdraft allows a business to overdraw their account to an agreed limit Bank Bills Long Term Borrowing Mortgage Debentures -The company repays the amount of the debenture by buying back the debenture. Finance companies raise funds through debenture issues to the public. Leasing involves the payment of money for the use of equipment that is owned by another party. Factoring is the selling of accounts receivable for a discounted price to a finance of factoring company. Venture Capital is funds supplied by investors to either a new organisation or to an already established business ready to grow or diversify. Grants are provided by the government for businesses to develop and promote international competitiveness. Grants often enable an organisation to become competitive in the global environment e.g exporting organisations. * Comparison of debt to equity financing Debt finance refers to short and long term borrowing from external sources of an organisation Equity Financing refers to the internal sources of finance in the organisation Gearing/Leverage is the proportion of debt to equity which is used to finance the activities of a business Using Financial Information * The Accounting Framework Financial Statements Revenue Statements shows the revenue earned and expenses incurred over the accounting period with the resultant profit or loss. Revenue statements show operating revenue earned from the main functions of the business e.g sales of inventories and the non-operating revenue earned from operations such as rent and commission. It also shows operating expenses such as rent, advertising, insurance. Balance Sheets represent the assets and liabilities at a particular point in time expressed in money terms and calculates the net worth of the business. The balance sheet shows the level of current and non-current assets and liabilities including investments and owners equity. Balance sheets indicate whether it has enough assets to cover debt interest and money borrowed that can be paid assets used to maximise profits if owners are making a good return on their investment * The accounting Equation and Relationships (A) Assets = (L) Liabilities + (OE) Owners Equity The accounting equation forms the basis of the accounting process which shows the relationship between assets, liabilities and owners equity. The accounting equation shows that the assets of the business may be financed by either the owners or by parties external to the business. COGS = inventory + purchases closing stock * Comparative Ratio Analysis By comparing ratios of a firm over time reveals trends and indicate directions for the future. Comparisons with other businesses and industry ratios is often used although can be inaccurate due to differences in companies and industries. Businesses often compare ratios against common standards such as statistics from the ABS. * Limitations for Financial Reports Historic cost accounting states that values are stated at the cost incurred at the time of purchase or acquisition, meaning financial statements will be a mixture of different year figures. Historic cost has been used for a long time although may become inaccurate in times of inflation. Value of Intangibles licences, trademarks, brand names and goodwill. Effective Working Capital (Liquidity) Management * The Working Capital Ratio Working Capital Ratio = Current Assets over Current Liabilities (2:1 ACCEPTABLE ALTHOUGH VARIES) The Working capital ratio shows if current assets can cover current liabilities. * Control of Current Assets Cash Balances are generally kept at a minimum and hold marketable securities as reserves of liquidity. Receivables is important in terms of management of working capital. The quicker the debtors pay, the better the firms cash position. Inventories make up a significant account of current assets and their levels must be carefully monitored so that excess or insufficient levels of stock do not occur. * Control of Current Liabilities Payables must be paid by their due dates due to avoid any extra cash charges imposed for late payment and to ensure that trade credit will be extended to the business in the future. Loans management of loans is important for establishment interest rates and ongoing charges must be investigated and monitored to minimise costs. Overdrafts policies should be used to manage bank overdrafts and monitor budgets on a daily or weekly basis so that cash supplies can be controlled. * Strategies for Managing Working Capital Leasing Factoring Sale and Lease back is the selling of an owned asset to a lesser and leasing the asset back through fixed payments for a specified number of years. Effective Financial Planning * Effective Cash Flow Management The activities of a business are divided into three categories as a statement of cash flows 1. Operating Activities e.g inflow cash and credit, outflow payments to employees 2. Investing Activities -e.g selling of old motorbike, purchasing new property 3. Financing activities- e.g inflow selling of shares, outflow repayment of debt. * Management Strategies distributing payments through out a month or year or different period so that cash shortfalls do not occur payments and bad debt of accounts by debtors can cause shortfalls of cash for businesses at important times. discounts for early payments * Effective profitability Management Cost Control Fixed Costs e.g insurance and salaries Variable costs change with the level of activity within a business e.g materials and labour used in the production of a product e.g fixing a roof. Cost Centres are particular areas, departments or sections of a business to which costs can be directly attributed. Direct costs are those allocated from a particular product, activity, department or region e.g depreciation of equipment used solely in the production of one good. Indirect costs come from shared projects, activities, departments or regions. Staff should be motivated to minimise expenses where possible as savings can be substantial if people take a close look at costs and eliminate waste and unnecessary spending. * Revenue Controls Sales objectives must be at a level of sales that will cover costs (fixed and variable) and result in profit. Changes to the sales mix can affect revenue. Research should be made to identify the effects of sales mix changes before implantation. Pricing Policy affects revenue and therefore impacts on working capital. To attract buyers while underpricing may bring high sales but still result in cash shortfalls. Ethical and Legal Aspects of Financial Management * Audited Accounts An audit is an independent check of the accuracy of financial records and accounting procedures. Types of Audits- 1. Internal conducted internally by employees 2. Management used to review the firms strategic plans and determine if changes need to be made. 3. External required by corporate law to ensure it complies with Australian auditing standards. * Australian Securities and Investments Commission (ASIC) ASIC enforces and administers laws and protects consumers in the areas of investment, life, insurance, super and Australian banking. ASIC sets out to reduce fraud and unfair practices in financial markets and products. ASIC ensures that companies adhere to the law. Collects information about companies and makes it accessible to the public. * Corporate Raiders and Asset Stripping Asset Stripping describes the practice of organisations that identify and sell off for a profit, assets of a company, especially one that has been acquired in a recent takeover. Entities that take over other companies and sell off the assets are known as corporate raiders. HSC Topic 3 Marketing Case Study Types of Markets Resource BHP Billiton Industrial Painter Intermediate Gloria Jeans selling cakes Mass IBM Computers Niche ‘Mountain Bike Magazine Developing Marketing Strategies Product and Service Positioning * Qantas was under competitive pressure from Virgin Blue in the leisure market * Qantas wanted to maintain its higher positioned government and business segments * Expanded to a subsidiary Jetstar who were positioned as a value-for-money product Price including pricing methods Price Points * Jetstar International * Base price for seat, Charge $30 for meal, $7 for blanket and amenity kit and $12 for entertainment kit Promotion Advertising * Dell Computers focus much of their advertising to print media * Use inserts/pamphlets/brochures in magazines, typically in the technology liftout section of the newspaper, where their target market is most likely to be reading Place Distribution * Dell distribute products directly, with no intermediaries * Exclusive distribution (no stores), Intensive (internet) * Distribution system is e-commerce Ethical and Legal Aspects Role of Consumer Laws in dealing with Deceptive and Misleading Advertising * Gillette (Duracell) VS Eveready * TV advertisement claims Duracell lasts up to four times longer than ordinary batteries * Eveready claimed the ad infringed the TPA * Independent tests showed the Duracell batteries never last 4x longer * Federal Court ruled Duracell breached the TPA in the areas of misleading and deceptive conduct and false representations about the quality and benefits of goods The Nature and Role of Markets and Marketing Marketing is a total system of interacting activities designed to plan, price, promote and distribute products to present and potential customers. * Types of Markets Resource markets e.g mining, agriculture, forestry and machinery. Industrial Markets purchase products to use in the production of other products e.g buying flour to make bread Intermediate markets (resellers) consist of wholesalers and retailers who purchase finished products and resell them to make profit Consumer Markets e.g cars, clothing, food Mass Market is when the seller mass produces, mass distributes and mass promotes one product to all buyers Niche Markets are micro markets made for buyers who have specific needs or lifestyles * Production Production Orientation 1820s 1920s When a business concentrates on making as many possible goods at the lowest price possible Sales Approach 1020s 1060s When a business concentrates on selling techniques to attract customers Marketing Approach 1060s 1980s When a business collects information on consumer trends to sell its products * The Marketing Concept Consumer Orientation when a business concentrates on maximising customer satisfaction to sell its products Relationship Marketing the focus on encouraging repeat purchases and loyalty to the business by managing customer relations at the time of and after the initial purchase. Elements of a Marketing Plan * Establishing Market Objectives * Identifying Target Market Total Market Approach one type of product with little or no variation aimed at everyone through one distribution system. Market Segmentation approach the market is subdivided into groups of people who share certain characteristics. * Developing Marketing Strategies (examining elements of the 4 Ps) * Implementation, Monitoring and Controlling Financial Forecasting measures the sales potential and revenue forecasts (benefits) for strategies and compares these with anticipated costs. Comparing actual and planned results 1. Sales analysis comparing of actual sales with forecast sales to determine the effectiveness of the marketing strategy 2. Market share analysis/Ratios by comparing competitions market share to their own this can reveal changes in total sales (increase or decrease) 3. Marketing Cost Analysis marketer breaks down the total marketing cost into specific marketing activities to access the effectiveness of each activity. Market Research Process Market research is the process of systematically collecting, recording and analysing information concerning a specific marketing problem. The three steps of the market research process are; 1. Determining information needs 2. Collecting data from primary and secondary sources 3. Data analysis and interpretation -the data that represents average, typical or deviations from typical patterns. The data must be then displayed in way which statistics and figures can be conducted e.g spreadsheets Customer and Buyer Behaviour Customers are classified into two categories: Consumer the process of purchasing goods and services for personal household use. Organisational the purchase of goods and services by producers, resellers and government. Types of Customers Household Personal personal and household spending plays a dominant role within the economy as it contributes to the level of economic activity which affects business profits, unemployment levels, interest rates levels and rate of inflation. The Firms market consists of businesses that purchase goods and services for further processing or for use in their production process. Educational institutes Government Customers Governments spend billions of dollars each year for a wide variety of goods and services ranging from battleships to paperclips. All purchases of the government spend public funds to buy products, the government is accountable to the public, requiring a much more formalised set of buying procedures where firms submit quotes to supply a particular good or service and the lowest bid is generally accepted. * The Buying Process The buying process involves 5 common steps: Recognise the problem need or want requiring satisfaction Search for info brands, product characteristics, warranty, price etc Evaluate alternatives cost and benefit analysis Purchase Evaluate after purchase stability of product, satisfaction gained or dissatisfaction may occur. * Factors influencing Customer Choice Psychological influences e.g perception, motive, attitude and personality Socio-cultural influences e.g family, friends, social class, culture and subculture. Economic Influences -A boom is a period of low employment and rising income. Contraction is a period of slowly rising unemployment with incomes stabilising. Recession sees unemployment reach high levels and incomes fall dramatically. Expansion means unemployment levels start to fall slowly and incomes begin to rise. Government Influences government will put into place policies that expand or contract the level of economic activity. These policies directly or indirectly influence business activity and customers spending habits and such will influence the marketing plan. Developing Market Strategies * Pricing Strategies Price Skimming charging the highest price possible for innovative products Pricing Penetration charges to lowest price possible for a product or service to achieve large market share Loss-leader selling a product below its cost price to attract customers Price Lining a limited number of key prices for selected product lines e.g one line of watches for $35 and a more expensive line at $55 * Pricing Methods Cost-plus margin the total cost of production then adds on amount for profit (mark-up) Market set prices according to the level of supply and demand, when demand is high prices are high Competition based a business chooses a price based on competition, either below, equal to or above * Marketing segmentation and product Mass marketing or a total marketing approach This includes basic food items, water, gas, electricity etc. Concentrated Market Approach -By using the concentrated market approach the business is able to analyse its customer base more closely and design strategies to satisfy this select groups needs, and develop particular products based on customer feedback. Product Differentiation is the process of developing and promoting differences between the businesses products and those of its competitors. e.g jeans with designer labels and washing detergent with brightener additives * Place/Distribution Channels of Distribution or marketing channels are routes taken to get the product from the factory to the customer. The process usually involves a number of intermediaries such as wholesalers, brokers, agents or retailers. To choose the channel of distribution the location is the main contributor of the business market or market coverage (number of outlets a firm chooses for it product). There are three ways a business can cover a market Intensive distribution when a business saturates the market with their product e.g milk, lollies and newspapers Selective Distribution businesses use a moderate proportion of possible outlets where customers are prepared to travel e.g clothing, furniture Exclusive Distribution only one retail, outlet in a large geographical area for exclusive and expensive products. Physical Distribution Transport Warehousing involves receiving, storing and dispatching goods. Inventory controlled through a system that maintains quantities and varieties of products appropriate for the target market.  · Effects on Distribution 1. Technology 2. Local Government Approving new development applications and alteration to existing premises Fire regulations Determining land zoning and the purpose for which a building and land can be used Parking regulations Health regulations Size, shape and location of business signs Ethical and legal Aspects Environmentally responsible products Materialism an individuals desire to constantly acquire possessions Impact of retail development -intensely competitive environment may result in some retailers using questionable marketing practices Sugging Selling Under Guise of a survey, Role of Consumer Law Deceptive and misleading Price- Discrimination Implied Conditions or terms Merchandise quality meaning that the product is of a standard a reasonable person would expect for the price Fitness of purpose meaning that the product is suitable for the purpose for which is being sold. That is, it will perform as the instructions or advertisement implies Warranties Resale Price Maintenance Legislations to respond to ethical and legal aspects of marketing: The Trade Practice Act 1974 is one of the most important pieces of legislation in Australia and has two purposes: 1. To protect consumers from misleading and deceptive conduct 2. Restrictive trade practices to restrict competition as well as ensuring that a number of businesses are operation at any one time in the same market, to avoid the problem of monopolistic power. Fair Trade Act (FTA) is a mirrors legislation that covers sole traders and partnership as well as companies Implied conditions in both Acts: Merchantable quality worth the money Fit for purpose does its jobs. HSC Topic Four: Employment Relations Case Study Managing the ER function Line Management * ALDI Supermarkets * Individual store managers are expected to solve all instore problems there is no ‘area manager or specialist ER department Key influences on ER Social Inf Business Management and Change at Billabong (BB) Business Management and Change at Billabong (BB) HSC Topic One: Business Management and Change Case Study Billabong Management Theory Behavioural Management Theory Creative thinking and innovation are of greater importance than ruthless efficiency. Managers see their roles primarily as motivating staff communicating the companys vision to customers stakeholders. Workers overcame problems and gave input into the way Billabong was run. Primarily to do with business culture and lack of morale caused by inertia of managers their resistance to change BILLABONG Sources of Change * External influences Economic factors: Negative: level of unemployment and growth/interest rates means less people can afford BBs products Rising incomes in East Asia and South America have helped create new markets Social factors: Changing consumer tastes Increasing tastes in sports such as skateboarding and surfing BMX now included at Olympics increases recognition of sport and clothing Political factors: Protectionism and limiting of imports through tariffs has seen BBs product strengthened in the domestic market Gov emphasising and pushing Aus exports, BB has seen improved overseas sales. Geographic: Pollution of beaches discourages people from surfing Influences what products BB have to release Snow gear in countries like Switzerland and surf gear in markets like Hawaii Internal influences  · E-Commerce Positive: Simplifying logistical and organisational difficulties +: Monitoring and tracking sales à  control Internet website greater relationship/interaction with customers  · New Procedures Private à   Public Comply with legal regulations meant à  financial record systems for annual financial report Tighter control over finances so as to increase return for investors  · Business Culture Management team changed in 1998 when Matthew Perrin and Gary Pemberton bought 49% of BB Now comprised of more professional managers with greater business knowledge and procedures than the original surf enthusiasts who established the business Structural responses to change Outsourcing Production to SE Asia and China Response to economic and financial influences Allows company to focus more on design and marketing Lowers costs to maintain competitive advantage in price-sensitive markets Strategic Alliances Cooperated with Channel V Billabong Music Bus Tour Both had similar target markets Increased brand recognition and awareness Reasons for resistance to change Financial Costs Developing new products such as skateboards and sunglasses requires money Acquiring smaller businesses, eg. Honolua Surf Company cost around $20billion Inertia of owners International expansion brings some risk from the financial backers/owners and therefore saw resistance from shareholders Managing change effectively Identifying need for change BB gained an edge over competitors by being one of the first businesses to expand overseas in the early 1980s Diversifying into skateboarding and accessories increased market share Creating culture of change New management team in 1998 acted as ‘change agents achieved growth by constantly observing and pursuing new opportunities Change Models (force field analysis) Driving Forces Restraining Forces à  revenue New opportunities for staff Year round demand (seasons) Costs of production Lack of new designers Need to hire new managers for new departments Change and Social Responsibility Ecological Sustainability Surfrider Foundation Conservation and regeneration of beaches and foreshores Quality of life Encourages team work and a relaxed atmosphere both in the office and in retail stores BB has a strict ‘no child labour policy and regularly inspects overseas production facilities Cultural Diversity Encourages communication between domestic and international stores/offices Employees are encouraged to transfer between international offices to gain new experiences The Nature of Management  · Management Roles -An interpersonal role is one in which the manager deals with people. Proactive- incorporates dynamic action and forward planning to achieve particular objectives -An informational gathers information within the business and supplys it outside the business -A decision-making role involves solving problems and making choices  · Skills of Management -People Skills -Strategic thinking -Vision -Self-Managing -Teamwork Ethical behaviour Responsibilities to stakeholders include: manage change social justice ecological sustainability compliance with the law codes of practice Understanding Business Organisations with Reference to Management theories  · Contingency Theory  · Classical-Scientific Planning, Organising, Controlling Division of labour, chain of command, autocratic leadership style meaning the manager tends to make all the decisions in the business.  · Behavioural ability to understand and work with people from a variety of backgrounds and different expectations Leading, Motivation, Communication Flatter organisational structure democratic leadership style where managers consult employees to ask suggestions and take them into account when decision making.  · Political encourages the formation of coalitions to promote different points of view. Power and Influence within a business can have both a positive and negative effect. It can be sued to intimidate (negative) or empower others (positive). Legitimate power due to status or position of the person in the firm e.g management Expert power due to a result of a persons skills and expertise Referent power from a persons individual characteristics (personality and charisma) Reward Power to the rewards or compensation a manager distributes Coercive power controls individuals by the actions or words of the manager Negotiating and Bargaining, Stakeholder views, Coalitions Managing Change  · Nature and Sources of Change in Business External Changing Nature of Markets, Economic Influences, financial, geographic, social, legal, political, technological Internal Effects of decelerating technological change, e-commerce, new systems and procedures, new business cultures Structural Response to Change -Outsourcing Flat Structure Strategic alliances Networks  · Reasons for Resistance to Change Financial Costs Inertia of managers and owners Cultural incompatibility in mergers and takeovers Staffing Considerations de-skilling, acquiring new sources, loss of career prospects and opportunities. * Managing Change Effectively Identifying need for change- SWOT anaysis and balance sheets Setting Achievable goals mission statements and company goal Culture of Change Change Models Force-Field Analysis Unfreeze/Change/Refreeze Change and Social Responsibility Social Responsibility is the awareness of a businesss management of the social, environmental and human consequences of its actions. Customers eventually find out which businesses are acting responsibly and which are not. Ecological Sustainability Quality of Working life Technology E-Commerce Globalisation and Managing Cultural Diversity HSC Topic Two Financial Planning The Role of Financial Planning * Strategic role of Financial Planning strategic plan Organisational goals and objectives Managing financial resources * Objectives of Financial management Liquidity -pay debts in the short term (less that 12 months) Profitability ability to maximise profit Efficiency -manage its assets to maximise profits with the lowest possible level of assets Growth increase its size in the long term Return on capital -profit returned to owners or stakeholders as a % of their contribution * The planning Cycle Addressing present financial position e.g revenue, p l statements, budgets Determining financial elements of the business plan Developing budgets Cash Flows Financial reports Maintaining record systems Planning financial controls Financial Markets Relevant to business financial needs * Major Participants in Financial markets Banks Financial companies -provide loans to individuals and businesses e.g personal and secured Insurance companies -loans to the corporate sector through insurance premiums Merchant bks (investment bks) -services such as borrowing and lending to the business sector. Superannuation/Mutual funds provide funds to the corporate sector through the investment of funds received from superannuation contributions The Reserve bank of Australia (Government) -acts as a banker and financial agent for the federal government * The Role of the Australian Stock Exchange (ASX) as a primary Market The ASX is the major financial exchange in the country. It comprises the largest primary and secondary markets for companies and individuals wishing to create and exchanges financial assets in the economy * Influences on Financial Markets domestic markets e.g change in inflation, demands for funding, changes in government policies. Companies can be positively and negatively affected. Overseas influences such as world events, foreign exchange rates, tax regulation for foreign operations * Trends in Financial Markets Technology has allowed markets to become more competitive and grow allowing financial transactions all the time. Globalisation will also give overseas investors access to Australian companies and increase opportunities for Australian investors and international markets. Management of Funds * Sources of Funds Internal Owners Equity Retained Profits External Short-term borrowing Bank Overdraft allows a business to overdraw their account to an agreed limit Bank Bills Long Term Borrowing Mortgage Debentures -The company repays the amount of the debenture by buying back the debenture. Finance companies raise funds through debenture issues to the public. Leasing involves the payment of money for the use of equipment that is owned by another party. Factoring is the selling of accounts receivable for a discounted price to a finance of factoring company. Venture Capital is funds supplied by investors to either a new organisation or to an already established business ready to grow or diversify. Grants are provided by the government for businesses to develop and promote international competitiveness. Grants often enable an organisation to become competitive in the global environment e.g exporting organisations. * Comparison of debt to equity financing Debt finance refers to short and long term borrowing from external sources of an organisation Equity Financing refers to the internal sources of finance in the organisation Gearing/Leverage is the proportion of debt to equity which is used to finance the activities of a business Using Financial Information * The Accounting Framework Financial Statements Revenue Statements shows the revenue earned and expenses incurred over the accounting period with the resultant profit or loss. Revenue statements show operating revenue earned from the main functions of the business e.g sales of inventories and the non-operating revenue earned from operations such as rent and commission. It also shows operating expenses such as rent, advertising, insurance. Balance Sheets represent the assets and liabilities at a particular point in time expressed in money terms and calculates the net worth of the business. The balance sheet shows the level of current and non-current assets and liabilities including investments and owners equity. Balance sheets indicate whether it has enough assets to cover debt interest and money borrowed that can be paid assets used to maximise profits if owners are making a good return on their investment * The accounting Equation and Relationships (A) Assets = (L) Liabilities + (OE) Owners Equity The accounting equation forms the basis of the accounting process which shows the relationship between assets, liabilities and owners equity. The accounting equation shows that the assets of the business may be financed by either the owners or by parties external to the business. COGS = inventory + purchases closing stock * Comparative Ratio Analysis By comparing ratios of a firm over time reveals trends and indicate directions for the future. Comparisons with other businesses and industry ratios is often used although can be inaccurate due to differences in companies and industries. Businesses often compare ratios against common standards such as statistics from the ABS. * Limitations for Financial Reports Historic cost accounting states that values are stated at the cost incurred at the time of purchase or acquisition, meaning financial statements will be a mixture of different year figures. Historic cost has been used for a long time although may become inaccurate in times of inflation. Value of Intangibles licences, trademarks, brand names and goodwill. Effective Working Capital (Liquidity) Management * The Working Capital Ratio Working Capital Ratio = Current Assets over Current Liabilities (2:1 ACCEPTABLE ALTHOUGH VARIES) The Working capital ratio shows if current assets can cover current liabilities. * Control of Current Assets Cash Balances are generally kept at a minimum and hold marketable securities as reserves of liquidity. Receivables is important in terms of management of working capital. The quicker the debtors pay, the better the firms cash position. Inventories make up a significant account of current assets and their levels must be carefully monitored so that excess or insufficient levels of stock do not occur. * Control of Current Liabilities Payables must be paid by their due dates due to avoid any extra cash charges imposed for late payment and to ensure that trade credit will be extended to the business in the future. Loans management of loans is important for establishment interest rates and ongoing charges must be investigated and monitored to minimise costs. Overdrafts policies should be used to manage bank overdrafts and monitor budgets on a daily or weekly basis so that cash supplies can be controlled. * Strategies for Managing Working Capital Leasing Factoring Sale and Lease back is the selling of an owned asset to a lesser and leasing the asset back through fixed payments for a specified number of years. Effective Financial Planning * Effective Cash Flow Management The activities of a business are divided into three categories as a statement of cash flows 1. Operating Activities e.g inflow cash and credit, outflow payments to employees 2. Investing Activities -e.g selling of old motorbike, purchasing new property 3. Financing activities- e.g inflow selling of shares, outflow repayment of debt. * Management Strategies distributing payments through out a month or year or different period so that cash shortfalls do not occur payments and bad debt of accounts by debtors can cause shortfalls of cash for businesses at important times. discounts for early payments * Effective profitability Management Cost Control Fixed Costs e.g insurance and salaries Variable costs change with the level of activity within a business e.g materials and labour used in the production of a product e.g fixing a roof. Cost Centres are particular areas, departments or sections of a business to which costs can be directly attributed. Direct costs are those allocated from a particular product, activity, department or region e.g depreciation of equipment used solely in the production of one good. Indirect costs come from shared projects, activities, departments or regions. Staff should be motivated to minimise expenses where possible as savings can be substantial if people take a close look at costs and eliminate waste and unnecessary spending. * Revenue Controls Sales objectives must be at a level of sales that will cover costs (fixed and variable) and result in profit. Changes to the sales mix can affect revenue. Research should be made to identify the effects of sales mix changes before implantation. Pricing Policy affects revenue and therefore impacts on working capital. To attract buyers while underpricing may bring high sales but still result in cash shortfalls. Ethical and Legal Aspects of Financial Management * Audited Accounts An audit is an independent check of the accuracy of financial records and accounting procedures. Types of Audits- 1. Internal conducted internally by employees 2. Management used to review the firms strategic plans and determine if changes need to be made. 3. External required by corporate law to ensure it complies with Australian auditing standards. * Australian Securities and Investments Commission (ASIC) ASIC enforces and administers laws and protects consumers in the areas of investment, life, insurance, super and Australian banking. ASIC sets out to reduce fraud and unfair practices in financial markets and products. ASIC ensures that companies adhere to the law. Collects information about companies and makes it accessible to the public. * Corporate Raiders and Asset Stripping Asset Stripping describes the practice of organisations that identify and sell off for a profit, assets of a company, especially one that has been acquired in a recent takeover. Entities that take over other companies and sell off the assets are known as corporate raiders. HSC Topic 3 Marketing Case Study Types of Markets Resource BHP Billiton Industrial Painter Intermediate Gloria Jeans selling cakes Mass IBM Computers Niche ‘Mountain Bike Magazine Developing Marketing Strategies Product and Service Positioning * Qantas was under competitive pressure from Virgin Blue in the leisure market * Qantas wanted to maintain its higher positioned government and business segments * Expanded to a subsidiary Jetstar who were positioned as a value-for-money product Price including pricing methods Price Points * Jetstar International * Base price for seat, Charge $30 for meal, $7 for blanket and amenity kit and $12 for entertainment kit Promotion Advertising * Dell Computers focus much of their advertising to print media * Use inserts/pamphlets/brochures in magazines, typically in the technology liftout section of the newspaper, where their target market is most likely to be reading Place Distribution * Dell distribute products directly, with no intermediaries * Exclusive distribution (no stores), Intensive (internet) * Distribution system is e-commerce Ethical and Legal Aspects Role of Consumer Laws in dealing with Deceptive and Misleading Advertising * Gillette (Duracell) VS Eveready * TV advertisement claims Duracell lasts up to four times longer than ordinary batteries * Eveready claimed the ad infringed the TPA * Independent tests showed the Duracell batteries never last 4x longer * Federal Court ruled Duracell breached the TPA in the areas of misleading and deceptive conduct and false representations about the quality and benefits of goods The Nature and Role of Markets and Marketing Marketing is a total system of interacting activities designed to plan, price, promote and distribute products to present and potential customers. * Types of Markets Resource markets e.g mining, agriculture, forestry and machinery. Industrial Markets purchase products to use in the production of other products e.g buying flour to make bread Intermediate markets (resellers) consist of wholesalers and retailers who purchase finished products and resell them to make profit Consumer Markets e.g cars, clothing, food Mass Market is when the seller mass produces, mass distributes and mass promotes one product to all buyers Niche Markets are micro markets made for buyers who have specific needs or lifestyles * Production Production Orientation 1820s 1920s When a business concentrates on making as many possible goods at the lowest price possible Sales Approach 1020s 1060s When a business concentrates on selling techniques to attract customers Marketing Approach 1060s 1980s When a business collects information on consumer trends to sell its products * The Marketing Concept Consumer Orientation when a business concentrates on maximising customer satisfaction to sell its products Relationship Marketing the focus on encouraging repeat purchases and loyalty to the business by managing customer relations at the time of and after the initial purchase. Elements of a Marketing Plan * Establishing Market Objectives * Identifying Target Market Total Market Approach one type of product with little or no variation aimed at everyone through one distribution system. Market Segmentation approach the market is subdivided into groups of people who share certain characteristics. * Developing Marketing Strategies (examining elements of the 4 Ps) * Implementation, Monitoring and Controlling Financial Forecasting measures the sales potential and revenue forecasts (benefits) for strategies and compares these with anticipated costs. Comparing actual and planned results 1. Sales analysis comparing of actual sales with forecast sales to determine the effectiveness of the marketing strategy 2. Market share analysis/Ratios by comparing competitions market share to their own this can reveal changes in total sales (increase or decrease) 3. Marketing Cost Analysis marketer breaks down the total marketing cost into specific marketing activities to access the effectiveness of each activity. Market Research Process Market research is the process of systematically collecting, recording and analysing information concerning a specific marketing problem. The three steps of the market research process are; 1. Determining information needs 2. Collecting data from primary and secondary sources 3. Data analysis and interpretation -the data that represents average, typical or deviations from typical patterns. The data must be then displayed in way which statistics and figures can be conducted e.g spreadsheets Customer and Buyer Behaviour Customers are classified into two categories: Consumer the process of purchasing goods and services for personal household use. Organisational the purchase of goods and services by producers, resellers and government. Types of Customers Household Personal personal and household spending plays a dominant role within the economy as it contributes to the level of economic activity which affects business profits, unemployment levels, interest rates levels and rate of inflation. The Firms market consists of businesses that purchase goods and services for further processing or for use in their production process. Educational institutes Government Customers Governments spend billions of dollars each year for a wide variety of goods and services ranging from battleships to paperclips. All purchases of the government spend public funds to buy products, the government is accountable to the public, requiring a much more formalised set of buying procedures where firms submit quotes to supply a particular good or service and the lowest bid is generally accepted. * The Buying Process The buying process involves 5 common steps: Recognise the problem need or want requiring satisfaction Search for info brands, product characteristics, warranty, price etc Evaluate alternatives cost and benefit analysis Purchase Evaluate after purchase stability of product, satisfaction gained or dissatisfaction may occur. * Factors influencing Customer Choice Psychological influences e.g perception, motive, attitude and personality Socio-cultural influences e.g family, friends, social class, culture and subculture. Economic Influences -A boom is a period of low employment and rising income. Contraction is a period of slowly rising unemployment with incomes stabilising. Recession sees unemployment reach high levels and incomes fall dramatically. Expansion means unemployment levels start to fall slowly and incomes begin to rise. Government Influences government will put into place policies that expand or contract the level of economic activity. These policies directly or indirectly influence business activity and customers spending habits and such will influence the marketing plan. Developing Market Strategies * Pricing Strategies Price Skimming charging the highest price possible for innovative products Pricing Penetration charges to lowest price possible for a product or service to achieve large market share Loss-leader selling a product below its cost price to attract customers Price Lining a limited number of key prices for selected product lines e.g one line of watches for $35 and a more expensive line at $55 * Pricing Methods Cost-plus margin the total cost of production then adds on amount for profit (mark-up) Market set prices according to the level of supply and demand, when demand is high prices are high Competition based a business chooses a price based on competition, either below, equal to or above * Marketing segmentation and product Mass marketing or a total marketing approach This includes basic food items, water, gas, electricity etc. Concentrated Market Approach -By using the concentrated market approach the business is able to analyse its customer base more closely and design strategies to satisfy this select groups needs, and develop particular products based on customer feedback. Product Differentiation is the process of developing and promoting differences between the businesses products and those of its competitors. e.g jeans with designer labels and washing detergent with brightener additives * Place/Distribution Channels of Distribution or marketing channels are routes taken to get the product from the factory to the customer. The process usually involves a number of intermediaries such as wholesalers, brokers, agents or retailers. To choose the channel of distribution the location is the main contributor of the business market or market coverage (number of outlets a firm chooses for it product). There are three ways a business can cover a market Intensive distribution when a business saturates the market with their product e.g milk, lollies and newspapers Selective Distribution businesses use a moderate proportion of possible outlets where customers are prepared to travel e.g clothing, furniture Exclusive Distribution only one retail, outlet in a large geographical area for exclusive and expensive products. Physical Distribution Transport Warehousing involves receiving, storing and dispatching goods. Inventory controlled through a system that maintains quantities and varieties of products appropriate for the target market.  · Effects on Distribution 1. Technology 2. Local Government Approving new development applications and alteration to existing premises Fire regulations Determining land zoning and the purpose for which a building and land can be used Parking regulations Health regulations Size, shape and location of business signs Ethical and legal Aspects Environmentally responsible products Materialism an individuals desire to constantly acquire possessions Impact of retail development -intensely competitive environment may result in some retailers using questionable marketing practices Sugging Selling Under Guise of a survey, Role of Consumer Law Deceptive and misleading Price- Discrimination Implied Conditions or terms Merchandise quality meaning that the product is of a standard a reasonable person would expect for the price Fitness of purpose meaning that the product is suitable for the purpose for which is being sold. That is, it will perform as the instructions or advertisement implies Warranties Resale Price Maintenance Legislations to respond to ethical and legal aspects of marketing: The Trade Practice Act 1974 is one of the most important pieces of legislation in Australia and has two purposes: 1. To protect consumers from misleading and deceptive conduct 2. Restrictive trade practices to restrict competition as well as ensuring that a number of businesses are operation at any one time in the same market, to avoid the problem of monopolistic power. Fair Trade Act (FTA) is a mirrors legislation that covers sole traders and partnership as well as companies Implied conditions in both Acts: Merchantable quality worth the money Fit for purpose does its jobs. HSC Topic Four: Employment Relations Case Study Managing the ER function Line Management * ALDI Supermarkets * Individual store managers are expected to solve all instore problems there is no ‘area manager or specialist ER department Key influences on ER Social Inf