Problems in the Stock Market

Background

Business operators in US have one thing to be sure of; that investing in US stock market has never been save under any circumstances. This may be attributed to the fact that investment in equities does not guarantee 100% outcome.  A lot more people have come to think of investing as a game of probabilities. This may be attributed to the many happenings that occur in the stock market and which significantly affect the investment in either a negative or positive way.

The stock market has become a trial and error for investors especially those in the middle class. The enormous number of businessmen from all categories has made the stock market becoming more volatile and less predictable investment sector than ever. The trend has made even the best designed investments to fail. The unpredictability trend has also made even the best brokers to fail in providing appropriate advice.  The external shocks have been among the factor causing unpredictability in the stock market.  From time immemorial, some of these shocks have included inflation, political instability, oil and fuel price increase, defaults by major firms and the high rate of interest. These and other shocks are not easily predicated, and apparently, their effects on the stock market are not easily predicated either (Barrie, 188).

Scatigna, (2013) observes that forecasting the financial markets in the coming years is challenging and uphill task.  This due to the many variables that challenges the outcome,  Other factors influencing this  phenomena    include the geographical and  political  events  that largely dictates the  course  of financial markets in the coming years.  The news media has also posed as a problem in forecasting financial markets in the recent times.  These markets are captive to news which sways them down or up.  Unless one has a capability of seeing future events, predicting the performance of any financial markets confidently is a difficult venture.

 

The basic question that has been pondered by many investors is on how to trade in the stock market in an efficient way.   This has been an equally challenging phenomenon as ever before. Apparently, conventional strategies such as Markowitz’ portfolio of mean variance when applied with parameters that have been estimated from data are poised to give a remarkable impulsive portfolio weights. This is basically due to the complexity of estimating the anticipated returns in an accurate manner (Bielecki,et al, 2005, 214).

 

Trading strategies for earning abnormal returns may be developed by following signals of organizational distress or recovery. By use of signals developed by two famous bankruptcy models, that is the Wilcox X value model  and the  Altman Z score, the researcher grouped the NYSE organizations  in accordance to whether  they  were moving from positive  gains to negative gains. For a period of 15 months, before the issuance of the yearly report that influenced and alteration in the state, organizations classified by the Altman model as recovering from distress indicated significant abnormal positive returns. On the other hand, those that were classified as deteriorating portrayed negative returns.  Both groups in this perspective went on exhibiting abnormal returns in the anticipated returns over nine months prior to the announcement date. By use of the Wilcox model as the discriminator of recovery, the researchers established no abnormal return behavior prior or after the distress forecasting but substantial expectation of recovery signs.

 

It is generally acknowledged that prediction of the stock market is a cumbersome task.  It is therefore with this reason that intelligent systems for predicting the stock market have widely been developed. Some of these systems include genetic programming and nero-genetic among others. The systems behave more like a process of random walk and vary in time. The complexity of the stock market opens away for the significance of the intelligence prediction systems. In then last ten years, stocks and future investors have come to rely extensively on these intelligence decisions in making their business deliberations. One of the goals in this study is to examine the significance of genetic programming and neural genetic networks in the prediction of the stock markets.

 

Genetic programming

Genetic programming is a newer development in the field of evolutionary algorithms. This system extends to the conventional genetic algorithms by accepting the dispensation of non linear structures (Koza, 167).  Holland (1975) defines a genetic algorithm as a randomized search procedure that works on a group of individuals or solutions that are encoded as linear bit of strings. This population develops over time through the application of operators which resemble those in nature that is the selection of fittest, crossover and mutations. GP is an evolutionary computational method that is most based on what is referred to as “tree representation”. This type of representation is tremendously flexible since trees can better present much of mathematical equations, computer programs, or full models of the systems processes (127). Koza continues to explain that genetic programming is used to produce a model that is based on a one day ahead in predicting stock exchanges. In yielding a higher rate of return on the investment, the model is tried for approximately fifty business days consecutively in yielding high returns on investment.

Kelly et all 2004 observes that in the recent perspectives, genetic programming has proved to be  a highly effective and significant method in identifying  data relationship for which there is a lack of a more precise  and theoretical construct. The GP search could be equally useful in developing business strategies that are based on the agent economic models. These strategies employ prices in the stock market and technical indicators, for instance the moving average divergence or convergence and a diversity of exponentially weighted poignant averages in generating, selling and buying signals.

Genetic programming solves stock market problems by imitating the evolution process (Koza, 3). Under this system, a population of   candidate solutions is retained and customized   in a manner that weak solutions are removed and replaced   by strong variants until minimal or no progress is achieved with regard to the best solution in population. When this happens, it is said that the problem has converged to a solution that is feasible (Karjalainen, 245).

Another significant use for this system is in predicting financial asset prices. It completes the first phase in the construction of technical trading. Technical strategies can now be generated on the framework of simulated stock market data. It is expected that the technical trading agents such as investors play an important role in assisting the model to imitate the real global financial markets. Further, this model can be very useful in developing strategies that are aimed at mitigating the negative effects. Effectual execution may take a few iterations of developing and testing technical investors. This is because the inclusion of the simulation is poised to alter the behavior of the replicated stock market prices (Becker, 26)

The fitness function is another significant element in the genetic program.  This component measures the achievement of a solution strategy.  Since the objective of the agents is to make better use on the investment returns, the fitness function is a common element in computing these returns in the sense that one dollar would achieve by using the strategy of the tree.  For the fitness function, every tree is assessed at every time step.  If the tree happens to return a value which is greater than 0, a buy signal is developed. If the value happens to be lower than 0, then a sell signal is developed.  If this tree happened to be in the market at a previous moment and a buy signal was realized, then there is no action to be considered. Consequently, a sell signal has no influence if the tree does not appear in the market. At the beginning of the training, every tree starts with a dollar. When the tree sells, the first stock is multiplied by the ration of the buying price to selling price.  After it runs through the times, the original dollar is subtracted off for the fitness to counter the trading returns. Further, it should be noted that “in the market” translates to the investor’s money while “out of the market” translates to the withdrawal of the investor’s money (Neely, 111).

Nero-Genetic (ANN)

Studies have pointed out that neural networks have facilitated the achievement of better results in the prediction of the stock market in comparison to either linear or non linear functional form to model the movement of prices in the stock market.  Varahrami, (2012) observes that Neural networks have the benefit of simulating the models that are non linear in a case of the existence of the slight priori knowledge structure problem or the number of input variables that are immeasurable are much higher or when the systems are characterized by chaos.

Neural genetic networks or simply neural networks are a category of generalized, non linear models triggered by studies involving the human brain.  The main benefit accrued from these systems is that, they have a capability of approximating various aspects of non linear function to a subjective degree of precision with a relevant number of hidden units. These networks obtain their intelligence from the learning procedure. Consequently, this intelligence generates the ability to automatically adapt or associate the memory to perform specific functions (Goldberg, 69).

Artificial Neural Networks (ANN) is a network that is based on biologically stimulation. The method is based on the composition of neurons and the process of making decisions in the human mind (Madala, and Ivakhnenko, 384). Explained differently, Artificial Neural Networks is a mathematical analogue technique of a human nervous system. It is very useful in pattern identification, prediction and pattern sorting processes. This method has been reviewed and proved to be reliable by various scholar and authors especially in the case when the related systems are so complex that the underlying processes or relationships are not fully understandable or harbor chaotic characteristics (Krishnan, 328).  Development of Artificial Neural Networks for any particular systems incorporates three crucial elements a) proper training algorithm b) network topology c) transfer role.  The network learns though adjusting the interconnections between layers.  As the training or learning procedure is finalized, a relevant output is produced at the output layer. The learning process may either be unsupervised or supervised. If the problem is with regard to prediction, then the learning process should be supervised so that the anticipated output is prior assigned to the network (Darvizeh, et al, 87).

 

 

Work Cited

 Barrie, Scoot. “The Complete Idiot’s Guide to Market Timing” Alpha Books, 2003

Scatigna, Lou. “Economic and Financial Market Forecast” 2013. The Financial  Physician.

Bielecki, T.R., Jin, H., Pliska, S.R. and Zhou, X.Y. (Continuous-time meanvarianceportfolio

selection with bankruptcy prohibition. 2005. Math. Finance 15 213–244.

MR2132190

Koza JR. “Genetic programming: on the programming of computers by means of natural

Selection”. Cambridge, MA: MIT Press, 1992.

Holland, JH. “Adaptation in natural andarti3cial systems” Ann Arbor, MI: The University of

Michigan Press, 1975.

Kelly. A.,  Farnsworth,G.  “Successful Technical Trading Agents Using Genetic Programming”

Sandia National Laboratories Albuquerque. 2004.

 

Karjalainen, Risto and  Franklin Allen. “Using genetic algorithms to find technical

 

Trading rules” Journal of Financial Economics, 51:245–271, 1999.

 

 

Becker, Lee  and Mukund Seshadri. “GP-evolved technical trading rules can

 

outperform buy and hold” In Proceedings of the Sixth International Conference

on Computational Intelligence and Natural Computing, Embassy Suites Hotel and

 

Neely Christopher J. “Risk-adjusted, ex ante, optimal technical trading rules in

 

Equity markets” Working Papers 99-015D, Federal Reserve Bank of St. Louis,

1. available at http://ideas.repec.org/p/fip/fedlwp/99-015.html

Varahrami, Vida.   “Good Prediction of Gas Price between MLFF and GMDH Neural Network”

Faculty of Economics, University of Tehran, Tehran, Iran. 2002.

 

Goldberg D. E., Deb K. “A comparative analysis of selection schemes used in genetic

Algorithms, Foundations of Genetic Algorithms” Morgan Kaufmann press, pp. 69-93, 1991

Madala,H.R. and Ivakhnenko,A.G. “Inductive Learning Al-gorithms for Complex Systems”

Modeling; CRC Press Inc., Boca Raton, 1994, p.384.

 

Krishnan, S.M., Srinivasan, N., Ravichandran, V., Chan, K.L., Vidhya, J.R., Ramakirishnan, S.

“Exponentiated backpro-pagation algorithm for multilayer feedforward neural net-work Neural Information Processing” ICONIP apos; 02. Proceedings of the 9th International Conference on Volume 1, Issue , 18-22 Nov. 2002 Page(s): 327 – 331 vol.1

Darvizeh, A., Darvizeh, M., Gharababaei, H. “Modeling of explosive cutting process of plates

using GMDH-type neural network and singular value decomposi-tion” Journal of Materials Processing Technology, 2002, vol. 128, no. 1-3, pp. 80-87, Elsevier Science

 

Executive Summary

The first part of this report gives a summary of the business’ ownership structure, a description of the business itself and its mission, vision and objectives (Castrogovanni, 1996).

The next section focuses on its core competencies, its keys to success and also the range of products and services that it will be offering to the market. This is an indication of the elements that will keep this business afloat.

The section that talks about competitive advantage illustrates the ways in which Healthy Meals on wheels will survive the highly competitive market.

In Market research, the business plan shows the preliminary ground work that was done before deciding to set up base in Leeds. This takes into account both the primary data and secondary data.

The business model demonstrates how the firm will be operating on a day to day basis including. This is followed by a SWOT analysis that examines the firm’s internal and external business environments.

The economics of the food business we intend to run is also highlighted and this is followed by the potential barriers that may be faced. The final part has the financial analysis that summarizes the capital invested, its source, the repayment schedule and a projection of the first month’s profit and loss accounts.

General Description of the Company

As the name suggests, Healthy Meals on Wheels will be part of the food industry and more specifically in outside catering both as retail and also on a contract basis. This is basically the sale of and delivery of pre-packed meals to different customers/organizations as well as the sale of pre-packaged food at a mobile food stands in the form of a modified truck (Abrahams et al, 2003).

Mission Statement

The mission of Healthy Meals on Wheels is to be a market leader in the supply of pre-packaged foods in the city of Leeds and eventually the whole country.

The objectives of Healthy Meals on Wheels

Dynamic management that will ensure the business adapts appropriately to market conditions so as to ensure continued growth of the business and its personnel.

To ensure the provision of nutritional foods that are practical and affordable to our customers; this is to be achieved by application of factual nutritional data and stringent production standards. This will eventually guarantee a healthy customer base and thus a healthier community.

To ensure customer satisfaction by placing their interests first since they are the reason we are in business. The trend in today’s business environment is to provide customer-centric service. This will mean that the business has to fit snugly into the customer’s lifestyle with little if any interruption at all.

To make use of sustainable production methods that help cut on energy costs and also consider the environment. This will not only improve profitability but also enable Healthy Meals on Wheels to provide affordable culinary solutions to its customers. Such a move will ensure sustainability in the face of harsh economic times that have affected majority of the population.

Keys to Success

Punctuality of both the employees and that of our deliveries to clients. Time is a scarce resource that we should leverage in our favour as to maximize on business that can be carried out (Honig et al, 2004; 29).

Timely payment of money to supplier and other expenses as well as timely collection of monies owed to Healthy Meals on Wheels. This will be crucial as it will ease the process of budgeting and minimize if not eliminate shortages.

High quality products that will lead to customer loyalty and continued growth through recommendations by satisfied customers.

Professionalism in the day to day running of the firm’s activities and finally commitment to continued efforts in research and development of healthy and delicious foods.

A Summary of Healthy Meals on Wheels’ Products and Services

Our target market is the working population who have to focus on their occupation and hence limited time to prepare packed lunch or have very short lunch breaks and need to eat something nutritional to keep them going. Another segment that we hence target is institutions that are willing or interested in outsourcing their catering needs to an external organization.

The food industry as a whole is very dynamic in the City of Leeds and this presents the perfect opportunity for Healthy Meals on Wheels to curve out its own niche in this region. At present, Yorkshire is generating just over 12 % of the United Kingdom’s revenue from Food and Drink sales. Specific niche products that have been found to exhibit exceptional growth are ethnic foods as well as speciality foods with taking up a percentage contribution of 15% and 35% respectively to the city’s total food and beverage revenues. This data clearly shows that there is a ready market that is able and willing to spend their money on food outlets and for our business, this means high demand. Our key task will be to channel this customer traffic in our direction and maintain them (Leeds City Region, 2013).

Business Strengths and core competencies

One of the partners has a degree in Catering as well as two years’ experience in the management of several fast-food outlets all over the country. This has ensured exposure to the most efficient methods of producing food in large-scale with limited time, space and high output expectations in addition to high standards of food processing and packaging (Timmons and Spinelli, 1994).

The other partner is a nutritionist by training and has been in consultancy for the last five years. This brings on board an individual who knows how to ensure foods are of not just a high quality but also prepared in a manner that adheres to sound eating habits that are recommended by doctors to a society that is being plagued with lifestyle diseases.

There is an existing culture of reliance upon research and development in the food industry in Leeds and this will make it easier for our planned business to take advantage of the facilities that are present and perhaps also get the appropriate accreditation.

The business is run by only two people and this will ease decision making and thus ensure more time is spent running the business. Our target location, Yorkshire also has a wide pool of skilled and semi-skilled labour whose services shall be employed by Healthy Meals on wheels.

The Ownership of Healthy Meals on Wheels

This business is duly registered as a partnership with two partners involved in the ownership of the enterprise. Each partner has an equal stake in the company. This form of ownership was agreed upon because it is the easiest to register given the fact that the start-up idea was formulated by two individuals.

The nature of the business is also sensitive and this needs the decision makers to be highly qualified as well as accountable for the day to day operations. The food and drink industry is highly sensitive because of the direct health implication that is placed on the consumers’ health. In a highly litigious society such as the one that we are in today, it is essential that a business does all that it can, including preventive measures of avoiding civil or criminal suits against the firm for mostly unintended errors.

The shared responsibility will help the partners hold each other accountable.

Products and Services of Healthy Meals on Wheels

The products that will be provided by the business are healthy foods that are a blend of ethnic cuisines and speciality foods. These will be sold in retail from the back of specially designed vans that double up as production units of the foods that have already been pre-prepared and only require warming. This includes traditional as well as exotic meals that can be taken as lunch, breakfast or a healthy snack. The main ingredients of these meals will be chicken, vegetables and a variety of spices. These will be accompanied by fresh fruit, milk, yoghurt, juices and fruit salads. For conventional retail customers, there will be a counter on the side of the truck for them to make their purchases on the go. We will also be making deliveries to different offices as long as a threshold of at least 15 orders is met in the given premises (Vespar, 1990).

For outside catering, we will be stationing our vehicle at public events as well as in private functions like corporate functions, weddings and birthdays where we will provide meals on a contract basis.

Competitive Advantage

Healthy Meals on Wheels will maintain an active and strong online presence on the main social media networks such as Facebook, twitter and Google plus. This will ensure our customers who are online are aware of our current position as well as the different products we offer.

To achieve competitive advantage, we will employ a no-frills approach to our business. This means that we will only be focusing on our core business of providing quality foods. This means that our products will be largely homogenous as this will enable the business to cut costs by specialization and also economies of scale.

Our staff will also have to adapt quality customer service techniques such as always greeting them warmly with a smile and also paying attention to their questions and complaints. The staff will need to be knowledgeable on the nutritional information of the different foods that we prepare including the ingredients of the foods that we are offering so as to attend adequately to the customers’ queries. It will be important to pay attention to regular customers and address them by name as this will help to retain them (Karlsson et al, 2004; 32).

Initially, we will rent out a house which will be the main production centre for the different foods that will be delivered to the market. To cut costs of transportation, the location of our production facility will have to be close to the central business district as well as the Market where we will be sourcing our raw materials. The savings that will be made in this context are time and also money since both stock and supplies will be where they are needed at all times. The delivery of raw materials and supplies to the mobile van will be outsourced to another organization.

The assets that the business will purchase include the purpose-built catering van, communication equipment, Ovens, Microwaves, ice boxes, fridges, blenders and also the food mixers.

Marketing Plan

Research on the market healthy meals on wheels’ target market is important as it provides actual data that can be compared with the plans that the partners have for the business. This will help to make adjustments and also projections on the budget to be formulated and used. To get an accurate picture of the market conditions, two methods of research were used. These are primary research and secondary research.

Primary research

This is the most accurate as it is based on observations that have been made first hand on the ground. In regard to peak times for fast food outlets, we established that there are three periods when such establishments get packed with long queues of customers. These times are 7-9 am, 11am -2pm and also 4pm to 6pm. The rest of the times, some establishments close down to restock while others attend to the few customers who come intermittently.

In regard to the orders, it was noted that morning and evening sales were mainly made up of drinks and a simple snack while the midday shift was mostly made up of people purchasing more filling or heavier meals as well as fruit/vegetable salads.

Judging from the dressing of the customers, it is safe to state that majority of them are on a break from their place of work when they are buying the foods. It was also observed that people prefer to buy a meal from an outlet that is near the public parks where they can relax as they eat.

As for the workforce, it was seen that most establishments had one permanent employee who also doubled up as the supervisor at the outlets. The other two-to three who work here are usually semi-permanent workers paid per hour. These workers are mainly sourced from the surrounding universities.

Secondary Research

This is information that was gotten from publications and online articles about the food and drink industry in the city of Leeds. It emerged that this city is the largest in terms of sales of food and drink in the whole United Kingdom. Secondly, many large producers and suppliers of food and drink have set up their operations in Leeds and Yorkshire in particular. Coca-Cola for instance boasts that Leeds produces more of their product than any other location in Europe. In total, there are over 9000 food and drink companies that are carrying out their business in Leeds.

The population of Leeds is estimated to be approximately 2.5 million people and it is also important to note that it is a largely cosmopolitan region. Majority of these people fit into the middle –income category with an average annual income of £36000.

 

 

Business Model

Healthy Meals on Wheels will be operating as a standard catering truck operation does with the key difference being in the product offering and customer service. These trucks have not really picked up in the United Kingdom but have been booming business in the United States of America. The main business unit will be a fast food outlet that is operating from a trailer that is attached to a modified pick-up truck. This is a mobile unit that will be parked at a strategic location in the morning then moved at lunch time and then moved again in the evening depending on the amount of customer traffic. At any one time, this unit shall be manned by a permanent employee and two other workers and the other permanent employee.

The actual cooking will be taking place at the production house but the final preparation can be done at the production house where we have a fully equipped kitchen. Since there will be a large refrigeration units, food can be precooked even three days in advance and stored here. These will be delivered in three main shifts to the outlet and also occasionally an extra round when the demand is higher than usual.

Hot meals will however be delivered directly from the production centre to organizations that have outsourced our catering services for their workers.

 

 

A SWOT Analysis of Healthy Meals on Wheels

Strengths

The owners have a sound understanding of the industry’s market demands.

The combined experience of both partners will aid in minimizing common mistakes that occur.

The business shall employ staff who are flexible and able to handle the pressure that comes with the catering industry.

Weaknesses

None of the partners has a background in hands on entrepreneurship or running a personal business.

It may also take a long time to teach the employees the different preparation methods because of the detail and hygiene standards that are required.

Opportunities

The City has a large population of workers and these make up our potential customer base.

The fact that the city is cosmopolitan means that our healthy meals will have a wide appeal given the fact that they are based on traditional foods from different communities/ ethnicities.

Threats

The presence of an already huge number of established catering establishments all around the city.

Another potential threat is the resistance of customers to the new products that we are offering due to the loyalty they have to the existing brands.

It will be important to for the management of Healthy meals on wheels to capitalize greatly on its strengths and opportunities while taking measures to minimize the challenges and threats to business.

Economics

The current market for our products is expected to be about 250,000 potential customers who are employed in the city and its environs. At present, the outside catering industry is still growing through at times demand seems to outweigh supply of food to these people.

A trend that is being observed in this market is that consumers are increasingly shunning foods that are made from refined sugars and excessive salt.  This is in an effort to fight lifestyle diseases that are on the increase.

Since the industry is still in its initial stages of growth, a business like Healthy meals on wheels has an opportunity to expand and open more outlets as it established itself in the market.

Barriers to Entry in this Market

The initial cost of capital is quite high since we have to purchase commercial ovens, food mixers, pick-up truck, and a trailer, modify it and also equip it with the necessary enhancements to make it a mobile food kiosk. This will be overcome by leasing some of these assets where possible.

The cost of marketing on newspapers, radio and television are prohibitive yet they have the widest reach. To counter this, we can employ the use of a road show.

Another barrier is the effect of the economic downturn that is leading some customers to shy away from buying food and instead carrying packed lunch from home.

Pricing

Our pricing strategy will be one where a 40% mark-up is levied on the production costs. For the purpose of competition, portions and the type fop ingredients will be chosen relative to the desired cost/price and the market averages for similar foods.

Sourcing

The ingredients for the different products that we will have on offer will be gotten from the wholesalers who supply the supermarkets such as Asda and Morrisons. The spices however will be routinely delivered from the different markets around the country where they are sold.

Location

The facts that two major roads pass through Leeds means those Healthy meals on wheels have an ample opportunity to take advantage of this traffic. These roads are the M1 and M62 motorways. There is also the nearby port Humber that experiences a considerable amount of human traffic.
Management Summary

The two partners will be acting as full time managers who will be overseeing a total of 8 employees, two being permanent and six being temporary. Once the permanent employees have been adequately trained, they will then train the six temporary workers, three will be stationed at the production centre and three at the mobile premises.

Financial projections

Entry Strategy

Based on the budget that has been formulated, this business requires an initial investment of

£ 40,000 of which the two partners have raised 10,000. We will take up a loan of 30000 from a family member who intends to be repaid at the simple rate of 10% for of the amount for the next one year on a quarterly basis.

Investor Interest

First quarter of year	6000
Second quarter of the year	6000
Third quarter of the year	6000
Fourth quarter of year	6000
Total amount paid back at the end of the year	12000

This means that one of the business’ expenses is the monthly 1500 which has to be set aside.

Based on the operating expenses and other costs of doing business, we require about 6000 pounds a month to maintain operations and also pay back the debt that we owe. If business goes as projected, the amount will be successfully repaid by the end of the first year of operations.

 

 

Profit and Loss account

For the month ending May 30, 2013

Item	Pounds	Pounds
Sales		7500
LESS:  Cost of Sales		2000
Gross profit		5500
Wages and salaries	1500
Interest on loan	1500
transportation	700
Bills (water and power)	500
Total expenses	4200	(4200)
Net profit		1300

References

Abrams, Rhonda, and Rhonda M. Abrams. The successful business plan: secrets & strategies.       The Planning Shop, 2003.

Castro Giovanni, Gary J. “Pre-startup planning and the survival of new small businesses:   Theoretical linkages.” Journal of management 22, no. 6 (1996): 801-822.

Honig, Benson, and Tomas Karlsson. “Institutional forces and the written business plan.” Journal of Management 30, no. 1 (2004): 29-48.

Karlsson, Tomas, and Benson Honig. “Judging a business by its cover: An institutional      perspective on new ventures and the business plan.” Journal of Business Venturing 24, no. 1 (2009): 27-45.

Leeds City Region. “Leeds City Region LEP: Investor Support-Food and drink.” Retrieved from             http://business.leedscityregion.gov.uk/invest/sectors/food-drink/ on March 30, 2013.

Timmons, Jeffry A., and Stephen Spinelli. New venture creation: Entrepreneurship for the 21st                 century. Vol. 4. Homewood: Irwin, 1994.

Vesper, Karl. “New venture strategies.” University of Illinois at Urbana-Champaign’s Academy     for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship        (1990).

 International Human Resources Management

Abstract

International human resource management is becoming increasingly important for the success of multi national organizations.  Presently, organizational forces have required that firms devise and implement global based strategies for the success of their businesses.  One of the   most crucial choices which IHRM practitioners encounter is whether to incorporate human resources regulations and practices in the regional context. International Human Resource Management Orientations (IHRMO) typology elaborates what IHRMO’s is and what is involved is established from reviewing literature from both this local and regional aspect.  The purpose of this study is to examine the inter-country differences which affect the IHRM. Some of the aspects explored include training and development, health and safety, payment systems, and the role of the human resource function.

Introduction

International human resource management (IHRM) is the practice of managing people across international boundaries by organizations that operate on the international level. In essence, it includes: the global management of employees and people and not just expatriates. The typical role commonly undertaken by a human resource manager includes: selection, recruitment, performance appraisal, dismissal, promotion management, training and so on. International HRM can be explained as a set of operations that are focused at managing the companies’ human resources at an international level so as to realize the company’s goals and achieve a competitive advantage over the competitors both at the national and international level (Marchington, 2013).  The typical functions of the IHRM may include: selection, recruitment, performance appraisal, training and development and dismissal function at an international level.  Other operations may include expatriate management, global skills management and so on (Spackman, 2010).

Differences between DHR and IRM

There are three types of employees managed at international level namely; home country employees, host country employees and third country employees. Among the significant differences   between the domestic HRM and international IHRM is that, domestic HRM is on national level while IHRM is on the international level (CFMS, 2010). Broadly speaking, international human resource management  perform the same functions  as those performed in the domestic HRM,  only that  in domestic,  these activities are performed within the boundaries of a nation. On the other hand, the international HRM performs these operations in at least more than three nations.   This is the country where the International organizations are based, the host nation where the unit is located and the countries where the employees or the human resources of an organization are derived.  This means that employees in an IHRM can be derived from the parent country, host nation, or a third nation (Saleeth, 2010).

 

Role of IHRM manager

International human resource managers are mandated to handle personnel issues that are associated to the foreign operations of an organization. In essence, IHRM operate worldwide in regions where there businesses are located. They assist in placement of employees who are expected to operate in oversees assignments. Other assignments may include:  preparing employees to working in international operations and translating the cultural and customs of the company in the host nations (Merkle, 2012).

Current Models of IHRM (in diagram form)

Adapted from Zheng (2011). “Towards An Extended International HRM Model for Emerging Multinational Enterprise” World Academy of Science, Engineering and Technology 53 2011. http://www.waset.org/journals/waset/v53/v53-17.pdf

Human Resource Planning Strategies (In diagram Form)

Adapted from Simpson, (2010). “Strategic HR Planning & Analysis Model”

Human Resources Systems Group

 

 

 

 

Inter-Country Differences in IHRM

How Inter-Country Difference Can Affect IHRM Practices and Policies

Human resource management practices and policies tend to vary from one country to another.  A study undertaken by Rao, (2010) was interested in evaluating the human resource management practices   in various countries around the world. The study offered snapshot for both the similarities and differences in the wide range of nations that were under study.   Aspects that were seen to be conspicuous were Cultural and Technological Differences.

Cultural Differences

Along with differences in nationality, people from different countries also have different cultures. Culture is the way of life of a particular group of people and national culture is hence the way of life of citizens of a particular country. In regard to Human resource management, culture has an effect on issues such as power-distance and also work ethic. Elements such as recruitment and training are also determined by cultural differences.

In this study it was found that employers tended utilize almost the same criterion for selecting their employees. In U.S for instance, employers tended to rank interviews.  The capability of a person in undertaking the technical necessities of the job and the proved   work experiences in a similar area are the methods that were employed   in this countries.  This behavior was similar in such countries as Latin America and Australia.   In these countries, the cultural differences showed a great influence across these countries. It was established that in Mexico, a top consideration for being hired   was based on having the right connection while in the People’s Republic of China, Korea and Indonesia, employee tests were regarded as one of the top three practices among the organization.  In Japan and Taiwan, one of the personnel selection criteria is the capability of an individual in getting along with others in the same company.  This criterion was not observable in other countries that were under study. With regard to the use of financial   incentives were seen to be counterintuitive.  The survey reveals that incentive plays a minimal role in US pay systems. Japan, the people’s republic of China is seen as playing a significant role.

Technological Differences

Like culture, technological differences that vary from country to country also have an effect on the manner in which the human resource aspect is handled. Technology is significant to the communication networks, transportation and also mechanization in the place of work. The technology that is in use in a particular country is also heavily dependent on the training facilities that are present in a country. When employing individuals form different nationalities, it is crucial that the human resource manager takes into account this factor since it can help in term of setting the necessary qualifications that need to be met. Some technologies require a special license to operate and it is thus crucial for the HR manager to ascertain this. Government regulations regarding the safety measures to be taken in the handling of these technologies should also be adhered to.

Legal or Legislative Factors

Different countries have different legal systems and this means that the part of the law that touches on employment will also differ. Issues of concern to international human resource management in this context include the minimum wage, employment age, taxation of salaries and also the rights of workers and those of the employer. Other elements that fall under this docket include the power of UNIONS and their membership. At times legally accepted ways of Dispute Resolution methods are also proposed by the law. In some countries, Industrial courts have the jurisdiction to rule on cases between employees and employers.

Industrial Differences

An industry is a collection of firms that supply the market with a similar product. Though the products may be the same, industry in which a firm’s work falls in may be categorized differently depending on the country being analyzed. Having an appreciation for this can be highly beneficial to a human resource administrator. Recruitment and training of personnel can be efficiently done with ample knowledge of this since positioning and placement of personnel will be tandem to the best practices that are already in application in the particular country.
Employment and Staffing in Finland and France

In Finland, there are about 125 000 employees who are either categorized as civil servants or employees under contract.  The municipal staff is also constituted of civil servants and those who are on contract in equal measure.  The ministry of finance is mandated for issuing policy guidelines with regard to the administration of state employees. The state agencies which are independent implement their own policies and personnel guidelines concerning human resource management aspects such as recruitment, vacancies, salaries and human resource development.   The central administration is mandated at directing and supervising the implementation process of the agencies through an approach of the management by results in their various policy fields (Khartoum, 2008, 26)

The department of service in Finland has a transparent recruitment system, clear and open employment qualifications for entry and also for promotion. The examinations required are the usual University tests. The rights and responsibilities of the state employees are clearly stipulated in the civil servants policies. The general terms and legal status of state employees are regarded as being the same as those of other employees. In Finland, the position is much more important that the career system. In other words, there is no elite system of education which has been initiated for the purpose of preparing “highfliers” in the civil employment system.  The terms of service and remuneration are stipulated by means of collective agreements identical to those of the private sector. The payment system (Khartoum, 2008, 27)

France

Public employees in France are contractual employees, civil servants, military staff and magistrates. The total number of civil employees is approximated to be 4.8 million which are categorized as state employees, local government employees, hospital administrative employees and workers for other public institutions. There are three educational levels which define the employment criteria and remuneration as well as the hierarchical level. These levels include category A consisting of degree materials, category C consisting of secondary school leavers and category C consisting of auxiliary staff.  Each of these categories is further divided into professional bodies. The civil service general service statute is the major legal foundation mandated for regulating all the civil servants with specific statutes have been initiated for each of these professional bodies.

Majority of public employees pursue a career system climbing steps within a grade on the framework of automatic seniority. In accessing higher grades of employment, in other words promotion, positive evaluation and success to the mandatory exam are needed.  Procedures for mobility such as job reassignment are available for those staff in higher category.  Civil employees belonging to some prestigious professional bodies or those who are in top management positions form the French higher civil service, including the staffs who are involved in designing policies. Informal membership in that category is not dependent on seniority. The top management rotates for each three to six years and is provided with some leave to work for a specified time in either private or semi public corporations. The government and employees are mandated to regulating the employee remuneration in the public sector. Civil employees in similar hierarchical level in each ministry and professional body obtain the same basic salary; where as the benefits and other bonuses differ for each of these professional bodies. Khartoum, 2008, 31)

Stora Enso is a worldwide paper industry which is based in Finland. The company has more than 32,000 workers and 85 production facilities operating in more than 35 nations worldwide. At Veitsiluoto Mill, all the reductions in the personnel that are deem necessary are conducted with respect to sensitivity and individuals on each of the employee needs. Staff changes are informed as the earliest stage possible. The required measures affecting employees are agreed upon together with the personnel. The companies’ employees are entitled to a safe and health work environment.  The management ensures that any abuse to employees be it psychological, sexual, harassment physical or abuse is kept at bar at the company.

The Veitsiluoto Mill incorporated the equality plan in 2001 which it continues to update regularly. The main goal of this plan is ensure that all employees understand the meaning of equality and how it should be taken into consideration.  When recruiting new employees, the company aims at upgrading the education level and the already existing employees have either individual or group related plans of development.  There are minimum education levels that are required for each new recruit depending on the task to be performed by both the blue and white collar workers. Additionally, the company and personal operation modes are developed  so  as to ensure that the tasks are varied, leading into the development of personal experiences  and the  support of working as a team ( StoraEnso, 2008,  18).

The human resource management at tiger brands is entailed with strategy development and execution, managing employees, commercial management, leadership, talent development among the employees, human resource management, Transformation, and company development.  Other functions of this departments includes: management of lip standards, skills development among employees such as the scorecard, reward and recognition programs, performance management systems, performance enhancement  systems , competency based recruitment , and leadership development programs (Kheswa, 2011). The HR function at Tiger is mandated to enable the organization achieve a high standard of performance culture.  It employs a combination of change management, capability development skills and organizational development in applying informed practice confounded from research in managing and implementing change. In addition, this organ is mandated to embed culture and values within the firm as continuous process (Kheswa, 2011).

  The main focus for the human resource management function at Adagio Paris Hotel in France is finding strategies that are aimed at recruiting and retaining the best employees. The company puts more emphasis on this aspect since they believe that employees and people in general, are the essence to offering an outstanding experience in hospitality sector. The management service at Adagio employs one of the profound systems in human resource including the success factors and people soft in recruiting and retaining the best performing employees and talented individuals.  The firm maintains sturdy relations with other firms in the hospitality industry and are accredited leaders in recruitment through the internet as well as electronic applicant tracking.  By use of updated databases, the management is able to track costs related to   drug testing, turn over statistics, as well as background research (Tripadvisor, 2013)

Health and Safety in China and Dubai

In accordance to the Chinese ministry of health, there were 13,218 cases of occupational illnesses in 2001. This was an increase of 13% in 2000.  Among these population, 2,355 passed away owing to the occupational damage. This only provided the iceberg of the health hazards that are extant in many workplaces in China. The actual situation may be even worse than that.  For instance, a report on the occupational health of employees, business enterprises, and autonomous regions in the country pointed out that the state owned enterprises that provided workers with protective equipments were 78%; employers for state owned enterprises were 57.2% while their private counterparts were a paltry 1.9% (SU, 2003).

In the present perspective, the health professionals place much emphasis on the status of occupational health and safety conditions.  Other sectors such as labor rights, multinational organizations, local factory operators and many Chinese workers have until recently put more emphasis on safeguarding occupational health and safety conditions. Owing to this aspect, China has developed as a world’s “factory floor “(Brown et al, 2012)

Saic Motor which is an organization based in China emphasizes on identifying the most efficient technologies that could be used in improving the efficiency and safety of the transportation system. The company develops measures in mitigating the potential threats and vulnerabilities within a significant system. At Saic, engineers are responsible for ensuring the safety and health regulations of the state are adhered to.  These personnel are mandated to evaluate the effectiveness of the transportation system by assessing the usefulness of the new designs through focus groups, interviews, and detailed simulations by use of the representatives of the human subjects (SAIC, 2013).

An examination of Apple, which is  a Chinese industry  manufacturing  iPads and iPhones  shows  serious concerns  with regard to the excessive working hours,  failings in the health and safety,  unpaid overtimes  and the interference of management  in trade unions.  In a most detailed public investigation by the independent labor association, more than half of the employees at this firm are being overworked. The auditing firm revealed that there were lack of protective tools and equipments, missing permits and blocked exits in the factory. On the other hand, the company management was found to be   biased in selecting candidates for placement in worker committees with the indication that these committees are not constituted by those who require representation,   but are dominated by the representatives of the management.  This aspect has left some workers feeling alienated and has diminished confidence in safety procedures (Garside, 2012).

 

The labor laws in Dubai involve a clear set of   safety regulations for employees working in each ministry.  For instance, construction and industrial workers are not allowed to work in the case when the environment becomes too hot.  This is an attempt at curbing injuries related to heat.  Workers in all sectors are allowed to work two hours less the normal ones during the month of Ramadan.  The Dubai municipality is mandated at overseeing safety   and health regulations. Those not following the stipulated laws and regulations are subjected to fines and penalties.  The Dubai municipality regulations differ for each organization and deal with issues such as environmental permits for different sectors, hazardous waste, the import of dangerous goods and environmental building codes (Dubai, 2013).

Safety and health is arising concern for many company in Dubai such Lube Oil. In 2004, Luke Oil aligned itself with the occupational safety and health administration so as to protect its workers from factory hazards in the production industry and designing means   of reducing potential health risks from lubricant and oil exposure as well as the metal working fluids. The alliance also emphasizes on establishing education programs, proper and safe use of oil products by its clients (High Beam, 2011).

Training and Development in Germany and Spain

The federal ministry of labor and that of education and research collaborates with the management of many organizations and in the field of training workers. The ministry supports German providers of training in developing the nation’s workforce in the local and international perspective. It has been noted that both the labor and education department in German and Spain have reached a particular agreement in promoting youth employment.  These agreements are established in a memorandum of understanding signed by the German federal minister of labor and social affairs and Spain labor minister. The objective of that memorandum is to work together in fostering youth employment. The collaboration between the two nations mainly focuses on international labor market polices as well as vocational training (Federal ministry of education, 2013).

Taking and example of Adidas, a German based corporation, the company considers its workers just like athletes who require constant training.  According to the management, employees at Adidas are provided with training and coaching program in building their strengths, overcoming their own challenges and improving their methods of realizing their objectives.  Training and development are some of the talent management tools the company considers in shaping the skills and experiences of these employees (Adidas, 2013). Endesa is another company based in Spain. In this corporation, employees are regarded as being as one of the major strategic assets of the corporation. Therefore, the company emphasizes on training as the key element for developing talents within the business structure. This training is normally adapted to the present and future needs of every worker in the organization. Moreover, the company is constantly in the process of constant improvements and the utilization of the most relevant and modern methods of initiating better and effective programs to the needs of the participants.

Payment/ compensation in India and Ireland

The Irish civil service is a common grading and pay system in Ireland. All the sectors and departments approach the grading systems in a similar way.  There is a central mechanism which determines each grade.  The rationale for this arrangement is promoting and preserving an impartial and independent civil service. There is however a fundamental question on the HR policies and regulations on whether these polices and regulations are still relevant or desirable (IPA, 2008).

In India, the reserve Bank of the state is mandated to oversee the payment systems in that country.  The reserve bank consistently strives towards making sure that the payment system runs smooth. The regulation of Payment and Settlement Systems board is charge of regulating these systems. The payment system in that country is regarded as one of the most essential components of a financial ad economic system in that country.  Since the payment systems are considered essential components of a financial system, the bank have opted t devised innovative ways of to make payments systems more efficient. The BPSS has tried to influence a change in the method of payment, from paper to electronic.  This is due to the fact that electronic means are considered to be both safer and efficient. Efforts are consistently being deployed to alter the people’s mindset and making them to turn into electronic payment systems (Business in Indian Banks, 2009).

On the other hand, the financial systems in Australia constitute a set of arrangements which cover the aspect of borrowing and lending of money. In addition, it also includes the transfer of ownership of financial claims.  The various sectors of the financial systems in this country include: banks, insurance, superannuation, financial markets, and the payment systems. With regard to the payment systems, there are several of them that are in use in Australia.  The Australian clearing association is mandated to oversee these payment systems. They include: cash, cheques, direct entry, EFTPOS and ATM, BPAY,  high value payments,  credit cards (VISA, master Card,  Diners Club) (Reserve Bank of Australia, 2009).

 

Functional Flexibility

Functional flexibility is the ability of a firm to move its workers to other responsibilities and duties   within that organization. It reflects the capability of an organization in adapting to the changing circumstances and also the requirements.  Apparently, Functional flexibility   is influenced by issues such as the management, training and outsourcing (Business Dictionary).

The concept of functional flexibility is normally perceived as a balance between the flexibility and security requirements of both employees and employers. This aspect has currently moved center space in the present European debate with regard to the upgrading of employment regulations.  The new flexibility model is poised to surpass the trade off between security and flexibility through adopting measures which take into account the consequently conflicting objectives at the same moment (Eurofound, 2008b). Flexibility is therefore an intergraded strategy adopted by many firms in Europe (European Commission, 2007a).

The concepts of flexibility and security warrant a further explanation and consideration. In this perspective, flexibility is concerned on successful transitions in the life cycle of the realities in work, on one side, economic inactivity, unemployment, job transitions, and retirement on the other hand. Flexibility seeks to facilitate the advancement of workers into better jobs and also mobility in upward directions. In addition, this concept also assists a lot in the optimal development of their careers and talent. Flexibility is concerned on the flexible work organizations that are able to counter the new needs in production, master of new skills and adopting new business models. Moreover, it concerns itself on stronger involvement of employees with regard to decision making plus enhanced autonomy in relation to their jobs (Wächter, 2004).

 

Time Flexibility

Time Flexibiltiy is another type of internal labor flexibility.  This means flexibility with regard to the time of work, in other words, working around the clock through shift work or some moment in a day, week, month or year. On the other hand, it may mean flexibility  during the course of the week, for instance in the case of part time employment contracts in comparison to full time employment contracts. Flexibility in work time could also be established during the course of the entire working life through issuing of leave schemes.   A research that was done recently on working time at organizational level distinguished between working time arrangements that were influenced by organizations necessities and arrangements in working time influenced by the needs of the employees (Chung et al, (2007). Apparently, organizational oriented flexibility could be related to economic development though improved company performance. On the other hand, employee oriented flexibility is related to social cohesion through enhanced work life balance at various phases in life.

Various researchers have tried to explore into the concept of flexibility by looking at the links between functional flexibility and numerical flexibility.  These researchers have attempted to figure out and explain on how companies are able to acquire these aspects concurrently. This could in turn result into a competitive advantage. Kalleberg (2001) observes rightly that the link is realized by use of the core-periphery model.  A study carried out by Tarique and Schuler, (2008) analyzed 178 responses from employers plus 245 from employees.   The finding of this study clearly reflected that of Kalleberg’s hypothesis that core-periphery model can not be accurately used to represent how organizations plan for their manpower.  Also the findings could not support the theory that it was paramount to have a category of employees who were lowly paid, low commitment and insecure jobs so as to protect a core category of employees who were effectively committed and who enjoy their employment when coupled with flexibility.
Conclusion

With the ever increasing number of organizations going global, demand for qualified, professional and informed International Human Resource Personnel has skyrocketed. This is because many an organization have flopped and lost millions of dollars because of poorly orchestrated internationalization strategies. These failures have served as valuable lessons to multinational organizations that are continuing to expand. When they do so, they have to engage the locals in employment and at times bring in professionals from other countries. As illustrated above, this is not a simple affair and as a result an increased importance of IHRM specialists who act as guides to the organization so as to ensure profitability through the firm satisfying its obligations to its international employees and any government that may have a stake in the same. This translates to increased productivity and profitability.

 

 

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                                     Risk Analysis and Management of Solar Star Air.

 

Introduction

Solar star initial launch and success depends on a number of assumptions just like all other business plans whose probability of success are based on a number of events going exactly as planned. The assumptions made range from interest rates, market growth, consumer and competitor’s behavior, exchange rates, etc. These assumptions may have been based on realistic values and conditions but the actual results may be different from what was predicted initially. What happens if the differences have very serious impact on the existence of the business? To provide provision against these unforeseeable factors contingency plans are also included in the business plans.

Economic factors that may affect the implementation of the Sola Star project include; Recession and high interest rates may affect the profitability and eventually the growth of solar star project. During recession the volume of sales may drop significantly just as much as the interest rates may rise. These events may lead to disastrous effects if they are not provided for in the budgets. Inflation may also affect the business in the same way. (Duncan, 1996)

1. The large initial capital investment that’s needed by Qantas to develop and implement the Solar Star project will be challenging to obtain. These funds are meant to be invested in a project that is targeting a market that is still new and the nature of the projects performance has never been tried anywhere else before. There is a lot of uncertainty in the market as the project still under trial. (Crouhy, Galai and Mark, 2001)
2. The over reliance on Quantas air to fund all the Solar Stars preliminary expenses and initial investment is a risk that Solar Star cannot afford to ignore. In the event of unforeseen events interfering with the funds of Quantas, the Solar Star project will be negatively affected. The risks of overreliance on Quantas to fund Solar Star can be reduced by providing a provision or a reserve that can be used to finance the operations of Solar Star.
3. The consumers concerns about safety and reluctance to embrace the concept of using Solar Stars Planes that are propelled using Solar Cells need to be addressed and their confidence restored on the use of the these planes that have been specifically designed to conserve the environment.

3aThe customers have to be reassured that before an airplane is licensed to carry passengers its degree of safety has to be at par with all other planes in the market just as much the Solar Star will be using a new technology to fly buts its safety standards remains at par with all other airlines. All the various parts of the plane have to be independently checked before they are fitted to the plane. http://solarmagazine.com.au/news/solar_ventilation_devices_compared_and_contrasted

Political factors may prevent the implementation of the project. For instance if the government refuses to grant Solar Star a license to operate in Australia or refuses to renew grants that were critical to the project, then it would be a serious set-back to the implementation process. Increase in taxes and exchange control rates may also affect the implementation process.

Issues and public opinion may also affect the ultimate demand of the potential product. Public opinion can affect the demand of a product and even face off the product from the entire market.

The underlying product technology could become obsolete and be superseded by other forms of advanced technology hence the need of a very strong research and development department.

3c.The threat of obsolescence can be addressed by reassuring the customers that the Sola Star technology is a long term project that will still evolve into even better offer in future. The backing by the government of Australia to fund part of its research and development costs is one way of assuring the potential customers that its confidence ratings are very high and that the government is willing to invest its funds in the project.

 

 

Lawsuits may arise challenging the business ownership rights in case of trademarks and other intelligent property rights. These cases may delay the implementation or even cost the management of the project extra costs that were not budgeted for in the project. These cases can be handled effectively by insuring against these cases and also by creating a contingency reserve fund. (Dorfman, 1997)

4. Production failures may interrupt the operations of the implementation project. For instance, problems in obtaining spare parts and other essential components may ground the operations of the project.

The quality of service may be below the expectations of the customers who may opt for other services from the competitor’s side. These may be demoralizing to the staff and the management who may feel discouraged by the resulting low sales. (Haimes, 1998)

Solar Star investment business plan may require a SWOT analysis to determine its strengths, weaknesses, threats and opportunities. It will assist in analyzing risks, identifying and adopting a strategy while also restricting the business processes. (Simmonds, 1981)

Solar Stars major strengths are its strategic partners, its overall profitable venture that has never been tried before and which may basically gain customers out willingness to be related with the noble idea of preserving the environment. Its expected low prices and maintenance costs is expected to give it advantage over the rest of the companies in the same field. While its weaknesses are the many threats of obsolescence and the threat of customer dissatisfaction with the overall business idea of using solar to propel huge planes. The opportunities that exist in Australia are many and diverse. Australia is one of the world’s largest economies sitting at number thirteen. It has a GDP of $1.4 trillion with an economic growth of 3.25% both in the year 2012 and 2013. Australia has a per capita of $60000. These economic conditions make it a world class investing destination for any multination corporation. It’s an opportunity that any planned business can succeed. Also the prospects of environmental protection associated with Solar Star project make it most customers preferred choice. The major threat to Solar Star existence is the prospect of obsolescence associated with solar technology and its ever changing advancement innovations. The rapid changes that keep on developing relegate earlier advancement to the back seat as the new innovations take effect.

Risk analysis and management
Risks	Impact	Likelihood	Risk level	Risk treatment	Residual risks
1	Costly Capital	average	very high	low	Insurance	None
2	Safety	High	Average	Average	Assurance	Low
3	Overdependence	High	High	High	Diversification	None
4	Supplier Risks	Very High	Low	Average	Diversification	Average

 

To conclude, the risks can be summarized as tabulated above. The costly capital that Solar Star relies heavily on Quanta’s air to subsidize has an average impact on the overall business as Quanta’s air has assured Sola Star that it will finance the project. The likelihood that the high capital will affect the business is very high as the loan has to be paid back. The treatment of this option is to insure the loan plus the interest. After the payment of the loan however the business will operate smoothly as planned unless it’s affected by an act which is unforeseeable at the moment, currently it has no residual side effect.

Safety has a high impact on the operations of Sola Star at the moment. Most people generally have a salient fear of new innovations and they may need assurance that the technology is safe and it’s completely reliable. Once the customer’s confidence is assured then the issue of safety will be resolved.

The overdependence on Quanta’s air is also another problem. In the event that the management of Quanta’s air is replaced with other managers whose opinions are not similar with Solar Stars philosophies then the whole project will crumble. Solar Star needs to diversify its resources and back up plans in case of any eventualities.

Supplier risks are the highest risks in Sola Star’s risk management profile. The Solar Star concept is a new technology and the management of the project relies heavily on a number of suppliers who are limited in numbers given that the project is relatively new. The threat of new development in the ever changing technology may relegate the suppliers to the back seat unless they also embrace the technology and change according to the new innovations. These events may lead to lack of spare parts for the Sola Star project unless they get assurances that they (suppliers) are committed to the long term existence of the project. Solar Star also needs to source more suppliers who can also produce the spare parts at reasonable costs.

 

 

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Management, Project Risk Management, Upper Darby.

Haimes, Y., Y., (1998) Risk Modeling, Assessment and Management, John Wiley & Sons, Inc.,

New York.

Simmonds K., (1981) The Fundamentals of Strategic Management Accounting, London.

http://solarmagazine.com.au/news/solar_ventilation_devices_compared_and_contrasted/062913/

Alternative Energy Sources

The demand for energy across the globe will double by the year 2050 (International Energy Agency, 2006). Indeed, energy will continue to be a major component in powering economic activities in all societies. However, with the finite nature of non-renewable sources of energy, it is imperative that governments start investing in renewable sources of energy. This will ensure infinite sustainability of economic activities. Therefore, turning to natural means of generating energy through renewable technologies is one way of reducing the continued reliance on fossil fuels. There are significant benefits of using renewable energy compared to hydrocarbon fuels. First, they are economically viable and have less effect on the environment. In addition, they provide a good source that ends human dependence on finite fossil fuels. Therefore, countries can achieve the objective of healthier and clean environment by shifting to the use of biomass, biodiesel, Wind Energy, and Solar Energy. These sources are critical as they reduce global warming because of low carbon emission, as opposed to fossil fuels. This paper will focus on each of these sources of energy, analyzing the advantages as well as shortcoming.

Biomass

Biomass, as the term suggest, is the fuel that is derived from living organisms, which includes plants and animals. As a renewable source of energy, biomass can be used directly or directly. It can also be converted into other types of fuels such as biofuel. The use of biomass signals a brighter future because of the many benefits compared to conventional sources of energy (Brenes, 2006, Gehrke, 2009).

Concerns

Although biomass is an infinite source of energy, it potent some challenges to governments. It is feared that their use could lead to starvation because of using more land to produce energy crops instead of food crops (Brenes, 2006). As more people demand more land to raise crops fro producing biomass, there will be less land available for farming, housing, and agricultural land use. In addition, there is no wastage in the process of making biomass because only the oils are used in the production of energy, and oils cannot be considered to be food. The other concern is that biomass can lead to the destruction of natural ecosystems. Quintessentially, this means destroying the environment. However, this is not the case because the trend is shifting towards raising animals and crops for the sole purpose of producing biomass.

Positives

The use of biomass as a renewable source of energy comes with many benefits to societies. Biomass fuels can be produced in any country since they rely on widely available plants and animal wastes (Brenes, 2006). Theoretically, it is a source of fuel that can never be exhausted. This means less reliance on fuels from foreigners because; not all countries have oil reserves. In addition, biomass reduces wastage of energy compared to fossil fuels. This is because a small amount of input material is required in generating fuel. Moreover, the energy crops that are used in generating biomass have a 1 years cycle period. Plants can use up carbon dioxide emitted when biomass is burned, thus minimizing carbon emissions. Reduced carbon emissions mean less global warming (Brenes, 2006). Therefore, biomass is helpful in reducing the threats posed by climate change. The greatest benefit of biomass is that they burn safely, and this reduces pollution significantly.

Biodiesel

Biodiesel is a clean substitute of petroleum diesel that is produced from vegetable oils, animals’ fats, and recycled greases. It is safe to use and has less pollutants than petroleum diesel. The use of biodiesel in vehicles improves public health and the environment compared to fossil fuels. In addition, reduces engine wear by almost 50% compared to fossil fuels (Pahl, 2008). The reason is that biodiesel can lubricate many moving parts of the engine, thus increasing the engine life (Pahl, 2008). The product is also less toxic and has relatively less damage compared to petroleum diesel if exposed or released to the environment. Biodiesel can be made form anywhere in the world from a wide-ranging variety of ingredients. One important feature of biodiesel is that it can be used in any diesel engine without any modifications.

The natural availability of biomass is a great advantage over fossil fuels. They form an incredible source of fuel, thus lessening the dependence of limited fossil fuels. However, large-scale production has not been realized to match the amount of fossil fuel being generated daily. This long-term goal requires more investments. Nevertheless, the effort is worthy as the world will continue being safer as people shift to renewable sources of energy.

Wind Energy

Wind energy, as the term refers, is energy sourced from the wind. It is harnessed by turning the wind turbines to produce electrical energy (Rivkin & Silk, 2010). Wind is moving air whose motion is brought about by the suns’ heat energy. The wind turbines make the kinetic energy possessed by wind change or turn to mechanical energy, which in turn can be used, for other purposes like pumping water or in generators to produce electricity for lighting homes or running machines. The turbines, which are like propellers, are connected to a shaft, which in turn is connected to a generator, which produces electrical energy.

Wind energy is a renewable form of energy, which is cost effective, clean and can be used in place of other forms of energy like nuclear energy (Rivkin & Silk, 2010). Wind energy is a non-pollutant to the environment, and has continued to offer energy solutions in most parts of the world like the Middle East. The medieval wind machines are these days replaced with the modern ones that produce electricity, which is cost-effective, clean, and renewable for individual and industrial use (Wallace & Adler, 2008). It is argued that due improved technology and reduced cost of electricity from wind, most parts of the world like America are adopting to this source of power as a supplement to other forms of energy for industrial use. However, in the developing countries the production of this form of energy in bulk is not pronounced, since the little that is produced is only for small-scale use like water pumping, television, radios, and lighting. It is not self-explanatory or automatic that wind is used for energy production. The theory behind this is that, the global wind pattern is varied (Turk & Bensel, 2011). The variations of solar heating on different parts of the earth brings about differences in temperature on land, seas, mountains, and valleys which off course may affect the movement of air from one region of the earth to the other. This is because heated air becomes less dense and tends to rise and its flow can be affected by the terrain of the ground and other features like buildings and vegetation that slow down its speed. Wind of low speed may have little impact on turning the wind turbines (Rivkin & Silk, 2010). The result is low power or none at all.

Concerns

Despite the fact that the wind energy is a renewable form of energy, there are major concerns associated to planning the establishment of such a plant. They range from interference of electromagnetic waves; which carry communication signals, noise nuisance from generators to visual crash since most wind machines are big and so they tend to cause obstruction. Economics on cost of production is yet another concern. Despite the point that cost of running the machines is low, the cost of installation is very high owing to the point that wind blow depends on regions on the surface of the earth (Turk & Bensel, 2011). Therefore, if the installations are merely for domestic use then this mode getting energy may not be cost effective. On the other hand, the wind plant requires a spacious land to install, which is a limitation to most developing and industrialized countries where idle lands are a big challenge. Therefore, if every home had to fit a wind plant then the whole project becomes cumbersome. Even if some of the materials can be made locally like rotor blades, the cost remains high especially if the plant cost recovery is not subsidized by commercial uses like pumping commercial water, and grinding grain (Turk & Bensel, 2011).

Wind farms have been on the decrease due to increased taxation. This is because the tax is levied on the amount of power output. Owing to the cost of installation, the expected commercial benefits/returns, and taxation, the imbalance of the three parameters has stalled down or decreased the number of wind farms.

Positives

Although the installation costs can be essentially high, wind energy can replace electricity easily, minimizing the reliance on oil and natural gas. In addition, wind energy can be harnessed without the use of turbines. These benefits make it more viable than fossils.

Solar Energy

This energy comes directly from the sun. The sun is the most useful source of renewable energy. Indeed, the other forms of energy rely on the sun. For instance, biomass cannot be there if the sun was not there inn the first place. Plant life relies on the sun for their growth. One of the most obvious advantages of solar energy is that it does not emit greenhouse gases (World Bank, 2009). This makes it friendly to people and the environment. As countries rush to meet climate change obligation, solar energy provides a good platform for achieving such an objective.

Concerns

The major concern pertaining to solar energy is pollution, which emanates from fossil fuels. It is likely that the energy from the sun could be affected by the pollution from fossil fuels. However, as the world moves towards the use of renewable sources of energy, such concerns might diminish with time (World Bank, 2009).

Positives

Solar energy is one of the most abundant sources of energy. Besides, it is also critical in the generation of other forms of energy. Without the sun, life would simply not be there. Therefore, the generation of biomass, wind, and ocean energy all depends on the sun. Moreover, the sun also provides a secure and clean source of energy in homes and for industrial use. In addition, solar energy does not require raw materials like coal and oil. Besides the installation costs, every other thing is absolutely free (World Bank, 2009).

In summary, solar energy has been used for many years. Solar energy has been popular over the years. Indeed, the benefits of solar energy will continue to lower the costs associated with fossil fuels. Besides, many people have found meaningful employment through solar energy generation efforts. Its continued use will significantly lower reliance on fossil fuels (World Bank, 2009).

Geothermal Energy

Geothermal energy is derived from the hot rocks underneath the earth. The fission of radioactive materials in the earth’s core and some places within the earth’s crust becomes extremely hot, which cause the water in the earth to become steam. Because of compression, the steam formed under the ground gushes out of the earth in the form of hot springs. The hot springs generate geothermal power (World Bank, 2009).

Concerns

Geothermal does not rely on the sun in any way to generate like other forms of renewable energy. However, the major concern is that hot springs need to be insecure environments. Besides, current technologies are deficient in extracting geothermal power at most places (Gupta & Kukanta, 2011). Without proper supervision, the host springs can be disastrous to those who go near them.

Positives

Geothermal power reduces the effects of global warming as lesser greenhouse gasses are emitted in harnessing the energy. Geothermal power requires less space to harness and maintenance costs are relatively less (World Bank, 2009).

In summary, geothermal power is useful in minimizing global warming. It can meet the needs of a secure environment as it reduces emissions to the environment. Besides, geothermal power does not have any wastages or by-products that can harm the environment.

Conclusion

In summary, this paper has addressed the challenges posed by non-renewable sources of energy in running economies. It is clear that fossil fuels cannot run forever. It calls upon people to look for other options of generating energy to meet their needs. Therefore, governments should invest in renewable or naturals sources of energy. The use of renewable sources is paramount as their use is indefinite. In addition, natural sources of energy do not have adverse effects on the environment, compared to fossil fuels. As highlighted above, there are many sources of renewable energy, and these will greatly minimize the reliance on fossil fuels. Moreover, the threat posed by fossil fuels on human health will significantly reduce as people revert to natural energy. Indeed, the quality of life on earth, as well as the overall well-being of all people is dependent on a healthy planet. This can only be achieved by the safe generation of energy. It is from this understanding that governments should formulate policies and provide the necessary frameworks for harnessing the natural sources of energy.

Although the dependence on fossil fuels can be minimized by the use of renewable energy, it is clear that the resources needed to enjoy the full benefits of renewable sources are enormous. This because there is no liquid fuel that can replace oil, in terms of scale and usage. Fossil fuels production and use is widespread. Therefore, long-term technologies for the production of renewable energy to match the current levels of fossil fuels are far from being realized. However, current trends focus on that direction.

 

References

Brenes, D. M. (2006). Biomass and Bioenergy. New Research. New York: Nova Science Publishers, Inc.

Gehrke, R. (2009). Renewable Energies for Your Home: Real World Solutions for Green Conversions. USA: The McGraw Hill Companies.

Gupta, K. H. & Sukanta, R. (2007).  Geothermal Energy: an alternative resource for the 21^st century. Oxford: Elsevier

International Energy Agency (2006). Energy Technology Perspectives: Scenarios& strategies to 2050.New York: OECD Publishing

Pahl, G. (2008). Biodiesel: Growing a new energy economy. Washington, DC:  Chelsea Green Publishing

Rivkin, A. D. & Silk,L. (2010). Wind Energy. Burlington, MA: Jones & Barlett Learning

Turk, J. and Bensel, T. (2011). Contemporary Environmental Issues. Retrieved from: https://content.ashford.edu/books/AUSCI207.11.1/sections/fm

Wallace, M. & Adler, B. (2008). The Ways We Will be 50 Years from Today: 60 of the World’s Greatest Minds. USA: Thomas Nelson

World Bank, (2009). World Development Report 2010: Development and climate change. New York: World Bank Publications.

Nuclear Power

Chernobyl and Fukushima nuclear disasters

The Chernobyl and Fukushima nuclear disasters are considered as the worst nuclear plant accidents in history. Indeed, they have been classified as level 7 on the International Nuclear Event Scale. The Chernobyl plant accident, which occurred in resulted from the poor design of the facility. In addition, the workers did not have adequate skills to handle the catastrophe. As a result, the radiation from the plant led to a loss of about 30 people according to Soviet officials. However, the figures could be higher. More workers were required to contain the disasters with over 18 billion rubles used to cater for costs. Cases of cancer and deformities resulting from radiation from the nuclear facility continue to be reported. The Fukushima Daiichi nuclear disaster was occasioned by the Tohoku earthquake and Tsunami on 11 March 2011 (Buck, Upton & Folger, 2011). There were no human errors in design, and the cooling systems were well above those of Chernobyl. Although many people lost their lives because of the earthquake and Tsunami, no deaths have been reported concerning radiation from the nuclear plant (Buck, Upton & Folger, 2011). Indeed, radiation from the plant was significantly low compared to the Chernobyl case. Overall, the Chernobyl and the Fukushima nuclear plant provide vital lesson for as people move towards the use of nuclear energy (Buck, Upton & Folger, 2011, Turk & Bensel, 2011). The necessary safeguards must be put in place and safety upgrades are necessary on the nuclear plants.

Drawbacks of using hydropower and nuclear energy

Hydropower plants can significantly alter the geology of a place. It can also lead to massive dislocation of people and animals to build the dams and other facilities. Moreover, if a dams breaks, it can lead to massive loss of lives. However, compared to nuclear plants, dams are relatively cheaper to build. Dams do not require fossil fuels to run. Therefore, hydropower provides the cleanest form of energy (Miller, 2011).

On The other hand, the disaster of the two nuclear plants provide a platform for engineers as well as scientists to evaluate the risks and benefits that accrue from nuclear energy plants in a way that satisfies the curiosity of all people (Ingram, 2005, Turk & Bensel, 2011). However, the major risks factors are radiations from nuclear plants, and management of nuclear waste. It is estimated that materials waste can take up to 500 years before they become useful again (Miller, 2011). The facilities require huge sums of money to erect, more than would be required to build a dam to generate hydropower. The resources needed to contain any accident are enormous compared to hydropower. In addition, care must be taken to shield people, animals, and the environment.

Indeed, all types of energy sources have inherent risks as well as benefits. For instance, in 2010, 11 workers lost their lives in the Deep Water Horizon oil platform (Kilroy, 2010). In the same year, 29 workers lost their lives at the Big Branch Coal Mine (Kilroy, 2010). As if that is not enough, a natural gas pipeline occurred in California claiming eight lives and displacing hundreds of thousands of people from their homes (Blatt, 2011). The building of the Hoover Dam in the US triggered several earthquakes that led to massive geological damages. These statistics are glaring and tell a story in a big way. Every source of energy has its own benefits and risks. However, it is up to the engineers, scientists, as well as governments to put in place enough safeguards to minimize the risks that go with these plants (Ingram, 2005). For instance, the low-lying rooms in the Fukushima plant would not have been flooded were it not for the Tsunami. Therefore, engineers should take cognizance of any event that might hinder the operations of a plant.

In summary, the Fukushima nuclear plant and the Chernobyl nuclear meltdown are two poignant instances in the energy generation sector. Several lives were lost because of radiation from Chernobyl accident. This proves the inherent risk in using nuclear energy as a source of energy. Although no one lost his or her live in the Fukushima plant, this is not enough reason to wish away the incidence. In addition, nuclear energy is a safe way of generating energy because of few risks to the environment compared to the use of fossil fuels. On the other hand, hydropower provides the safest and cleanest form of energy, compared to nuclear energy. The biggest problem of nuclear energy is the long-term risks from waste materials and radiation. In addition, nuclear plants are more expensive to build than dams.

References

Blatt, H. (2011). America’s Environmental Report Card: are we making the grade?.New York: The MIT Press.

Buck, H. E. Upton, F. H. & Folger, P. (2011). Effects of Radiation from Fukushima Daiichi on the U.S. Marine Environment. London: DIANE Publishing.

Ingram, S. (2005). The Chernobyl Nuclear Disaster. New York: Facts on File, Inc.

Kilroy, J. (2010). Deepwater Horizon Rig and Upper Big Branch Mine Suffered Similar Safety Negligence. Retrieved from http://tenthmil.com/campaigns/policy/deepwater_horizon_rig_and_upper_big_branch_mine_suffered_similar_safety_negligence

Miller, K. (2011). Nuclear Power or Hydropower? Hydropower is best in the end. Retrieved from http://voices.yahoo.com/nuclear-power-hydropower-9129357.html?cat=58

Turk, J. and Bensel, T. (2011). Contemporary Environmental Issues. Retrieved from: https://content.ashford.edu/books/AUSCI207.11.1/sections/fm

 

Analysis of DS Smith Plc

Part 1: Recent financial management developments in the company over the past three to five years

DS Smith Plc is an office products wholesaler and a supplier of recycled packaging materials for consumer goods has attained global presence. The company employs over 20,000 people in 18 countries where it operates and has revenue of £4 billion. However, the company is a group of companies whose operations are mostly in the paper and furniture products, and the Group’s strong market positions in combination with its focus on cash generation and cost competitiveness has provided a robust base which it uses in the confrontation of today’s business environment that has become very challenging with a goal of achieving tremendous benefits from future economic recovery (DS Smith Plc, 2012).

Investing

DS Smith Plc has made significant investments over the past five years in addition to some disinvestments as its strategy to achieve market competitiveness through improved efficiency and cost efficiency. Thus, as a result of these strategies DS Smith Plc has attained financial strength which has enabled it to make significant and continuous investments in all the areas of the Group’s operations. For instance, in 2009, the company’s paper segment invested over £100m towards purchasing and rebuilding of PM6 at Kemsley Mill aimed at making lightweight CCM papers, the only one based in UK (DS Smith Plc, 2012).  Recently, DS Smith the company has invested in the same facility to develop a White Top Test Liner production to facilitate utilisation of white recycled pulp produced at this facility too. This has been done to produce this new product envisaged to be of the highest quality and provision of a whiter, cleaner and brighter liner paper. According to financial theory these investment have been made in order to achieve market efficiency and competitiveness as well as cost effectiveness (DS Smith Plc, 2012).

In September 2010, DS Smith Plc completed acquisition of Otor, a company based in France that deals with corrugated packaging materials in order to make DS Smith Packaging France a market leader in the provision of consumer goods’ corrugated packaging. Moreover, over the past five DS Smith Plc has only one major disinvestment where the company completed to disposal of Spicers which was one its facilities concerned with office products wholesaling for £200 million to Unipapel SA in December 2011. From the perspective of financial theory, this move was aimed at making the company more competitive in the market as a result of improved efficiency (DS Smith Plc, 2012). Furthermore, on 30^th June 2012, the company made another significant investment through acquisition of Svenska Cellulosa Aktiebolaget (SCA) Packaging for about €1.6 billion, and SCA Packaging. These investments have made the DS Smith Plc a key market player through extension of market presence and increased market competitiveness through improved efficiency and cost effectiveness.

Financing and Capital Structure

Financial and capital structure of the company involves obtaining of funds from various sources of cash such as operating cash flow, shareholders’ equity, borrowing as well as where appropriate disposals of non-core businesses. The Group’s financial and capital structure has over the past five years been undergoing adjustments to ensure it aligns with financial theory and it enables the achievement of its objective for desired results in capital structure through an appropriate capital costs while providing flexible funding both for immediate and medium-terms for the accommodation of material investments or acquisitions (DS Smith Plc, 2012). From the perspective of financial theory, the Group’s financial and capital structure has been aimed to achieve and maintain a balance sheet that is strong towards providing continuous sources of financing through availability of a variety of maturities as well as borrowing from diverse sources. Also this has been motivated by the Group’s strategy to achieve overall treasury objectives such as to ensure availability of sufficient funds to facilitate management of financial risks. The Group’s Treasury Committee is usually involved in controlling the treasury strategy.  Moreover, the main borrowing facilities for the Group are varied, and as at 30 April 2012, total committed borrowing facilities were approximated at £1.5 billion. Furthermore, at the same time the company’s total gross borrowings (derivatives included) at were about £331.5 million, and the weighted-average maturity for its borrowing facilities was four years and eight months compared to the previous weighted-average maturity for its borrowing facilities of four years and two months on 30^th April 2011. No major changes in the Group’s financial and capital structure that have occurred in the recent past (DS Smith Plc, 2012).

Dividends

The Group’s dividend payments have been undergoing a positive trend that is noteworthy because it’s only some companies in the industry of Paper & Paper Products that over the past five have managed to pay any dividends. In addition, when the dividend payments over the past five years measured on annualized basis are considered, both earnings per share and dividend per share growth ranks relatively better among its peers in the industry (DS Smith Plc, 2012). However, when the total dividends declared to be paid to the Group shareholders in each of the financial year are considered a positive trend is observable from the year 2010. Thus, given as percentages total dividends per share from 2008 to 2012 are give as follows: 8.8, 4.5, 4.6, 6.5, and 6.3 respectively. A notable negative change can be observed between 2008 and 2009, and it is attributable to the global financial crisis that affected all the companies internationally. Apart this significant observable change, it can be noted that there no other considerable change that can be seen (DS Smith Plc, 2012).

 

Part 2: Calculations of the company’s total shareholder return (TSR) averages and standard deviations over the past five years

A company’s TSR over the long-term, it is the best indicator of investment success comparatively since it is a reflection of how well it has led to creation of value for shareholders in a labour, capital and product markets that are highly competitive (DS Smith Plc, 2012).

2008

TSR = End Share Price – Opening Share Price + Sum of Dividends per Share / Opening Share Price

0.75-2.02 + 0.06/2.02 = -1.24 = 12.4%

 

2009

TSR = End Share Price – Opening Share Price + Sum of Dividends per Share / Opening Share Price

1.19-0.74 + 0.03/1.19 = 0.48 = 48%

 

2010

TSR = End Share Price – Opening Share Price + Sum of Dividends per Share / Opening Share Price

2.04-1.17 + 0.03/2.04 = 0.88 = 88%

 

2011

TSR = End Share Price – Opening Share Price + Sum of Dividends per Share / Opening Share Price

1.96-2.07 + 0.05/1.96 = 0.14 = 14%

 

2012

TSR = End Share Price – Opening Share Price + Sum of Dividends per Share / Opening Share Price

2.03-2.02 + 0.06/2.02 = 0.04 = 4%

 

References

DS Smith Plc (2012), Annual Financial Report, 2012. Retrieved on 1^st April 2013 from: http://www.dssmith.uk.com/investors/annual-report#/5/zoomed

DS Smith Plc (2012), About us. Retrieved on 1^st April 2013 from: http://www.dssmith.uk.com/

DS Smith Plc (2012), Share Price. Retrieved on 1st April 2013 from: http://www.dssmith.uk.com/investors/share-price
Appendix

Figure 1: A chart of the DS Smith share price over the past five years

Source: DS Smith Plc

 

Subsidies refer to the assistance set aside by governments to boost producers of commodities or to avert a decline of industries. Moreover, governments can provide subsidies to control production of certain products. Different governments have granted subsidies to agricultural products to support the agricultural industry. Subsidies to farmers and landowners reach them in various forms such as direct payments and price supports through government storage and purchases. Moreover, some governments create regulations minimizing prices for farm inputs, crop insurance and disaster response. These subsidies have varied effects of the general economy and do not benefit everyone. Therefore, there are those who support the subsidies while others do not.

Farm owners are part of the group that supports subsidies in agriculture. The prices for renting land that receives subsidies from the government are higher than for a farm that does not receive subsidies (Alston and Jennifer, 1697). Farm owners in farms receiving subsidies are, therefore, supportive of the subsidy programs. Stability of food prices is necessary so that people across income levels can afford it. Without subsidies, monopoly players in the market can dominate food markets and raise prices. This would make food commodities costly and unaffordable to many people. Given the critical role that food security plays in a nation’s well-being, farmers’ income should be ensured. Moreover, they should be properly shielded from harsh economic conditions that would lead them to go out of business. The government encourages farmers to plant crops that conserve the soil for sustainability through subsidies’ programs. Farming takes place mostly in the rural areas that are less developed than urban centers. Subsidizing agricultural products encourages development in the rural areas such that the countries’ development becomes uniform. Consequently, people in both rural and urban locations are able to enjoy relatively good standards of living.

On the other hand, subsidies seem unattractive because they concentrate the farm economy’s dependency on the government. Economists opposed to the subsidies argue that market forces would be more efficient and less expensive than the government in regulating prices and production (Wuerthner and Mollie, 58). Subsidies encourage individual farmers to acquire extra land so that they can have additional subsidies from the government. Consequently, the subsidies concentrate production in the control of few corporations, which undermines the family farm concept. The primary objective of government subsidies is to control production. However, critics of subsidies argue that they have not been able to achieve the objective (Wuerthner and Mollie, 20). The failure to achieve the primary objective results from the farmers who should keep part of their land out of production. The farmers put aside the least product piece, leaving the most productive parts in production, despite having received subsidies. Subsidies transfer taxpayers’ money and income from consumers to the wealthy land owners. This is undue advantage granted to farmers and land owners at the expense of the general population. In addition, the society bears the losses incurred in the farm lands in the form of dead weight losses. Opponents of subsidies assert that there are no known broad social benefits that accrue from this distribution of losses.

Subsidies have both benefits and negative consequences, depending on the effects they have on various people (Alston and Jennifer, 1694). Moreover, there are divergent opinions pertaining to their legitimacy and effectiveness in achieving their primary objectives.

Works Cited

Alston, Julian and Jennifer S. James. ‘‘The Incidence of Agricultural Policy’’. Handbook of Agricultural Economics Vol. 2.1 (2002): 1689–1749. Print.

Wuerthner, George, and Mollie Matteson. 2002. Welfare Ranching: The Subsidized Destruction of the American West. Washington, D.C.: Island Press. Print.

Employee Relations

Introduction

There are factors at the international and local levels that have influenced the decline of unions. A combination of both local and global factors has contributed to the decline. Therefore, the claim that global factors have played a major role is partially true.  Three factors have led to the decline of unions in Australia, two of which are global while one is local. These factors include introduction of Accord, changing employee composition and business cycle’s casual effects.

Although there are influential factors on the global trade stage that have led to the decline of trade unions in Australia, the local environment has played the biggest part. The Australian Council of Trade Unions (ACTU) and the Australian Labor Party developed a strategy known as ‘Statement of Accord’ in 1983, which gave the government the mandate to establish income policies. The Accord also planned to restructure various industries, especially where unemployment was high. In return, trade unions were to relinquish their rights to industrial action. Reducing union rights to industrial action reduced their power for collective bargain on behalf of employees (Bryson, Ebbinghaus and Visser, 2011). This was a unique setback to Australia that consequently led to the reduction of trade unions.

The changing employee composition in the Australian workforce involved additional of employees to non-unionized sectors and decreasing employees in unionized sectors (Spooner and Innes, 2001). This is consistent with the global trend caused by the decreasing manufacturing sector and increasing service sector. In addition, the existing unions failed to recruit part time and casual workers in the union. This left out the rapidly growing type of workers, especially in the service sector. Consequently, the number of employees belonging to the unions continues declining.

Business cycle’s casual effects relates to high rates of unemployment in the Australian economy (Pyman, Teicher, Cooper and Holland, 2012). Although unemployment is common in many countries, its levels in Australia, combined with other local factors had a great impact on the declining unions. During harsh economic conditions, unions have not been able to retain those who lose their jobs. Therefore, there is reduction of union members at such times. Recruitment of new members has proved difficult due to bad perception attributed to the unions. Unions are perceived to be unable to address their members’ concerns. Managers’ bad attitude towards unions has discouraged some employees from joining the unions.

To halt this decline, there are several mechanisms that the Unions can utilize. Improving their recruitment strategy to engage new members is a mechanism that can reduce the decline of the unions. Due to the difficulties involved in recruiting employees, leaders of the unions should start sensitizing people about their role in employee welfare from school level (Lee and Lansbury, 2012). They should create programs to be used at school to educate the upcoming employees on the need to join unions. Such a move can counter the negative perceptions and attitudes that people have created about unions.

The second strategy that unions can use is to change their policies so that they can effectively respond to the needs of its members. Many employees fail to join unions because they do not believe unions have the ability to solve their problems (Kearney, 2003). Unions can increase their acceptance from employees by being able to address issues affecting them promptly and effectively. This strategy can revive the unions and ensure that their future is guaranteed.

Another strategy to stop the unions from declining is to amalgamate small unions to form one effective organization. The strength of unions stems from their ability to make their presence felt. When small unions combine to make a big one, they increase their bargaining power because they have ability to cause a massive work disruption (Bryson, Ebbinghaus and Visser, 2011). However, the unions must improve their service delivery to the employees to gain their acceptance and support.

Conclusion

In conclusions, global factors partially play a role in the decline of unions in Australia. Although global factors such as changing employee composition and business’ casual effects contribute to the decline of unions, local factors play a critical role. One main local factor that has contributed to the decline of unions in Australia is the formation of the Accord. The Statement of Accord proclaimed by the Australian government limited the powers of the unions to take an industrial action. The changing employees’ composition decreased their number in the unions and the unions were unable to conduct an effective recruitment. The casual effects of business cycle caused unions’ decline by rendering many union members jobless during harsh economic conditions. Three strategies can be used by union leaders to stop further decline. The first one is improving their recruitment strategy to attract new members. Secondly, the unions can change their policies so that they can match with the expected service by members. Since members join to satisfy their needs, those needs must be met for them to remain active members. The final strategy that unions can use to stop the decline is to consolidate small unions to form big unions.

References

Bryson, A., Ebbinghaus, B., & Visser, J. (2011). Introduction: Causes, Consequences and cures of union decline. European Journal of Industrial Relations, 17 (97), 97-105.

Kearney, R.C. (2003). Patterns of union decline and growth: An organizational Ecology Perspective. Journal of labor research, 14 (4), 561-578.

Lee, B., and Lansbury, R.D. (2012).Refining varieties of labor movements: Perspectives from the Asia-pacific Region. Journal of industrial relations, 54 (4), 433-442.

Pyman, A., Teicher, J., Cooper, B., and Holland, P. (2012). Unmet demand for membership in Australia. Journal of Industrial Relations, 51 (1), 5-24.

Spooner, K., and Innes, C. (2001). Union membership: Australia. Employment Relations Record, 1 (1), 27-35.

 

International Business- China Road and Bridges Corporation.

 

Introduction

China Road and Bridge corporation was initially China Road and Bridge (Group) Company with its high performance and qualifications, is a very large scale, wholly state owned corporation that targets foreign trade and the international market in economic cooperation and it deals with the construction of roads, dams, by passes, bridges, tunnels, port, and other infrastructures as the main operation and  general trade, investment, real estate and leasing services as the peripheral trading activities. CRBC (China Road and Bridges Corporation) is China’s largest construction and design company and is among the top 500 Global Corporations with over forty foreign branches worldwide.  China Road and Bridges Corporations has established relevant and significant independent coordination centers that manages and coordinates the activities of its foreign trade and other international transactions. These centers are found in Asia, Europe and Africa.

CRBC enjoys a high standard reputation domestically and globally as an international contracting company in road, ports/piers and bridges and has a famous trade-mark in the construction industry.

CRBC operations can be traced back to the initial years of the Peoples Republic of China. With its sporadic growth, development and reform of china’s social-economic system. After many years, CRBC has developed and acquired a respectable and almost prestigious label of international contractor after several years of restructuring under the Foreign aid office. It was known as the China road and bridge engineering company in 1979.After its approval in the same year, it later became the China Road Company in 1997 and eventually it became the China Road and Bridge Corporation in (CRBC) in 2005.

CRBC holds the national level qualification for contracting various professional contracting services and special road construction by the ministry of construction in the People’s Republic of china.

CRBC won its first contract as a foreign aid task on behalf of the the peoples republic of china in 1958, which was followed by the construction of a harbor in Mauritania in the 1970’s. CRBC has struggled to achieve its foreign strategic targets by winning tenders and participating in social economical activities in foreign countries that have cooperative ties with china.

CRBC has embarked on international marketing and globalization of its activities to achieve its objectives. Globalization is the process or action of extending social relations to different parts of the world. This process arises from the movements and transportation of people, items, services or ideas. Internationalization or integration is the outcome of globalization. Internationalization involves integration of religion, politics and economic activities. It describes the relationship across cultures of macro- social processes and its interplays. Internationalization erodes some cultural beliefs but also universalizes the characters and the traditions of the local communities and its environs.

Advances in the transportation systems, telecommunications infrastructures and its affiliated networks which include the internet are the major factors in internationalization which promote economic and cultural interdependence. In the year 2000, the international monetary fund (IMF) identified four major aspect of internationalization: trade and transactions, financial capital and investment movements, migration and the movement of people and the actual dissemination of knowledge. The change in climate, cross-boundary pollution in water and air, the overfishing in oceans are the environmental challenges associated with internationalization

Internationalization is a process or part of globalization which is affected and affects businesses and the work organization, economic, the socio-cultural resources, and the natural business environment.

CRBC, assisted by the people’s republic of china has used several strategies to internationalize. These strategies range from economic to cultural strategies. CRBC and PRC (People’s Republic of China) have pursued these activities and strategies to internationalize aggressively.

Internationalization led to the emergence of international network of social, cultural and economic systems. The intensification and integration of worldwide social and economic relations that link distant localities in a way that local events and happenings are shaped by the nature of events occurring many kilometers away.

CRBC and PRC have adopted social cultural strategies to facilitate their entry and eventual dominance of their economic and cultural activities globally.

The internet

It’s a product of internationalization as well as a catalyst; internet connects computer operators and users around the globe. From the year 2000 to the year 2009, the number of people using the internet has increased from 394 million to almost 2 billion. China Road and Bridges Corporation and the people’s republic of China have adopted the use of internet to facilitate its policies and objectives worldwide. The internet has a very wide and extensive client base worldwide that it’s capable of reaching literally every part of the world. For instance in 2010, 22 per cent of the entire world’s population had access to computers with one billion Google searches each day, 300 million users reading blogs and over 2 billion videos being viewed daily.

Health Improvement and Provision of clean water.

China Road and Bridges in conjunction with the PRC have partnered in developing health facilities and provision of clean water through drilling holes in many parts of Africa and the Asian continent. Most parts of Africa availability of clean water is only possible during the rainy season which is not adequate. The provision of water to these communities goes a long way to in building good and long lasting relationship between the two groups of people i.e. the Chinese and the Africans. This also promotes peace and acts as a unifying factor between the two communities.

Health facilities and medical assistance is limited to only a few people living in urban areas in most parts of Africa and Asia. The Chinese government in conjunction with the CRBC has already built many dispensary and medium size health facilities in Africa and parts of Asia according to its official website. Health problems transcend national borders and have global political, social and economical impact internationally. Global health is all about improvement of health worldwide, reduction of differences and disparities and protection against epidemics and global threats that overlooks or disregards the national borders.

However internationalization has its share of problems also. International travel has also contributed immensely to the spread of the world’s deadliest and infectious diseases. Modern forms and modes of transportation allow and accommodate more people and products to travel or be transported around the world at a much faster pace than the olden days but they also open the airway to the deadly transcontinental movement and transportation of infectious disease vectors. For instance the HIV/AIDS, Due to the immigration, approximately over 500,000 people in china are believed to be infected and among the foreign born Chinese in china have a much higher infection in tuberculosis rate than the locals.

Sports

Internationalization has led to promotion of sports and athletic activities in international competition worldwide. CRBC has sponsored Chinese teams to participate in the world arena, for instance in the FIFA world cup qualifiers and in the IAAF athletic competition. These provide an avenue for CRBC to promote its products and expertise. The recently concluded Chinese Olympic summer games in the year 2012 was a show case of the modern construction technology by the Chinese government whose majority were constructed by the CRBC.

Global natural environment.

CRBC has over the years engaged in Construction methods that sustain the environment and promotes a forestation and reduces the climate change. CRBC global natural environment strategy is the protection of the natural environmental. Factories and industries in the developing countries have also increased their international output and they too experience less environmental regulation and policy hence they have experienced increased pollution on air and also on the surface and underground water bodies.

The international foreign investment and development agencies of developed countries have finally led to a race to the bottom where countries lower their environmental and resource policies and protection laws to attract foreign investment and capital. The reverse of these concept is true where developed nations have maintained high standards of environmental protection policies and laws have experienced an upsurge in investment activities and have eventually created a race to the top phenomenon.( Held, et al., 1999).

The distances, due to internationalization are shrinking between the continents and countries and have prompted the developing and the developed countries to find ways of solving the problems internationally and not regionally. Big organizations like the United Nations are now part of the regulators of pollution and through international agreements like the Kyoto Protocol have undertaken policies like the clean air initiatives to determine monitor and reduce atmospheric pollutants. Global traffic, production, and industrial waste have increased global levels and nature of air pollutants.

Global workforce strategy

CRBC and PRC have embarked on global Chinese language sturdy programs through the internet online facility, Student exchange programs in the universities, award of scholarships to bright students to sturdy in china and many more programs targeting foreign nationals to learn the Chinese language.

The global workforce is made up of the international labor from the pool of foreign immigrant workers or those working in multinational companies and interconnected through the global networking system and production. In the 2005, the international labor pool of workers employed in multinational companies was estimated to be 3 billion workers. The global workforce is currently very competitive and due to specialized jobs becoming readily available worldwide due to the ease of the internet. Workers can be located half way through the world by use of the internet. Multinational corporations can find highly specialized workers that are very skilled, well informed and very experienced. The major problem with CRBC is the language barrier which they have taken measures to address in their strategic plan of internationalization and expansion plan. (Steger, M. 2009).

International migration.

CRBC and PRC have undertaken to allow foreigners to migrate into china with the sole reason of training them to understand and appreciate the Chinese culture and practices including the language.

Many countries have a certain kind of guest worker program with policies spearheaded to meet the countries objective goals and economic targets. CRBC has its own programs to assist needy students migrate to china to attend universities and other institutions of higher learning, meanwhile they also learn the Chinese language, customs, religious beliefs and sample even Chinese food. There is also a program that encourages brain drain to China. This is done by providing lucrative employment opportunities to professionals in order to lure them to work in China.

The following are the strategies that CRBC (China Road Bridges Corporations) can adopt to internationalize.

Adopting Multicenter models of organization

CRBC can break the compromise and settle for an organization structure between centralization and decentralization by shifting or moving some business and functions from their corporate headquarters to regional overseas centers. For example, the construction of roads is currently focused in Africa where the bulk of work is centered. The road construction division can be based in Africa where decisions can be made faster and operations plans can be reviewed without a lot of time wastage. Each section will be responsible for its decision to source,   design construct and market itself.

Ad Hoc collaboration.

In this strategic model the different sections share services as needed and at times coordinate some urgent media and governmental relations through the host country manager. Synergies are literally limited to ad hoc projects and maintain specific mandates. P & L(profit and loss) accountability and the daily operation and strategic decision making remain with the section heads. Success of this model tends to be based on the nature of the relationship dependent.

Dedicated Country-Based collaboration.

CRBC will need a permanent representative or a permanent coordination unit or team whose major role will be to identify synergies (both revenue and cost) that can be realized by directing and coordinating the activities of all the international business units. For instance, one large multi enterprise business industrial firm that has a dedicated and efficient country team of about forty to fifty full time permanent business employees, charged with the responsibility of understanding customer demands, preference and maintaining consistent and fruitful relationships across all business units. The teams overall strategy is on growing revenue by expanding internationally the current client’s accounts and winning other new ones.

Cross-Business-Unit/Management independent council

Under this strategy CRBC has to establish a business council which would include all the local business unit managers and headed by one local country manager. The business council makes all decisions on the cross border business unit engagements in order to capture all synergies and then pulls resources to implement the projects.

Continuous Talent Development

Virtually all international companies operating in foreign countries face significant challenges in the management of the human resource department. While the need for highly trained and experienced, internationally capable and locally computer savvy managers who are particularly rare and scarce Most companies, including CRBC, have short histories of global economic activity and therefore have not yet employed a sizeable cadre of locally based managers with long experiences in Asian oriented management skills and practices in the Asian business practices. The difficulties is not only in employing such people but also in training, developing, rewarding, motivating and retaining them and in creating and achieving alignment with the companies objectives, values and targets.

One of the methods of dealing with this issue is establishing a pipeline of internationally capable locally based managers. Though the local talent pool is expanding most internationally based corporations are still managed by foreign expatriates. Some companies relate this inadequacy to the fact that it’s difficult to find the right talent and experience for the top job. The job description is very demanding as the foreign companies need managers who can communicate effectively with their head offices, control special situations and liaise with the head office for advice in investment procedures, financial returns and soliciting for resources and expertise locally and internationally.

The potential manager should also possess local skills, knowledge and networks so that he can get issues done. In addition he should also have the skills, interest and ability to adapt to the local and global cultures, religion and beliefs. The manager must also be capable of leading a fast growing business in an environment that’s has insufficient and inadequate infrastructure.

Identifying, managing and Grooming High Potential local talent

Effective practices in this field include planning for the Human resource requirements at least twelve to eighteen months having in mind the organization’s growth potential, attrition and staff development needs. Successful companies need all top managers to identify and develop high potential employees in their management or organization, having active teams which are effectively coached and developed with equally talented high potential managers and also to limit the number of expatriates both in top management and middle level management positions.

CRBC also should limit the number of years their expatriates should stay in their host countries to a maximum of three years, in an effort to develop local talents and also to cut down on costs. During the three year period, the expatriates have three clear and defined objectives: to set up the organization, identify, train and develop the local staff and find the successors for their positions. Expatriates managers who fail to achieve their objectives and who can’t find the right successors should forfeit their bonuses in their final year.

Develop leaders with global perspectives.

CRBC should train potential managers who have a broad and global perspective. It’s very important to assist high potential local employees understand the nature of the company and how the company’s center operates and functions to allow them to develop some relationship with the head office which some day they may need in case they are to replace the expatriates.

Capturing the Benefits of localization.

Manufacturing and trading in foreign developing countries means huge savings in terms of cost savings as well as operational advantages and strategic locations. Companies can employ highly trained, skilled and flexible low cost labor rates in place of very expensive and less flexible manpower. The presence of raw materials and other amenities which are available locally makes the foreign branches more profitable and better placed to achieve their objectives and strategic goals.

Forging Effective Alliance and Partnerships

CRBC has to reach out to other external parties for immediate resources and local expertise. CRBC has to view their suppliers, its distributors and other partners in the construction industry as valued members of their organization. Offering them free training, consultation services, and providing basic financial motivation and incentives such as a way of participating  in profit sharing mechanism and also providing a limited number of distributors in order to achieve more control and influence.

Its imperative for CRBC to be seen as committed to its developing partner for the long haul. A company that’s not willing to invest in facilities, plants and infrastructures in a country that’s it’s operating in, projects a clear message that the company is only there for a short term period and maybe interested only in its business operations only and later after maximizing its profit return back to their home country. It’s obvious the suppliers would have no reason to deal with such a company fairly as they would feel short changed and would have no reason to treat the company as a long term partner. There would be fears that the company may just pull out if the market fails or if their profits dwindles. Investing in developing countries demonstrates long term commitment.

CRBC believes that there are many untapped opportunities than threats to better leverage partnership and alliances.

 

References

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