Research Topics: Capitalism

Instituting Best Practices for Continuous Improvement

Introduction             Procter and Gamble (P&G) is presently considered as one of the largest companies worldwide. Base on its 2003 company report, P&G markets nearly three hundred product brands. Whisper, Tide, Clairol, Downy, Pantene and Pampers are some of the world renowned brands marketed by the company. The success of P&G is not only evident by its wide product coverage but by the amount of its sales obtained from about a hundred and sixty nations. In addition, the company’s growth has also been made evident by its hundred and fifteen manufacturing plants scattered in eighty countries. The progress of the P&G is also attributable to its workforce, which is made up of more than ninety thousand employees (Procter and Gamble, 2003). One of the keys to the company’s present success is the business strategies it has implemented over the years. One of the strategic changes which are remarkable in the industry is its launch of Organisation 2005. Primarily, the goal of this paper is to analyse the launch of Organisation 2005 within the industry. The paper will discuss the factors that trigger the initiation of Organisation 2005 using SWOT analysis. In addition, this case study analysis also aims to relate the Organisation 2005 with the eight managerial Tasks for strategy execution, a model which has been formulated by Thompson and his colleagues. Task 1 SWOT ANALYSIS             It is a common fact that competition in the business world is very tough. Hence, the management of different organisation are trying to find the best way in order to be successful and achieve their organisational goal. For example, business, nowadays, have to cut cost to the bone by downsizing, outsourcing, offshore IT development and management.  The growth and success of an industry now depends on its ability to innovate to execute new business strategy effectively. Many organisations see that changing the business strategy must become a part of the core competency of every part of the organisation and its network of business partners (McKie 2004). It is noted that management adheres to different changes because of some factors. Like any other organisations or industries, Procter & Gamble has also been able to initiate change in their business strategy. In order to address the company’s problems due to the changes in the industry, P&G tried to develop a new strategy that will basically allow the company to have competitive advantage. The company also wanted a strategy that will improve its ordering and billing systems as well as quality of services for the consumers. This part of the paper provides insightful details regarding the organisational factors that drive or triggers them to initiate Organization 2005 strategy. The organisational factors will be analysed using SWOT (Strengths, weaknesses, market opportunities and threats. The strengths and weaknesses actually characterize the internal analysis of the company. Issues such as the reputation of the company, the type and quality of its product, manufacturing costs, the effectiveness of their sales team, profitability, innovativeness on research and development, market share and other issues of the company’s capabilities are recognized as strengths and weaknesses (Martz Marketing Group, 2002).               Organisational Strengths             As mentioned, the main objective of P&G is to have a new business strategy that will enable them to sour growth in the mature market (Madapati, 2005). One of the organisational strengths that triggers the initiation of Organization 2005 is the ability of the management of P&G to develop a new strategy that will enable them to outgrow or compete with the emerging competitors and the ability of the management to identify the important aspects of the business to be changed.    In addition, strength of the company that triggers them to pursue Organization 2005 is the ability to anticipate stakeholders needs which can be done by restructuring the organisational structure. Furthermore, P&G is also known as a company with much ambition when it comes to outgrowing their rival companies, in this regard, their strengths that triggers or generates the initiation of Organization 2005 is the perseverance of its personnel and staff to enhance the marketing strategy of P&G in the global market. The company possesses a strong brand name in the industry that represents both value and quality. This strength emphasizes P&G capability to still attract customers even after the initiation Organization 2005.   Organisational Weakness             Although, P&G has their organisational strengths that trigger the initiation of Organization 2005, which involved changes in their business strategy, the company also encompasses some weaknesses. One of the weaknesses that can be attributed with P&G is the inability to sustain business strategy change because of some management issues and problems. Based on the case, Jager has not been able to sustain effectiveness in his initiation of Organization 2005, which affects the whole strategy execution. Furthermore, the inability of the management to anticipate cross-cultural conflicts and issues because of employee transfers can also be considered as a weakness for the company. While the internal side of the company represents its strings and weaknesses, the opportunities and threats on the other hand is external in nature. Opportunities may be recognized in rising markets, extending service networks, growing economies or capitalizing on the competitor’s flaws. Threats on the other hand, represents issues such as the introduction of new competitors, changing market trends, alliances formed by competitors as well as the transforming demographics. Both of these factors are interrelated with the company’s strengths and weaknesses. Opportunities may be used in the maximization of the company’s strengths. Though the company is already operating globally; however, the number of its international branches are only limited to a few countries. This then does not optimize the ability of the company to effectively operate internationally even with its Organization 2005 approach. In addition, as a diversified organisation, the strategy may affect the launch of Organization 2005, especially when the management have not been able to integrate the value of diversity with the new strategy.   Organisational Opportunities Because of the strategies that Procter & gamble has implemented throughout the years, the company has many opportunities ahead which can be considered as factors that triggers their initiation of Organization 2005.  One of the organizational opportunities that P&G possess is in terms of the growing interest of the management with technological facilities. The new business strategy (Organization 2005) requires the use of information technology, especially in acquiring and managing data. This interest on technology will enable P&G to meet its goal as it implements Organization 2005. The integration of the business units of P&G can also be considered as an opportunity for the implementation of the new strategy. Furthermore, the company has the resources to support the business strategy, which includes technological support for better marketing activities are which is included in the business strategy (Organization 2005). Forming strategic alliances, merging or taking over other local and global industries is also another possible opportunity for the company to strengthen its operations, overcome competitors and support its future success through its Organization 2005.   Threats             Even if Procter & gamble have various strengths to pursue Organization 2005, the company has also some threats which may affect its implementation. This includes the experience of P&G when it comes to having low sales throughout the 1990s. In addition, it has been mentioned in the case the Procter & gamble are experiencing product decline because of the existence of rival companies which have faster innovative abilities and effective management strategy.  As the company is starting to change the entire business strategy, other threats or conflicts may not be met even after its initiation of Organization 2005. The organisational strengths, weakness, opportunities and threats that has been mentioned above, can be considered as essential factors on determining the needs of initiating Organization 2005 within Procter & gamble. The strengths that have been mentioned in the above analysis can be said to be good factors that will help the company have a successful implementation for Organization 2005. On the other hand, the weaknesses that has emphasized can be noted to be a major obstacle for Procter & Gamble to pursue it their change management approach through the Organization 2005.             The opportunities serves as a guiding forces for Procter & Gamble to continuously believe on the benefits of pursuing Organization 2005 in spite of their weaknesses in some aspects, while the threats can also be considered as a guiding aspects to be given attention by the management of Procter & gamble to ensure that their initiation of Organization 2005 will guarantee success and will be able to meet their organizational objective of being the number one industry in household and healthcare and hygiene products.   Task 2 : Eight Managerial Tasks             Organizational change is an important aspect of business establishments and companies as this concept allows operational improvement. By means of organizational change, companies are able to adapt new technologies and implement more effective strategies. In turn, this results to increased profitability, higher market share, better internal and external customer relations, enhanced operations and other significant advantages. Generally, the beneficial outcomes brought about by organizational change direct businesses to growth and progress. Moreover, this helps companies overcome major challenges. In considering a strategic change, the management must also consider the aspect of strategy implementation. Strategy implementation has been heralded as the key to corporate strategic success. It has been said that in order to strategically implement an organisational change, it is essential that the management should consider the eight managerial tasks for strategy implementation (See Appendix 1) formulated by Thompson, Strickland and Gamble (2005).  Using this model, the Procter & Gamble initiation of Organization 2005 will be assessed.   Task 3             The competition in the business arena has been very stiff and complex.  In this regard, the organization must be able to utilize a strategy and management system that will enhance the performance of the business so as to outgrow its rivals (Pearce & Robinson, 2000; Thompson & Strickland, 2003). In today’s rapidly changing and improving companies and businesses, individuals at all levels are also increasingly called upon to demonstrate the ability think strategically.  As the business wants to expand abroad, there are certain tasks that need to perform.  Businesses grow in two distinct ways; by natural so called ‘organic’ means, or by acquisition and merger. The acquisition and merger route is appropriate when growth in traditional products and markets is restricted, due to market size or share, for instance, or when a higher level of growth in turnover is needed, for whatever reason. However, starting up or acquiring businesses outside of current markets and products diversification is an excellent way to strengthen a company. According to Gieltson, Bing & Laroche (2003) there are reasons for acquisitions including different kinds of efficiency improvement such as replacement of inefficient management product, financial, and tax synergies.  Other possible reasons are gain of monopoly power, valuation discrepancies caused by information asymmetry as well as a number of agency motives such as growth maximization, free cash flow, and employment risk reduction.  In addition, acquisition allows two previously unrelated companies to achieve economies of scale or synergies.  Under the economic theory, two entities, when combined or been merged may be worth more than if they had remained independent.  This is especially true where a merger allows the companies to either eliminate overlapping cost centres or may reduce transaction costs between two firms.  As a result, the unified firm may reduce costs, improve quality, and boost output.  Synergies also result where the combined enterprises is less risky than the constituent corporations. The eight managerial tasks include (1) building a capable organization, (2) exercising strategic leadership, (3) shaping corporate culture to fit strategy, (4) tying rewards to achievement of key strategic targets, (5) installing support systems, (6) instituting best practices, (7) establishing strategy supportive policies, and (8) allocating resources.   Building a Capable Organisation             As noted in the case, it has been said that the main objective of implementing Organization 2005 is to accelerate the growth of the company. Organization 2005 includes comprehensive innovations in the structure of Procter & Gamble, work processes as well as culture to enable the employees to make themselves become more flexible and speed up the innovation.  In addition, the company also aims to leverage the global presence of the company and become competitive in the global market. In terms of the first managerial tasks, it can be said that, based on the case study, the management o Procter & Gamble has been able to build a capable organisation. First, the management of P&G has been able select the most appropriate individual who will handle or managed the said organisational change. In this regard, as a CEO and as the main person who initiate the Organization 2005, Jager has been able to choose the most appropriate individual that will implement the changes. However, since the Organization 2005 has some flaw during its execution, it can be attributed to the inability of the chosen individuals to meet the real objective of the strategy. In terms of human resources the imperative tasks that has been implemented during the change process include the designing of the work environment and organization structure to move from present departmental structure to the new team based structure, develop new Human resources policies and programs to help employees make the transition and upgrade current employee skill sets and/or hire new employees with relevant skills.             In order to build a capable organisation, it is also essential that the management must ensure that they are able to dientify the core competency of the business to initate the changes. For all practical purposes, “core competencies” seem to be the same concept as “critical capabilities,” “resources,” and the other possible fads since they all advocate the building of competitive advantage based on “something” internal to the firm. Typically, a core competence is defined in relation to the competitive impact of its output; that is, a core competence provides the firm with (sustainable) competitive advantage via the way it is executed (Prahalad & Hamel, 1990; Grant, 1991) or via its attributes; for example, a core competence is firm-specific and hence difficult to imitate (Barney, 1991; Grant, 1991). However, even if these definitions are useful in terms of competition and strategy, they are not very operational (Leonard-Barton, 1995), which sometimes create some serious difficulties in identifying and developing the core competencies of a firm (Drejer & Riis, 2000). Hence, organization must be able to determine its core competencies in an operational manner. Once the company has identified its core competency, the next thing to do is to develop all other aspects which can be helpful for achieving the organizational goal, i.e. growth. Core competencies of the company also represent its competitive advantages; these include features of the company that enable it to overcome business competition and other relevant challenges that they may encounter during the implementation of Organization 2005. In Procter & gamble’s case, one of these core competencies is its workforce or people. Talent and skills are among the most important factors a P&G must look for in its employees.             Based on the case study, upon the implementation of Organization 2005, the company also considered to have a support-team to make sure that the strategic change will meet its goal. In building capable organisations, the company have been able to think all the important aspects of selecting employees suitable for implementing Organization 2005. Although Jager has experienced problems which led to his resignation, Lafley, on the other hand, have taken over the position and have continued what Jager has started but with some changes.   Exercising strategic leadership             In managing strategic implementation, one must also consider how the management exercise strategic leadership. Accordingly, leadership is an important aspect of management. As stated by a few authors (Cohen & Brand, 1993; Hyde, 1992), managing strategic implementation requires full leader participation and involvement instead of designating individual groups who will shoulder all the responsibilities. The involvement of leaders serves a number of purposes. For instance, this helps in preventing the resistance of employees to changes brought about by the implementation of a new strategy. The enthusiasm and determination of the leaders to make the strategy work can positively influence other company staff. Furthermore, this also helps in creating a sense of commitment and loyalty (Hill, 1991).             The presence of leadership in strategic change is also one effective factor in addressing technical and non-technical issues. It is important however that the appropriate leadership style is used. In the case of the implementation of Organization 2005, it can be said that there are two leaders who have been responsible for the initiation of the new business strategy: Jager and Lafley. Based from the case study, Jager has become a good leader at the start of the implementation. However, the inability of Jager and his team to anticipate possible dilemma upon Organization 2005 implementation has impacted the whole change process which makes the strategy fail and have forced Jager to resign from his position. As said in the case, there are certain problems that have been encountered in the leadership of Jager. First, Jager had tried to put too much pressure on the Procter & Gambles managers into bringing their products to market faster. The inability of Jager as a leader to decide strategically is also an issue. This can be seen in the dual acquisition of Warner-Lambert and American Home Products, which were useless during that time. In addition, Jager has also become a leader who became reckless in all his action hoping that he will regain what they have lost.             The next leader who handled or managed Organization 2005 is Lafley, a veteran in the company. As Lafley saw the mistakes of the previous leader of Procter & gamble, he made it sure that he will lead P&G to achieve success. In addition, Lafley can also be noted to use a distinctive leadership style.        Leadership style is the pattern of behavior used by a leader in attempting to influence group members and make decision regarding the mission, strategy, and operations of group activities (Scholl 2000). In this regard, it is said that Lafley has been able to apply the right leadership style in the right moment and situation to effectively implement Organization 2005. By acting as a responsible leader, Lafley has been able to inspire employees to put the good of the whole organization above self interest. In addition, upon the implementation of the Organization 2005 Lafley also stimulate employees to be more innovative, and he also take personal risks and are not afraid to use different types of methods in order to achieve the objective of implementing Organization 2005.   Corporate Culture Many definitions have been used to characterize corporate culture. Probably, the most common was the one based on Schein’s point of view in which his fundamental assumptions comprise the core and most important aspect of corporate culture. He defined corporate culture as the pattern of creating shared common assumptions that the organization learned as it resolves problems of outer adaptation and inner integration that has been considered valid making it possible for others to pass it down to new members as the appropriate way to think, perceive and feel organizational concerns (Schein, 1992, p.12). In this perspective, Schein appears to emphasize on having a common goal or unified direction among organizational members which is based on the past challenges and experiences the business had successfully overcame. These common goals are then achieved through past practices and strategies that are guaranteed to work. Schein develops a definition which stressed on the importance of having a standard that is consistently applied by the members of an organization. In common terms, corporate culture is defined as the manner in which things are accomplished. The definition given by Schein was supported by other researchers such as Cummings and Worley (2001). According to these authors, corporate culture involves the sharing of learning. Sharing of thoughts and experiences with others implies that corporate culture promotes a certain level of stability among the members of the organization. In comparison to earlier times, corporate culture is more in demand and recognized at present (Schein, 1992) due to competition, increased globalization, diversified workforce and formation of business coalitions. This in turn led to product and strategy innovation; integration among organizational units to improve efficiency, quality, speed in manufacturing and distribution of services; introduction of new technologies; international transactions; facilitation of teamwork; and management of the diverse human resource. However, it should be noted that the application of corporate culture would have to less insidious in terms of implementing certain standards and behavioral patterns that were applied in the past (Collins and Porras, 1994). Corporate culture is founded by certain elements. In this case, values within the corporation are the main foundation of corporate culture. Similar to how corporate culture differs from one organization to another, the values within the corporation vary as well. The value of the organization serves as its defining elements where symbols, practices, standards and other related matters are derived. Values can be defined as a consistent belief that a certain mode of personal or sociable conduct is preferable against a contradictory mode of conduct. In general, values are considered internalized beliefs which guide individual behavior (Deal and Kennedy, 1982). Through this element of corporate culture, employees are able to establish a social identity which in turn generates meaning and connectedness. Through underlying values, people are able to manage their lives in a way that aid them to choose fitting roles, occupations and organizations. Thus, there are author who have suggested that some people find organizations appealing primarily because both share the same values and principles (O’Reilly, Chatman and Caldwell, 1991) The elements of corporate culture may include known and unknown values; customs and rituals; stories and myths about the history of the organization; explicit and implied expectations of behavior from each member; typical language used within the group; the climate or the feelings suggested by the manner members interact with each other or with outsiders; and metaphors and symbols.   Tying Rewards to Achievement of Key Strategic targets Installing Support systems Instituting Best Practices for Continuous Improvement The conception of best practice conceives the subsistence of collection of highly commendable performance of work practice which enhances the overall performance of the organisation that implements its notion (Arthur, 1994; Huselid, 1995). Best practices may include but not limited to different management approaches such as knowledge management, strategic management, supply chain management, performance management, information technology management and others. Having been able to realise the importance of having a management system adhering to best practices, international best practice management have emerged. At a high level, best practice may refer to those documented strategies which are accessible in any means. Furthermore, best practice are those strategic aspects which are noted be effective, appropriate and universally accepted approaches, tactics, business practices, plans, activities developed by authorities and carried out by a well-trained staffs in accordance with existing provisions and regulations.    It is noted that different organisation must be able to comply with best practices to ensure business success and competitive advantage. Best practice is the process of specifying an organisation’s objectives, developing policies and plans to achieve these objectives, and allocating resources so as to implement the plans. It provides overall direction to the whole enterprise. It can be viewed as a set of theories, frameworks designed to explain the factors underlying the performance of organisations and to assist managers in thinking, planning and acting strategically. The use of this in an organisation may be considered as a key foundation for having a competitive organisation. Hence, it is recommended that an organisation must choose the most appropriate best practice management to be imposed in the company. Successful strategy requires the firm to choose the markets in which its distinctive capabilities yield competitive advantage. But the adaptive, incremental nature of strategy means that the starting-point is where the firm is now, specifically in terms of best practice management approach.  Strategy is the direction and scope of an organisation over the long term: which achieves advantage for the organisation through its organization of resources within a changing market environment, to meet and satisfy the needs of the markets and fulfil the expectation of stakeholder expectations. Best Practice helps an organisations to answers both the questions “where do you want to go?” and “how do you want to get there?” but the first question is answered when each industry set the goals and the second is answered when such industries plan the strategies. The traditional approach basically focused on the first question but the traditional approach gives equal importance to both of them. While developing a corporate strategy that adheres to best practice for any profit organisation, the management have to keep in mind the demand of the customers and the marketability of the products and services offer Credit:ivythesis.typepad.com

Instituting Best Practices for Continuous Improvement

Introduction Procter and Gamble (P&G) is presently considered as one of the largest companies worldwide. Base on its 200...

Bonds are fixed income assets with variable returns

Question 1             Bonds are stores of wealth. Unlike a bank deposit, bonds are fixed income assets with variable returns (bond yields). Bond yields are therefore responsive to changes in money-market interest rates.  Bonds are capital market securities and as such have maturities in excess of one year ( 2000). Bonds can provide an element of stability that offsets some of the volatility of equities. However, bond values are vulnerable to economic changes that can undermine their value. The largest economic threat to bonds is rising interest rates. Previously issued bonds trading on the open market or in a bind mutual fund have a current market value. This value and interest rates are inversely proportional. The value of a bond goes down if the interest rates go up.   The risk associated with interest rates is known as interest-rate risk. Interest-rate risk is the risk that the present value of a bond will change because of a change in interest rates. When interest rates fall, the present value of bonds rises. When interest rates rise, the present value of bonds falls. Generally, the prices of fixed-income securities with longer maturities change more for a given change in interest rates than the price of short-term securities. Thus, longer-term securities generally have more interest-rate risk than short-term securities.   Interest rate risk is the risk of price movement of a bond cause by a change in interest rates. A change in interest rates occurs when investors require a different rate of return on a bond (often because the yield or return on a bond (often because the yield or return on similar bonds has changed). The required return on bonds frequently changes because of a general change in investor demand for bonds, because of a general change in supply of bonds, or both. Aggregate changes in the supply and demand for bonds are often attributed to changes in inflationary expectations, since investors typically require higher nominal returns on bond investments when purchasing power losses from inflation are expected to be high. However, changes in the supply and demand for bonds can also occur even without a change in inflationary expectations when the supply of and demand for credit changes (implying “tighter” or “looser” credit conditions and changes in the difference between nominal interest rates and inflationary expectations). Regardless of the cause, aggregate changes in bond supply and demand result in a general change in the required yield to maturity on virtually all bonds. Irrespective of the cause of a change in interest rates, bond prices will rise when the required yield on them falls, and prices will fall when required returns rise. However, because interest rates and interest rate changes vary on different bonds (such as for bonds with different maturities), changes in required returns may vary for different bonds.   Example: Changes of Bond Prices as Affected by Interest Rates               Maturity   7.5s99     6s02   5.5s28 Change in Interest Rates   Percentage Price Change     0%   0.00%   0.00%   0.00%   Up 2%   -1.94%   -6.49%   -24.53%   Down 2%   2.02%   7.05%   38.48%   Clearly, the price of the bond with the longest time to maturity (5.5s28) moves the most for each change in interest rates, while the price of the bond with the shortest time to maturity (7.5s99) moves the least for each change in interest rates. Thus, the bond with the longest time to maturity has the most interest rate risk while the bond with the shortest time to maturity has the least interest rate risk (2000).   Question 2             Marks and Spencer Plc is an international retailer with 718 locations across 34 countries. The group sells clothing, gifts, home furnishings and foods under the St. Michael trademark in its chains of 294 stores in the United Kingdom.             Over the recent years, Marks and Spencer have experienced losses and its share value decreased. With more than a hundred years of experienced and a good following, Marks and Spencer continued to be among UK’s top businesses. Even if the company is experiencing problems, I think it is still a good time to buy shares because I think the company will recover and that returns will be high in the long term.   Question 3             It is the best time to invest in real estate when the supply is scarce or when the demand of the influx of people to a geographical area will outperform the supply. If geographic locations (for example provinces or less developed cities) are being developed into a business hub where more and more businesses will be transferring and will be opening up, that is the best time to invest in housing or real estate.   It is best to invest in housing (or real estate) if an investor wants to diversify his/her investments. The stock market is more unpredictable than the real estate market. I think the best time to invest in housing is when an investor has diverse investments and is able to save 5 to 10 percent of his money for real estate. The key is diversification. In my opinion investments in stocks and housing offer both opportunities and risks. The only way to increase benefits and decrease risks is through diversification. There are several options for investing in housing or real estate. A more direct way is to buy individual commercial properties, such as apartment houses, rental homes, or office buildings. These generate income through leasing and by profits from the eventual sale of the property. Also popular are seat equity homes, where the investor buys a home, improves it, then sells the property quickly for a profit. Another way to put real estate into an investor’s portfolio is through Real Estate Investment Trusts (REITS). Real estate investment trusts have become very popular over the last decade. These companies pool investor money. REITs are traded on stock exchanges and over the counter. Because share prices are modest and shares can be bought or sold without difficulty, REITs are easier for investors to own than buying individual or limited partnership property. REITs must distribute 95% of their taxable income (excluding capital gains) to their shareholders, so they tend to be good investments for those seeking regular income.  Tax rules make REITs particularly attractive. First, they are exempt from Federal corporate income taxes, and most states honor this exemption. That means there is no double taxation of income, as occurs with most corporations (1997).   Investing in housing and real estate is a good choice because practically speaking, the world is not getting any bigger. Unlike other investment options, housing is a real physical structure an investor can own and cannot disappear like intangible money that resides in stocks or bonds.   In investing in housing, the investor must consider the needs and requirements of the market which are driven by the following: 1. Rising House Prices – rapid inflation of house prices has not been matched with rise incomes creating affordability issues. 2. Demographic Change – a growing population, fuelled by increasing migration, combined with falling average household sizes continue to place increasing pressure in the supply of housing nationally. 3. Economic Change – the UK is continuing to experience a notable shift in its employment profile as a result of declining levels of employment in traditional industries and a shift to more service based employment. The wages with these jobs impact upon the type of housing required with a greater split between ‘high earners’ and ‘low earners’.   Question 4             A call option is a contract that gives its owner the right, but not the obligation, to buy something at a specified price or before a specified date. The ‘something’ that can be bought with the option is called the underlying asset. For example if an investor buys a call option (with 100 shares) from Marks and Spencer, he or she has the right to purchase 100 shares of Marks and Spencer’s  common stock at a specified price, any time between the date of purchase and a pre-specified date. The fact that the call owner does not have the obligation to exercise the option means that he or she has limited liability. Should the price of the underlying asset fall, he or she can just walk away from the call contract without ever having had to acquire the underlying asset.   The call option pays off when the underlying stock goes up but does not obligate the owner when the underlying stock goes down. For this privilege, the purchaser pays a price (also called a premium) up front. The market price of the option depends on the exercise prices, the stock price, the time to maturity, the volatility of the underlying stock, the reckless interest rate and the anticipated size of dividends before maturity. The most important influence on an option’s value day-to-day is the stock’s price. The next most important influence on the option’s value is the volatility of the underlying stock price. In fact, one interesting use of option prices is to compute implied volatilities, that is the level of volatility (“vol”) implicit in the option price. The other influences either do not change on a daily basis (the exercise price and the anticipated remaining dividends) or have movements with relatively minor effect on the option price at normal maturities (time to maturity and the riskless interest rate).   The factors that affect the value (price) of a call option are: <ul style="margin-top: 0in; margin-bottom: 0in" type="circle"> <li class="MsoNormal" style="text-align: justify; line-height: 200%">Current Stock Price – Call option value increases as the current stock price increases. </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%">Exercise Price – As the exercise price increase, a call option’s value decreases.</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%">Option Period – As the expiration date is lengthened, a call option’s value increases.</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%">Risk-Free Rate – Call option’s value tends to increase as risk-free rate increases.</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%">Stock Return Variance – Option value increases with variance of the underlying stock.</li> </ul>     Credit:ivythesis.typepad.com

Bonds are fixed income assets with variable returns

Question 1 Bonds are stores of wealth. Unlike a bank deposit, bonds are fixed income assets with variable returns (bond yields...

DRAWING ON THE MODELS AND CONCEPTS COVERED IN THE FIRST 6 LECTURES, IDENTIFY 3 FIRMS THAT 3 OF THESE MODELS WOULD APPLY TO

Part 1:             The CNA Financial Corporation is an insurance company based in Chicago that has recently enhanced its human capital model by means of aligning the capabilities of the staff with that of the stakeholders’ objectives. The customized model of the company, also referred to as the capability profile model, was actually based on the change-agent and consulting models, which was developed by PricewaterhouseCoopers. The tailored model was designed in order to allow the company to attract, develop and retain highly-skilled internal auditors ( 2001). For this purpose, the model is made up of human capital measures or capabilities that would help in achieving the company’s expectations. These measures include project management, customer focus, people development, business and organizational knowledge, team and individual accountability, IT audit proficiency, logical reasoning and audit proficiency.             The model applied by the company is based on the basic concepts of human capital. The firm works in a knowledge-based field; thus, it realizes the significant role human capital plays in its operations. The measures selected by the model developer were also dependent on human capital concepts. Specifically, it has been cited that skills, knowledge and capabilities of the employees serve as the critical resource of human capital ( 1988). In addition, as previous authors have cited, assessing human capital can be done through individuals’ identifiable skills, education and experience ( 2001); this concept is also evident in the company’s intent for applying its enhanced human capital model.             The human capital concept basically explains that knowledge and skills of the employees are significant for companies to work. In particular, this concept is crucial in achieving satisfaction, improve sales and income as well as social cohesion. On a higher level, human capital is also a significant concept that contributes towards economic growth. With these basic features, the development of human capital model matches the behavior of CNA Financial Corporation. Based on its objectives, the human capital model was established in order to ensure that the capabilities of the employees meet the needs of the company as well as the business environment where it operates. The management of the company also believes that the human capital model will add value to its different control procedures and business plans ( 2001). The model applied by CNA is quite different from the original concept of human capital. While the original concept is focused on recruiting highly-skilled employees, the company’s model emphasizes on continuous staff development. Specifically, the human capital model of the company involves the provision of opportunities for the employees’ growth. In order to optimize the skills and potential of its human resource, the staff is given the chance to master the competencies of a particular task in order to move to higher level responsibilities. The management realizes that applying the human capital concept does not stop from the workers’ employment but up to their actual performance. To optimize the concept of human capital, companies should then provide means of constant development for the employees. The employment of this feature has actually helped CNA achieve significant changes as member of the internal audit eventually become the organization’s key leaders ( 2001).   Part 2:             Similar to CNA, the International Revenue Service (IRS) of the United States has developed human capital metrics in order to adopt the concept. The organization also aims to acquire the right people and assess whether the existing workforce complies with its work standards. The metrics of the organization is composed of different standards that focus on certain employee aspects. For example, standard 1 evaluate if the human capital meets the organization’s mission and objectives. Standards 3, 4 and 5 are more concentrated in the output or performance of the staff. On the other hand, the fifth standard is focused on the employees’ knowledge, mission-critical skills, talent and competency. Through this standard, the organization can then develop means of closing competency gaps as well as assess the effectiveness of these means ( 2005).             The application of the human capital concept as well as the development of standard metrics of the IRS is patterned after the role of the human capital model in any organization. Specifically, a human capital model is applied in order for the organization to acquire human unique knowledge and skills that will make its operations possible ( 1999). Through its efforts, the organization is able to achieve increased performance in 2004 ( 2005).             The application of the human capital concept in IRS however, is somewhat different from traditional and current theories. In the early times, the theory of human capital was focused the effect of human capital to earnings ( 1980). Considering that the IRS is a service-based organization that does not particularly operate for profit generation, such traditional concept does not suit the nature of the IRS. In addition, companies typically apply human capital models in their operations mainly to gain and utilize unique competitive advantages ( 1994). Organizations invest on hiring and training employees in order to shape them in accordance to their standards. Eventually, these investments will return through the employees’ performance, contributions and ideas.             Nonetheless, in the case of the IRS, the organization did not actually apply the human capital concept in order to gain advantages that would make it more competitive. But more specifically, the organization applied this concept in order to gain more competent staff that would deliver better services for the people. Although the aim of the human capital model application is different for the IRS, the outcome of the strategy is still the same. In particular this helped the organization increase the value of its abilities. From this example, it has been stressed that human capital models are not only for the main purpose of increasing profitability; acquiring human knowledge and skills through the human capital concept is also useful for delivering more efficient non-profit services. Part 3:             A firm that specializes in collections and asset investigations, Hunter Warfield, Inc. (HWI) had recently opened a corporate university. This multi-faceted learning facility is centered on the growth, development and success of the company’s employees. For this strategy, the company developed the Hunter Warfield Human Capital Model that applies the human asset optimization approach. This model starts with the process of recruitment down to the employees’ journey on their respective career paths. Similar to the aforementioned organizations, HWI also applies various measures that would facilitate its selection of knowledgeable and highly skilled candidates. The process of targeted screening, testing and selection are all carried out at this phase. The short listed employees are then subjected to an on-boarding process; at this stage, employees go through a process called New Employee Orientation where they are taught of the company’s business operations, culture, objectives and standards. After which, employees are trained in accordance to the position they will fill in ( 2006).             As with the case of CNA, HWI’s human capital model includes a feature called the Individual Development Plan (IDP), which serve as an outline that describes the learning and performance development required from an employee in order to fulfill their goals as well as reach a higher level of success. The company’s human capital model supports the provision of both informal and formal learning interventions. Activities and subjects such as client service, management and sales are all covered by these interventions and are based on the culture of the company ( 2006).             The goal of the company for applying the human capital model is also based on the concept relevant to it. As mentioned, human capital models are developed and applied in a company in order to ensure that the employed human resources have the abilities, skills and knowledge that will contribute to good business outcomes ( 1997). Specifically, these models enable companies to increase the levels of their productivity ( 1995). HWI developed it human capital model in order to ensure that its entire staff are trained properly and are capable of delivering the best services. Ultimately, this model was developed by the company in order to become the greatest agency among other similar companies. With these application objectives, it becomes clear that the behavior of the company suits what the human capital can provide.             There is a great emphasis in this company example that the concept of human capital model is a two-way concept. Rather than selecting highly-skilled employees for the company benefit, the concept adapted by HWI highlights the benefit of the model to the employees as well. The model developed also ensures that the employees are not only trained based on their individual job positions, but they are given a clear overview of the company’s nature and goals. This aspect ensures that the employees truly understand the meaning of their roles and contributions for the company. This example then highlights the true meaning and role of the human capital model to actual company application. References: Credit:ivythesis.typepad.com

DRAWING ON THE MODELS AND CONCEPTS COVERED IN THE FIRST 6 LECTURES, IDENTIFY 3 FIRMS THAT 3 OF THESE MODELS WOULD APPLY TO

Part 1: The CNA Financial Corporation is an insurance company based in Chicago that has recently enhanced its human capital ...

INDUSTRIAL CAPITALISM AND EARLY UNIONISM, 1850-1880

Industrial Capitalism and Early Unionism, 1850-1880   Summary of Articles The first article entitled “The Honest Workingman and Workers’ Control…” specifies the power and the role of skilled workers during the nineteenth century. The author explained in the article that during this period, skilled workers possess the right and the power to dictate and to influence the nature of their work in all its aspects, including recruitment, wages, training, use of machines, and in the work itself. In this regard, skilled workers are referred to as “autonomous workers” who have significant control over the quantity and quality of their work and their product (, 1904). In the long run, due to the results of the workers’ actions, they have decided to cooperate and to function under the governance of unions. The second article is entitled, “Joe Beef of Montreal”, which describes the significant role played by Joe Beef or Charles McKierman in the live of labouring men of Montreal. The tavern was a significant element in this article, as it shows the connection between drinking and the working life of the labouring class during that time. In addition, this article was also successful in showing and depicting the difference between the lives of middle class and the working class men. In the previous article, it has been mentioned that in the long run, the skilled workers cooperated with labour unions to be able to govern their working conditions. Similarly, Joe Beef and his tavern were also able to reinforce mutual responsibility in both the skilled and unskilled workers (, 1981-82) during that time through a culture that helped unify the working class. The third article entitled, “After the Fur Trade”, emphasizes the significant roles the aborigines played in the development of capitalism in British Columbia. The article depicts the interest of the aborigines with the wage-labour economy during that time, which is related to the concept of the “potlatch” system of the aborigines. Potlatch, as defined by  (1992), refers to the different ceremonies among the aborigines that included feasting, dancing, and giving of gifts to all in attendance, and through this ceremony, the hereditary status and rights to resources of a particular family or individual are maintained. The aborigines have observed that members of tribes participating in the wage-labour economy, including the fur trade are able to obtain objects and wages that somehow determine their status in the tribe. In one way or another, the capitalists during that time was able to benefit from the situation, as they are encouraging more aborigines to work for their factories, such as sawmills and canneries. This article was also successful in informing its readers of the advanced skills of the aborigines, who are able to combine seasonal wage labour with economic cycles. Moreover, the article was also able to emphasize the gender roles of aborigines, which is characterized by division of labour. In terms of wage-labour, both men and women work for factories, along with other individuals from other nations.   Comparison and Contrast of the Arguments             Although the three articles tackled topics related to industrial capitalism and labour unions, each of the articles has separate topics and issues to emphasize. Both the first and second article talked about the rights of workers during that period. However, the first article emphasized the powers of skilled workers over their work and their productivity, while the second article emphasized the unequal rights and privileges skilled and unskilled workers obtain from their work. However, despite this difference, three similarities can be detected. First similarity of the two articles is the emphasis on unification of principles, where in the first article, the power of the skilled workers was tamed by the unions, which enabled them to follow the rules, while in the second article, a single man, Joe Beef, was able to unify both the skilled and unskilled workers through the concept of mutual responsibility. Second similarity of the two articles is the emphasis on the male workforce, disregarding the women who participated in the wage-labour economy. Both the articles stressed that the majority of the working class during that time are comprised by the male gender, as they are the ones capable of working on physical jobs, such as mining and moulding. The third similarity between the first two articles is the emphasis on the relationship of drinking as part of the practice of the working class. In this regard, Joe’s tavern and the factory of the skilled workers play a significant role, as these places are the venues for skilled and unskilled workers to have fun and to voice out their complaints regarding their work and their lives.             In relation to the third article, it has been able to emphasize the role played by capitalism in providing work for the aborigines. However, this aspect becomes similar to the other two articles, as capitalism serves to be the driving force of the different factories in the manufacturing industries during that time, which helped provide wages and work to the working class. However, despite this similarity, two specific differences of the third article to the other two can be pointed out. First difference is the fact that the third article emphasized the indigenous culture of the aborigines, which played a particular role in the aborigines’ participation in the wage-labour economy. In this regard, the concept of the “potlatch” becomes an important influence to take note of because this encouraged the aborigines to earn more to be able to maintain a high status in their tribe, which was not the kind of influence that served as the driving force for the skilled workers in the first two articles. The second difference is the particular importance and participation of women in the wage-labour economy, which was not the case in the first two articles. In the third article, the author was able to emphasize that because the aborigines pay significant attention to division of labour, women during that time was also able to work in factories, such as sawmills and canneries, regardless of their gender. In this regard, the aborigines have a high regard of the roles that women play in their society or tribe, which is totally different from industrial societies described in the first two articles.             In terms of argument, all three articles are able to emphasize that capitalism fueled the wage-labour economy in the country during that period. The arising industrial revolution and development of machineries and other manufacturing equipments during that time served as the driving force for the change in the strategies of the working class. The gradual shift of the economies from agricultural to industrial may somehow determined the social status of the working class, including other members in the society. In addition to this, the role of the church was also significant in the development of industrial capitalism and the wage-labour economy, as the church used the influence of faith and religion in order to persuade many to work. On the contrary, the first two articles are more similar in terms of the location or society compared to the third article. The first two articles focused on the industrial society, while the third article focused on the indigenous communities of the aborigines. In the last article, culture and belief were emphasized to be the driving force for the aborigines to participate in the wage-labour economy and capitalism.     Opinion on the Articles             With this, in my opinion, I believe that in relation to capitalism and the wage-labour economy, the third article on the aborigines was the article that made a better argument. This is because the author gave particular importance to the group of individuals that usually experience discrimination in the society. The author was also able to indirectly emphasize that because of their lack of formal education, these groups of people are the ones being used by capitalists for their self-interests. As stated in the article, the capitalists had the greatest idea of obtaining beaver and other animal fur from the aborigines when they accepted “strange” things from the colonizers, such as knives and other metal objects. In this regard, the colonizers used these objects as offerings in place of the fur, which during that time is considered a luxury and status quo item. From this, it can be observed that the colonizers abused the skills and ignorance of the aborigines. In addition, due also to the lack of their formal education and understanding of how things work in the industrial and advanced society, the skills and labour of the aborigines are being abused by paying them less than they deserve. Because of their cheap labor, capitalists are able to obtain and profit much higher from the trade. With this, I believe that the third article was able to serve as a good eye opener for its readers, in realizing that these situations can still be observed in the contemporary society despite the extensive use of technology.             Based on my analysis, comparison of the three articles is not as difficult, as they provide significant similarities and differences that can be detected and determined through in-depth understanding of the events that happened in the cultural history of Canada. Comparison of the three articles was challenging enough to impart additional knowledge on my part, thus, further developing my critical and analytical thinking skills. Thus, in this regard, although challenging, comparison of the articles provided more benefits than difficulties.               References             Credit:ivythesis.typepad.com

INDUSTRIAL CAPITALISM AND EARLY UNIONISM, 1850-1880

Industrial Capitalism and Early Unionism, 1850-1880 Summary of Articles The first article entitled “The Honest Workingman and Worker...

Investment Appraisal as a Tool for Management Decision Making

Investment Appraisal as a Tool for Management Decision Making               First and foremost let us identify what is Investment Appraisal and why it is an important tool for a management decision making process. We will also get into a bit of technical and literal advantages when it is used in management decision.          Investment Appraisal is a means where assessment of products and services takes place whether or not it is in favor of the company before purchase. It is also a means whether the project is worthwhile or not. So whatever investment the company must undertake the management decision should take place and there are many things to consider before the actual expenditure. For example the company has an initial ,000 Capital Investment that is not been used, they may simply put the money in the bank and it will serve them well since the bank will give them a steady secured interest of about 5% monthly. It is easy to say that it’s alright put it there since it is safe.        But what if they can choose to invest the money in a Capital Stock market where they can earn as much as 10 percent to 20 percent per month but risk may involve the rise and fall of stocks. Will the management be willing to put their money in such investment opportunity? Management should decide.       If they have another option of putting the money in a new business venture let’s say putting up a new business or putting the money in a partnership of a store outlet that is newly established. This investment may involve a lot of risk since this store is new and their customers are not yet stable, added to it is the products they are going to sell may not be familiar with the customers or you may wonder if the place is highly accessible. But they can give you as much as 50% Interest rate of their income since you are a business partner. Investing in such a new business venture takes a lot of risk. So the question is will the management be involved in such investment? Among the three options what would they choose? To give you a clearer view let us summarize the process so you can choose between the following; ·         Investment 1.  Bank Investment        =     5% Interest rate                =  0% risk ·         Investment 2.  Capital Stock Market  =    10 to 20% Interest rate     =  20% risk ·         Investment 3.  Partnership                 =    as much as 50% Interest = 50% risk      Management would choose where are we going to put our money? Or should I seek for more investment? As you can see management decision is highly critical and prerogative since it involved the whole organization and its entirety. Another option they can choose is to divide the money to invest in two or three of the following or simply do not invest at all. The decision should be properly weigh down due to its complexity but since the investment has not been concluded management would simply put their money in the bank for safekeeping. But if management has found a better opportunity they may consider transferring their money to such investment.       Talking about asset or material acquisition, management investment appraisal should be at hand. Usually investing in a fixed asset involved learning such purchase or the money would be wasted. For example a company must buy a land for building a factory. The parcel of land maybe low priced but the accessibility makes it difficult to employees. Will the management decide to buy or not? It is up to them, or will they look for a high priced piece of land that is at the center of highly commercialized area and high accessibility traffic footed community? What if they have a limited budget? These conclusive questions do not require you to look for answers but to put yourself in the shoe of the management to make such decision.  To help you decide to come up with such conclusion you may need to seek the help of the organization or simply decide it yourself. The following should give you a helpful guide in Investment Appraisal. ·         Investment should build a valuable profit today and in the future ·         You must understand that investment requires time to get the actual return ·         Allocate the financial capability of the company before investing ·         Make use of your investment to its maximum capacity ex. purchases of machineries, computers capital stock etc. ·         Properly assess products and services before investing. This includes taking advantage of their promotion, warranty or guarantee or other stuff       All in all Investment Appraisal is a great tool for management in decision making it can involve the personality and the status of the company in the eye of their employees and customers. Generally a good decision makes a company really progressive, or on the other hand management who cannot make such decision is mostly companies who are weak and who are left behind.                 Credit:ivythesis.typepad.com

Investment Appraisal as a Tool for Management Decision Making

Investment Appraisal as a Tool for Management Decision Making First and foremost let us identify what is Investment Apprai...