Research Topics: Transaction Costs And Core Competencies

The Condition Of The Organizational Costs And Benefits Of Transitioning To The Outside Provision Of A Service : Transaction Costs And Core Competencies

Having considered the in-house administration costs and the costs to the contractor, John A O’Looney suggests to further look into the transaction costs and core competencies of the organization.   Transaction Costs   Learning from experience, many public managers finds that it is very difficult to identify all the services in the contract for outsourcing. However, if a service is not listed in the contract, it is expected that an additional charge will be imposed for additional service. As suggested by John A O’Looney, if the public manager is unable to foresee and plan for any unexpected changes in the outsourced service, the transaction costs such as renegotiating the contract and setting new performance measures will eat up the expected savings.   Now, let examine as to whether the transaction costs will eat up the expected saving in outsourcing the service provided by the Hong Kong Auxiliary Police. According to John A O’Looney, high transaction costs tend to exist when the service is complex, experimental or poorly understood. The services provided by the Hong Kong Auxiliary Police are definitely complex in nature. Take the role of reserve at times of natural disaster as example. First of all, the nature of the natural disaster is difficult to expect. Secondly, the date, time and location of the natural disaster may affect the assistance required from the auxiliary police. Therefore, it is impossible to take all the contingencies into account in the contract. As a  result, the transaction costs to outsourcing the services provided by the Hong Kong Auxiliary Police is high.     Core Competencies     Apart from the transaction cost, John A O’Looney also mentions the concept of core competencies. He stresses that organization should focus on its core competencies to maintain a high degree of competitiveness in the market. He quotes Cannon as an example to illustrate the importance of core competencies. Cannon has put tremendous resources and development in the optics area while outsourced the production line. As a result, Cannon gains the financial benefits in outsourcing ancillary services and also maintains its competitiveness in the optics market.   Now, let explore what are the core competencies of the Hong Kong Auxiliary Police. According to ‘Vision and Statement of Common Purpose and Values’ issued by the Hong Kong Police in 1996, it states very clearly about the vision, common purpose and values pursued by the Hong Kong Police. The details of ‘Vision and Statement of Common Purpose and Values’ are[1]: -   Vision   That Hong Kong remains one of the safest and most stable societies in the world   Common Purpose   The Hong Kong remains Force will ensure a safe and stable society by :   v     upholding the rule of law v     maintaining law and order v     preventing and detecting crime v     safeguarding and protecting lift and property v     working in partnership with the community and other agencies v     striving for excellence in all that we do v     maintaining public confidence in the Force   Values v     Integrity and Honesty v     Respect for the rights of members of the public and of the Force v     Fairness, impartiality and compassion in all our dealings v     Acceptance of responsibility and accountability v     Professionalism v     Dedication to quality service and continuous improvement v     Responsiveness to change v     Effective communication both with and outwith the Force.   According to Service Quality Wing Chief Superintendent Gordon Yeung, the “Vision and Statement of Common Purpose and Values’ provides a clear direction (Vision), specifies the core functions (Common Purpose) and provides guiding principles (Values) to Force members in the execution of duties. [2]. In order words, the core competencies of the Hong Kong Police including the Hong Kong Auxiliary Police are upholding the rule of law, maintaining law and order, preventing and detecting crime, safeguard and protecting lift and property, working in partnership with the community and other agencies, striving for excellence in all that police do and maintaining public confidence in the Force. Having examined the roles play by the Hong Kong Auxiliary Police, the services provided by the Hong Kong Auxiliary Police definitely fall into the category of upholding  the rule of law, maintaining law and order, and safeguarding and protecting life and property. To sum up, the three major services provided by Hong Kong Auxiliary policed are the core competencies of the Hong Kong Police.   [1] The Hong Kong Police, “Vision and Statement of Common Purpose and Values”, Web version http://www. info. Gov. hk/police/aa-home/English/vision.htm (15 May. 20004)   [2] The Hong Kong police,”Off Beat”,Web version http://www.info.gov.hk/police/offbeat/722/eng/bottom.htm(1 June,2004) Credit:ivythesis.typepad.com

The Condition Of The Organizational Costs And Benefits Of Transitioning To The Outside Provision Of A Service : Transaction Costs And Core Competencies

Having considered the in-house administration costs and the costs to the contractor, John A O’Looney suggests to further look into ...

AUTONOMOUS ECONOMIC ORGANISATION AND TRANSACTIONS

Introduction   A key characteristic of a “civil society” is autonomous economic organization and transactions.”( 19947) The belief that giving individuals the freedom to maximize their own wealth results in the maximization of society’s wealth is a cornerstone of capitalist philosophy. As the noted economist stated in his defense of capitalism during the depression of the 1930s, the allocative efficiencies and experimental creativity achieved through autonomous economic organization and transactions are “powerful instruments to better the future.”( 1936) Moreover, the rule of law is a predicate for achieving autonomous economic organization and transactions. (1995) The rule of law has two basic principles. First is that people should be ruled by the law and obey it, and secondly, the law should be such that people will be able to be guided by it. (, 1994) Hence, the rule of law assures that individuals know what the law is so they can maximize their own welfare within its confines. It also assures that individuals can pursue this wealth-maximizing autonomy without interference from either other individuals or the state. By assuring that the law is applied equally to all, is binding on the state, and prevents arbitrary actions by the state, the rule of law provides the freedom for the members of a “civil society” to order their own economic affairs. (1988) There is a strong relationship between the rule of law and Western contract law. In the West, it is believed that the objective and predictable enforcement of contracts is desirable because it maximizes the welfare of the parties involved, thus promoting the welfare of society as a whole. (1990) Individuals enter into contracts because they believe that an exchange will make them each better off. Where contracts are enforced in an objective and predictable manner, individuals are better able to determine which transactions will be wealth-maximizing and are able to shift the risk of uncertain events in economically efficient ways. On the other hand, where contractual enforcement is subject to changing state policy wealth-maximizing transfers may be voided by the state or never attempted due to the risk of contractual non-enforcement. Further, the resolution of contractual disputes by a legal system that is an impartial mediator of interests is beneficial for society because it establishes rules to resolve future disputes and “encourages socially desirable behavior by future bargainers.”( 1993)   At the center of contract theory is the role of default roles. Contracts are necessarily incomplete and therefore a court or legislature must fill gaps. Recent scholarship has recommended that a lawmaker charged with this task look beyond the individual parties to a contract. This scholarship suggests that a default role can be designed to induce an equilibrium at which parties of one type accept the default role while parties of another type, to whom the role is costly, opt for an alternative contract term and thus reveal their type. When such a role works as intended, the revealed information permits efficient contractual arrangements and enhances social welfare. Explained this way, as an abstraction, the analysis seems simple and sound. The devil, though, is in the details. A default rule might fail at separation for reasons that have so far escaped scholars. The analysis of default rules thus requires amendment. Moreover, where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have  been in the contemplation of both parties, at the time they made the  contract, as the probable result of the breach of it. Case               Seller Ltd is a manufacturer and seller of lifting equipment. Buyer Ltd, (operates a heavy goods vehicle servicing and repair business. On 1 July 2006 Buyer requested a copy of Sellers brochure and this was sent by post and received by Buyer on 3 July 2006. , acting for Buyer telephoned Seller and was put through to  Seller Sales Director  told  that Buyer wished to purchase the hydraulic jack system which was specially designed to be able to lift heavy goods vehicles and was listed in the brochure at Â£28,000   thanked     for his order and agreed that the would be manufactured and delivered to Buyer on 31 August 2006 at the listed price of Â£28,000. told  that purchasers were required to submit orders on Seller standard order form, a copy of which was contained within Seller brochure, but in the meantime  would arrange for manufacturing to commence.  completed the order form contained in the brochure and sent it to together with a covering letter which stated “Please note that all orders are submitted subject to Buyer terms and conditions, a copy of which is enclosed.” The hydraulic jack was delivered to Buyer on 5 September 2006, together with an invoice for Â£30,800 which was stated to be payable in full in 30 days. telephoned and queried the price, stating that he had agreed a price of Â£28,000.  replied that unfortunately Seller costs had increased and the company had had to utilise a clause in the company terms and conditions which stated Seller reserves the right to increase the price of goods supplied by a maximum of 10%.  hung up and checked Seller terms and conditions and found that one did indeed contain the above wording, albeit in small print.  then checked Buyer terms and conditions and discovered that one of the terms provided: The contract price shall be that specified at the time of purchase. Buyer will not accept any variation in the price after submission of an order In consequence  sent Seller a cheque for Â£28,000 which was stated to be in full and final settlement of the account. Seller cashed the cheque and sent Buyer an invoice for what was stated to be the outstanding balance of Â£2,800.   Misrepresentation of Contract             According to the misrepresentation in the contract of law, misrepresentations happens when a false statement of fact was made by one party to another, which is not stated in the term of the contract, that made the other party enter the contract. In the case of and agreed to complete the purchase form provided that the Hydraulic Jack will be delivered in his place; payable in 30 days full and most importantly it is only £28,000. Although, it is stated in the purchase form that the price of the products can be subject to change in maximum of 10% upon the discretion of the seller, however, according to the buyers terms and conditions, the contract price shall be that specified at the time of purchase. This is where the false statements of facts happened. In the context of the UK law, the notion of a contract is characterized as an agreement where an individual accede to attend another who commence to compensate the former with wages and establishes between them exclusive sense of duties of the kind theoretically known as obligations, duties which as a minimum in the first instance can be imposed only by and against the factions to the transaction. Nevertheless, there will always be hindrances and imperfections in transactions. Contracts might become incomplete due to several reasons, which in turn could be perverted or unintentional. Several legal actions that may be undertaken in the occurrence of an uncompleted contract include the concept of breach of contract and misrepresentation. The former is characterized as the failure with the lack of lawful justification to perform any promise which forms the whole or part of a contract. This basically states that one party refuses to explicitly and totally refuse to perform the agreement. The latter, on the other hand, is described as an erroneous or fabricated representation that which if acknowledged, directs the mind to an apprehension of a circumstance other and dissimilar from that which exists. Simply speaking, the thrust of misrepresentation is to deceive and to mislead from the inception of an agreement. In most cases, reparation will be of such amount as to place an aggrieved party, inasmuch as funds could comply, in the same situation as if the contract had been completed although it is still subjected to the rule that damages are not to be prearranged for casualties of an exceptional category. In a number of cases, the reparations permitted by law are simply nominal. To illustrate, for an unsuccessful payment of a liabilities at the period decided upon, nothing further than the quantity of the debt itself could be retrieved. Conversely, in the instance of breach of promise of marriage, reparation that may go beyond the financial loss, are prearranged as a compensation for indignant feelings. A contract occasionally provides that a particular figure shall be remunerated on breach, and regulations have been positioned for deciding whether such a sum is to be reckoned as a punishment. The verdict will turn barely to a minor degree on the issue whether the manifestation of ‘penalty’ or ‘liquidated damages’ has been utilized in the agreement. Destructive duties stated in a contract may as well be obligatory through an injunction, another of the court preventing the responsibility of an undertaking. In certain circumstances, a positive obligation may be imposed by order for particular performance, a solution which is approximately limited to agreements for the sale or conveyance of interests in land, and for the turning over of other property which is so inimitable or degree that damages would be an insufficient resolve. The court has a prerogative in yielding an injunction and an instruction for specific performance and in carrying out the discretion will have take into account all the conditions of the case, and especially to the demeanor of the party appealing for it. Nonconformity with an injunction of either kind will be sanctioned by incarceration. (1995) In the case of vs , after purchasing an ironmonger’s business, things started to become different from what the seller had made the plaintiff believed. The defendant was given damages for fraud misrepresentations and according to the judge, “The defendant is bound to make reparation for all the actual damage directly flowing from the fraudulent inducement … It does not lie in the mouth of the fraudulent person to say that they could not have been reasonably foreseen.” On the other hand, the misinterpretation theory reaches this conclusion by interpreting all promises as representations about the promisor’s future conduct. A person who promises to give a friend a ride has made a definite statement about what will happen in the future. If she then fails to come through with the ride, her failure makes this statement about the future a false one, thereby violating the obligation to tell the truth (in addition to causing harm). By contrast, a person who says that she will probably give her friend a ride, but who reserves the right to change her mind, has made a much weaker probabilistic statement about the future. That person’s failure to perform would not make her previous statement false, and therefore would not violate the obligation to tell the truth, even though it might cause the same amount of harm to her friend. According to the misinterpretation theory, this is why a person who promises to give her friend a ride has a stronger reason to do so than does a person who has merely said that she is likely to give her friend a ride, without actually promising. Admittedly, the obligation to tell the truth appears here in what may be an unfamiliar guise. The obligation has some elements of strict liability, for it is no defense to say that at the time of promising the speaker thought that her statement would come true. In addition, the obligation to tell the truth is perhaps more usually thought of as an obligation limiting what one is allowed to say, by obliging people not to say anything that is false. Under this theory, though, the obligation limits what speakers can do, by forbidding people from doing anything that will make their prior statements turn out to be false. Rather than requiring people to conform their statements to reality, the misinterpretation theory of promising requires people to act in such a way that reality will conform to their prior statements. (1983) A misrepresentation made by one person to another with the purpose and effect of inducing him to enter into a contract with the former, will entitle the latter to avoid the contract, if it is a misrepresentation as to some material fact. A declaration of opinion is not and does not befit a misrepresentation for the reason that the opinion ended up to be erroneous or the purpose is not accomplished. In the instance where a representation is not purely false, yet is recognized to be so to the individual who renders it, or is made it heedlessly devoid of concentration whether it is true or false, it is identified as fraud or deceit. For the rationale of giving a right to averting of the contract, it establishes diminutive variance whether a misrepresentation is innocuous or deceitful, save that it will be harder to resist the inference that a fraudulent misrepresentation was made for the purpose of inducing the contract. And when a verdict has been achieved, especially when the transaction has been accomplished by conveyance dissimilar outcomes will be given to an innocent and a fraudulent misrepresentation. The former will not have the right to be set aside while the latter will. Generally, there is no obligation compelling a party to any intended contract to make a disclosure to the other of material facts which might affect his judgment. (1995) A significantly appealing quality of misrepresentation suits is the burden of proof. In the suit of breach of contract, the plaintiff has the burden of proof whether a violation of the agreed covenant among parties has transpired. On the other hand, a misrepresentation suit provides the burden of proof to the accused party. Consequently, if the defendant is not able to emancipate his evidential burden and acquire the justification of reasonable belief, the claimant should come off in its claim and salvage those losses which he can demonstrate were instigated by the misrepresentation. Thus, it may be easier to prove a misrepresentation claim than a breach of contract. For that reason, the misrepresentation is asserted as a contingency plan to the contractual accusation. (, 1995)               Bibliography   Credit:ivythesis.typepad.com

AUTONOMOUS ECONOMIC ORGANISATION AND TRANSACTIONS

Introduction A key characteristic of a “civil society” is autonomous economic organization and transactions.”( 19947) The belief that ...

Top