Classic Pen Company Case

A VOTRE SANTE: PRODUCT COSTING AND DECISION ANALYSIS IN THE WINE INDUSTRY Priscilla S. Wisner Department of Accounting and Information Management College of Business University of Tennessee 638 Stokely Management Center Knoxville, TN 37996 Phone: 865. 974. 1714 Email: [email  protected] edu Case: A Votre Sante Page 1 of 17 Electronic copy available at: http://ssrn. com/abstract=1659912 BACKGROUND A Votre Sante (AVS) is a small, independent winery owned by Kay Aproveche. Kay has a relationship with a grower who grows two types of wine grapes, a Chardonnay and a generic white grape.AVS buys the grapes at the point that they have ripened on the vine. AVS is responsible for harvesting the grapes and all further processing of the grapes into wine. In 2010, AVS earned an operating margin of almost $100,000 on sales of $848,000, for an 11. 6% margin (see Exhibit 1). The process of winemaking is fairly simple, yet requires much attention to process details. After the grapes are harvested, they are brought to the winery for washing and crushing. The crushing process separates the juice from the pulp, skin and stems.The juice is used to make the wine; the pulp, skin and stems are recycled back onto the fields whenever possible or otherwise disposed of. The amount of wine generated from the grapes is dependent each year on a number of climatic and growing factors such as temperature, length of growing season, rootstock and fertilizers used. Once the juice is extracted, it moves into the fermenting process. The Chardonnay wine grape is fermented using oak barrels; the oak in the barrels gives flavor to the Chardonnay wine.The barrels are expensive ($500 each), but are sold after four years for $200 apiece to another smaller winery. The juice fermenting in each barrel results in the production of 40 cases of wine. The generic white grape juices are fermented in a holding tank; a full tank would result in the production of 1,500 cases of wine. The fermenting process takes place in a temperaturecontrolled environment; however, each fermenting method results in some wine loss through evaporation. Kay Aproveche estimates that theChardonnay will lose approximately 10 percent of its volume through the fermentation process, while the generic white will lose approximately 5 percent of its volume. Harvest takes place in the late summer and early fall months; typically, the time elapsed from harvest to final sale is about 11 months. Case: A Votre Sante Page 2 of 17 Electronic copy available at: http://ssrn. com/abstract=1659912 PRODUCT INFORMATION AVS bottles three wines: a Chardonnay-Estate, a regular Chardonnay and a Blanc de Blanc.Data related to the three wines is as follows: Chardonnay-Estate contains only Chardonnay grapes that are grown for AVS; the expected sales price is $22/bottle. The market demand for Chardonnay-Estate wine is estimated to be 24,000 bottles for 2010. Regular Chardonnay is blended by combining the Chardonnay wine left over after bo ttling the Chardonnay-Estate with the fermented generic wine; the blend mixture is two parts Chardonnay grapes and one part generic grapes. The expected sales price is $16/bottle.Blanc de Blanc wine is made from all remaining generic white grapes; the expected sales price is $11/bottle. All three wines are bottled at AVS using one bottling line. In a typical year, AVS bottles enough Chardonnay-Estate to meet the predicted market demand, then bottles the regular Chardonnay after blending all remaining Chardonnay wine with the necessary amount of generic grapes. The Blanc de Blanc is the last wine to be bottled, using all remaining generic white grapes. Kay again expects the wines from this harvest year to sell out.ADDITIONAL OPERATIONAL AND COST DATA Chardonnay Grapes 2009 harvest – 100,000 pounds purchase price of $85,500 expected loss in volume through fermentation and bottling – 10% Case: A Votre Sante Page 3 of 17 Electronic copy available at: http://ssrn. com/abstr act=1659912 Generic White Grapes 2009 harvest – 60,000 pounds purchase price of $38,500 expected loss in volume through fermentation and bottling – 5% Wine-making Chardonnay grapes are fermented in oak barrels; each barrel results in the production of 40 cases of wine Barrels cost $500 apiece, and can be used for our years and sold for $200 each at the end of four years; assume that you have to purchase all new barrels for the 2009 harvest Generic white grapes are fermented in the holding tank; the tank can hold up to the equivalent of 1,500 cases of wine Bottling Requires 36 pounds of grapes (post-fermenting) for one case (12 bottles) of wine In the bottling process, the wine is put into bottles, with both corks and labels added during this process. The materials cost associated with the bottles, corks and labels are estimated to be $2. 50/bottle. Direct Labor Harvest labor is paid an average of $7. 5 / hour. It is estimated that 80 pounds of grapes can be harvested e ach hour. Crush labor is paid an average of $8. 00/hour. It is estimated that it will take 300 hours to crush the grape harvest. Overhead Expenses Administrative rent and office expenses – Estimated to be $20,000 / year. Depreciation is charged based on the following equipment schedule: Case: A Votre Sante Page 4 of 17 Equipment Tractors Crushers Holding Tank Bottle Lines Cost $15,000 $6,000 $40,000 $10,000 Est. Life 10 years 10 years 20 years 10 years 5 years Other Production Equipment $15,000Indirect Materials – Part of the wine-making process involves introducing yeasts and other additives into the wine to help the fermentation process and to help balance the flavors in the wine. Indirect production materials average $1. 55 per case of wine. Lab expenses – Lab expenses of $8,000 are incurred for lab supplies and equipment. The lab is used by the production supervisor and the wine master to test the grapes and wine at various stages of production. Liquor taxes – AVS is required to pay a liquor excise tax of $3/bottle on every bottle of wine sold.Production office – AVS pays a part-time person to help administer the production function. This person orders supplies, reviews and approves production invoices, and performs other administrative functions. The production office budget is estimated to be a flat rate of $12,000. Sales and related – Kay’s sister, Bebe Cadadia, is paid $30,000/year on a contract basis to sell AVS wines. She works through distributors, who are paid $2/bottle for each bottle sold. Supervision – Kay’s brother, Kan Pai, supervises the production of wine from the harvest through the bottling processes. His salary and benefits total $55,000 annually.Case: A Votre Sante Page 5 of 17 Utilities – Utilities costs are incurred primarily to maintain a constant temperature in the fermenting process. These are expected to be $5,500. Waste treatment – After crushing, the pul p, skins and stems that are left over must be disposed of. One-half of the waste can be recycled back onto the fields as a compost material; the other one-half must be disposed of at a landfill dumping cost of $2,000. A winemaster is employed to help formulate and test the wines. This is done on a contract basis; AVS pays the winemaster $5,000 for each type of wine that is formulated.Kay’s role is to manage the AVS business. Her annual salary and benefits total $75,000. CASE QUESTIONS 1. Create a single company-wide contribution margin income statement for AVS that includes each expense category. Also calculate the average revenue and net income for one bottle of wine. (Note: Do not break out the variable or the fixed costs by type of wine. ) 2. Another grower has available 20,000 pounds of Chardonnay grapes from the 2009 harvest. AVS has the opportunity to buy the juice from these grapes (they have already been harvested and crushed).If AVS could blend these grapes with the generic white grapes (using the 2:1 blend formula) to produce a new Chardonnay wine to be priced at $14/bottle, and required a 15% return on sales for this wine, what is the maximum amount that AVS would pay for a pound of grapes? 3. Other than the cost of the grapes, what factors would you consider to support your purchase of the grapes, and what factors would cause you to reject buying the grapes? 4. Kay Aproveche recently read an article about Activity Based Costing (ABC) and is intrigued by the costing methodology.She would like to be able to better assign costs to each of AVS’s products, and has collected the following information about AVS activities. Use this Case: A Votre Sante Page 6 of 17 information, along with the information given in the case, to construct a product cost analysis using ABC. Assume that AVS did not buy the grapes referred to in Question 2. Harvesting activity – The Chardonnay grapes can be harvested at the average rate of 71. 5 pounds/hour, while the generic white grapes are harvested at the rate of 100 pounds/hour.Includes costs related to tractors and harvest labor. Crush activity – Relates to the pounds of grapes crushed. Includes costs of crusher equipment and crush labor. Fermenting Activities – Barrel costs relate to the Chardonnay wines by the percentage of wine used in each wine type. Holding tanks relate to the Blanc de Blanc and the Chardonnay regular wines by the percentage of wine used in each wine type. Lab and Supervision Activities – Kan Pai estimates that these activities are split 60% Chardonnay-Estate, 25% Chardonnay regular and 15% Blanc de Blanc.Other production activities and costs not directly associated with a specific wine – allocate according to the number of bottles produced of each wine. Administrative activities – Allocate according to sales revenues. 5. Write a brief memo to Kay Aproveche that explains what ABC is, and that discusses both the benefits and costs of doing an ABC analysis. What would you recommend to Kay Aproveche regarding the ABC analysis? Case: A Votre Sante Page 7 of 17 Exhibit 1 A Votre Sante Income Statement – 2010Sales Chardonnay – Estate Chardonnay (non-Estate) Blanc de Blanc Total Revenues Product Costs Grapes Bottle, labels, corks Harvest labor Crush Labor Indirect Materials Depreciation Lab expenses Production office Utilities Waste treatment Wine Master Supervisor Barrels Total Product Costs Gross Margin Administrative & Sales Costs Administrative rent & office Liquor taxes Sales commissions Sales manager Administrative salary Total Fixed Costs Operating Margin price $ 22 $ 16 $ 11 # bottles 24,000 $ 9,000 16,000 49,000 $ $ 528,000 144,000 176,000 848,000 124,000 122,500 14,500 2,400 6,329 8,100 8,000 12,000 5,500 2,000 15,000 55,000 4,725 380,054 467,946 $ $ 44. 8% 55. 2% $ $ $ 20,000 147,000 98,000 30,000 75,000 370,000 97,946 11. 6% Case: A Votre Sante Page 8 of 17 TEACHING NOTE: A VOTRE SA NTEThe A Votre Sante (AVS) case is multi-faceted in that it requires students to incorporate operational measures into product costing results, and also to understand cost accounting from a variety of perspectives, such as: Product versus period costs Variable versus fixed costs Activity based costing Relevant costs and opportunity costs Additionally, the case questions require both quantitative and qualitative analyses of the business issues faced by AVS. AVS has been used in a graduate-level managerial accounting class for MBAs, and would be most appropriate for an advanced undergraduate or a graduatelevel accounting or MBA course. The detail in the case is rich enough to support a variety of analyses.Alternative uses could be to have the student construct a cost of goods manufactured statement or a traditional financial statement, both of which reinforce the differences between product and period costs. Students must know the difference between product and period costs to success fully complete the ABC analysis, but they could be made more explicit by requiring the statements. Additionally, alternative decision analysis questions could be developed using the variable and fixed cost structures described in the case. Case question number two is only one example of a potential decision analysis question. The following discussion contains the answers to the questions listed in the case, and does not detail the solutions to alternative questions. Case: A Votre Sante Page 9 of 17Question 1: Contribution Margin Income Statement To develop the contribution margin income statement, you first have to calculate the number of bottles of wine produced by AVS. This number is dependent upon the yield from the grapes. The relevant calculations are as follows: Chardonnay Grapes 100,000 10,000 10% 90,000 Generic Grapes 60,000 3,000 57,000 Yield: Pounds harvested Loss in processing Yield Bottles of wine produced: 5% Chardonnay Estate Regular pounds of grapes: Chardonnay grapes Generic grapes Total pounds of grapes Bottles (3 lb. / bottle) 72,000 72,000 24,000 18,000 9,000 27,000 9,000 Blanc de Blanc 48,000 48,000 16,000 Total 90,000 57,000 49,000The contribution margin income statement (Teaching Note Exhibit 1) is fairly straightforward, with the following concepts / calculations causing the most difficulty: The inclusion of liquor taxes and sales commissions in variable costs: These are both period expenses, but are clearly based upon the number of bottles sold, and therefore are included in the variable costs. Where to include the wine master expense: Since the wine master is paid according to number of blends, not number of bottles, this expense is listed as a fixed cost. Arguably, it could be listed as a variable cost, given that the cost will be based on the number of wines produced.As part of the discussion we will examine the rationale behind listing wine master as a fixed or a variable expense. Barrel expense: The case states that the barrels pro duce the equivalent of 40 cases of wine. A case of wine is post-fermentation/bottling and therefore after the 10% loss has occurred. The Case: A Votre Sante Page 10 of 17 barrels contain the wine at the start of the process. Therefore, there have to be enough barrels to hold all the wine at the beginning of the process, not at the end. This factor results in 63 (62. 5) barrels being required for the harvest1. Question 2: Additional Purchase Opportunity, Quantitative Analysis Case Question 2 asks what is the maximum amount that AVS would pay to buy an additional pound of Chardonnay grapes.There are three parts to calculating this answer: the benefit from the additional Chardonnay wine to be sold, the relevant costs related to producing this wine and the opportunity cost of not producing as much Blanc de Blanc wine. Teaching Note Exhibit 2 displays the calculations relevant to this decision. Chardonnay regular wine requires a 2 to 1 mixture of Chardonnay and Blanc de Blanc wine. There fore, the 18,000 pounds of Chardonnay grapes will be combined with 9,000 pounds of generic grapes. The 27,000 pounds of grapes will result in an additional 9,000 bottles of Chardonnay regular wine being produced. However, it will also result in a 3,000-bottle decrease in the amount of Blanc de Blanc wine produced, since some generic grapes will now be used for the Chardonnayregular wine.Question 3: Additional Purchase Opportunity, Qualitative Analysis The following factors would support AVS’s decision to purchase the additional grapes: Potential increase in market share Diversification of suppliers Ability to leverage fixed costs over more production If quality of purchased grape is perceived to be better To block a competitor from buying the grapes 1 Each case of wine requires 36 pounds of grapes (post-fermenting). A barrel holds the equivalent of 40 cases of wine (post-fermenting), or 1,440 pounds of grapes (40 x 36). To convert the post-fermenting grapes to prefermenting g rapes, they must be divided by . 9, or 1,440 / . 9 equals 1,600 pounds of grapes. The harvest of 100,000 pounds of grapes therefore requires 62. 5 barrels for storage (100,000 / 1,600). Case: A Votre Sante Page 11 of 17Ability to focus time and effort on wine making (rather than harvesting and crushing) Creates an incentive for the current grower to control costs The following factors would support AVS’s decision to reject the grape purchase: Poor quality of the grapes An additional AVS Chardonnay wine creates confusion in the marketplace Lack of control over the harvest and crush process Lack of confidence in the additional sales forecast Inability of the current capacity (e. g. bottling line, space) to support additional production Inability to use the additional barrels purchased in future years Cannibalization of the current Chardonnay, Chardonnay-Estate or Blanc de Blanc sales Reliability concerns with the new supplier Other hidden costsQuestion 4: ABC Quantitative Analy sis Teaching Note Exhibit 3 contains the ABC product costing analysis, and shows both the per product line and per unit costs. The ABC outcome demonstrates that the Chardonnay-Estate is the most profitable wine for AVS, the Chardonnay-Regular is marginally profitable, and the Blanc de Blanc is not profitable. While Blanc de Blanc is not profitable, a product-line contribution analysis would need to be completed to determine if Blanc de Blanc has a positive contribution margin, and therefore contributes to covering fixed costs of AVS. Case: A Votre Sante Page 12 of 17 Question 5: ABC Qualitative Analysis The first part of this question asks for an explanation of ABC, and a discussion of the benefits and costs of an ABC analysis.Relevant points are that ABC is a method of assigning costs that first assigns costs to the activities identified in the business, and these costs are assigned to the cost objects (in this case, the three wines) in a manner which reflects each cost object†™s use of the activity. Using ABC to assign costs is especially beneficial where there exists either variation in processes or variations in cost object requirements. It is also useful as a tool to calculate activity or process costs, which can act as a benchmark against which to judge future improvements. A well-defined ABC cost allocation will provide more accurate costing information than a less-sophisticated cost allocation system. The costs of ABC are that it is a time-consuming process and it requires a comprehensive knowledge of the entire operation to successfully complete.For a small company such as AVS, software costs would be minimal; the ABC system could easily be constructed using a spreadsheet program. After looking at the results of the ABC analysis, it is clear that the Chardonnay-Estate wine is driving the profitability of AVS. The Blanc de Blanc is the poorest performer; recommendations to Kay Aproveche would be to explore both pricing and cost control opportunit ies for the Blanc de Blanc wine. One â€Å"rule of thumb† used in the wine industry is that the price of a bottle of wine is approximately related to the cost of a ton of grapes by a factor of 100 to 1. If you multiply the $11 price per bottle by 100, the result is $1,100.AVS pays $1,283 for a ton of generic grapes, which suggests that AVS is not receiving enough value for Blanc de Blanc wine relative to the price of the grapes. Perhaps AVS is paying too much for this grape, or they are underpricing the wine. The answer to this cannot be fathomed by data in the case, and is subject to many other variables (such as strength of the harvest and strength of the wine market); however, it is mentioned here as performance measure that is used in the industry. Although some students will suggest that AVS discontinue producing Blanc de Blanc, because it has a Case: A Votre Sante Page 13 of 17 positive contribution margin it would not be to AVS’s benefit to discontinue this wine without having a better substitue.Looking at the line item costs, students should note that the costs for bottles, labels and corks are the same for each of the wines, which may not be correct or appropriate. Students should question whether this makes sense, and note that AVS might decrease costs in the Blanc de Blanc line by buying lower-priced bottles, labels and corks. Another interesting piece of information from the cost analysis is the Wine Master cost and how large it is on a per-unit basis when the number of bottles is low. This helps demonstrate to the students how volume creates economies of scale, and often leads into a discussion about how to expand product lines without incurring additional fixed costs, especially when initial volume is expected to be low.Summary The AVS case is based upon actual wine industry data, although the data has been simplified to reinforce the teaching points and concepts. It is also true to the wine making process, with the exception of AVS ’s process of making the Chardonnay regular wine from the fermented Chardonnay and Blanc de Blanc wines. This can be done, but most commonly the juice from the wine grapes is combined at the start of the fermenting process, so that they can ferment together. Because of the different yield rates in the fermenting process, the case had the wines ferment separately and blend at the end. The case can be taught in a 75-minute class, or by omitting the decision analysis question 50 minutes would be sufficient.I have also used it to teach the differences between the financial income statement reporting (product and period costs) and the contribution margin income statement reporting (variable and fixed costs), and then assigned decision analysis and/or the ABC costing as an additional assignment. Case: A Votre Sante Page 14 of 17 Teaching Note Exhibit 1: Contribution Margin Income Statement Sales Chardonnay Chardonnay – Estate Blanc de Blanc Total Revenues Variable costs Grap es Bottle, labels, corks Harvest labor Crush Labor Indirect Materials Liquor taxes Sales Barrels Total Variable Costs Contribution Margin Fixed Costs Administrative rent & office Depreciation Lab expenses Production office Sales Supervisor Utilities Waste treatment Wine Master Administrative salary Total Fixed Costs Operating Margin price $ 22 $ 16 $ 11 # bottles 24,000 $ 9,000 16,000 49,000 $ 528,000 144,000 176,000 848,000 avg. revenue per bottle: $ 17. 1 $ 124,000 122,500 14,500 2,400 6,329 147,000 98,000 4,725 519,454 328,546 61. 3% 38. 7% $85,500 + 38,500 # bottles x $2. 50 2,000 hours x $7. 25/hour 300 hours x $8/hour # bottles x 1. 55/12 $3/bottle $2/bottle 63 barrels x $300/4 years $ $ $ 20,000 8,100 8,000 12,000 30,000 55,000 5,500 2,000 15,000 75,000 230,600 97,946 11. 6% $ 2. 00 per bottle $ $ Case: A Votre Sante Page 15 of 17 Teaching Note Exhibit 2: Decision Analysis, Additional Grape Purchase Yield Chardonnay grapes 20,000 2,000 18,000 9,000 pounds loss (10%) yield 2 p ounds of Chardonnay grapes per bottle (along with 1 pound of generic grapes) 9000 bottles @ $14 / bottle bottlesAdditional Chardonnay Product Line Revenue: $ 126,000 Costs: generic grapes $ 6,079 bottles, labels, corks 22,500 indirect material 1,163 liquor taxes 27,000 sales distribution 18,000 barrels 975 wine master 5,000 Total costs: $ 80,716 Gain from new Chardonnay $ 45,284 Lost Sales of Blanc de Blanc Wine Revenue: $ 33,000 Costs: generic grapes $ 6,079 bottles, labels, corks 7,500 indirect material 388 liquor taxes 9,000 sales distribution 6,000 Total costs: $ 28,966 Lost Contribution Margin $ 4,034 Net Impact Required Return Total Net Benefit Pounds of Grapes Maximum Price $ $ 41,250 $ 18,900 $ 22,350 20,000 1. 12 9000 pounds x. 6754 / pound $2. 50 / bottle $1. 55 / case $3 / bottle $2 / bottle 20,000 pounds / 1, 600 each blend 3000 bottles @ $11 / bottle 9000 pounds x. 6754 / pound $2. 50 / bottle $1. 55 / case $3 / bottle $2 / bottle 15% per poundCase: A Votre Sante Page 1 6 of 17 Teaching Note Exhibit 3: Activity Based Costing Income Statement C – Estate Sales Revenue Driver Grapes pounds of grapes Bottle, labels, corks # bottles Harvest labor harvest labor hours 1 Tractor Depreciation harvest labor hours 1 Crush Labor pounds of grape crushed2 Crush Equip. Depr. pounds of grape crushed2 Indirect Materials # bottles Lab and Supervision # bottles Liquor taxes # bottles Sales # bottles Wine Master # blends Barrels percentage of wine3 Holding Tank percentage of wine4 Other Production Expenses Depreciation # bottles Prod. Office # bottles Utilities # bottles Waste treatment # bottles Administrative Expenses Admin.Salary % of sales revenue Admin rent & office % of sales revenue Sales % of sales revenue # bottles rev. /bottle 24,000 22 $ 528,000 68,400 60,000 8,117 840 1,200 300 3,100 37,800 72,000 48,000 5,000 3,780 308,537 1,959 5,878 2,694 980 11,510 46,698 12,453 18,679 77,830 Total Expenses Operating Margin 397,877 $ 130,123 24. 6% $ $ product l ine data C – Reg. B de B 9,000 16 144,000 23,180 22,500 2,717 281 442 111 1,163 15,750 27,000 18,000 5,000 945 316 117,403 735 2,204 1,010 367 4,316 12,736 3,396 5,094 21,226 142,946 1,054 0. 7% $ $ 16,000 11 176,000 32,421 40,000 3,666 379 758 189 2,067 9,450 48,000 32,000 5,000 1,684 175,614 1,306 3,918 1,796 653 7,673 15,566 4,151 6,226 25,943 209,231 (33,231) -18. % $ Total 49,000 $ 848,000 124,000 122,500 14,500 1,500 2,400 600 6,329 63,000 147,000 98,000 15,000 4,725 2,000 601,554 4,000 12,000 5,500 2,000 23,500 75,000 20,000 30,000 125,000 750,054 97,946 11. 6% $ $ 22. 00 $ 16. 00 $ 11. 00 2. 85 2. 50 0. 34 0. 03 0. 05 0. 01 0. 13 1. 58 3. 00 2. 00 0. 21 0. 16 0. 00 12. 86 0. 08 0. 24 0. 11 0. 04 0. 48 1. 95 0. 52 0. 78 3. 24 16. 58 5. 42 $ 24. 6% 2. 58 2. 50 0. 30 0. 03 0. 05 0. 01 0. 13 1. 75 3. 00 2. 00 0. 56 0. 11 0. 04 13. 04 0. 08 0. 24 0. 11 0. 04 0. 48 1. 42 0. 38 0. 57 2. 36 15. 88 0. 12 $ 0. 7% 2. 03 2. 50 0. 23 0. 02 0. 05 0. 01 0. 13 0. 59 3. 00 2. 00 0. 31 0. 00 0. 11 10. 98 0. 08 0. 24 0. 11 0. 04 0. 48 0. 97 0. 26 0. 39 1. 62 13. 08 (2. 08) -18. 9% per-unit data C – Estate C – Reg. B de B Case: A Votre Sante Page 17 of 17

A Brief Analysis of Subprime Crisis

A Brief Analysis of Subprime Crisis Introduction The US subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage holes and foreclosures, and the resulting decline of securities backing mortgages. Approximately 80% of U. S. mortgages issued to subprime borrowers were adjustable-rate mortgages. After U. S. house sales prices peaked in mid-2006 and began their steep decline forthwith, refinancing became more difficult.As adjustable-rate mortgages began to reset at higher interest rates, mortgage crisis soared. Securities backed with mortgages, including subprime mortgages, widely held by financial firms, lost most of their value. Global investors also drastically reduced purchases of mortgage-backed debt and other securities as part of a decline in the capacity and willingness of the private financial system to support lending. Concerns about the safety of U. S. credit and financial markets led to tightenin g credit around the world and slowing economic growth in the U.S. and Europe. 1. Background—mortgage market The immediate reason or trigger of the crisis was the bursting of the United States housing bubble which peaked in approximately 2005–2006. High default rates on â€Å"subprime† and adjustable-rate mortgages , began to increase quickly thereafter. An increase in loan incentives, such as simple initial conditions and long-term trend of rising housing prices encouraged borrowers to increase the commitment that they will be able to quickly re-financing more favorable conditions for mortgage difficulties.Additionally, the economic incentives provided to the originators of subprime mortgages, along with outright fraud, increased the number of subprime mortgages provided to consumers who would have otherwise qualified for conforming loans. However, once interest rates began to rise and housing prices started to drop moderately in 2006–2007 in many parts o f the U. S. , refinancing became more difficult. Defaults and foreclosure activity increased dramatically as easy initial terms expired, home prices failed to rise as expected, and adjustable-rate mortgage interest rates reset higher.Falling prices also resulted in 23% of U. S. homes worth less than the mortgage loan by September 2010, providing a financial incentive for borrowers to enter foreclosure. The ongoing foreclosure epidemic, which part of subprime loans, that began in late 2006 in the U. S. continues to be a key factor in the global economic crisis, because it drains wealth from consumers and erodes the financial strength of banking institutions. In the years leading up to the crisis, significant amounts of foreign money flowed into the U. S. from fast-growing economies in Asia and oil-producing countries.This inflow of funds combined with low U. S. interest rates from 2002-2004 contributed to easy credit conditions, which fueled both housing and credit bubbles. Loans of various types (e. g. , mortgage, credit card, and auto) were easy to obtain and consumers assumed an unprecedented debt load. As parts of the housing and credit booms, the amount of financial agreements called mortgage-backed securities, which derive their value from mortgage payments and housing prices, greatly increased. This financial innovation so that institutions and investors around the world to invest in the U.S. housing market. With falling house prices, is to use the world’s leading investment mortgage-backed securities severe financial institutions to report significant losses. Defaults and losses on other loan types also increased significantly as the crisis expanded from the housing market to other parts of the economy. Total losses are estimated in the trillions of U. S. dollars globally. While the housing and credit bubbles were growing, a series of factors caused the financial system to become increasingly fragile.Policymakers did not recognize the increasingl y important role played by financial institutions such as investment banks. Some experts believe these institutions had become as important as commercial banks in providing credit to the U. S. economy, but they were not subject to the same regulations. These institutions and some regulated banks was also a significant debt burden, while providing the loans, there are not enough financial cushion absorb large amounts of loan default or mortgage-backed securities losses. These losses impacted the ability of financial institutions to lend, slowing economic activity.Concerns regarding the stability of key financial institutions drove central banks to take action to provide funds to encourage lending and to restore faith in the commercial paper markets, which are integral to funding business operations. Governments also bailed out key financial institutions, assuming significant additional financial commitments. The risks to the broader economy created by the housing market downturn and subsequent financial market crisis were primary factors in several decisions by central banks around the world to cut interest rates and governments to implement economic stimulus packages.Effects on global stock markets due to the crisis have been dramatic. Between 1 January and 11 October 2008, owners of stocks in U. S. corporations had suffered about $8 trillion in losses, as their holdings declined in value from $20 trillion to $12 trillion. Losses in other countries have averaged about 40%. The value of the stock market and housing losses further down the local consumer spending, an important economic engine downward pressure. The larger developed countries and emerging nations in November 2008 and March 2009 met with state leaders to develop strategies to resolve the crisis.A variety of solutions have been proposed by government officials, central bankers, economists, and business executives. 2. Causes The crisis can be attributed to a number of factors pervasive in both housi ng and credit markets, factors which emerged over a number of years. 2. 1 Boom and bust in the housing market The housing bubble in the United States grew alongside the stock of the late1990s. High stock wealth induced families to spend more of their new disposable income and save much less. This â€Å"consumption boom† was largely focused on housing.The increase in damand for housing had multiple effects. First, the value of houing increased, which in turn increased demand of housing and jump-started the bubble. Second, the supply of housing decreased and more housing had to be built to meet the rising demand. The rising housing prices created an expectation that housing values would continue to rise, leading home buyers to pay more for housing than the housing was actually worth. This self-fulfilling cycle continued until the median price of housing outgrew median incomes, peaking in about 2005.When the growth became unsustainable in 2006, the housing bubble â€Å"burstâ⠂¬ . Before the rapid rise, followed by a sharp fall in housing prices, which will greatly exceed the mortgage debt, the translation of the value of the property. 2. 2 High-risk mortgage loans In the years before the crisis, the behavior of lenders changed dramatically. Lenders offered more and more loans to higher-risk borrowers, including undocumented immigrants. Subprime mortgages amounted to $35 billion in 1994, 9% in 1996, $160 billion in 1999, and $600 billion in 2006.A study by the Federal Reserve found that the average difference between subprime and prime mortgage interest rates declined significantly between 2001 and 2007. Decline in risk premiums and credit standards are common to the combination of the credit boom and bust cycles. In addition to considering higher-risk borrowers, lenders have offered increasingly risky loan options and borrowing incentives. In 2005, the median down payment for first-time home buyers was 2%, with 43% of those buyers making no down paymen t whatsoever. By comparison, China has down payment requirements that exceed 20%, with higher amounts for non-primary residences.The mortgage qualification guidelines began to change. At first, the stated income, verified assets loans came out. Proof of income was no longer needed. Borrowers just needed to â€Å"state† it and show that they had money in the bank. Then, the no income, verified assets loans came out. The lender no longer required proof of employment. Borrowers just needed to show proof of money in their bank accounts. The qualification guidelines kept getting looser in order to produce more mortgages and more securities. This led to the creation of NINA. NINA is an abbreviation of No Income No Assets.Basically, NINA loans are official loan products and let you borrow money without having to prove or even state any owned assets. All that was required for a mortgage was a credit score. 2. 3 Mortgage fraud In 2004, the Federal Bureau of Investigation warned of an â€Å"epidemic† in mortgage fraud, an important credit risk of nonprime mortgage lending, they said, could lead to â€Å"a problem that could have as much impact as the S&L crisis†. The Financial Crisis Inquiry Commission reported in January 2011, that: â€Å"†¦ mortgage fraud†¦ flourished in an environment of collapsing lending standards and lax regulation.The number of suspicious activity reports—reports of possible financial crimes filed by depository banks and their affiliates—related to mortgage fraud grew 20-fold between 1996 and 2005 and then more than doubled again between 2005 and 2009. One study places the losses resulting from fraud on mortgage loans made between 2005 and 2007 at $112 billion. Lenders made loans that they knew borrowers could not afford and that could cause massive losses to investors in mortgage securities. † New York State prosecutors are examining whether eight banks hoodwinked credit ratings agencies, to in flate the grades of subprime-linked investments.The Securities and Exchange Commission, the Justice Department, the United States attorney’s office and more are examining how banks created, rated, sold and traded mortgage securities that turned out to be some of the worst investments ever devised. In 2010, virtually all of the investigations, criminal as well as civil, are in their early stages. 2. 4 Credit default swaps Credit default swaps are financial instruments used as a hedge and protection for debtholders, in particular MBS investors, from the risk of default.As the net worth of banks and other financial institutions deteriorated because of losses related to subprime mortgages, the likelihood increased that those providing the protection would have to pay their counterparties. This caused the system uncertainty, investors did not know which company would be required to pay to cover the mortgage defaults. When investment bank Lehman Brothers went bankrupt in September 2008, there was much uncertainty as to which financial firms would be required to honor the Credit default swaps contracts on its $600 billion of bonds outstanding.Merrill Lynch’s large losses in 2008 were attributed in part to the drop in value of its unhedged portfolio of collateralized debt obligations after AIG ceased offering Credit default swaps on Merrill’s collateralized debt obligations. The loss of confidence of trading partners in Merrill Lynch’s solvency and its ability to refinance its short-term debt led to its acquisition by the Bank of America. 2. 5 Boom and collapse of the shadow banking system The securitization markets supported by the shadow banking system started to close down in the spring of 2007 and nearly shut-down in the fall of 2008.More than a third of the private credit markets can not be uesd as a source of funds. According to the Brookings Institution, the traditional banking system does not have the capital to close this gap as of June 2009: â€Å"It would take a number of years of strong profits to generate sufficient capital to support that additional lending volume. † The authors also indicate that some forms of securitization are â€Å"likely to vanish forever, having been an artifact of excessively loose credit conditions. † 3. Impacts 3. 1 Impact on the USThe credit market is likely to respond with tighter lending standards, fewer warehouse subprime mortgage lines, fewer subprime lenders, and greater self-regulation and reformation, most of which will be driven by the securitization market to the extent that it still exists. There may be an urge to proactively modify loans that would likely result in default. The increased pressure from the government and consumer groups, combined with new subprime lending standards, will decrease lenders’ willingness to lend to nonprime borrowers and investors’ willingness to participate in subprime loan securitization.The result has been a nd will continue to be a â€Å"credit crunch† for subprime borrowers. The result will decrease availability of subprime lending, which in turn, will decrease homeownership among low-income or minority borrowers. When the housing bubble began to deflate in 2006, borrowers saw a sharp reduction in the value of their homes, and found themselves in a position of â€Å"negative equity†, or a mortgage debt that far exceeded the value of the mortgaged home. Because homeownership is the single most important source of wealth, this meant many Americans experienced a dramatic loss in personal wealth.The decline in home prices has cost American homeowners more than 4 trillion dollars in wealth, and as previously noted, has cost African Americans alone between $71 and $122 billion. The decrease in home values not only caused homeowners, but also communities, to lose wealth. As a result of foreclosure, surrounding house values have declined. Neighbors matter when it comes to puttin g a value on homes. Appraisers use comparable sales data to calculate the value of a home, which lenders require for selling and refinancing.Comparable sales in the community to reduce problems of all foreclosure houses, where in a position to sell the owner is not a pleasant option value. In addition, the borrower becomes unable to refinance at lower interest rates, this will cause even more foreclosures. 3. 2 Impact on the Chinese economy The US credit crunch has played out in the Chinese housing market. The house price movements in China, the US and the UK have moved synchronically, with the Chinese market lagging a bit behind the two developed countries.The market condition of China at the start of 2008 was similar to the US market during the first half of 2007, when the house prices began to drop. House prices in China increased sharply and even doubled during 2006-2008 in some fast developed cities. The Chinese National Development and Reform Commission showed that the House P rice Index of 70 Large- and Medium-sized Cities in China rose 6. 5% in 2008, 1. 1% lower than the previous year. Meanwhile, the interest rate adjustment is widely used as a monetary instrument by most central banks to manage their national economies.From January 2001 to 2003, the US Federal Reserve cut the interest rate from 6. 5% to 1% to boost the economy . Cheap credit overheated the US housing market quickly. Consequently, the Federal Reserve raised interest rates to cool the market. This U-turn in interest rate policy was the catalyst for the crash in the housing market that accelerated from 2006 onwards. 4. Regulatory proposals and long-term solutions President Barack Obama and key advisers introduced a series of regulatory proposals in June 2009.The proposals address consumer protection, executive pay, bank financial cushions or capital requirements, expanded regulation of the shadow banking system and derivatives, and enhanced authority for the Federal Reserve to safely wind -down systemically important institutions, among others. The Dodd–Frank Wall Street Reform and Consumer Protection Act was signed into law in July 2010 to address some of the causes of the crisis. 4. 1 State and Local Action Increasingly, state and local governments have taken action responding to the foreclosure crisis through a combination of municipal litigation and anti-predatory lending bills.Baltimore and Cleveland initiated public nuisance suits against prominent lenders last year for targeting their communities through predatory lending. These cases may have an important role in providing meaningful, timely relief for a large number of homeowners who are in default or on the verge of default. In addition, over 25 states have initiated anti-predatory lending legislation triggered by North Carolina’s successful legislation enacted in 1999 and 2000. However, state legislation is limited due to federal anti-predatory lending statutes preempting state action.The Bal timore complaint, in particular, stresses the racialized impact of predatory lending. Two-thirds of the foreclosures associated with Wells Fargo lending were in census tracts with over 60% African American populations, while less than 16% were in tracts with less than 20% African American residents. 4. 2 Federal Legislative Actions Over the last year, Congress has introduced a variety of proposals designed to address the crisis, from increased funding for housing counseling and consumer education to empowering bankruptcy judges to unilaterally change the terms of existing mortgages to bail-out distressed borrowers.Federal and state regulators are following suit with guidance and restrictions on some prime lending. There has been an increase in litigation related to the subprime lending market based on discriminatory predatory lending, an increased call for â€Å"suitability standards† in mortgage lending, and more non-consumer law suits, such as investors suing issuers, lende rs suing brokers, and investors suing lenders. This comprehensive legislation includes the Federal Housing Finance Regulatory Reform Act, The Hope for Homeowners Act, and the Foreclosure Prevention Act.The Federal Housing Finance Regulatory Reform Act provides regulation for government sponsored entities such as Fannie Mae and Freddie Mac and the Federal Home Loan Banks. This regulator will have the authority to establish capital standards, prudential management standards; enforce its order through cease and desist authority, civil money penalties and the authority to remove officers and directors; restrict asset growth and capital distributions for undercapitalized institutions; put a regulated entity into receivership; and review and approve new product offerings of the enterprises.Conclusion This subprime mortgage crisis demonstrated a lesson for the world. Every financial institution and company learned an expensive lessen from it. Every country learned what they should do and w hat they should avoid in the future. Moreover, each individual also learned the norm, the ethics, and the responsibilities that they need to follow and take in business practice. One important thing to remember is to not be too obsessed and greedy about anything.

Do Managers Need to Develop Concrete Skills in the Political Analysis Essay

Do Managers Need to Develop Concrete Skills in the Political Analysis of Organizations - Essay Example As the discussion outlines the political analysis of the organization literally dissects the different mechanisms through which it takes care of the deliverables that essentially emanate from the organizational stronghold, and for the sake of the common men and women on the street. The managers need to find the best possible ways through which they can present the alleviated stance of the organization. This is done so that the organization understands the needs and requirements of the public, for which it exists in essence. The managers act as the representatives of the organization and hence the face of its varied business entities. Whatever these managers do in the long run signifies the very basis of growth and development, for the sake of the organization. The company’s political position is thus dependent on the way these managers present the real picture as well as give a charter for the things to shape up in the future. This paper discusses the implications of the manag ers as they develop the required skills within the political analyses of the organizational values and principles. From this paper, it is clear that first it is found out as to why the political analysis of the organization is deemed as significant in the time and age of today. The reason for this is that the political analysis gives a good measure of the strengths that exist within the organization and the opportunities that it could touch upon in the future. It can also establish its very basis within the industrial domains and tell the relevant players in the industry that this organization means business just like them. It can easily outline the areas where the organization wishes to emphasize these strengths and create the much-needed difference. So basically what this political analysis does is to create a clear-cut basis for the organization, both from a short-term perspective as well as in the long run scheme of things.

Conventions of academic writing Essay Example | Topics and Well Written Essays - 500 words - 1

Conventions of academic writing - Essay Example Formatting paper in APA style means paying attention to mechanical details such as typeface, line spacing, margins, and page numbers. On the other hand, it has rather been conducive to accomplish my English papers using the MLA style. As an academic writing convention that provides guidelines for writing and documentation of research in the  humanities, especially in  English studies, I acquire a sense of flexibility every time I review and edit my critical writing with MLA format. This style is widely used as well in the study of other  modern languages  and literatures, including  comparative literature,   literary criticism,  media and  cultural studies, and some other related disciplines. Writing a paper on history subject is another area for which I find MLA style useful. This convention had undergone certain changes including the use of italics instead of underlining title and URL listing of online sources is optional. Plagiarism is nowhere far from the crime of inflicting damage or plunder of intellectual property, making it a serious academic offense. If I were a writer whose original quote/line is used or rephrased by someone else, for whatever purpose without due acknowledgment, then that person commits plagiarism against my right to personal property. In this case, I am equivalently deprived of a ‘right to identity’ by way of rational design or one that essentially sets an individual’s uniqueness apart from the rest. To avoid plagiarism, it is always essential to cite references especially the primary ones properly. For instance, whenever one finds it necessary to use more than three words in a row that occurred exactly in the same order in the source material, these words must be put into quotation marks with in-text citation within parentheses having footnote or endnote added to give appropriate credit to the source. Hypothesis is one important research

Management principles Essay Example | Topics and Well Written Essays - 1250 words

Management principles - Essay Example Our company will strive hard to develop itself as a foremost local fast food brand in the market. We plan to offer the most enchanting services to our customers when they visit our outlet or surf through our website. What we endeavor to deliver, is satisfaction and quality, so that we can establish mutual trust with our customers. Paramount Fast Food Services will sell quality products such as fries, hamburgers, pizzas, hot dogs, sandwiches, ice creams and soft drinks. At our restaurant, customers will enjoy the proactive support of our people. The restaurant will be designed in a manner to deliver the most relaxed atmosphere to customers. Paramount Fast Food Services restaurant will range from 80 – 100 meter square and will seat from  35-40 guests. The restaurant will remain open all through the week from 8 in the morning to midnight. We will set up the most comfortable furniture in the restaurant along with the installation of air conditioners and heaters. We will also ensure that our brochures and posters are well distributed in all the parts of the city in order to reach out to our customers. Our restaurant will be adorned with the posters and photographs that highlight our products. In addition to that, we will also be installing a television at the restaurant so that customers can enjoy the foo d while watching their favourite soccer or cricket match. We will be making special arrangements for the children by allocating a separate play area for them where they can enjoy a variety of games. Thus, the atmosphere will be such that gratifies all our customers. Moreover, take away system is also an essential part of our restaurant and it will be one of our priorities to ensure smooth progress of it. Our restaurant will be located in the heart of London near the Oval Cricket Stadium. This location is quite popular in London as people of all ages often come to watch matches during the cricket season. This area is also populated with

Waste Management Essay Example | Topics and Well Written Essays - 2250 words

Waste Management - Essay Example This amounts to 20,000 to 30,000 tonnes of general battery waste generated each year. Facilities for recycling automotive batteries are well developed and 90% of the highly hazardous automotive batteries go for recycling. However comparatively, only one percent of household batteries go for recycling. In 2000, approximately 19,000 tonnes of waste general usage batteries and 113,000 tonnes of automotive batteries had to be disposed. Most of these were dumped in landfill sites. Approximately 680 million batteries were purchased in UK in 2001, and statistics show that over 89% of these were general purpose batteries. Figures in other countries like US and Japan are as devastating. Estimates1 indicate that over three billion industrial and household batteries were sold in the US in 1998, and battery consumption rate rose by 5.8 percent annually through 2002. Between 1998 and 2003, the global demand for secondary batteries grew by 67% with Japan holding 65% of the market share in 2003. Th e cost of recycling varies in different countries, while some base it on the chemistry of the battery, others measure it across tonnage alone. However the basic cost for recycling batteries approximately comes to $1,000 to $2,000US per ton. The costs double when transportation is also included. This is a figure that all countries are trying to bring down, with Europe aiming to achieve the figure of $300 per ton (Buchmann, 2001). Authorities responsible for managing battery waste Currently various local authorities have been established specifically for managing battery waste. The Waste and Recycling Action Plan (WRAP) has started various programmes across UK for battery collection. REBAT is another organization in the UK set up to manage and collect portable rechargeable batteries. It is a component of the British Battery Manufacturer Association, and provides comprehensive information on recycling companies and support for battery recycling. A few of the battery recycling plants and programs set up in Europe include names of G&P Batteries, the first recycling plant dedicated to recycling household batteries. Britannia Refined Metals in Kent and HJ Enthoven & Sons in Derbyshire are two recycling

Explain the relationship betweenTeam Learning and Shared Vision Term Paper - 1

Explain the relationship betweenTeam Learning and Shared Vision - Term Paper Example ave its basis on the cognitive capabilities of every individual that varies according to history of psychological patterns as expressed by many theories, specifically the Psycho Dynamic Theory (Klein, 1998). In contrast, team learning is a vast concept with huge nitty-gritty involved in it. It requires extensive effort and investment of a lot of time to lead a team through a learning process. Since, there are many individuals who have to go through distinct cognitive processes unique than the rest, the learning process is extensive with many endorsements to get things clear on part of every individual. Thus, it reaches a high level of complexity that could mean excessive repetition for some individuals if they are quick learners and can readily adapt to a change. Moreover, to add to the complexity in a team-learning environment, every individual happens to have a distinct social, cultural, psychological, religious, and psychosocial background. These factors have unique and strong impact over the lives of those individuals and these factors influence the way they carry themselves in different lifestyles. Their thinking capabilities and cognition are usually shaped by these factors since their brought up and lifestyle depend on them. Therefore, a team of diversified individuals with distinctive lifestyles and culture are very much difficult to handle making it difficult to impart something to them homogeneously. On the contrary, in an individual learning, the specific person is considered as a unit; however, in team learning, the whole team is a unit. Thus, it does not matter if half of the members work effectively and the other half does not; the only thing that could make them successful would be every individual putting up good efforts and collaborating with each other’s aptitudes to achieve something, which is aspired and pursued by all of them (Gorelick, Milton & April, 2004). Coming towards the second concept, let the paper analyze what the concept

To what extent are current approaches to the management of workplace Essay

To what extent are current approaches to the management of workplace stress; work life integration and equal opportunities successful in addressing these issues - Essay Example Solving the real problems in the work field like hiring better employees, enhancing work motivation, increasing job satisfaction, promoting safety attitudes, reducing absenteeism and accidents form part of better organisational outlook towards better management. (Arnold, J.et al, 2005) Stress is purely related to the involvement of the self with the environment. Can a corpse have stress over its burial or cremation? Thus stress is concerned with the movements of life that lays its impact on perception differences. Many stimuli, psychological, social and even physical are stressors only if they are perceived as stressful. (Stephen M. et al, 2001) Work-life integration involves appropriate management adoption in the life styles and work fields. The factors destabilising the balance are prone to emerge both at work place and at the family environment. The role of a staff in striking the balance between work place stress and family level management is normally and abundantly dependant upon the situations at the work place environment. A husband’s inappropriate fury over paltry family issues is to be borne by the family members or wife giving importance to the work place stress of the bread winner. Absence of such endurance at family level causes certainly an imbalance in the minds of the working people causing unwanted results both at work place and family. Imbalance at work place has its impact on the outcome of his/her job, which is production capability. Equal opportunity is the best tool for an employer to bring as much work force in to his umbrella as possible to be considerably productive. The same is also the tool for the employees to get their fundamental rights fulfilled, which simultaneously pave way for trade unions to become the middle force to get the staff welfare profusely maintained. As this factor permeates between both employees and employers, attainment of perfect equilibrium is often elusive. The part of employers

Three Questions on Ultrasound (500 words per question) Term Paper

Three Questions on Ultrasound (500 words per question) - Term Paper Example In the Spatial Substance Picture strategy, pictures of an item are taken from different perspectives, and then are mixed to form an averaged picture quickly. This picture gives the better representation of the item, finding all the minute details. The resulting picture is the compound picture, displaying better picture quality as compared to the traditional ultrasound examination pictures. A study of research of difference reveals that the spatial compound imaging gives better meaning for the soft-tissue of the body with reduced disturbance distortions, in evaluation to the traditional top quality sonographic ultrasound examination The drawback of speckle reduction in compound sonography is overcome by the frequency compound imaging, using higher harmonics of frequencies. The conventional sonography is performed on lower harmonics, which are more probable to the speckle noise effect, thus altering the sonogram information. The using of advanced harmonics in frequency compound imaging ensures that a much wider bandwidth of the transducer frequency is achieved, where the received frequency is double the intensity of the transmitted frequency. Therefore, the echo of the transmitted sound wave that is reflected back after striking a tissue is stronger in the case of frequency compound imaging, thus generating a clearer image (Chan & Perlas, 2011). Also in the diagnosis of deeper organs and lesion, the 3D/ 4D techniques are very useful, as it has a simple and reproducible methodology. This makes it easier to get the image of the same organ at different intervals (Layyous, 2012). The multi beam technique generates multiple lines of the transmitted beam to be sent at once from the probe. These multiple lines then overlap when several beams have been sent, and carry the detailed information about the test organ. They are then separated in the reconstruction stage of the analysis where all the information is dealt separately. The

What differences an entrepreneur from the small business owner Essay

What differences an entrepreneur from the small business owner - Essay Example differentiates entrepreneur from the small business owner by critically reviewing the theorists that have studied this area before drawing a conclusion. Small business sector is characterized by a range of activities undertaken by the managers of small firms. A small business owner refers to â€Å"an individual who establishes and manages a business for the principal purpose of furthering personal goals† (Carland et al., 1984, 358). The major conditions include: business has to be the primary source of income; takes majority of owner’s time and resources. Moreover, owner considers business as an extension of his or her personality and ties family needs and desires in an intricate manner (Carland et al., 1984, 358). On the other hand, an entrepreneur is â€Å"an individual who establishes and manages a business for the principal purposes of profit and growth† (Carland et al., 1984, 358).Entrepreneurship is distinguished by innovative behaviour and application of strategic management practices in the business (Carland et al., 1984, 358). Despite the fact that there is a plethora of definition of entrepreneurship, there is general consensus that it involves a transformational process of market change conducted by specific kind of managers (Stokes and Nicolas, 2006, 29). Despite considerable overlap between small business and entrepreneurship, both concepts are distinguishable. All new business ventures cannot be categorized as entrepreneurial in nature. Entrepreneurship is not a new phenomenon as people have been referring to entrepreneurs for hundreds of years. The word entrepreneur originates from the French that refers to someone who takes between or goes between. In early days, the term represented a middleman who used to direct the resources that are provided by others. During middle ages, entrepreneurs managed huge projects on the behalf of landowners or church, for instance, building a castle or cathedral. The concept became more complex with addition of

Graphic communication Essay Example for Free

Graphic communication Essay Sch 31: Promote communication in health, social care or children’s and young people’s settings. 1.2 Explain how communication affects relationships in the work setting. Communication plays a massive part once building a relationship in the work setting. By regularly keeping effective communication between practioners, parents/careers and children makes a positive working environment. The relationships are mostly based on the type of communication between one another, communication is not just by verbally but also the body language we show, facial expressions and our gestures. Communication with children and young people is very important. When a child is new to the setting you would want them to feel comfortable and safe in your company away from parents/ careers. As of when the children and young people does feel positively about the new environment around then helps the parent/career of that child to feel relaxed and comfortable to hand over their child into your care knowing they will have an enjoyable experience. The main way to build positive communication with the child/ young person is through play, as you talk with them during activities the child would become more relaxed as you ask questions about their games and actions, by showing interest into the child’s/ young persons holistic development will then build a positive relationship with that child/ young person. By showing positive body language in the setting, shows an invitation to the child/ young person that you’re there to play games, do activities and be there to have a conversation. Lowering down to the child’s/ young person’s level which will then put you into the position to engage in eye contact, this will make the child/ young person feel like you are more approachable to communicate with for example; ask you questions. When verbally communicating between you and the child the tone of your voice is very important, the child will pick up on the way you say things more than what you said as this will tell them if you’re being positive towards them; talking with them, or either being direct; talking to them. Not only do you talk to them but also the child will response, or even approach you first to communicate; either for a general conversation or to ask a question. All children are different, either it is by the way they’re brought up, their culture, have different beliefs, and in the way they communicate for example; English is an additional language. If you had a child in the nursery who had English as a second language, and knew few words, verbally communicating with this child wouldn’t be the first thing you would do. There are loads of different ways to do this for example; using picture cars with words, not only will this technique help communicate but also help build the childs English vocabulary. Another being demonstrating, for example; in an activity, lets say gluing and sticking, show the child what to do by demonstrating the activity for them to then copy your actions. Communication is very important, not only with the child/ young person but also their parents/ careers. Parents and careers need to be kept updated with everything that happens with their child/children and information that they need to know about the nursery itself. The stronger the relationship between the practioners and the parent/ career the stronger the trust the parents/ careers have with their child/ children in your care. Information should be shared on a day to day basis between the practioner and the parent/ career abpout everything that happens in the nursery. This information can be shared in different ways depending on the confidentiality. Information for all parents to know who have children at the nursery should be notices such as for example; new children joining the group, allergies that children have prompting the parent/ career about the foods the child should be allowed to take into the nursery, changes to day plans (hours, activities, trips). This sort of information can be transferred by sending out a newsletter to the parents/ careers individually when they drop off of pick up their child/ children, a notice board inside/ outside of the nursery for everyone to read, emailing or texting to the parents/ careers as this could be an easier way for them. On the other hand information more confidential about an individual should just be kept between that parent/career of the child/ children and the practioner who is giving the information. This information can be transferred by a letter, email and a text but in my opinion this sort of nonverbal communication just doesn’t seem formal or appropriate. Information like this should either be told over a phonecall or even face to face at the beginning or end of the school day; Taking the parent / career aside to have a conversation in a private room away from other parents and practioners. The information given would be topics such as, the child’s behaviour; if they are being disruptive, not listening to the staff harming other children, or even if the child seems upset and won’t join in on different activities and games set. Sometimes communicating can’t always be as easy as having a conversation or written communication for example; a child’s information profile. A parent/ career can be harder to approach in different situations for example; the parent/ career has English as an additional language and knows some English but not enough to have a general conversation about the child, in this situation more verbal communication would be easier to approach than written communication. Also a parent/ career with dyslexia, verbal communication is easier to approach, especially when information is need on the childs profile for in the nursery, so in this scenario, the parent or career would have to verbally share this information with the practioner for them to record this information. As long as the parent/ career is knowledgeable of what is happening with their child and the nursery they will feel comfortable and trusting with their child in the care of the nursery. Keeping communication strong between yourself and work colleagues is very important as the information you share between one another is what will keep the nursery running where as if this communication was at a poor standard then no information will get told to everyone, people including staff, the parents/ careers and children. The sort of communication that would be between colleagues mostly on a day to day basis would be verbally, when in the work setting, such things being for example; about activities and games, day plans, child absences, food times and parents drop off and pick up times. Also this all doesn’t need to be verbally if it’s the same information to be transferred to each member of staff every day, there could be for example a chart e.g; in the baby room a chart been posted up on each child’s different feeding and sleeping patterns. Building a strong relationship with colleagues would make life in your setting more comfortable, easier to work with one another and just better to talk to each other. Also by having a stable relationship communicating with each other will keep all of the staff up to date with everything happening. Communicating with colleague to colleague is a different to which you would talk to a child or a parent/ career. Speaking to a colleague would be less formal than anyone else as in the work setting you would build a strong friendship as well as just a work relationship. On the other hand when speaking to a profession outside of the nursery such as a special educational needs coordinator you would communicate in a more formal way and confidentially would be strict. Of a profession like this you would communicate verbally face to face with them, or by even email, sharing the sort of information about a child they’re there to study. The different professions would need trust in you and the rest of the staff to make sure this child/ children don’t feel left out because they’re different and that you respect and look out for them. In conclusion, when working in a nursery setting you are to be prepared to strongly communicate with everyone involved in your work to build that trust and respect. Not only verbally and just speaking but also thinking about how to speak and how to show your body language and facial expressions.

Company overview and market analysis for Audi

Company overview and market analysis for Audi Audi, this Germany brand was found by August Horch in 1899. Since this motor company established, Audi has been designing and manufacturing Audi cars in innovation and future conception. Today, Audi has became one of the three German super automobile manufacturers which producing the full range models, from economical, sport, luxury and sport utility vehicle. In the latest Audi annual report, the total revenue has reached to 29.8 billion euros with profits 1.35 billion euros by the end of 2009. What is more, Audis sales have increased significantly from 653,000 to 1,003,000 between 2000 and 2008, especially in the Middle East market and Chinese market. For example, Chinese government has agreed to purchase Audi car for officials in long term. Furthermore, Audi just launched the new supermini A1, the four door coupe A7 and the new generation flagship A8. In this essay, argument will be made that this German producer how to remain competitiveness under this changing environment. Audi C ompany and Audis P.E.S.T.E.L analysis will be covered by this German strong brand. A8 Revolution To compete against with the other two German brands Mercedes and BMW in the upscale markets, Audi has introduced the flagship model A8 in 1994. With the first vehicle using aluminum space frame technology and luxurious equipment, A8 gained considerable market share in the global executive luxury car field. The second generation of A8 launched in the end of 2002, Audis engineers met the development trend of automobile, taking a brand new A8 with new engine technology and longer wheelbase to customers. The successful sales of Audi A8 did not discontinue, Audi aims to be the number one in selling luxury car with introducing the third generation A8 in 2010. Audi has been designing and producing A8 for 16 years, the experience for making luxury car is a great treasure in this German automaker. P.E.S.T.E.L. Analysis Political Since the last century, Germany is famous for making cars, such as, Mercedes, Audi and BMW; Porsche and Volkswagen. German government also encourages these motor producers showing the Germany made car to the customers from all over the world. Audi set the headquarters in Ingolstadt and have a strong human resource with over 60,000 staff from different nationality. With the Audis global strategy implementation, this German auto manufacturer has established several large plants in different countries. Hungary and China are good examples. Economic In 2008, the global economy recession spread over the world. Fortunately, the global economy is being recovery from the end of 2009, even though some countries are still facing credit crunch, such as Ireland; but most governments from different countries had confidence to making peoples life better. For example, in Germany, government spent billions supporting and encouraging German families to purchase; in UK, government also gave benefits, which means people get extra ¿Ã‚ ¡2,000 from the current car with more than 10 year life time when exchanging a new car in a dealer. According to the Audi statistics, sales of new car have increased sharply from 2009 to 2010 in the European and North American markets. What is more, Middle East and China are still the large demand group; For example, Audi has delivered 108,000 cars to China in the first three months, compared with the total sells 705,000 cars at the same period. Social Audi is a large car manufacturer in the world, the social impact is inevitable, this German giant owns over 60,000 staff in the world, and which means Audi support more than 60,000 families every year. In this aspect, Audi has been improving the workshop condition to satisfy employees, and Audi also offer successes of creating exceptional cars when employees join the group. Manufacturing perfect cars needs large quantity qualified material, Audi have established several partnership with suppliers. Due to the economy recession, consumers are willing to choose the fuel efficiency car instead of buying the big engine SUV; Audi remained the price for customer, but added more technology into the car. Technological Technology development is the key feature of Audi Company; Audi is best known of its permanent four wheel drive system, called QUATTRO. Today, Quattro is widely used in most Audi model, and offering drivers more safety and pleasure in any situations. In China, the heavy snow spread over the southern part at the winter of 2008, compared with Audis successful performance on snowy road, the competitor Mercedes realized it is the right time to fit the four wheel drive system into saloon and sport car. In comfort aspect, Audi introduced air adapted suspension; this equipment could adjust suspension in order to achieve best performance on different road condition. In 2010, the new Audi A8 is equipped with the 8 speed transmission which offers the soft and quick acceleration in order to achieve fuel efficiency. Audi also cooperated with Italian super car Lamborghini to achieve sport value. For example, the S8 and RS model are equipped with Lamborghinis engine and transmission system. Environmental Audi paid more attention in corporate social responsibility .It is inevitable for Audi not polluting the environment, because it is a manufacturer. Audi promises to minimize the environmental impacts. In these 20 years, Audi spent billions in researching the efficiency engine; the new generation engine means more horsepower but little emissions. For example, the new TDI diesel engine has already meet the future European 5 emission standard. Furthermore, Audi announced car emissions will be cut further 20% by 2012. That is how this German maker leads the environmental car market. Legal Germany government set a group of legislation in order to protect road users safety and environment. Crash standard and European car emission limits are good examples. 4. A8: The upscale target market Audis flagship A8 L W12 takes driving to a whole new level of luxury. This is true, even though car makers and customers are paying more attention in fuel efficiency car markets on todays environmental condition, but every famous brand is still proud of their flagship, like Birkin handbag of Hermes. Flying used to be a pleasurable experience for most businessmen, especially for the fist class ticket. Cars can not fly, but Audis engineer made the dream become true. The new generation A8 providing exceptional and efficient luxury transport for passengers. A8 means technology, comfort and luxury, especially from Germany. Audis most important features, aluminium body depends on Audi Space Frame, permanent four-wheel drive Quattro and air adaptive suspension. Since the first A8 was produced in 1994, A8 has firmly established Audi name in the luxury car market. According to the research, over half of luxury cars are produced by the German super three, almost 300,000 luxury cars delivered to customers worldwide each year; in addition, around 70% of these luxury saloon are sold to outside west Europe, especially for North American market and Middle East. The luxury car market was not influenced by the economic recession; the demand for luxury cars has increased for many years, especially for the new arrivals. Audi gained highly reputation from A8s loyalty customers in these years from all over the world, due to the changing group of luxury car buyers, the percentage of 30 to 40 years olds buyers increased sharply in this ten years. Audi are also willing to these potential buyers. Changing Ages is an important factor for luxury car segmentation; emotional factor could also influence customers decision. For example, luxury car is a symbol for peoples status orientation; what is more, the luxury car always understands the fashion, trend and design. Audi A8 is the best choice for the experienced loyalty buyers and potential group customers. Overall, this new generation flagship will take more market share to Audi in the luxury market. Recommendations The 21st century is also a technology era; Audi should continue spending billions and billions in innovation in order to achieve the mass markets. Secondly, climate change is a key issue in todays world; Audi should pay more attention to social responsibility. Cutting emissions and materials recycling are good examples. Thirdly, due to the large increase demands from Asian market, Audi should enlarge its volume to satisfy this potential region, especially for the tier 2 and tier 3 cities of these countries. At last, the advertisement campaign is more and more important for car companies, Audi should design different type visual advertisement for marketing. In my personal experience, sitting in a silver Audi car with bright red from dashboard, just illustrate the meaning of an Audi car: machine with blood. Conclusions With 100 years experiences constructing motor machines, Audi became one of the most famous car manufacturer brands in the world. Audi car is illustrated by design, safety, comfort and sport. What is more, this German automaker giant achieved large market share and highly reputation from the whole world; Audi also established the products portfolio in order to meet different customers needs. For example, A4 and A6 are popular in the European market; the sales of large SUV Q7 and luxury A8 achieved considerable performance in the North American market. Furthermore, due to the scarce of resources and climate change, Audi realized it is important to decrease the environmental impacts during the operation. Like the new generation of Audis flagship A8, taking Audi to a new level of luxury; Audi company will take transportation into a new milestone.

Evolutionary Polynomial Regression

Evolutionary Polynomial Regression Evolutionary polynomial regression (EPR) is a data mining technique based on evolutionary computing that was developed by Giustolisi and Savic (2006). It combines the power of genetic algorithm with numerical regression to develop symbolic models. EPR is a two-step technique in which, at the first step, exponents of symbolic structures are searched using a genetic algorithm (GA) that is the key idea behind the EPR, and in the second step, the parameters of the symbolic structures are determined by solving a linear least squares problem.   The general symbolic expression used in EPR can be presented as follows Where y is the estimated output of the process, m is the total number of the polynomial terms which excludes the bias term a0, F is a function constructed by the process, X is the matrix of independent input variables, f is a function defined by the user, and aj is a constant value for jth term. The first step and key idea in identification of the model structure in EPR is to transfer Equation 1 into the following vector form Where is the least-squares estimate vector of the N target values; is the vector of d=m+1 parameters aj and a0 ( is the transposed vector); and is a matrix formed by (unitary vector) for bias a0, and m vectors of variables. For a fixed j, the variables are a product of the independent predictor vectors of inputs, . EPR starts from Equation 2 and searches for the best structure, i.e. a combination of vectors of independent variables (inputs) . The matrix of input X is given as [15]: Where the kth column of X represents the candidate variable for the j th term of Equation 2. Therefore the jthterm of Equation 2 can be written as: Where, Z jis the jthcolumn vector in which its elements are products of candidate independent inputs and ES is a matrix of exponents. Therefore, the problem is to find the matrix ESkmof exponents whose bounds are specified by the user. For example, if a vector of candidate exponents for inputs, X , (chosen by user) is EX=[0,1,2] and number of terms (m) (excluding bias) is 4, and the number of independent variables (k) is 3, then the polynomial regression problem is to find a matrix of exponents ES 4-3 [15]. An example of such a matrix is given here Each exponent in ES corresponds to a value from the user-defined vector EX. Also, each row of ES determines the exponents of the candidate variables of jth term in equations (2). By implementing the above values in equation (4), the following set of expressions is obtained: Therefore, based on the matrix given in equation (5), the expression of equation (2) is given as: In the next stage, the adjustable parameters, aj, can now be computed, by means of the linear Least Squares (LS) method. The original EPR methodology was based on Single-objective Genetic Algorithm (SOGA) for explore the space of solutions while penalizing complex model structures using some penalization strategies. In this method, in the first stage, the maximum value for the number of terms (m) is assumed then a consecutive search for the formulas having 1 to m terms is undertaken. To accelerate convergence, the results obtained in each stage of search could be randomly entered into the population of the next stage search [15]. However the single-objective EPR methodology showed some drawbacks, and therefore the multi-objective genetic algorithm (MOGA) strategy has been added to EPR. In 2006, Guistolisi and Savic (2006) improved the EPR technique to overcome these shortcomings, using Multi-Objective Generic Algorithm (MOGA) instead of SOGA. The main features of the developed method are as follows [22]: 1) Increasing the model accuracy, 2) Reducing the number of polynomial coefficients, 3) Minimization of the number of inputs (e.g. the number of times each Xi appears in the model). In the developed version, a simultaneous search is conducted for polynomials having 1 to m coefficients; consequently, it is faster than the previous version (i.e., SOGA). In order to determine all models corresponding to the optimal trade-off between structural complexity and fitness level of the model, The EPR technique is Equipped with a range of objective functions which help to optimize the result based on Pareto dominance criterion. The objective functions used are: (i) Maximization of the fitness; (ii) Minimization of the total number of inputs selected by the modeling strategy; (iii) Minimization of the length of the model expression. The objective functions mentioned above can be used in a two objective configuration or all together. In which one of them will limit the complexity of the models, while at least one objective function controls the fitness of the models. In this study the multi-objective EPR is used to develop the EPR-based models. The coefficient of determination (COD) which is used to evaluated the level of models accuracy at each stage is Where Ya is the actual measured output value; Yp is the EPR-predicted value, and N is the number of data points in which the COD is computed.

When Will We Learn :: essays research papers

The gods must be crazy. Strange pollen is in the air. Like Mr. Dylan said, 'The times, they are a-changin' '. What has it been, thirty years since he penned that line? What has changed? America, as a whole has wallowed in the pitfalls of it's own failures and mistakes for so long that we can't seem to break through this bad habit. Sitting here in out artificial pride and patriotism as we go out on the limb of World War Three. We tap dance on the landmines of world dominance. We are not in control anymore. And yet, we think he have this power over all. And it's this grand feeling of strength that fills our weakening hearts every time we look at that flag, that is going to spread it's poison through out us when we least expect it. 'The times they are a changin' '. Or at least we thought they were. Or have we just spent our lives covering up every threat, masking every failure, and then proceed with advances with hopes that they will overshadow that horrible truth? The fact of the matte r is, we have grown too comfortable. Spontaneity is dead and gone. Or maybe it is just buried alive, and someone or something will dig through the soil and revive the American Dream. Because it has been discarded from our minds. We have lost that motivation, that inner drive, that heart and soul of what made this blistered nation appear to be great. We've degenerated so far that now the warts are beginning to emerge from underneath the surface. Underneath where the truth lies. And the truth lied underneath because no one ever learns from their mistakes. No one owns up to the responsibility. Which explains this whole conflict in Kosovo. God willing this will be the end of times, the final straw. On the brink of nuclear war. Just wipe the whole fucking world, and cut God a break from having to do it himself. Of course, that is what the book of Revelation is really saying. I don't honestly find the apocalyptic nature of that book very frightening, not after I stop and take one look aro und me. I don't think that I will be woken from the sounds of sleep by the beckoning blows of trumpets from the sky to see Jesus Christ descend from the clouds.

Loneliness In Of Mice And Men Essay -- English Literature

Loneliness In Of Mice And Men John Steinbeck’s Of Mice & Men: Loneliness ========================================== Loneliness is a state of being alone in sadness, resulting from being isolated or abandoned. As I understand it, loneliness is when a person has no one to talk to, no one to confide in, nor anyone to keep companionship with. Loneliness also makes a person slip into a desolate state, which they try to conceal under a tough image, and is an emotion even the strongest cannot avoid. In his novel, Of Mice and Men, John Steinbeck deals with loneliness by looking for comfort in a friend, but settling for the attentive ear of a stranger. Although they seem at ease and friendly on the surface, a deep sense of loneliness lingers in the hearts of Crooks, George, and Curley's wife, to which they are desperate to find an escape from to cope with their seclusion from the rest of society. Crooks, a lively, sharp-witted, black stablehand, who takes his name from his crooked back, leads a lonely life. He lives according to the rule that no black man is allowed to enter a white man's home. Crooks’ loneliness is a result of rejection from everyone else on the ranch. He is forced to live alone in a barn, where he lives his life in isolation because of his colour, which was an issue in those days. When Lennie visits him in the room, Crooks' reactions reveal the fact that he is lonely. As a black man with a physical handicap, Crooks is forced to live on the border of ranch life. He is not even allowed to enter the white men's bunkhouse, or join them in a game of cards. His resentment typically comes out through his bitter, sad, and touching vulnerability, as he tells Lennie: â€Å"†¦A guy needs somebody to be nea... ...ch seems to disappear when narrating the story of the farm to Lennie. Curley's wife's loneliness is covered behind the mask of a portrayed prostitute, but the mask falls off during her conversations with strangers, including Lennie. I think John Steinbeck's message about loneliness and people's attempts to overcome loneliness in the novel is to reveal to us the nature of human's true existence. One cannot escape from being lonely, and the characters' attempts to overcome their loneliness is to seek the desire and comfort of a friend, but settle for the attentive ear of a stranger. I feel that Steinbeck is not completely successful in delivering his message across because for a full realization, one has to dig deep into the story, as well as place themselves in the shoes of a character to emphasize with, as well as relate to them and perceive their misery.

Submarines :: essays research papers

The Evolution of the Sumarine Due to War The submarine is an extreamly useful tactical tool. Bred through war, the submarine is one of the most advanced covert weapons technologies today. The submarine is a ship designed and built to travel under water. A "true" submarine spends the majority of time under water and is capable of staying under water indefinaltely(Rush 140). The only "true" submarine today is the nuclear sub. The first "true" submarine is the U.S.S nautilus(Rush 141). There are two main types of war affiliated submarines, attack submarines and ballistic missile submarines. The attack submarine is designed to seek and destroy enemy submarines and surface ships. The much larger ballistic missile submarine is designed to carry multiple warheads to attack enemy cities and military facilities ashore(Polmar 748). The submarine origionated over 2,000 years ago when Alexander the great went below the Mediteranian Sea in a glass barrel(Wyckoff 13). Submarines were toyed with by scientists through the years but not many uses were found for the concept of a submersable until the revolutionary war. The first attack submarine was the Turtle, designed by a student at Yale university by the name of David Bushnell, it's purpose was to sink a British war ship in New York Harbor(Polmar 750). It's mission was a failure but none the less was the first attempt to sink a ship with a submersable(Polmar 750). The first success was made durring the Civil War(Polmar 750). The Confederate sub Hunley rammed the Union ship Housatonic in Charleston Harbor, and both the Hunley and the Housatonic sank(Polmar 750). The Hunley's weapon consisted of an explosive at the end of a long pole wich was to be set off when in close enough proximity to the ship it was to attack(Polmar 750). The submarine has advanced dramaticly due to war. The first major advancement in submarine technology is the invention of a gasoline and batery powered submarine by John P. Holland(Polmar 750). This ship was bought by the US Navy in 1900 and named the U.S.S Holland(Polmar 750). The U.S.S Holland was capable of speeds of 6 knots submerged(Polmar 750). The gasoline and battery powered combination allowed for submarines to run on gasoline while surfaced, and by battery power when submerged and combustion was no longer possable without wasting valuable oxogen within the submarine. The next leap in the technological development of the submarine was the periscope developed by Simon Lake in 1902(Polmar 750).

Immanuel Kant: An Advocate of Modern Deontology Essay

Deontologists claim that an action or a moral rule is right because of its own nature, even if it fails to bring about the greatest good. Deontology is critically based on duty (deontos) – a moral obligation we have towards another person, a group or society as a whole. In this sense, deontology is concerned with the intrinsic properties of actions, not their end result. Immanuel Kant is arguably the most famous advocate of modern deontology. According to Kant, moral law is synthetic apriori and took an absolutist approach. Kant argued that since everyone possesses the capacity to reason and has a conscience, it would be possible for all people to arrive at an understanding of moral truths without the need for experience. He claimed because reason is universal, moral reasoning would lead to the same results over and over again. Kant belived that obedience to the moral law is a ‘categorical imperative’ – an absolute and unconditional duty on all people to act morally in the correct way. He said that true morality should not depend on individual likes and dislikes or on abilities, opertunitities of external circumstances. Obedience to a moral command is an end in itself. Personal preferences(intuition) cannot be trusted as a reliable guide to what is morally right. Duty is more important, and to this end, he advocated the principle of universalisbility’ which requires people to ‘act in such a way that their actions might become a universal law. Universalisable principles apply to everyone. In his ‘formula of kingdom ends’, Kant claimed that every action should be undertaken as if the individual were ‘a law-making member of a kingdom of ends’ this should ensure that every individual appreciates the significance of his/her part in establishing moral guidelines and rules. Furthermore, the ‘formula of the end in itself’ ensures people are vauled for the intrinsic, not instrumental worth, while the formula of autonomy’ stresses that a moral action must be genuinely free if it is to be genuinely good.

Impact of Culture on Entrepreneurship

Information Management and Business Review Vol. 4, No. 1, pp. 30-34, Jan 2012 (ISSN 2220-3796) Impact of Culture on Entrepreneur Intention Syed Imran Sajjad1, *Haroon Shafi1, Aasim Munir Dad2 1Iqra university Islamabad campus 2University of Science and Technology (MUST) Mirpur Azad Kashmir, Pakistan *[email  protected] com Abstract: The main purpose of this study is to identify the role of entrepreneurship in Pakistan. After reviewing the literature, researchers identify those predictors who influence the entrepreneur’s intention with the help of socio cognitive model.National culture of a country influences the entrepreneur’s intention to start new business. Perceived feasibility, perceived desirability and entrepreneurs experience has a direct impact on entrepreneur’s intention. The study finds out the impact of culture on entrepreneur intention, different cultures have different ways to influence the entrepreneur intention and different ways to impact on int entions towards perceived feasibility and perceived desirability .The study helps entrepreneur’s decision making process and also helps out the development of further new business in Pakistan, motivates students to become entrepreneurs and analyzes their feasibility and desirability. Culture varies from country to country, within country different provinces, how different cultures, different traditions, norms and values. So in future, it helps to analyze entrepreneur’s intention in different cultures.Key words: Pakistan’s society, Entrepreneurship, entrepreneur’s experience, culture 1. Introduction Entrepreneur is an individual who runs a business with new idea or adding value in existing idea entrepreneur is a creator, risk taker who brings change in environment, with the help of technology, effective organization trained employees, and gets maximum benefit. A good leader is that, who manage all these activities on continuous bases.This is the study of a n individual who starts new business. In this paper researchers analyze the entrepreneurial intention how entrepreneur is being motivate to starts new business, the relationship between entrepreneur intention with their experienced and relationship between desirability that influences the entrepreneur intention, study also analyze the affect of national culture on entrepreneur intention as well as entrepreneurial activity for development nd underdevelopment countries. Different aspects of human behavior but the one predictor intention plays an important role (Ajzen, 1991) when individual starts new business than an economic activity starts than circulation of money starts ultimately growth of country starts according to Romer(1994) due to entrepreneur investment in new venture long term growth of country starts.According to Mitchell et al (2002) for starting a new business many factors influence entrepreneur intention like desirability, feasibility, and entrepreneurial experience, b ut it varies culture to culture and nation to nation, within country culture varies, researchers are still unclear, the over all impacts of culture in entrepreneur intention, Every country has its own culture, its values, norms and beliefs that affects the entrepreneurial intention, at some stages the culture plays an important role in decision making.Now a day’s private sector plays a vital role in economic development, in private sector small business owners have various opportunities to start new venture. The policies of government are important for entrepreneurs, but only development of policies is not sufficient, their implementation is also mandatory to attract investor to invest in business, small and medium enterprises some time not going well due to lack of knowledge and infrastructure.This paper is conceptual in nature and focuses that how entrepreneurs motivate to start a new venture especially in the context of culture. 2. Literature Review 30 Entrepreneurial inte ntion: Entrepreneurial intent to begin an innovative enterprise, in literature different researchers suggested the importance of entrepreneur intent such as (Shapero & Sokol, 1982; Shapero, 1975; Krueger, 1993; Bird, 1988; Krueger et al. , 2000). Some researchers including (Bird, 1988) identified entrepreneur individual nature, skill, experience the same as social desirability and personal feasibility.Different Researchers recommended including (Shane, 2003), that: the existence of an entrepreneurial possibility; its identification by the entrepreneur; and the conscious decision of the entrepreneur to be aware of that chance, are between the mandatory steps required in the entrepreneurial process. Cristina and Dwayne (2009) saw the effect of entrepreneur intention in Caribbean and the found out the link among entrepreneur intention, desirability, and feasibility and suggested that culture acted as moderator to influence the entrepreneur’s intention.After reviewing literature it has been seen that there is linked between desirability perception and entrepreneur intention to begin a new venture, Krueger (1993) practiced Shapiro’s theoretical model and suggested that there is a positive impact of perceived desirability on entrepreneur intention (Krueger et al. , 2000). For better understanding of different indicators and the impact of these indicators on entrepreneur (Krueger et al. 2000) suggested that attitude of entrepreneur varies for every exogenous facet that affects entrepreneur intention to become entrepreneur. P1. Perceived desirability will directly influence entrepreneurial intentions. The study analyzed that perceived feasibility and perceived desirability are decided by exogenous facet for example individual and conditional facets disclosure to entrepreneur experiences that studied as exogenous facets, all these observation manipulate entrepreneur intentions.According to (Bandura, 1994) self-efficacy is an emotional and thinking process . In this, model the two predictor perceived feasibility and desirability act as mediators the both predictors influence entrepreneur experience. This paper is extensions of social cognitive process model that analyzed to identify, save, and recover the information ultimately take suitable action (Frese and Zapf, 1994). For entrepreneur information any resource is very important, to identify that information and take proper action.Cristina and Dwayne (2009) argued that perceived feasibility and desirability has direct impact on entrepreneur intention and also there is a direct relationship between entrepreneur experience and intention, entrepreneur, experience plays an important role, experience influences the intention, due to experience their performance increase, experience motivated towards risk taking for new venture . Due to entrepreneur expertise that is gained from previous experience makes strategies more effective (Zhao et al. 2005). It has been argued that feasibility per ceptions regarding entrepreneurship are influenced by prior exposure to entrepreneurial experiences. For example, (Shapero and Sokol, 1982) contended that prior exposure to entrepreneurial activity would have a positive effect on perceptions of feasibility (and perceived desirability). Krueger (1993) demonstrated in his study that breadth of entrepreneurial xperiences significantly and directly influenced perceived feasibility, In literature it is carefully reviewed that entrepreneur’s intentions reveal a very few piratical support such as (Krueger and Dickson, 1994), analyzed that in risky situation self efficacy of those entrepreneurs are high influence high level of perception, if feasibility is high then entrepreneurs intention is more to start a new business and desire to invest more and more in business.A supportive culture also influences the entrepreneur’s intention, with his social and moral values and belief. P2. Perceived Feasibility will directly Impact on entrepreneurial intentions P3. Entrepreneur experience has a direct Impact on entrepreneurial intentions 31 Figure 1: Model Culture Perceived Feasibility Entrepreneurial Experience Entrepreneurial Intentions Perceived Desirability Culture: It recommends that the culture is most effective constant for entrepreneur. Good cultural values also influence the entrepreneur intention.The appropriateness, consistency, effectiveness, (ACE) model of persuasion (Reardon et al. , 1989) three main thought of culture Importance, stability, efficiency. Culture includes some social, moral ethical values norms and beliefs that must be socially acceptable (Hofstede, 1980). This extends society think about those values norms and beliefs. Normally, researchers analyzed that culture facilitated the entrepreneurship because of high individuality, low ambiguity, and low in power remoteness, and high intention for commencement of new business. Hayton et al. , 2002, p. 34). National culture has a moderating effect on entrepreneur intention (Fernandez et al. , 1997), George and Prabhu, 2000) P4. culture of a country has a significant effect on entrepreneur intention. 3. Discussion The present study examines the role of entrepreneurial intention in Pakistan and how culture affects the entrepreneurial intention. This model is based on Shapero and Sokol (1982) and tested by Krueger (1993). Later on Dwayne Devonish, et. l (2009) investigates the effect of entrepreneur intention in Caribbean; In Caribbean Governments are familiar with the need to expand the structure and change the mechanism in provinces and encourage the entrepreneurship. This present study sees the effect of culture in entrepreneurial intention in Pakistani society. Now – a – day’s instability of government is not helpful for entrepreneur to invest. Government policies are also significantly affecting the entrepreneur intention.This model indicates that entrepreneurial experience has a direct and posit ive relationship with perceived desirability and perceived feasibility. The entrepreneurial intention plays an importance role for starting new venture, past experience influence their decisions the model shows the direct relationship between entrepreneurial intention and entrepreneurial experience. This model recommends that the entrepreneur’s experiences acts as a key function to influence the intention of an individual to become entrepreneur linked with the previous point of view and research (Shapero and Sokol, 1982).According to Krueger et al (2000) experience influences the entrepreneur intention, there is also a direct relationship between entrepreneur’s experience on perceived feasibility and perceived desirability, feasibility and desirability existing in environment that influence the entrepreneur’s experience, so perceived feasibility and perceived desirability partially mediates entrepreneurs experiences and entrepreneurs intentions. Entrepreneurs ex perience directly influences the entrepreneur’s intention to start a new venture. 2 The other two indicators perceived feasibility and desirability mediated the entrepreneurial experience towards entrepreneurial intention. In this paper, we see the impact of culture on entrepreneurial intentions and his experience, how values and norms of a culture affect entrepreneurial decision in Pakistani society, different cultures have their own values traditions and norms, many small and medium size organizations have different impact on culture. Mark-Pruett et al. 2008) suggest that national culture of a country is directly linked with entrepreneur intention. Culture is shared values, norms, traditions rules beliefs, and anticipated behaviors of people. Cultural values and beliefs specify the level to which society judges’ entrepreneurial behaviors, such as innovation, perceived feasibility, risk taking, independent thinking and perceived desirable. Managerial implication: The study also helps managers to understand the impact of culture on entrepreneurial intentions and experience.The other motivating research would be to arrange a relative research for the service firms in different markets. A good culture influences entrepreneurial intention ultimately its performance increases and firm grows. A good supportive culture is helpful for the development of the organization, Government policies must be stable and supportive for new investors, banks also play important role for giving them loan on low interest rates, and all these aspects attract the entrepreneur intentions to start a new venture.Limitation and Recommendation: The study finds out the impact of culture on entrepreneur intention, different cultures have different ways to influence the entrepreneur intention and different ways to impact on intentions towards perceived feasibility and perceived desirability. It is difficult to sketch the conclusion, because in both streams of researches, it is d ifficult to measure lack of agreement and lack of clearness. In conclusion, we can say that the involvement of culture and its influence on entrepreneurial intentions helps entrepreneur to take decision.The regular support is education that increases entrepreneurial performance and efficiency. It is suggested that the education system in universities and colleges should help to improve the skill and knowledge of students regarding entrepreneurship, and also focus the students attention to find out the their desirability and feasibility in the field on entrepreneurship, conducting seminar on entrepreneurship allow entrepreneurs to share the experience with students and motivate them. Danns and Mentore (1995) suggested that â€Å"entrepreneurial experience† helps the students to develop positive attitude and approach to start a new venture. . Conclusion and Future Research Finally, entrepreneurship is a key factor for the development of any country. The current study focuses on the entrepreneur’s intention, national culture of a country influences the entrepreneur’s intention, perceived feasibility, and desirability and entrepreneurial experience directly influence the intention of any individual to start a new business. This study only emphasizes only Pakistani culture, and culture related policies and their implementation. In future research scholar will focus on one aspect of culture or one particular area. Culture varies country to country.Appropriate scale should be developed to empirically examine relations among above model. References Ajzen, I. (1991). Theory of planned behavior. Organizational Behavior and Human Decision Processes, 50(1), 179-211. Bandura, A. (1994). Self-efficacy, in Ramachaudran, V. S. (Ed. ). Encyclopedia of Human Behavior Academic Press, 4, 71-81. Bird, B. (1988). Implementing entrepreneurial ideas: the case for intentions. Academy of Management Review, 13, 442-449. Cristina, J. & Dwayne, D. (2009). An explorato ry study of competitive strategies among hotels in a small developing Caribbean state.International Journal of Contemporary Hospitality Management, 21(4), 491 – 500. Danns, G. K. & Mentore, M. M. (1995). Race and economic power in Guyana: a study of the East Indians, in Ryan, S. and Stewart, T. (Eds), Entrepreneurship in the Caribbean: Culture, Structure, Conjuncture, University of the West Indies, Institute of Social and Economic Research, Trinidad and Tobago. 33 Fernandez, D. R. , Carlson, D. S. , Stepina, L. P. & Nicholson, J. D. (1997). Hofstede’s country classification 25 years later. Journal of Social Psychology, 137(1), 43-54. Frese, M. & Zapf, D. (1994).Action as the core of work psychology, in Trandis, H. C. , Dunnette, M. D. and Hough, L. (Eds), Handbook of Industrial and Organ. George, G. & Prabhu, G. (2000). Developmental financial institutions as catalysts of Entrepreneurship in emerging economies. Academy of Management Review, 25, 620-30. Hayton, J. C. , George, G. & Zahara, S. A. (2002). National culture and entrepreneurship: a review of behavioral research. Entrepreneurship Theory and Practice, 26(4), 33-53. Hofstede, G. (1980). Culture’s Consequences: International Differences in Work Related Values, Sage, Beverly Hills, CA. Krueger, N. & Dickson, P.R. (1994). How believing in ourselves increases risk taking: perceived self-efficacy and opportunity recognition. Decision Sciences, 25(3), 385-400. Krueger, N. (1993). The impact of prior entrepreneurial exposure on perceptions of new venture feasibility and desirability. Entrepreneurship Theory and Practice, 3, 5-21. Krueger, N. , Reilly, M. & Carsrud, A. (2000). Competing models of entrepreneurial intentions. Journal of Business Venturing, 15(2), 411-32. Mark-Pruett, R. , Bryan, T. , Francisco, L. & Jerry, F. (2008). International Journal of Entrepreneurial Behaviour & Research, 15(6), 571-594.Mitchell, R. , Smith, J. B. , Morsem, E. A. , Seawright, K. , Peredo, A. M. & McKe nzie, B. (2002). Are entrepreneurial cognitions universal? Assessing entrepreneurial cognitions across cultures. Entrepreneurship Theory and Practice, 26(4), 9-32. Reardon, T. , Crawford, E. & Kelly, V. (1989). Link between nonfarm income and farm investment in Africa households: Adding the capital marketing perspective. American journal of Agriculture Economics, 76 (5), 172-179. Romer, P. (1994). The origins of endogenous growth. Journal of Economic Perspectives, 8(1), 3-22. Shane, S. (2003).A General Theory of Entrepreneurship, Edward Elgar, Cheltenham. Shapero, A. (1975). The displaced, uncomfortable entrepreneur, Psychology Today, 9(11), 83-8. Shapero, A. & Sokol, L. (1982). Some social dimensions of entrepreneurship in Kent, C. (Ed. ), Encyclopedia of Entrepreneurship, Prentice-Hall, Englewood Cliffs, NJ, 72-90. Zhao, H. , Hills, G. E. & Siebert, S. E. (2005). The mediating role of self-efficacy in the development of entrepreneurial intentions. Journal of Applied Psychology, 90 (6), 1265-1272. 34 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.