Month: June 2017
Transnational Corporations Example for Free
1. Discuss the basis of the three different views of the motivation of transnational corporation (TNCs) below.
The view that TNCs aim to maximise shareholder value is a reflection of the economic model of the firm. This model sees all corporations, including TNCs, as production – distribution units whose sole goal is to provide maximum value to their owners. As such, under this model TNCs will always pursue maximum shareholder value according to the duty that they have to their owners to maximise the return on investment (Coase, 1937). In contrast, agency theory holds that as the owners appoint managers to act as their agents, the interests of these managers will often override those of the owners. This is particularly relevant for major multinational corporations, who are likely to have a number of disparate owners who are unable to exercise effective control over the managers and the company as a whole. As such, the top managers' goals can override those of the owners as the top managers are directing the TNC's activity (Ietto-Gillies, 2001). However, in a major TNC the top managers themselves are often unable to effectively exercise control over the entire organisation, and have to devolve responsibility to divisional and unit managers. In this case, it is the techno-structure itself, defined as the number of managerial and control levels in the TNC, that determines the overall direction of the TNC, with limited influence from top managers and owners. The techno structure defines these interests depending on how many levels of management there are, hence defining how well the owners and top managers can maintain any control.
2. Why do firms seek to expand their productive activity overseas, instead of simply exporting overseas? Compare the contributions of ANY TWO of the following to this question. S . Hynmer, R. Vemon and J. Dunning.
One of the main reasons that firms look to expand their production activity overseas, instead of simply exporting overseas, is to keep control of their production. The process of exporting results in a loss of control of production, as local agents have to be responsible for distribution and retail, and these agents may make decisions to suit their own ends. In addition, control will be reduced by the fact that the exporting firm can only export their surplus production, and may not be able to increase capacity to the point where they can fully satisfy the overseas market, thus reducing their ability to use capacity to suppress any competition (Hymer, 1960). In contrast, according to the eclectic paradigm devised by Dunning (1988), expanding production overseas is the only way that firms can take advantage of locational advantages such as cheap labour and raw materials. As such, under the eclectic paradigm, the expansion of production overseas will be driven by the need to maximise production efficiency, rather than the need to maintain control over foreign sales.
3(b) Explain the functions of the headquarters of a large transnational corporation (TNC) and explain the variety in way TNCs organise both their research and development and production facilities internationally.
The headquarters of a large TNC serves two main functions. The first is to coordinate and monitor the activities of the different aspects of the techno structure of the TNC, and hence ensure that they are all pursuing the interests of the owners and directors, and not the interests of the techno structure itself. The second is to provide centralised functions such as human resources and payroll to help maximise the efficiency of these supporting back office functions and ensure that costs are kept low (Ietto-Gillies, 2001). In terms of the organisation of research and development and production facilities, TNCs have a number of choices in this regard. Firstly, they can choose to locate them in the nations with the lowest labour cost and most favourable investment regimes, such as China and South East Asia. This provides significant cost advantages, but can create increased transport times and requires the loss of some control. Another option is to locate them in the most productive and advanced nations. This is more suitable for products such as pharmaceuticals, which require significant skills and economic development in order to develop and manufacture successfully, and also command a higher premium. Finally, TNCs can choose to outsource some or all of their R&D and production to specialists, which can dramatically reduce costs and risks, but at the cost of losing some control (Ietto-Gillies, 2001).
4. Consider the major changes, since the 1970s, in the relationships transnational corporations (TNCs) have to ANY THREE or the following; to other firms, to their individual customers, to their workers, to the communities they operate in, to national governments and to supranational organisations such as the World Trade Organisation.
Since the 1970s, the development of the European Union as a supranational organisation has changed the operations of TNCs operating in any countries in the EU. With the EU now being viewed as a unified market, and the European Commission acting as an overall regulator, the actions of TNCs are now largely influenced by EU policy, rather than by the policies of individual member states. This can be seen in the case of Microsoft, which was fined by the EU for anti-trust practices rather than by any member state. With regards to the relationships with individual customers, the most marked change has been in a shift away from selling to customers, and towards marketing to them. Previously, organisations concentrate on manufacturing goods and then selling them to customers by convincing the customers that they wanted them. However, in recent years as the range of companies and products has increased the paradigm has shifted towards using marketing to identify problems and needs, and then demonstrate to consumers how a specific product or service solves their problems or addresses their needs. This is a more individual approach to consumers than in previous years (Ietto-Gillies, 2001). Finally, the relationships between TNCs and their workers have become much more complicated. Firstly, increasing levels of labour legislation have given the workers more power to switch jobs without penalty and with minimal notice, whilst employers are less able to reduce their workforce in times of crisis. This has in turn led to TNCs focusing more on using contracts for peripheral activities such as marketing, whilst only maintaining a small core of full time employees for the most critical activities such as research (CIPD, 2008).
(b) Discuss the argument that the socio-cultural and political consequences of trans-national corporation (TNC) activity globally are harmful both to rich and poor nations alike.
The main focus of this argument is that the activities of TNCs are aimed at providing benefits to their owners and managers, not to the nations in which they operate. As such, TNCs always look to move their manufacturing and other operations to the country that is most beneficial to them. This implies harm to rich nations, who will see a fall in available jobs due to the price of labour, hence an increase in unemployment which reflects badly on government and society. For poor nations, this means that much of their economic growth is focused on being attractive to TNCs, which places downward pressure on labour rights and reduces the ability of governments to shape policy. This leads to a rise in the number of sweatshops and other labour intensive manufacturing operations in poorer nations. Whilst these may pay more than traditional jobs such as subsistence agriculture, they also often require longer working hours and in harsher conditions. The manufacturing also creates environmental damage thus harming the population as a whole (Frynas and Pegg, 2003).
6. In his (1973) Economics and the Public Purpose, J.K. Galbraith argued that large corporations transcend the nation state to create an international planning community (p. 180). Discuss the relevance of Galbraith's view of the power of trans-national corporations to replace the market both nationally in today's world.
In the modern world it can be argued that TNCs have largely evolved and developed to transcend national markets. This can most clearly be seen in the case of major information and media companies that are now able to serve the entire world from a single offering, such as Apple's 'iTunes' music downloading service. However, factors such as these are arguably due more to developments in communications and transport efficiency, with any company of any size able to use the internet to market and sell products around the world and arrange for international shipping over the phone. Indeed, if anything the large size of large corporations has made them more vulnerable to the interventions of nation states, as the corporations are as dependent on the richer nation states for access to their markets as the nation states are on the corporations for access to goods and services. As such, the only area in which the nation state can be said to have transcended nation states is amongst the poor nation states who are reliant on TNCs for much of their economic growth and employment (Frynas and Pegg, 2003).
7. Answer both part to this question:
(a) What is 'Civil Regulation' and how is it supposed to discipline trans-national corporation (TNCs)
Civil regulation is the process by which nongovernmental organisations, NGOs, exercise some power over TNCs through setting codes of conduct for businesses and holding them to these codes across the world. The theory behind civil regulation is that governments can only have a limited impact on TNCs, as they are wary of antagonising them and hence losing the benefits of TNC operations. NGOs are not subject to the same concerns, and hence are able to set codes of conduct for TNCs around labour relations, pricing and other factors. Whilst the TNCs do not have to follow these codes, the NGOs often have a significant impact on consumer attitudes, and hence can rally consumers to boycott TNCs who flaunt accepted guidelines (Sethi, 2003).
(b) Examine the problem TNCs face in responding to Civil Regulation and the main strategies TNCs have adopted to cope.
The main problem that TNCs face in responding to civil regulation is that businesses and NGOs tend to have diametrically opposing views. NGOs are strongly focused on social welfare and, if TNCs followed all of their recommendations, they would tend to make only marginal profits, hence losing investment and causing owners to replace the managers. TNCs have adapted to cope with this problem by cooperating and negotiating with NGOs to produce guidelines that allow for the achievement of a reasonable profit whilst adhering to some guidelines. In addition, TNCs have begun forming and sponsoring NGOs of their own, who act to challenge some of the claims around the negative impacts of the TNCs, and help to minimise the impact of any consumer backlash (Sethi, 2003).
8. In his The Civil Corporation' (2001), S. Zadek argued that corporate responsibility' or corporate citizenship' required a move away from Civil Regulation' of trans-national corporations. Explain and assess Zadek's argument.
The main thrust of Zadek's (2001) argument is that civil regulation requires NGOs to effectively regulate TNCs, whilst corporate responsibility requires TNCs to regulate themselves. As such, as long as civil regulation is prevalent, TNCs will tend to defer to its rules, and placate their customers by achieving the minimum possible compliance with accepted civil regulations. This actively discourages businesses from taking further innovative steps to become more responsible, as they can effectively claim that they comply with all applicable civil regulations and hence need do no more. This argument has merit, as in the absence of formal civil regulation; businesses could effectively compete for customers by competing to become more responsible. However, the argument assumes that consumers will take the time to compare and judge the responsibility of different businesses, which may well not be the case. In addition, without clear guidelines and regulations to judge businesses by, it may be difficult to objectively measure the social responsibility of a business, allowing TNCs to market themselves as socially responsible even if they are not.
9. Consider the following quotation from D. Korten (2001 :pp. 19-20)
The client believed global corporations might offer an answer to the problem of poverty and human conflict. The client has since concluded, however, that the systemic forces nurturing the growth and dominance of global corporations are the heart of the current dilemma. The client now believes that to avoid collective catastrophe we must radically transform the underlying system of business to restore power to the small and local. Drawing on the arguments or R. Douthwaite (1996) and C. Hines (2000) consider how local changes in behaviour and global changes to the rules of finance, production and trade might help restore power to the small and local. Douthwaite (1996) argues that one of the main changes in behaviour required to restore power to the small and local is the shift towards localised production and distribution networks, particularly for food. This is based on the argument that global food production networks focus on producing high priced food for richer nations, hence putting pressure on agricultural resources and damaging them, reducing food security and food democracy. A shift to local production and consumption would keep wealth within local economies as they would be producing and buying food amongst the community, hence keeping power local. In terms of rule changes, Hines (2000) argues that taxes are needed on energy and resource use, as well as on pollution. In order to achieve this, citizens will need to demand that the trade system is changed to reduce the impact of the World Trade Organisation, and instead focus on creating localised trade. This will reduce the power of TNCs, thus allowing a shift in regulation and global rules to support small and local operations and promote social and environmental priorities ahead of global trade and economic growth.
References
1. CIPD (2008) CIPD - The Nature and Terms of the Contract Employment: Workbook. BPP Learning Media. 2. Coase, R. H. (1937) The Nature of the Firm. Economica; vol. 4, p. 386-405. 3. Douthwaite, R. (1996) Short Circuit. Strengthening Local Economics for Security in an Unstable World. The Lilliput Press. 4. Dunning, J. H. (1988) The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions. Journal of International Business Studies; Vol. 19, Issue 1, p. 1-31. 5. Frynas, J. G. and Pegg, S. (2003) Transnational Corporations and Human Rights. Palgrave MacMillan. 6. Hines, C. (2000) Localization: A Global Manifesto. Earthscan. 7. Hymer, S. H. (1960) The International Operations of National Firms: A Study of Direct Foreign Investment. PhD Dissertation. Published posthumously. The MIT Press, 1976. 8. Ietto-Gillies, G. (2001) Transnational Corporations. Routledge. 9. Zadek, S. (2001) The Civil Corporation: the New Economy of Corporate Citizenship. Earthscan.
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Majestic Wine PLC – Report on Business Performance
Executive Summary
Majestic Wine Plc. opened its original wine warehouse in 1980. This Wood Green, North London warehouse merged in 1991 with Wizard Wine, which, at that time belonged to Iceland, the frozen food group, (Sunday Times, 2010, p1). Majestic Wine was listed on the Alternative Investment Market in 1996. It acquired Lay & Wheeler In 2009, a specialist in Burgundy and Bordeaux products (Sunday Times, 2010, p1). The retailing of wines, beers and spirits is its principal business activity (Majestic Group, 2009, p1). This business report analyses the group performance for two financial years, to 29th. March, 2010. It recommends, on the basis of appropriate performance ratios, (detailed in Appendices 1 – 4), that shareholders should buy more shares. Shareholders should augment their investment significantly if the group management shows an aggressive and focused plan for achievement of its objective of retailing from 250 stores, along with the deployment of a more aggressive capital gearing ratio and sharper operations management.
1. Introduction
Majestic has grown more than 12 fold from 1985, when it had only 12 shops, to 152 shops in 2010. It aims to expand its shop strength to 250 during the coming decade (Sunday Times, 2010, p1). Its sales are at a 10 year high, a result of the discarding of its policy of retailing only 12-bottle cases. Off-licences, (establishments selling alcohol for consumption off the premises), could in the 1980s operate only for a few hours every day, and even fewer over weekends. Warehouses circumvented this rule by posturing as wholesalers, thus compelling their customers to buy bulk 12-bottle cases (Goodway, 2010, p1). Steven Lewis, the feisty CEO of Majestic, tested and subsequently rolled out, from November 2009, a model allowing customers to buy lots of 6 bottles at a time (Goodway, 2010, p1). The policy was instrumental in increasing the number of customers by 54000 to 472000 in the course of a year (LSE, 2010, p1). The objective of this Business Report is to recommend to the shareholders of Majestic Wine PLC on augmentation or reduction of their investment in the company.
2. Analysis
2.1. Group Operations
The detailed computations in respect of the following ratios, relating to profitability, short-term liquidity and working capital, and long-term solvency are detailed in Appendix 1 - 3. The profitability ratios of the company reflect a marked improvement in terms of revenues, cost of sales and ROI. Most organisations opt to keep their debt low and cut their debt at the earliest (Jablonsky & Barsky, 2001). Whilst such inclinations arise from the need to be conventional and secure in business, excessive eagerness to diminish debt frequently leads to poor utilisation of obtainable debt, higher costs and uneconomical capital gearing (Jablonsky & Barsky, 2001, p 7-15). The long-term debts ratios reflect under capitalisation. The low gearing ratio reflects risk adverse tendencies, which can lead to slow growth in future. The practically unchanged working capital ratios reflect the maintenance of sub-optimal liquidity levels. The weak acid-test ratio can lead to a difficult situation if the need for liquidity arises on account of contingencies that need to be swiftly addressed.
2.2. Group Performance
The group turnover for the 52 week period ending 29th March, 2010 at A£33.2m was up 15.6 percent, with the profit before tax at A£16.0m rocketing by an incredible 117 percent (LSE, 2010, p1). Appendix 4 summarises the group performance, as reported in the Preliminary Results for 2010. The Group has experienced strong cash generation during 2010, with operational cash-flows of A£21.2m during the year. This figure is A£5.7m more than the A£15.5m generated during the previous year, and has essentially come about from the improvement in the underlying profit before tax during 2010. The Distribution and Administrative Costs have increased by 15.6 percent during 2009-10 as compared to the previous year. The EBIT (Earnings before finance costs and taxation) rose by 118.3 percent during the same period. The Profit before Taxation (PBT) grew sharply from A£7.4m to A£16.0m during 2009-10 year, registering an increase of 117 percent. The sales to private customers, which make up the mainstay of the business, have shored up well, even though sales to corporate customers has been unsatisfactory. The company's French operations have been hurt by a stronger Euro (Majestic Group, 2009, p1). This contributed to an exceptional non-cash charge of A£5.33m in 2009, which arose from the writing-down of the carrying value of the company's French retailing operations, Wine and Beer World (Majestic Group, 2009, p1).
The company's purchase policy of reducing the minimum purchase of 12 bottles to 6 has led to excellent results, even as it needs to be recognised that it may be difficult to replicate this year's soaring profits next year, because of the challenges involved in manoeuvring even more supermarket customers through its shop entrances (O'Doherty & Kuchler, 2010, p1). Majestic is nevertheless working towards seizing mid-market space with a number of value-adding schemes like developing sales to gastro pubs, increasing its wine-tasting programmes, and growing its fine wines business (O'Doherty & Kuchler, 2010, p1). Majestic's market share at 3.4% leaves abundant room for growth (O'Doherty & Kuchler, 2010, p1). Its share is trading at approximately 14 times its forecast earnings for 2011, higher than the average of its peer retailers, which are trading at an average of 12 to 13 times. Majestic, O'Doherty & Kuchler, (2010, p1) feel merits the premium and some more.
The company's results are remarkable, considering that the underlying profit growth of 26 percent in 2010 has been achieved after accounting for the reduction of A£5.3m in the carrying value of the French operations (Hemming, 2010, p1). The business is well positioned to capitalise on its core strengths as the economic environment starts improving (Majestic Group, 2009, p1). The company's acquisition of Lay and Wheeler's fine wine business in 2009 has contributed A£12.4m to 2010 sales (LSE, 2010, p1). It is to the credit of the group that the total dividend for the year has been raised by 5.1 percent, to 10.3p per share, against last year's 9.8p, despite continuing market pressures (LSE, 2010, p1). The underlying basic earnings per share (EPS) for 2010 at 18.4p were 31.4% higher than the 2009's 14.0p. The underlying diluted EPS for the same period at 18.3p rose 30.7% against the previous year's figure of 14.0p. The basic EPS for 2010 at 18.4p was 247.2% more than the 2009's 5.3p. The diluted EPS for 2010 at 18.3p was 245.3% more than the 5.3p achieved in 2009 (LSE, 2010, p1). The average transaction expenditure at A£129 for 2010 is 4 percent lower than 2009, despite a growth of 14.6 percent to 1.7m in transaction numbers (LSE, 2010, p1).
The UK like-for-like sales for the 10 week period from 30th.March, 2010 to 7th.June, 2010 rose 7.3 percent (LSE, 2010, p1). The company is expected to improve its sales in future. The retailer's professional credentials and good service levels have produced considerable loyalty amongst its patrons, which will be of assistance in the present economic climate. Majestic will also probably not be impacted by the recommended changes to alcohol pricing as its focus is more on the superiority of its offering than on its price (TradingMarkets.com, 2010, p1). It is recommended that shareholders should steadily increase their investments. Larger positions should be taken if the group management shows persistent and aggressive efforts to achieve its growth target of 250 sites within a decade and change its conservative capital gearing. The company however needs to address its short term liquidity in order to be ready for short-term contingencies.
2.3. Mission Statement
An exhaustive search of corporate information on the company reveals that Majestic does not have a well-defined official mission statement. The company nevertheless aims to continually increase its retail outlets and open more than 250 in the coming 10 years. The company also strives to provide high quality wine and excellent service to its customers. The achievement of these objectives can be considered to be its mission. The company's strategy focuses on increasing retail outlets and providing excellent value across product and price ranges and extraordinary customer service (Majestic Group, 2009, p1). The company's commitment to its mission is demonstrated by the steady increase in the number of retail outlets over the years and the numerous quality and performance awards it has won in a competitive scenario. The company has increased the number of outlets from 12 to 150 in the last 15 years. It was awarded the "High Street Chain of the Year", in 2008, by the International Wine Challenge Awards.
The Group was also awarded The "Specialist Wine Chain of the Year" by Decanter magazine in 2008 (Majestic Group, 2010, p1). The company's strength in customer services emanates from its policy of recruiting and retaining high quality graduate level staff, its continual investment in comprehensive training programmes, (widely accredited as best in the wine industry), and its focus on customer service, product knowledge and management (Majestic Group, 2010, p1). Majestic augments its specialist credentials by focusing on staff training. New staff members are encouraged to obtain the "Wine and Spirits Education Trust's (WSET) Advanced Certificate" in six months. Several employees train further. Approximately 150 staff members presently have, or are qualifying for the WSET Diploma, even as 7 of Majestic's personnel received Excellence Awards from WSET in January 2010 (TradingMarkets.com, 2010, p1). Majestic distinguishes itself from its competitors is by cultivating strong customer relationships (TradingMarkets.com, 2010, p1). The company hosts numerous events, like wine tastings, and courses to enhance customer knowledge of wine (TradingMarkets.com, 2010, p1). Such approaches, combined with high service levels, have facilitated the retailer in trading its clientele up the value chain (TradingMarkets.com, 2010, p1). Majestic aims to enhance its fine wine credentials by putting up fine wine display sections in all its stores in the next two years. Approximately around 50 percent of its present stores have such sections (TradingMarkets.com, 2010, p1).
2.4. Environmental Policies
Official communication by Majestic is noticeably silent on its environmental policies. Study of information available on the company's marketing strategy however reveals that the company is actively committed to a sustainable environmental policy of following green policies in its marketing operations (PRLog, 2010, p1). The company stocks a carefully grown assortment of red and white organic wines. Such wines are created from organically produced grapes, developed to ensure taste and value for money, and are suitable for vegans and vegetarians (PRLog, 2010, p1). Majestic's online marketing manager, Jamie McRonald explains that organic wine production is difficult and expensive since grapes are vulnerable to weather and animals. Such constraints make farmers disinclined to organic grape production (PRLog, 2010, p1). Organic wine is the ultimate part of the organic riddle, with fungicide and pesticide-free grapes maturing slowly on sun-soaked vineyards sans chemical safety, intervention or stimulation (PRLog, 2010). Whilst organic wines are by and large rarely stocked by the bulk of wine retailers because of their higher costs, Majestic actively stocks and sells organic wines. Such support will encourage farmers to take up organic farming and grow grapes without the use of environmentally damaging chemical fertilisers and pesticides. The company locates its stores off High Streets. Whilst this decision stems from its policy of keeping rentals low, it helps in reducing petrol expensive traffic jams in busy shopping areas. Majestic should however aggressively adopt and publicise environment friendly policies because of its influential position in the supply chain. A relevant area of focus could be the collection, reprocessing and disposal of recyclable waste material.
2.5. Competitor Analysis: Strengths and Weaknesses
The retail wine market in the UK is intensely competitive; it is highly fragmented and basically serviced by supermarkets and off-license retailers (Management Today, 2007, p1). Majestic thus faces competition from other off-license retailers and supermarkets. Supermarkets have over the years continuously increased their share of the wine market (Management Today, 2007, p1). Led by Tesco's and ASDA-Walmart, supermarkets are increasing their sales of wines at the cost of off-license establishments, whose numbers fell from 5430 to 4400 between 2004 and 2009 (Management Today, 2007, p1). The recent winding up of the off-licence chain First Quench, a direct outcome of intense competition from supermarkets, led to the loss of 6000 jobs (Management Today, 2007, p1). Whilst Majestic competes with supermarkets and off-licence chains and shops, its major competition obviously arises from supermarkets like Tesco, ASDA, Sainsbury's and Waitrose (How, 2006, p1). This competitive analysis of strengths and weaknesses treats supermarkets as one generic form of competition, even though there could be differences in the strategies, capabilities and weaknesses of individual supermarket chains (How, 2006, p1).
The national supermarket chains provide formidable competition to majestic wines. Their physical spread is immense and they are present in all High Streets, as well as in smaller towns and in rural settlements (Management Today, 2007, p1). They stock a huge variety of foods and household items as well as wines and attract far more footfalls than specialised wine retailers like Majestic. Such larger numbers of footfalls translate into greater sales because people tend to club food and wine purchases (Management Today, 2007, p1). Supermarkets are also by and large better located and many of them have substantial parking facilities, which help in attracting customers. Supermarkets also have the advantage of lower overheads, very substantial buying and stocking capacity, and bargaining power over suppliers. This enables them to offer better prices and work with lower margins (Management Today, 2007, p1). Whilst supermarkets have much strength, it needs to be recognised that wines are only one of their many products and management attention towards selling of wines in supermarkets is far more diluted than in Majestic, a company which literally breathes and lives wine. The difference in attention and commitment thus leads to comparatively lesser market aggression and customer service. Supermarket employees are certainly less conversant with wines than those of Majestic.
It is also possible that the smaller supermarket outlets may not have all customer wine preferences. Majestic is dedicated to the retailing of wines. The company's strength arises from its very substantial management and staff capabilities in the sourcing, stocking and retailing of wines (TradingMarkets.com, 2010, p1). The company's employees are extensively trained in different aspects of wine retailing, and it strives to stock an extensive range of wines, including those made from organically grown grapes (PRLog, 2010, p1). The company however suffers, in comparison to supermarkets, from fewer and unfavourably placed outlets, higher overheads, and lesser footfalls (O'Doherty & Kuchler, 2010, p1). The company counters this by locating its outlets off High Streets and uses its financial strength to buy wisely and extensively (O'Doherty & Kuchler, 2010, p1). It delivers at home and engages in numerous customer friendly activities to build customer loyalty.
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Cooperative Group Example for Free
Introduction
This report outlines some of the key concerns of the Cooperative Groups employees regarding the overall ethical direction of the Group. The Group prides itself on its commitment to ethical business, be it in the fair trade, environmental or locally sourced areas, and yet it is employees concerns that such standards are inconsistent throughout the Group and are therefore undermining the good reputation of the organisation. This report is particularly critical of the ongoing decision of the group to sell non fair trade products alongside the groups own fair trade products, specifically the promotion of these on a national level. In addition, the report emphasises the need to create much stronger links with local communities both as a means of engaging more with the communities in which the group operates, but also to create a more flexible supply structure based on the availability of local products.Fair trade and non-fair trade
It is the employees considered opinion that the issue of fair trade and non-fair trade is a key problem within the group's grocery stores at present. The ethical stance taken by the group in sourcing all of its own brand products from sustainable farms and fair trade networks is certainly to be commended, however, the wider decision which has been taken to still stock products such as Nescafe and Galaxy and Mars chocolate continues to undermine this decision. The ethics of this situation are clear – either one is for fair trade and the wider benefits which this brings, or one is against it and believes that the free market will provide for all. By stocking and thereby profiting from products which do not take this stance the group undermines its commitment to these causes , particularly given the fact that the groups own products in this area are high sellers and are particularly competitive. A stronger commitment here would do much to boost the ethical background of the group. It is also the employee's belief that this could be tied in strongly with the Cooperative Banks commitment to development projects in developing nations. It seems ridiculous to be giving with one hand and taking with the other and therefore the employees would like to see a more explicit and concrete commitment on this level which could be taken across the Group as a whole. Much of the key development literature on the problem of poverty in Sub Saharan Africa focuses on the problem of creating sustained investment and providing important markets for export for products. The Cooperative Group is in a unique position as the owner of a large bank and a grocery outlet to provide this support and could be a real leader in this field. The public relations benefits of such an approach do not need to be laboured but more importantly there is a real opportunity to use the organisation for good in the world. With the growth of ethical consumerism and the notion of green marketing there is a real opportunity to make a difference in this sector.Becoming truly local
It is the experience of many of the Group's employees that many customers who come to the Groups grocery stores feel somewhat let down by the failure to push forward with stocking local produce. Many of these have highlighted the fact that larger retailers such as Morrison's and Tesco have made strong headway on dealing with this issue. This issue is a key one in the sense that it engages with several of the key ethical considerations of the Group, as laid out on the Group's website. These include the environmental considerations of moving products great distances. There is an important issue here with central distribution centres and the way in which these operate. It is often the case that products will be produced in one area of the country, moved to another hundreds of miles away and then returned via a wagon to a point two villages away. This undermines the credibility of the organisation on an environmental level but also on a local level. Whilst employees appreciate the fact that such operations are often cheaper and are part of keeping the cost down, it is important to acknowledge the good public relations which could be created through enhancing the Group's commitment to local job creation. A more dynamic supply network would certainly create this as it would require a significant step up in administration for it to be successful. However, the employees of the Group believe that this would be a significant PR coup and would therefore win the Group significant support, particularly in more rural areas. It would combine to create jobs, reduce the carbon footprint of the Group and also help the Group provide a real service to local people. Most people agree that the fresher the produce, the better.Moving the organisation forward
Whilst this report is critical of the Group on several levels it must be acknowledged that the Group is to be significantly commended, particularly when one considers the current situation with many of its major competitors in the Grocery market. However, in a constantly changing world it is vital for such organisations as the Cooperative Group to continue to show the lead on issues such as local produce, carbon reduction programmes and ethical consumerism. To that end the organisation needs to examine fully what it believes the next level to be. This report embodies some of the views which should be seen as coming from the 'shop floor'. They are based on the direct experience and views of the man on the street and from those who work in the Group's outlets. Doubtless there are greater ethical considerations to be made and doubtless there are significant economic and financial aspects to be taken into account. However, for the Group to continue to pride itself on its ethical commitment it does need to take the next step forward. This report suggests that looking to make radical changes in the sourcing of produce could provide a significant amount of jobs in the country (through the necessary management and administration structures which would be created), could reduce the organisations carbon footprint and would provide fresher and therefore better produce to all of its customers. This would represents a public relations coup and would fall directly in line with the Groups ethical commitments. A further step which the organisation would like to see is through the role of the Bank. Once again, this is certainly deserving of significant support and plaudits for the work which it has done but the employees once again feel that a more concrete set of explicit principles could further improve both the reputation of the Bank as well as its ethical standing. These principles would also include a commitment to employees of the organisation but would also include the promise of support to small businesses which would be set up in support of the wider Cooperative Group operations. One example here would be of a small firm of delivery drivers which would be operating in support of rural farms in Northern Scotland. These would directly support the work of the Group in the sense of attempting to make the Group more local through sourcing food more locally and would therefore be supported by the Group knowing that there would be strong business there as the structure of the organisation changed.The current economic climate and the Group
In making these critical comments of the Cooperative Group the employees would like to stress their knowledge and acceptance of the problems currently associated with the economic crisis within Europe and the wider world. However, it remains their belief that the Cooperative Group can become a beacon of what ethical business operations can do for the communities in which they operate. The employees believe that much of the current economic crisis was caused fundamentally by greed, be it the greed of investment bankers who made investments that they knew would not pay off, or invested in projects which they knew were unethical and which would result in damaged livelihoods. The Cooperative Group can stand opposed to these problems by creating a clear charter that it will not pay Directors hundreds of thousands of pounds in bonuses but will reinvest this money in local communities, supporting local farmers and local transport networks, supporting developing nations and the farmers who work there, helping to build links between the nations. It is the belief of the employees that if the Cooperative Group were to move forward and take on this more advanced ethical stance that it would be financially costly in the first instance as infrastructures would need implementing and there would doubtless be problems associated with this. However, it is also the belief of the employees that many people would support such businesses, particularly where they knew that it was directly affecting local business. It is certainly true that for many consumers the major consideration would remain price. However, the employees firmly belief that with hard work and the commitment of the wider Group, these ethical changes can be implemented in a successful manner.Conclusion and Recommendations
• A stronger more direct commitment to moving the organisation forward in a sustainable and truly ethical manner. • The Groups stance on issues such as Fair Trade is commendable and has been an important step in raising the profile of products such as chocolate and coffee and the issues surrounding the sourcing of the key commodities which these require. • However, the Group must now acknowledge that the stance which it is taking on this issue is hypocritical – on the one hand advertising its own advocation of ethical sourcing and the importance of a fair price for growers whilst on the other hand continuing to directly profit from products which do not meet these standards. • The Group would therefore benefit from a much more clear cut and well defined ethical approach in which its Grocery stores were operated on principles similar if not identical to those of the Food Wholesaler SUMA. • The Group should oppose the sale of non-fair trade products under any circumstances and should work to source as many products as it can locally in order to support local industries, provide fresher produce to its customers and to provide greater local involvement. • This process will encourage a greater involvement with local communities and will help the Group in becoming a dynamic and ethical supplier to local communities which becomes a part of these communities rather than being another huge chain which rips the soul out of local values and towns. • To create an ethical pledge and commitment which will encompass all aspects of the Groups current ethical policies in a much more explicit and coherent way. One key example of this which the employees would particularly like to see is the following - The Group will not only commit itself to sourcing its own brand chocolate from fair trade farms it will actively support such farms with financial assistance from the bank and will undermine the market for non-fair trade products by refusing outright to stock such products.References and Bibliography
Bevins, Vincent. "Guardian survey reveals shoppers' green concerns." The Guardian London: The Guardian, 2010. Cooperative Group. "Ethical Trading and Fairtrade." Manchester: Cooperative Group, 2010. Cooperative Group. "Food Ethics." Manchester: Cooperative Group, 2010. Cooperative Group. "Food and Drink." Manchester: Cooperative Group, 2010. Klein, Naomi. "No Logo." London: Fourth Estate, 2010. Lang et al. "Food wars: the global battle for mouths, minds and markets." London: Earthscan, 2003. Moshirian, Fariborz. "Globalisation, growth and institutions." Journal of Banking and Finance 32.4 (2008): 472-479. Sachs, Jeffrey. "The End of Poverty: How We Can Make It Happen in Our Lifetime." London: Penguin, 2005. Stiglitz, Joseph. "Globalisation and its Discontents." London: Penguin, 2002. Stiglitz, Joseph. Sen, Amartya and Fitoussi, Jean-Paul. "Report by the Commission on the Measurement of Economic Performance and Social Progress." 2009. Weis, Tony. "The global food economy: the battle for the future of farming." London: Zed Books, 2007.Cite this page
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Free PESTLE Essays and Papers Pdf
Introduction
A PESTLE analysis provides and analysis of six of the key macro level factors which affect a business and the decision which it makes (Grant, 2008). This assignment will apply the relevant factors within the PESTLE framework to the international clothing retailer Next and its subsidiaries. Data upon which the assignment is based comes from a variety of sources including the company's annual report (Next, 2012) and released and well as information from the academic and business press. In order to give the assignment a greater level of focus, the report will be limited to an analysis of the external environment in the UK.Political
There are a wide range of political factors which affect Next at present but also factors which may have an impact upon the company in the future. One key political decision which affects Next in the UK is the rate of tax levied by the government. This has the ability to affect both the bottom line of the company in the form of corporation tax but also the ability of customers to spend with next, linked to income tax. At present, levels of corporation tax in the UK have been lowered in order to attempt to stimulate economic activity (Telegraph, 2012). However, given the continuing deficit, there is no guarantee that governments in the future will maintain the rate of corporation tax at its current level. Other key political decisions consider interest rates. At present, UK interest rates stand at an all-time low of 0.5% (BoE, 2010). This may be seen as a positive factor for firms such as Next who are effectively able to borrow large amounts of money for the purposes of capital expansion at much lower rates than have been previously seen. Such borrowing may take place in the form of long term borrowings from banks and financial institutions, alternatively the company may choose to issue corporate bonds (Arnold, 2008). Other political issues relate to the governments relatively "arm's length" approach to Europe and remaining outside of the single currency area (FT, 2012). For a UK based business such as Next that has international operations in the Euro Zone, this could be seen as negative with the prospect of foreign exchange rate risks being felt and the introduction of additional transaction costs which would be eliminated if the government decided to join the Euro Zone. From a more general perspective, the UK political system based upon parliamentary democracy may be seen as providing Next with a relatively low risk political environment in which to operate within (CIA, 2013). This may be seen as an advantage in comparison some of Next's ventures into potentially less stable political nations such as Russia and those of the Middle East. As such, this makes the UK a relatively safe market for Next to make further long term capital investments in where the company may think twice in the case of less stable political environments.Economic
A critical factor which may have an impact upon Next in the UK is the current state of the economic environment. As a business which makes use of a premium based differentiated strategy, as opposed to being a cost leader, it may be seen that swings within the economic environment have the ability to impact the fortunes of the company to a greater degree than those operating in the necessity and budget sector of the market (Johnson et al, 2008). From a purely statistical perspective, the years since 2007 have been an economic rollercoaster for the UK. Following the onset of the global financial crisis in 2007, the subsequent year saw GDP growth revert to negative figures with -1% contraction in the economy. This was followed by even worse performance in 2009 with a -4% contraction. Low levels of growth have been seen since in 2010 and 2011 with GDP growth of 1.8% and 0.8% respectively (World Bank, 2013). However, while the statistics show a slight recovery in 2010 and 2011, others within the business press (BBC News, 2012) indicate that the UK economy could continue to flat line or worse result in a "double dip" recession. These headline figures may seem to paint quite a negative picture for retailers such as Next which are highly reliant on the UK economy as a source of revenue. However, an analysis of more detailed economic data may highlight a different perspective. Tutt (2012) presents data which looks at the level of unemployment and household disposable incomes in the UK. In this case an alarming pattern is seen. On the one hand, levels of unemployment have been increasing in recent years with a rise from 0.86m in 2007 to 1.53m in 2011. However, conversely, the levels of disposable income of individual households during the period has consistently risen from A£14,308 per household in 2007 to A£16,042 per household in 2011 (Tutt, 2012). For Next and other premium end retailers this may have a key impact upon strategy. While there may be few customers able to by the products and services of Next due to rising unemployment, those who have remained in employment have generally become wealthier. As a result it is likely that such economic patterns may help Next to improve its average spend per customer, even if the total number of customers falls.Social-Cultural
There are many social and cultural changes taking place in the UK at present which may have a high level of impact upon the performance of fashion retailers such as Next. In many cases, as representatives of an essentially socio-cultural industry, the fashion industry itself may be seen as an industry which is affected by such trends to a greater degree than other industries (Curtis et al, 2007). One of the key issues in the UK market, but also seen across Next's wider European markets is the general aging of the population (Parliament UK, 2012). This may be seen as both problematic but also an opportunity for Next. One the one hand, an ageing population may see Next having to adapt its product portfolio in an attempt to ensure that the products supplied by company appeal to this aging demographic of the population. In addition, the prospect of an aging population may also see that competition for the increasingly smaller younger demographics of the market becomes more intense for Next as time progresses. Despite these drawbacks, there are also advantages linked to the issue. On consideration is that ageing populations tend to be less mobile than younger demographics, this may be a key advantage for Next given that its home delivery and online business model offer a convenient solution to the problem. Other socio-cultural factors include the consideration that the UK has since World War Two become an increasingly culturally diverse nation with an influx of diverse cultures, races and ethnicities all contributing towards the socio-cultural backdrop of the UK social system (Shepherd, 2010). For Next, this has not only external implications such as those linked to aligning product ranges to specific cultural segments, in attrition, the company musty also ensure that it deals with issues such as managing diversity in the context of its own organisation. In this case, increased cultural diversity can be seen as both a source of a competitive advantage yet also a potential source of conflict (Liff, 1997, Ivancevich et al, 2010). As EU expansion takes place and the new member states become further integrated into the EU, there is a distinct possibility that the trends for increased diversity in the UK's labour and consumer markets will increase rather than decrease.Technological
There is little doubt that new technological developments have transformed the UK business environment, especially those operating in the retail sector. Key developments may be seen as those technologies which are internet or communications based in nature, such as the wide spread diffusion of broad band (Jobber, 2007). Key technological developments such as the internet have allowed firms such as Next to develop online business models which complement traditional bricks and mortar retail establishments. Empirical evidence from the ONS (2009) on the subject shows that the growth has been almost exponential with a rapid acceptance on the behalf of customers of online shopping in both retail and other markets. Yet communications technologies have not only been used by the sector to facilitate online sales and shift away from the traditional high street "place." Other aspects of new technological development have seen a range of new marketing options opened up to retailers such as Next. Most important amongst these are developments which have allowed retailers to interact with customers using online social networking sites such as Facebook, YouTube and Twitter. These are now seen as key ingredients in the development of a successful marketing strategy (Zarrella, 2010), largely the product of technological changes in the sector. Other technologies have simply allowed businesses to develop better relationships with their consumers and communicate in a more effective way. Take for instance the technological developments of smartphones and "apps." Such technology has allowed companies to develop apps which allow consumers to find their nearest branch or check the facilities and product availability at a branch before making a visit. This allows an effective bridge to be built between the purely online business model such as those operated by a company like Amazon and those falling into the "bricks and clicks" category (McGoldrick, 2002) such as Next who must seek to leverage the benefits of both arms of the business. While technology in this section has largely been presented as an opportunity, there is of course a risk factor. Many have expressed concerns over the abandoning of the high street as consumers flock to online business models. The case is illustrated only too recently with the example of Jessops going into administration, a business which may be seen as falling victim to technological developments (Goodley, 2013).Legal
Like all businesses, Next must conform to the legal minimum standards which are enforceable in a jurisdiction. The case of Next's UK operations legal elements may be seen as more complex given that the company must comply with both UK law and EU law. Some of the key legal regulations which affect Next in the UK are considered below: Minimum wage legislation - A key piece of legislation in the UK which affects organisations such as Next with a large number of low paid workers is that of various minimum wage regulations. In this case, the legislation requires UK employers to pay their employees a minimum of A£6.19 per hour for those aged over 21 (Gov UK). Given the large number of employees of firms such as Next which are affected by the National Minimum Wage, temporary shifts in legislative policy can have a high impact upon the sector. Other key legislative issues include equal opportunities legislation and various other acts of parliament designed to ensure equality both in the work place and in the recruitment and selection process (Pilbeam and Corbridge, 2010). In this case, such legislation has a direct impact upon the processes and practises of an organisation such as Next who are required not only to design corporate polices which facilitate equality but also to record activities related to recruitment and selection should an employee call foul at a later date. The issue here for businesses such as Next is that the legislative environment often places the burden of proof on the defendant rather than the claimant in such cases. As such, the development of detailed HR processes and practises is critical (Bratton and Gold, 2007). Further issues relate to potential moves on the behalf of legislators to become tougher in relation to issues of tax avoidance. While Next has to date not been implicated in any of the tax avoidance scandals, there is a consideration that the actions of other retailers such as Starbucks and Amazon (Syal, 2012) may have provoked the onset of a tougher legislative environment in the future which may have an impact upon innocent parties such as Next.Environmental
The physical environment is also a key issue for firms operating in any given national market and consideration should be considered two how firms treat the physical environment and the impact this has on the business, but also the impact the physical environment generally has upon a business. In general terms, the physical environment which Next operates within in the UK may be seen as relatively benign in comparison to other parts of the world which suffer from high intensity natural disasters such as earthquakes, hurricanes and forest fires. Despite such an environment there have been a number of environmental issues recently in the UK which have affected the retail sector. These have included increasing more frequent floods (Retail Bulletin, 2013) and poor sales due to snow storms and the failure of local authorities to prepare for periods of inclement weather (Hall, 2011). Other aspects of the environmental analysis require firms to consider their own impact upon the environment. In general terms, the literature (Parsons and MacLaran, 2009) considers that consumers are becoming increasing aware of the impact of businesses upon their environment. As such, if businesses are to maintain customer loyalty and avoid negative backlashes, then they must seek to minimise their impact upon the environment. In the retail sector, this may include reducing waste, running more efficient transport operations and implementing ethical sourcing policies. While failure to comply with such consumer demands may result in a negative consumer backlash, with the adoption of the right approach, high environmental credentials can be used to add value to a product or service. Such an example is seen in the Marks and Spencer (2013) and Body Shop business models in the retail sector.Conclusion
Having reviewed the key factors within the macro level environment as presented in the PESTLE framework, it is possible to come to a number of conclusions in relating the model to Next and its UK operations. On the one hand, it would appear that the external environment is a significantly challenging one for Next with the prospect of further poor economic performance and a requirement to comply with what may be seen as a relatively tough legislative environment. However, the PESTLE factors would also seem to indicate that there are some large opportunities for Next in the UK. Such opportunities include the ability to borrow at low interest rates to fund capital expansion and increased opportunities to link technological developments to changes in the social fabric of society in order to drive more sales through web based platforms. Other factors such as changing technologies and increases in diversity may be seen as neither positive or negative intrinsically but still require some change on the behalf of Next. Having reached these conclusions, the final opinion of the writer is that the external environment is essentially neutral for Next at the moment and that the success of the business will be largely dependent upon whether managers of the business capitalise upon the stated opportunities or allow the challenges to see Next becoming another "casualty of the death of the high street."Bibliography
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The Hospitality Industry Essay Example Pdf
INTRODUCTION
This paper presents a review of the literature relevant to the topic of intercultural communication in the hospitality industry. It begins with an examination of Brown and Levinson's politeness theory, followed by a critique of Hofstede's five cultural dimensions and Edward Hall and others' theories of cultural awareness, concluding with a synthesis of the research on intercultural communication by leading commentators in this field. This analysis thus provides insight into the issues influencing the perception of politeness between the Spanish and English cultures in the hotel workplace.LITERATURE REVIEW
1. Politeness theory
In their 1978 and 1987 works on the theory of politeness, Brown and Levinson put forward a rational model of politeness, arguing that individuals across all cultures want to be approved of by others and free from unnecessary constraints, or positive and negative "face", respectively (Greene, 1997). In response to their argument that politeness is a universal part of language, Watts (2003) contends that this theory is overly idealistic because it ignores the means by which individuals in society struggle with politeness in their interactions with others. He holds that these features of social interaction are more important than the role of politeness in intercultural communication. Using a practical example of politeness theory, O'Dowd (2003) conducted primary research examining the interaction of Spanish and English cultures in business situations and found that if participants perceived another person as being interested in descriptions of their own culture, they subsequently felt encouraged to communicate more but, if they felt their positive face was threatened by the other person showing a lack of interest in their cultural background, they were more reluctant.2. Hofstede's five dimensions
Geert Hofstede describes culture as the collective characteristics of members of one group of people (Hofstede, 2001; Hofstede et al, 2010). His theories search for meaning in the correlation between a country's cultural indicators and his five dimensions of power distance, uncertainty avoidance, individualism, masculinity and long-term orientation (Vinken et al, 2004). In his most recent work, Hofstede adds a new sixth dimension of culture called "indulgence versus restraint" and introduces the concept of a "moral circle" to the debate (Hofstede et al, 2010). In a 1998 article, Hofstede builds on his earlier seminal works (1980; 1991) and further specifies that the main criteria for comparison are values and attitudes, also known as "constructs". He acknowledges that there has been much criticism of his methodology of using nations as the units for studying and comparing culture, but nevertheless contents that many nations contain a sufficient amount of comparable aspects. Hofstede suggests that cross-cultural misunderstanding is often based on the dimension of value variation between cultures, with the Spanish having a more group-orientated culture than the English. When an activity is planned by Spanish people, it is much more common to invite a large group than just one or two others, demonstrating collectivism over individualism. In addition, Hofstede suggests that the English not only have a high level of individualism, they exhibit above average masculinity and lower power distance and uncertainty avoidance than the Spanish.3. Cultural awareness
While Hofstede's work provides a useful framework, there is large body of research that explores in more detail the definitions and role of culture and cultural awareness, and it is valuable in the analysis of these cultures in relation to the hospitality industry. Holliday et al (2004:3) describe culture as being a "fluid, creative social force which binds different groupings and aspects of behaviour in different ways", and cultural awareness requires a fundamental understanding of this fluidity and how it impacts on various social interactions, particularly intercultural ones. The attitudes and perceptions associated with different national cultures exerts a strong influence on many business situations, including that of English receptionists interacting with Spanish customers, and the studies of cultural awareness by Edward T. Hall illustrate this point further. He describes culture as a "hidden force" and goes as far as to suggest that culture is synonymous with communication. When an English receptionist communicates with a Spanish customer, it is inevitable that each party will apply their own cultural framework not only in the way they communicate with each other, but in how they perceive the interaction. Other experts reinforce the notion that there are significant barriers to be overcome in terms of intercultural business issues (Larsson and Risberg, 1998). Bennett (1993) for one contends that it is important to be able to distance oneself from one's own cultural backgrounds in order to understand others, and Byram (1997) goes on to suggest that sensitivity to issues such as directness and politeness in language is an essential component of intercultural awareness. These theories can all be applied to help English receptionists and Spanish customers to have greater levels of cultural awareness and sensitivity, thus enhancing the business relationship.4. Intercultural communication
Building on the analysis in the previous sections, Charles (2007) points to the fact that English has become the accepted "lingua franca" of international business, and this is referred to by others as the "built-in bias" of the English language (Munshie and McKie, 2001). The hospitality industry is a prime example of this, and it has become accepted practice for customer-facing hotel staff to be able to speak English to come extent, regardless of the country in which the hotel is located. It is much less likely for an English receptionist to speak Spanish, for example. One expert has pointed out that frequently non-verbal communication can be misinterpreted. For example, she says: "Normally a handshake is brief but in Spain it may be prolonged for several seconds. This does not show deep personal warmth as it might somewhere else McLaren, 1998:137)." And as Welch et al (2005:11) point out, intercultural communication can actually be "an irritating reminder of what may be involved in crossing foreign cultures, and managing in a cross-cultural environment." Based on extensive primary research, Charles (2007) recommends that businesses should increase their awareness of the importance of cultural diversity in communication and develop a better understanding of how individuals relate to each other across language and cultural barriers. Another commentator (Verluyten, 1997) has provided evidence of the importance of intercultural training and awareness in this process, the lack of which can lead to "disastrous" results.CONCLUSIONS
This paper has presented a summary of the relevant literature and provided some interesting insights into the role of intercultural communication in the hospitality industry, especially between Spanish and English cultures. For one, an analysis of Hofstede and Brown and Levinson contributes to a better understanding the issues underpinning the differences between these two cultures and the various influences on people's behaviour, such as politeness and individualism versus collectivism. In particular, the work by Hall and others demonstrates that learning a second language, not just English as is normally the case, is important in today's working environment within the hospitality industry. A lack of cultural awareness especially can lead to barriers of miscommunication. For example, Spanish customers could potentially be seen as rude or overly direct by English receptionists who do not understand the cultural differences. The receptionists therefore often apply their own cultural background to the interaction and, as a result, expect a sometimes unreasonably high level of politeness. Communication can be significantly improved by efforts to raise intercultural awareness and sensitivity within the hospitality industry.BIBLIOGRAPHY
Bennett, M., 1993. Towards ethnorelativism: A development model of intercultural sensitivity. In M. Paige, ed., Education for the Intercultural Experience, pp.21-71. Yarmouth: Intercultural Press. Brown P. and Levinson S., 1978. Universals in language usage: Politeness phenomena. In E. Goody, ed., Questions and Politeness, pp.56-311. Cambridge: Cambridge University Press. Brown P. and Levinson S., 1987. Politeness: Some Universals in Language Usage. Cambridge: Cambridge University Press. Byram, M., 1997. Teaching and Assessing Intercultural Communicative Competence. Clevedon: Multilingual Matters. Charles, M., 2007. Language Matters in Global Communication. The Journal of Business Communication, 44(3). p.260. Greene, J.O., ed., 1997. Message Production: Advances in Communication Theory. Mahwah: Lawrence Erlbaum Associates. Hall, E.T., 1959. The Silent Language. New York: Doubleday. Hofstede, G., 1980. Culture's Consequences: International Differences in Work-Related Values. Beverly Hills: Sage Publications. Hofstede, G., 1991. Cultures and Organizations: Software of the Mind. New York: McGraw-Hill. Hofstede, G., 1998. A Case for Comparing Apples with Oranges: International Differences in Values. International Journal of Comparative Sociology, 39(1). pp.16-31. Hofstede, G., 2001. Culture's Consequences: Comparing Values, Behaviors, Institutions and Organizations Across Nations, 2nd ed. Thousand Oaks: Sage Publications. Hofstede, G., Hofstede, G.J. and Minkov, M., 2010. Cultures and Organizations: Software of the Mind, 3rd ed. New York: McGraw-Hill. Holliday, A., Hyde, M. and Kullman, J., 2004. Intercultural Communication: An Advanced Resource Book. London: Routledge. Larsson, R. and Risberg, A., 1998. Cultural awareness and national versus corporate barriers to acculturation. In M. Gertsen, A-M. Soderberg, and J. E. Torp, eds., Cultural dimensions of international acquisitions, pp.168-196. Berlin: Walther de Gruyter. McLaren, M.C., 1998. Interpreting Cultural Differences: the Challenge of Intercultural Communication. Dereham: Peter Francis Publishers. Munshie, D. and McKie, D., 2001. Toward a New Cartography of Intercultural Communication: Mapping Bias, Business, and Diversity. Business Communication Quarterly, 64(3). p.9. O'Dowd, R., 2003. Understanding the "Other Side": Intercultural Learning in a Spanish-English E-Mail Exchange. Language, Learning & Technology, 7(2). p.118. Thomas, D.C. and Inkson, K., 2003. Cultural Intelligence: People skills for global business. San Francisco: Berrett-Koehler. Verluyten, S.P., 1997. Business Communication and Intercultural Communication in Europe: The State of the Art. Business Communication Quarterly, 60(2). p.135. Vinken, H., Soeters, J. and Ester, P., eds., 2004. Comparing Cultures: Dimensions of Culture in a Comparative Perspective. Boston: Brill. Watts, R.J., 2003. Politeness. Cambridge: Cambridge University Press.Cite this page
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Cervical Example for Free
NHS Cervical Screening Programme: Liquid Based Cytology vs. Conventional Cytology
Introduction
Cervical screening, such as the regular programme provided by the NHS, is a very successful way of detecting the early signs of cervical cancer (Kitchener, Castle, & Cox, 2006). The NHS programme screens around 3.5 million (Moss et al., 2003) to 4 million (Karnon et al., 2004) women annually and it is estimated that this prevents between 1100 and 3900 cases of cervical cancer a year (Moss et al., 2003). In recent years a new way of screening the cervical samples has been developed. This is referred to as liquid based cytology rather than conventional cytology. However, there has been considerable debate over the costs and benefits of the new technology, as will be examined below.Background Information
Cervical cancer is linked to human papillomaviruses (HPV), a family of common sexually transmitted viruses (Eifel, Berek, & Markman, 2011). It is believed to be fairly common for women to be exposed to HPV viral cells but usually these are readily cleared by their immune response (Bosch & Iftner, 2005). However, in some instances women can develop an HPV infection following exposure to viral cells. The infection can seem largely asymptomatic but actually causes the abnormal multiplication of cells in the cervix, leading to warts, lesions or benign tumours and, if the infection persists, it can cause cervical cancer (Bosch & Iftner, 2005; Eifel et al., 2011). In fact, HPV is believed to be the main, perhaps even the sole, cause of cervical cancer. The NHS cervical screening programme is available to women aged between 25 and 64 years of age and involves taking a regular swab or smear of cells from inside their cervix (Moss et al., 2003). These are then sent to a pathology laboratory where they are screened by a cytologist for any abnormalities associated with HPV. In the absence of any abnormalities women between the ages of 25 and 50 years are advised to return for testing every three years, and those aged between 50 and 64, every five years (Health and Social Care Information Centre, 2013). The 2013 national statistics for the UK screening programme indicated that 78.3% of eligible women were up to date with their smear screening (Health and Social Care Information Centre, 2013).Cervical Cytology
The focus of this essay is on the process that takes place in the pathology laboratory, where the cervical samples are sent for cytological screening. A cervical cell sample that has no abnormal cells is categorised cytologically as being negative (negative for the presence of HPV or risk of cervical cancer). Alternatively, samples may be identified as containing borderline abnormal changes, or having dyskaryosis (Health and Social Care Information Centre, 2013). In some literature the terms dysplasia or CIN (cervical intraepithelial neoplasia) seem to be used in place of dyskaryosis (Eifel et al., 2011), but NHS literature seems to make most consistent reference to dyskaryosis. The extent of dyskaryosis is then classified across a range from mild to severe. Depending upon the severity, the woman may be referred for colposcopy or recalled for a repeat cervical smear test 6-12 months later. In the 2013 national statistics, 6.5% of cervical samples were identified as being abnormal, although only 1.2% were classified as being high risk (Health and Social Care Information Centre, 2013). Recently a new cytological screening technique has been developed, called liquid based cytology (LBC). The aim of this new method was initially to try to reduce false-negative and false-positive results (Karnon et al., 2004; Siebers et al., 2009), as well as the number of samples that are ‘inadequate’ or ‘unsatisfactory’ for effective screening (Arbyn et al., 2008; Siebers et al., 2009). In the conventional cytology method, a woman’s cervical sample is transferred directly from the collection spatula onto a microscopic slide (Arbyn et al., 2008; Moss et al., 2003). This transfer process seems to sometimes lead samples to be ‘inadequate’ for screening because the transferred cells are too difficult to clearly discern. This manual process does also, very occasionally, result in false results, even when conducted by experienced cytologists. The liquid based cytology (LBC) method involves a slightly different approach to the preparation of the slides. The cell sample is placed into a vial containing a preservative fluid (Arbyn et al., 2008; Moss et al., 2003). This creates a liquid suspension of the sample, which can then be poured onto the slide in a very thin, uniform layer. However, debate remains over whether this method really offers a substantial improvement over conventional cytology. The main points of contention surround accuracy and cost effectiveness, with other arguments relating to patient anxiety and opportunities for HPV testing.Exploring the Issues
Accuracy
Evidence is mixed over whether LBC offers a substantial improvement in accuracy compared to conventional cytology. Early studies, such as that by Monsonego et al. (2001), were very favourable towards LBC. Further, in an extension of the LBC technique described earlier, it became possible for a computerised system to read the LBC slides to identify potential areas of concern prior to examination by a cytologist (Davey et al., 2007). Across a large Australian sample of over 55,000 women, Davey et al. (2007) found that this method of LBC was significantly better at detecting additional high grade histology cases than conventional cytology. However, more recent studies seem to undermine these reputed improvements of LBC over conventional cytology. For instance, in 2009, Siebers et al, drawing upon a sample of close to 90,000 women in the Netherlands, concluded that LBC “is neither more sensitive nor more specific in detecting CIN or cancer” (p.1764). This same point is reiterated almost exactly by Arbyn et al. (2008) at the end of their thorough review of the most reputable, gold standard comparison studies. Whilst this creates a somewhat inconclusive picture, it is evident that LBC has not offered as marked an improvement in accuracy as might have been hoped. However, it is important to point out that none of the studies suggest that LBC is less accurate than conventional cytology. In fact, all of the studies mentioned above agree that LBC probably is more sensitive at picking up mild abnormalities and changes. It is just that this too is framed from a negative angle in the more recent studies because of concerns that unnecessarily following up these cases, when they are likely to be cleared by the patient naturally, would waste resources that would be better focused on high risk patients (Arbyn et al., 2008). There is, however, one clear point that emerges in favour of LBC in relation to accuracy. All studies seem to conclude that LBC does reduce the number of inadequate or unsatisfactory samples (Arbyn et al., 2008; Davey et al., 2007; Doyle et al., 2006; Moss et al., 2003; Siebers et al., 2009; Williams, 2006). For example, when LBC was initially trialled at three sites in the UK in 2002, Moss et al. (2003) collated data showing that LBC reduced inadequate slide preparations from 9% of samples down to 1-2%. In Scotland the difference was even greater, falling from 13% to 1.9%, and consequently referrals to colposcopy for women with repeated unsatisfactory results dropped from 25% to just 0.5% (Williams, 2006). These improvements substantially raise the efficiency of the whole screening programme. Therefore, it seems likely to have been these sorts of results that influenced the NHS that it would be cost effective to adopt LBC across the UK (Arbyn et al., 2008; Moss et al., 2003; Williams, 2006).Cost Effectiveness
Turning to cost effectiveness, there are a number of aspects to take into consideration. As mentioned above, LBC may lead to a potential increase in costs if there is an increase in following up low risk abnormalities. Whilst this is framed negatively by Arbyn et al. (2008) it might be better, both for the patient and economically, to fully confirm that there is no cancer risk earlier on, rather than allowing any potential cancer to develop. Further, the significant reduction in inadequate samples may outweigh this through much larger potential savings. Reducing the number of women who are recalled due to an inadequate sample saves valuable nursing time, reduces administration costs and reduces the costs associated with repeating the whole procedure. With these primary care benefits in mind, Moss et al. (2003) estimated that LBC could generate savings of between one to ten million pounds annually. More recent studies have focused on the laboratory to consider whether LBC improves productivity during this part of the process. Doyle et al. (2006) studied several laboratories during the change over from conventional cytology to LBC and found that on average each scientist was able to process more samples per day. The data collated by Williams (2006) similarly demonstrated that overall workload in the laboratories decreased and backlogs were cleared. Presumably, if LBC is combined with the computerised imaging technology that automates a large part of the process, there may be further efficiency as cytologist time and effort can be focused on the samples identified to contain abnormalities. Of course, all of this economising does not take into account the initial investment costs involved, or the on-going cost of the LBC specific materials. It is notable that both techniques mentioned in the NHS pilot study, ThinPrep and SurePath, are registered trademarks. Perhaps this is why more recent studies tend to argue that one of the disadvantages of LBC is that it is more expensive, both in terms of initial outlay and on-going operating costs (Arbyn et al., 2008; Eifel et al., 2011). Therefore, Arbyn et al. (2008) suggest that “economic advantage might be peculiar to the United Kingdom where inadequacy rates for the conventional Pap were excessively high” (p.175).Patient Anxiety
Beyond economics, another important point to consider is patient anxiety. A benefit of reducing inadequate samples is the reduction in anxiety for the patient. Although the nurse may try to reassure the woman that an inadequate sample does not indicate any abnormality, it may be difficult for the patient not to fear a risk of cancer. On the otherhand, if minor abnormalities picked up via LBC are followed up, as Arbyn et al. (2008) suggest, this might create unnecessary stress and anxiety for these patients and their families. This seems to suggest that between the two technologies patient anxiety may balance out - being alleviated for some patients or created for others. However, perhaps the balance swings in favour of LBC here, as it would seem preferable to monitor cases of mild abnormality just in case these progress, rather than to create unnecessary anxiety due simply to technical inferiority.HPV Testing
The other key advantage of LBC is the potential it offers to conduct additional laboratory tests. Preparing an LBC slide from the cervical sample uses only a small amount of the solution in the vial. Therefore, the remainder can be subjected to further tests. In particular, it is now possible for laboratories to test for the presence of HPV using HPV DNA testing (Kitchener et al., 2011). Any cases showing cell abnormalities during LBC can undergo HPV testing on the same sample. This might clarify any false-negative cases or mild abnormalities without the woman even knowing. It would also reduce the costs of referring false-negative patients for colposcopy or for an unnecessary recall screening. Whilst controversy has largely focused on conventional cytology and LBC, the NHS actually introduced LBC in combination with HPV testing (Moss et al., 2003). Recent studies have demonstrated that HPV testing may be more powerful than cytology, and suggest it may come to replace cytology as the primary screening technique (Katki et al., 2011; Kitchener et al., 2011). Katki et al. 2011 advocate that one negative result via HPV testing offers “strong reassurance against cervical cancer for five years in women from age 30” (p.1470). This could significantly reduce primary care costs as currently women aged 30-50 are tested every 3 years under the NHS screening programme. Kitchener et al. (2011) have gone further than this, suggesting that HPV testing might even allow the interval between cervical screens to be extended to every six years.Conclusion
There has been significant debate around the shift from conventional to liquid based cytology when screening for cervical cancer. This has been particularly heightened given the evidence that LBC does not appear to reduce false-positive or false-negative results in the way that had been hoped. However, in the UK at least, LBC significantly reduces the number of ‘inadequate’ samples, reducing primary care costs and patient anxiety in these cases. Although it is a little unclear whether LBC is more cost effective when all costs are taken into consideration, it seems that by investing in the technique the NHS is now well placed to quickly and easily adopt new scientific developments, such as wide-scale HPV testing. Given LBC, HPV DNA testing and the HPV vaccination, cervical cancer prevention seems to be a rapidly advancing area of science where new developments progress fairly quickly from research into routine health practice. Therefore, it seems wise that the NHS chose to invest in LBC and HPV testing when it did so that it can keep apace, and continue to offer cutting edge cancer screening to women.References
Arbyn, M., Bergeron, C., Klinkhamer, P., Martin-Hirsch, P., Siebers, A. G., & Bulten, J. (2008). Liquid compared with conventional cervical cytology: A systematic review and meta-analysis. Obstetrics & Gynecology, 111(1), 167-177. Bosch, X. F., & Iftner, T. (2005). The aetiology of cervical cancer. Sheffield: NHS Cancer Screening Programmes. Davey, E., d'Assuncao, J., Irwig, L., Macaskill, P., Chan, S. F., Richards, A., & Farnsworth, A. (2007). Accuracy of reading liquid based cytology slides using the ThinPrep Imager compared with conventional cytology: prospective study (Vol. 335). Doyle, B., O'Farrell, C., Mahoney, E., Turner, L., Magee, D., & Gibbons, D. (2006). Liquid-based cytology improves productivity in cervical cytology screening. Cytopathology, 17(2), 60-64. Eifel, P. J., Berek, J. S., & Markman, M. A. (2011). Cancer of cervix, vagina, and vulva. In V. T. DeVita, T. S. Lawrence, & S. A. Rosenberg (Eds.), DeVita, Hellman and Rosenberg's Cancer: Principles & Practice of Oncology (9th ed.). Phildelphia: Lippincott, Williams & Wilkins. Health and Social Care Information Centre. (2013). Cervical screening programme, England 2012-13. Leeds: UK Statistics Authority. Retrieved from https://www.hscic.gov.uk Karnon, J., Peters, J., Platt, J., Chilcott, J., McGoogan, E., & Brewer, N. (2004). Liquid-based cytology in cervical screening: An updated rapid and systematic review and economic anylsis. Health Technology Assessment, 8(20). Katki, H. A., Kinney, W. K., Fetterman, B., Lorey, T., Poitras, N. E., Cheung, L., . . . Castle, P. E. (2011). Cervical cancer risk for women undergoing concurrent testing for human papillomavirus and cervical cytology: a population-based study in routine clinical practice. The Lancet Oncology, 12(7), 663-672. Kitchener, H. C., Castle, P. E., & Cox, J. T. (2006). Chapter 7: Achievements and limitations of cervical cytology screening. Vaccine, 24, Supplement 3(0), S63-S70. Kitchener, H. C., Gilham, C., Sargent, A., Bailey, A., Albrow, R., Roberts, C., . . . Peto, J. (2011). A comparison of HPV DNA testing and liquid based cytology over three rounds of primary cervical screening: Extended follow up in the ARTISTIC trial. European Journal of Cancer, 47(6), 864-871. Monsonego, J., Autillo-Touati, A., Bergeron, C., Dachez, R., Liaras, J., Saurel, J., . . . Mottot, C. (2001). Liquid-based cytology for primary cervical cancer screening: a multi-centre study. British Journal of Cancer, 84(3), 360-366. Moss, S. M., Gray, A., Legood, R., & Henstock, E. (2003). Evaluation of HPV/LBC cervical screening pilot studies. UK: First report to the Department of Health evaluation of LBC (December 2002). Siebers, A. G., Klinkhamer, P. J. J. M., Grefte, J. M. M., Massuger, L. F. A. G., Vedder, J. E. M., Beijers-Broos, A., . . . Arbyn, M. (2009). Comparison of liquid-based cytology with conventional cytology for detection of cervican cancer precursors. The Journal of the American Medical Association, 302(16), 1757-1764. Williams, A. R. W. (2006). Liquid-based cytology and conventional smears compared over two 12-month periods. Cytopathology, 17(2), 82-85.Cite this page
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The Global RISK Example for Free
MIS Risk
As an MIS system is made up of “hardware and software”, consequently transformations in the system make it susceptible to a “penalty of change” such as “system failure” or other costly time consuming risks (Khosrow-Pour, 2001, p 831). As such technology must be effectively applied to the MIS “infrastructure (hardware, software and data)” in order to eliminate or minimise system risk (Khosrow-Pour, 2001, p 831).MIS issue
A “field research” at a UK bank to analyse a “multidisciplinary” move towards “empirical investigation” on handling Information Technology concluded that the dialogue between those “who request development of a management information system (MIS), the client or sponsor and the technologists” who build the systems usually creates a “confused picture” (Currie, 1995, p7). The clients are usually not clear about their systems requirements and consequently this leaves room for interpretation on the part of the “technologists” (Currie, 1995, p7). In addition, an “ad hoc approach” originates from problems experienced by “project managers” in detecting suitable “financial and non-financial performance” measures for continuous observing and managing of Information Technology projects (Currie, 1995, p7).How to address the MIS issue
The issue is a result of miscommunication between the business and Information Technology. Management has to ensure that the dialogue between the two teams is effective and also that organisation goals such as high productivity and cost reduction are included in the planning of an MIS systems implementation or change.Design/UCD Failures
Strategic Information Systems can sustain and “shape” business strategy to impact “organisational performance” in a relationship that forms a “trilogy” (Croteau et al, 2001, p78) however; the design and development” of Information Systems plays a major factor in the use of Information Technology (Das et al 1991, cited in Croteau et al 2001, page 80). User centred design places the end user's requirements and ability at the “forefront”, conversely current technology focuses on the quest for technology answers with no consideration for the end user's requirements in terms of “functionality” and ease of use (Kent et al, 2003, p87).UCD Failures
An eminent online book retailer's first online ordering system had a major costly flaw (Hambling et al, 2008, p10). System developers had included an electronic refund facility that allowed users to receive credit on their debit or credit cards if they purchased a negative number of books (Hambling et al, 2008, p10). During testing the systems developers did not anticipate that online shoppers would try to order a negative number (Hambling et al, 2008, p10). The program was amended to allow only the retailer's administrative staff to carry out refunds (Hambling et al, 2008, p10). Another UCD failure resulting from inadequate software design and testing was when the “European Space Agency Ariane 5” was initially launched in June 1996 and failed after 37.5 seconds (Hambling et al, 2008, p10). A software glitch resulted in the rocket deviating from its “vertical ascent” and had to be put into “self-destruct” mode to prevent the disastrous consequences of an active horizontal rocket (Hambling et al, 2008, p10). Furthermore, when the UK government launched “online filing tax returns”, a weak security design allowed access to other users' confidential earnings data regardless of log in location (Hambling et al, 2008, p10).How to prevent UCD failures
A manager must ensure that the end users of the system are the main focus of any system design with particular reference to a user's computer skills, security and the main objective of building the system, to improve business process. Consequently if the design is user focused; it is bound to function as intended. In addition, User Acceptance Testing (UAT) is the process whereby end users test a system to ensure that it “meets their business needs” (Hambling et al, 2008, p45). Although this process is seen as the responsibility of the end users of a system, it should be managed by managers to prevent errors (Hambling et al, 2008, p45).Project Failures
A failed project is one that exceeds its set budget, over runs, does not incorporate organisational goals or just one that is cancelled (Standish Group International 1994, cited in Linberg 1999, page178). The proportion of IT systems failure is still high when compared to other technologically advanced projects (Yeo, 2002) and although there have been some “success stories” in systems “development” projects these have been overshadowed by “broadly publicised failures” (Linberg, 1999, p177). When Information Systems projects fail, the trustworthiness of technical staff is negatively impacted (Remenyi, 1999, p5) and it is believed that the lack of risk management has greatly contributed to these project failures (Remenyi, 1999, p9). With particular reference to Information Systems projects, failure can range from little technical hardware problems to total “system failure” that harms a firm's business activity by creating huge costs (Remenyi, 1999, p19). Consequently, ineffective risk management is synonymous with leaving the results of a project to chance and “unfounded optimism” (Fairley 1990, cited in Remenyi 1999, page9).Project Failure Issues
When there are unrealistic expectations and people “try to do the impossible”, projects are likely to fail (Linberg, 1999, p177). A good example is a company bending over backwards in an attempt not to lose a significant client (Linberg, 1999). An unrealistic software development project deadline was set and when programmers protested profusely that is was just impossible, more programmers were added on to the project that was already operating around the clock (Linberg, 1999). Needless to say the project failed and the client was not retained (Linberg, 1999). Another example of a failed project was a large one that over run by at least eighteen months, had eight absconding “team leaders” out of a total nine, lacked clarity in the project definition and involved excessive working hours of more than sixty a week. However because the project was eventually finished, the project programmers did not have see the project as a failure even though it was due to the very late completion and inadequate project planning (Linberg, 1999).How to address the project failure issues
The approach to the first project should have been honest and realistic in order to meet the client's needs and also increase the likelihood of repeat business with the client. This is due to the fact that “a consulting engagement is successful if the consultant has met client expectations” (McLachlin, 2000) and if this is the situation then” the consultant has enhanced his or her reputation, with expectations of future revenue streams – whether or not any immediate income has been received” (McLachlin, 2000). Consequently business managers should first ensure that they can deliver before taking on the task. With reference to the second project failure, a carefully structured project plan with a clear project definition needs to be in place before management embarks on a project. A well structure project plan with carefully allocated resources, effective risk management and well monitored project stages will introduce and enforce project and budget controls.E-Commerce and its Issues
E-commerce is a compressed name for a broad range of unified business ideas, “technologies and cultural phenomena” (May, p2). E-commerce is about online retail commerce for certain individuals and for others, it concerns the sale of advertising space amongst other things (May, p2). Nevertheless, irrespective of its definition, E-commerce has warranted a lot of interest and in fact it is a vital transformation in “the way business is conducted” (May, p2). E-commerce has resulted in creating new prospects for several businesses in various industries to contend in the “global marketplace” (Chaffey, 2006, p4). As a result of readily available information on businesses, goods and services, companies are rapidly expanding the customer base and retaining customers due to the resulting improved client-customer relationships (Chaffey, 2006, p5). However, E-commerce software programs need more technical support than a good number of conventional “business systems” (May, 2000, p222). Business to business and “business-consumer” online programs demand twenty four operations around the clock, seven days a week right through the year (May, 2000, p222). Even though mirror sites are run to ensure “scalability”, web systems failure still occurs with several pages experiencing downtime (May, 2000, p222).E-commerce Issue
A website experienced an overload and needed to be taken offline in November 2005 due it being incapable of handling a lot of simultaneous logins resulting from publicity on some information on the website (Hambling et al, 2008, p10). Although this is a frequent occurrence in today's online activity, the main issue in E-commerce is security risk and as the confidence of shoppers determines the frequency and amount of purchases made online, this is indeed a very significant point. An online consumer's perception of security is affected by absence or presence of “third party certification” software on their websites (Pingjun et al, 2008). A review of a representation of the link between “third-party identifying logos, trust transfer and trust build-up” based on information acquired from an “online survey” confirms that when online consumers see a “third-party seal” on a shopping website, they tend to transfer their trust in the security “logo” to “online e-marketers” (Pingjun et al, 2008). These issues should be handled by anticipate overload from a technical perspective and also by ensure the consumer confidence is gained and retained in E-commerce.New Technology
Today's world is an age of unique transformations within technology in the midst of technology transforming communication, work, how business is conducted and how people socialise (Boreham, 2006, p1). When new technology is implemented, it is expected that management will impact how it is adapted by the workforce, despite this, an empirical study states otherwise (Leonard-Barton et al, 1988). When new technology is implemented, staff with existing technical abilities adapt automatically whereas staff low on computer literacy skills wait to be directed by management (Leonard-Barton et al, 1988). However, as an increasing amount of time and “investment capital” is absorbed by Information Technology and its consequences, business managers have a developing “awareness” that technology cannot be the “exclusive territory” of specialised IT companies or the Information Systems department (Porter 2008, p73). Businesses notice their competitors employ Information Technology to gain competitive advantage and acknowledge the necessity to become “directly involved in the management of new technology” although “in the face of rapid change, they don't know how” (Porter 2008, p73).New Technology Issues
New Technology is usually opposed as it usually involves change and people assess the size of the change required. New technology also usually results in a “large-scale organisational change” and consequently extra caution is applied as individual feelings must be influenced to get people to participate in new technology (Kotter et al, 2002, p1). In theory the opposition to new technology also known as the “crisis of progress” is as unconnected as it is connected in that community response to new technology impacts new technology “in a circular process” (Bauer, 1997, p2). Management should address resistance to new technology by first ensuring a “readiness for change” through training and guidance.References
Bauer M, 1997.Resistance to New Technology: Nuclear Power, Information Technology and Biotechnology; Cambridge University Press Boreham P., Parker R., Thompson P., Hall R., 2006. New Technology Work; Routledge Currie W. 1995.'The IT strategy audit: formulation and performance measurement at a UK Bank'. Managerial Auditing Journal.10 (1). pp 7-16.DOI:10.1108/02686909510077343. www.emeraldinsight.com. (Accessed: 15th February 2010) Chaffey D., 2006. E-Business and E-Commerce Management; Prentice Hall Desouza K. C., 2006.Agile Information Systems: Conceptualization, Construction, and Management; A Butterworth Heinemann Title Hambling B., Morgan P., Samaroo A., 2008. Software Testing: An ISEB Foundation; British Computer Society Kent S. T., Millet L. I., 2003. Who Goes There?: Authentication Through the Lens of Privacy; National Academics Press Khosrow-Pour M., 2001.Managing Information Technology in a Global Economy: 2001 IRMA Proceedings; IGI Publishing Kotter J P and Cohen D S(2002), The Heart of Change; Real-Life Stories of How People Change Their Organizations, Harvard Business School Press Leonard-Barton D., Deschamps I., 1988.'Managerial Influence on the Implementation of New Technology'. Management Science. 34(10). Pp 1252-1265.www.jstor.org. (Accessed: 16th February 2010) Linberg K. R., 1999, ‘Software developer perceptions about software project failure: a case study. The Journal of Systems and Software.49 (1). pp 177-192.www.elsevier.com. (Accessed: 16th February 2010) May P., 2000. The Business of Ecommerce: From Corporate Strategy to Technology; Cambridge University Press McLachlin R. D., 2000,'Service quality in consulting: what is engagement success, Managing Service quality, 10(4).pp. 239-247. www.emeraldinsight.com. (Accessed: 16th February 2010) Pingjun J., Jones D. B., Javie S., 2008.' How third-party certification programs relate to consumer trust in online transactions: An exploratory study' .Psychology and Marketing. 25(9). Pp 839 -858. www3.interscience.wiley.com. (Accessed: 16th February 2010) Porter M. E, 2008, On Competition; Harvard Business School Press 2nd Edition Yeo K. T., 2002.'Critical Failure Factors in Information systems projects'. International Journal of Project Management.20(3). www.elsevier.com. (Accessed: 16th February 2010)Cite this page
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Analysis of UK McDonald’s Sales Decline
Introduction
The aim of this report is to analyse the current situation of McDonalds as an organisation in the UK market and to evaluate their current sales decline. The primary focus is to provide a detailed analysis of the organisation and its position in the UK market, developing a link between declining sales and the overall shift in consumer behaviour. The report initially provides an overview of McDonalds as an organisation. This is followed by a detailed evaluation of the firm's current position in the market which links back to why sales are declining for the firm and what are the root causes for this in the business. This is followed by a recommendations section which develops a ground up strategy for the organisation to improve its performance in the UK market.McDonald's Overview
McDonald's UK is part of the larger group called McDonald's, which operates in over 100 countries. The organisation reported a revenue of $33 billion in 2014 and has over 400,000 employees worldwide (McDonald's Annual Report, 2014). As an organisation the firm operates over 36,000 outlets which is more than any other retailer across the globe. Before moving on, it needs to be highlighted that while McDonald's operates with a global 'menu', the organisation also develops bespoke products for some of the markets based on demand in the region (BBC, 2014).McDonald's in the UK
McDonald's is a well-known fast-food brand in the UK. It operates at over 3000 locations and has seen growth over the past 10 year (McDonald's Annual Report, 2014). However, recently, McDonald's across the globe and in the UK highlighted a consistent decline in sales. Millington (2014) states that McDonald's has reported a drop in sales by 4% in the UK, which highlight that the firm is not on the same growth path as it used to be. Similar article was published by Bold (2015) where the author highlighted that the growth pattern of McDonald's has stopped and the firm, for the first time in 45 years, is re-structuring due to a rapid decline in sales. This is critical for a firm that operates at a global scale, a 4% drop is effectively billions of dollars that the firm is unable to convert. Neilan (2014) states that from an earnings point of view the overall decline is GBP 3.8billion which is a significant number.The Cause of this Decline
While the previous section clearly highlights a downward trend in McDonald's market share in the UK, it is important to examine the overall cause of why this is happening. Doyle and Stern (2006) state that the UK market is one of the most rapidly declining fast food industries in Europe. This indicates that there is a change in trend within the market that is impacting the fast food business the market. Research conducted by Long et al (2014) states that one of the major reasons as to why there is a sharp decline in fast food consumption is obesity. The core notion here is that over the past 8 years more cases of obesity have been reported by the NHS than that in over 50 years (Pieterman, 2015). This is critical as health services often term 'junk' food as a cause of the obese society in the UK. McDonald's being one of the main suppliers of fast food is directly impacted by this change and stance by the NHS. The UK government has highlighted obesity as a high risk to individual's health this was backed by the NHS (Nutrition and Food Science, 2012). This is one of the major factors that has impacted the McDonald's market share and declining sales. Another important aspect linked with the loss in revenue and sales is associated with the fact that there is a shift in consumer behaviour towards fast food. Bernhardt et al (2012) state that an average UK individual is now 4 times more conscious of what they are eating from a health point of view. This clearly highlights that users now tend to look for healthy food options, which has a direct impact on the sales and revenue of McDonald's. Hence consumer behaviour plays a vitally important role in the current position of McDonald's in the market. There is also a consumer shift that is focused away to healthier fast food chains. Bloomberg (2015) highlights that 4 out of 10 individuals that skip McDonald's move on to buy a Subway meal as they consider it a healthy alternate to McDonald's. Another important aspect that is linked with the lack of sales is the inability of the firm to innovate and diversify. McDonald UK's menu has not changed over the past 50 years, and this has a direct impact on the buyers and how they perceive a firm from an innovation as well as a development point of view. While McDonald's strategy has worked over a period of time, it is clearly showing signs of its limitations with rapid decline in overall business revenue. Finally, another important aspect linked with the decline of McDonald's is negative promotions through social media. Kotler and Keller (2012) highlight that the advent of social media means free information flow across the market. Regardless of the authenticity of the data, information on social media has a direct impact on business sales. McDonald's is often termed as the fast food chain that only cares about revenue and not about consumer health, and social media has spread this aspect on a large scale. (Neilan, 2014) This therefore impacts the consumer buying behaviour and negatively impacts the sales of McDonald's in the UK market. All in all it is clear that the decline of the organisation in the UK is linked to the change in market conditions, consumer behaviour and a shift towards healthy living. It is also evident that McDonald's is highlighted as an organisation that is only working for its own good and hence its inability to innovate is clearly visible in the process.Recommendations, McDonald's
The previous section of the report clearly highlighted multiple elements that need to be considered by McDonald's in order to improve its current situation in the UK market. Keeping the discussion in context, it is critical that viable recommendations for the business are developed in order to improve the sales performance of the organisation. In order to develop a new model and to improve the overall position of the organisation in the market, it is recommended that McDonald's launches a new product line called 'McDonald's Health!' as discussed below.McDonalds Health: healthy Fast Food for the Masses!
One of the primary reasons linked with the rapid decline in sales for the business is the perception and the overall type of food served by the business. This food is classified as 'unhealthy' by various individuals and organisations. Keeping this in context, it is recommended that McDonald's starts a new product which is under the umbrella of the current organisation. The idea here would be to develop a unique product line focused on the healthy aspect of the market. Keeping this new product line a focused segmentation, targeting and positioning strategy is discussed in the table below.| Segmentation | McDonald's health will be segmented through the current geographical positions of McDonald fast food chains. The idea would be to start with the areas where sales have declined the most and launch the product line focused on geography as well as behavioural segmentation in order to target the most 'health conscious' areas of the country. |
| Targeting | The target market for this new product line will be individuals that are health centric. The main driving force here would be behavioural targeting which impact the consumer buying behaviour significantly. The idea would be to develop a viable path to brand awareness through a focused target market consisting of individuals that look for healthy food. |
| Positioning | As it stands McDonald's is positioned at the affordable end of the market. This is often highlighted as one of the major USPs of the firm. However, McDonalds Health will be targeted at the mid-tier end of the market, which would effectively mean that the brand will be considered a 'premium' option as opposed to McDonald's current offering. |
- Traditional awareness market campaigns will be launched to enhance the overall visibility of the brand in the market. The idea would be to move into different malls in the form of kiosks, which would offer free tasters and highlight key features. This, along with a collaboration with various health agencies to certify the product as healthy will be used to promote the product line across the country.
- The second core aspect that needs to be highlighted here is linked with the development of a social media marketing approach which builds around healthy living. The idea here would not be to promote the product line or the sub-brand, but to link with real world scenarios and push it on social media as a story. The call out for this campaign will be #mchealth which is linked directly with the newly launched product line.
| Product | Place |
| The new product line will include a menu consisting of heath centric options. The idea would be to have a product line that is not only effective but also has a positive impact on the brand itself. | The pricing structure of the product line will be different from the current approach. This product line will be placed at the mid-tier end of the market, hence falling in the semi-premium range. |
| Place | Promotion |
| The product line will be sold through normal McDonald locations. The idea would be to start off with a few locations and build a hype around this, before moving towards a wider audience. | Promotionally the core aspects are promotions through both traditional and non-traditional means. This would mean the focus would be on social media as well as creating awareness through traditional means. |
Conclusion
Overall the report provides and in-depth analysis of why McDonald's as a firm is witnessing a decline in its current market share. This highlights that the organisation due to its inability to cope with the changes in the market is unable to react to the changing consumer behaviour towards fast food chains. It is also clear from the analysis that the organisation needs to re-vamp its current position in the market in order to develop a viable footprint. To do this it is recommended that a health centric product line is launched which would allow the organisation to focus on the shifting trends in the market. Coupled with effective marketing, McDonald's UK should be able to steer its sales back to the required position.References
BBC (2015) McDonald's global sales continue to decline, Available from: Bernhardt,M. Mays,D. and Hall,A (2012) "Social marketing at the right place and right time with new media", Journal of Social Marketing, Vol. 2 Iss: 2, pp.130 - 137 Bloomberg (2015) McDonald's US to shrink for the first time in 45 years, Available from: https://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11797531/McDonalds-US-to-shrink-for-the-first-time-in-45-years.html Bold, V. (2015) McDonald's reports falling global sales, with performance partly buoyed by UK, Available from: https://www.marketingmagazine.co.uk/article/1330795/mcdonalds-reports-falling-global-sales-performance-partly-buoyed-uk Clive Long , Arleen Rowell , Anita Gayton , Elizabeth Hodgson , Olga Dolley , (2014) "Tackling obesity and its complications in secure settings", Mental Health Review Journal, Vol. 19 Iss: 1, pp.37 - 46 Doyle,P. & Stern,P. (2006), Marketing Management and Strategy, Harlow: Prentice Hall, Hooley,G. Piercy,N.F. & Nicoulaud,B. (2012) Marketing Strategy and Competitive Positioning, Harlow: FT Prentice-Hall Kotler,P. & Keller K. L. (2012), Marketing Management,14th Edn London: Prentice Hall McDonald's Annualreport (2014) Available from: https://www.aboutmcdonalds.com/content/dam/AboutMcDonalds/Investors/McDonald's%202014%20Annual%20Report.PDF Millington, A. (2014) McDonald's looks to pared-back UK menu to arrest global sales decline, Available from: https://www.marketingweek.com/2014/12/11/mcdonalds-looks-to-pared-back-uk-menu-to-arrest-global-sales-decline/ Neilan, C. (2014) McDonald's to restructure after "significant decline" in sales, Available from: https://www.cityam.com/1413895152/mcdonalds-review-and-restructure-after-significant-decline-sales Nurtrition and Food Science (2012) "Accelerating Progress in Obesity Prevention", Nutrition & Food Science, Vol. 42 Iss: 6, pp.458 - 458 Roel Pieterman (2015), Obesity as Disease and Deviance: Risk and Morality in Early 21st Century, Emerald Group Publishing Limited, Vol.44 Iss:1, pp.117 - 138Cite this page
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Art Concept Essay Online for Free
Journal entry for Readings
This essay provides a very good understanding about Art and I found it very interesting. Art is basically a conceptual concept. In other words, it can be defined as a creation, which is created by the will of person. As per my study, different forms of art exist but the author has laid the emphasis on graphic art. In this type of art, the design is created on a material like Plexiglas or rubber so as to move the designs onto another medium like wood, paper, cloth, metals, and plastics etc. In the present scenario, Japanese manga are inspiring the comic artists of the west, fashion designers, modern artists and millions of ordinary readers. The appearance of the wide-eyed figures of manga are found over t-shirts, video games, CD covers and even in the museums of art (Manga and Japanese Contemporary Art, 2005). I found the article very informative as it depicts the collection of the most appealing artists from modern manga and also tells me about the different variety of manga styles. It also contains the prints of woodblock by Hokusai. The exhibition of graphic art and its program of events depict the fan culture, which is closely linked with manga. The examples include cosplay or dressing similar to the manga characters. This program of events permits the visitors to attempt their hand at manga, listen to lectures on modern Japanese culture and also provides an experience of singing karaoke. In this article, the author has depicted cute and funny figures along with the strange and aggressive figures similar to those of manga (Manga and Japanese Contemporary Art, 2005).Journal entry for controversies
In my point of view, art is created by the mind. It is the blend of ideas and concepts. In my point of view, art should be such, which doesn't hamper any religion, values or beliefs i.e. art should form the basis of inspiration for the viewers by containing effective messages in it. But if the art is developed for a particular reason, it might lead into big controversies (Cox, 2006). A controversial event took place in the Dallas Museum of Art. Here, Sydney McGee who was a teacher (female) took a group of children aged 9 to 10, in Frisco from Fisher Elementary School to the Art museum of Dallas. It was found that the father of a child has filed a complaint that his child has been exposed to art which was absolutely unauthorized as he was shown an abstract nude. As a result, this brought controversy upon the school. Therefore, art should be created so that it is appreciated by its viewers and creates a good impact on them (Cox, 2006). Another controversial issue was that Hitler could not become part of the art school because it was painted in a traditional style and hence, was not able to fulfil the criteria of the art school. Art school requires a contemporary way of painting, which is less realistic. Hitler, during his regime, barred new artists, who were selling artwork and was in favour of the traditional artists. Art varies from place to place and as a result to this, the frequency of controversy increases.Journal entry for movies
I found certain movies like Girl with a Pearl Earring and The Agony and the Ecstasy very artistic. Both of these movies have depicted art in their content but in different ways. In the movie Girl with a Pearl Earring, an artistic temperament is depicted by girl. The movie reveals an artistic passion. The photography in the film is very sensuous, showing the golden age of Dutch culture. The pictures in the photography contain fantastic colour and scale, crowded with plentiful costumes and magnificent architecture. This photographic art keeps the eyes engaged. In 1930s, the art scene in America was greatly dominated by the practicality and regionalism. The film on Jackson Pollock by Ed Harris presents a powerful picture of Jackson Pollock. The film has performed in an outstanding manner by evoking the true feeling of the time duration with the help of the costumes and scenery. The film depicts the darker side of Pollock's life as he struggled with demons. This movie became the centre of attention for those American people who liked the modern art.Art in Exile
On the other hand, the film Agony and ecstasy shows huge interesting reflection of art. It is characterized as the superior period piece, which became an epic. I really appreciate this movie as it pictured Charles Heston as the grand artist. I really found it fairly attractive, the way they have displayed the stressed relationship. The movie depicts the true sense of the art and love. This movie clearly describes how art can move the soul of the person. I admire the extent of time spent by chuck in learning how to paint (Reed, 1965). Journal entry for the relevance with the Puerto Rico: In the late 20th century Graffiti has turned into a well-known force in urban settings. The extent of attitudes towards graffiti has shown a broad and contentious concept. Most of the writers regard the graffiti as a social term, which was introduced for culture around 70's. Therefore, I would use graffiti as writing. The tradition of folk art for carving the santos i.e. using saints of wood for house hold devotion forms the par of Puerto Rican culture. The santos from the past served as the prime object of devotion, but at present they form the part of artistic merit, which is because of the link with the ancient culture of Puerto Rico. Both the old and new santos of Puerto Rican function continuously in a devotional framework for a few number of their owners and santeros. For the carvers of Puerto Rico, carving a santos forms a religious experience (Dennant, 1997). Graffiti showed inter connected factors to the world of hip-hop, sometime also studied as a part of its own entity. Graffiti depicts an artistic aspect of confrontation towards the authority and simultaneously reflects expression towards subculture. I have found that in the early time of Christianity, saints were given honour as role models, courageous heroes and guardians. In the present time the carving of the santeros remind me of the fundamental task played by these holy pictures in the everyday lives of supporters. From the point of dedication towards the signs of Puerto Rican traditions and art, the modern santos from Puerto Rico fit into the highly prosperous tradition, which goes forward to progress in response to the changes in the political, social and religious context.References
Manga and Japanese Contemporary Art. (2005). Retrieved August 23, 2008 from https://www.taidemuseo.hel.fi/english/tennispalatsi/programme/manga.html The Santos Tradition. (2004). University of Florida. Retrieved August 23, 2008 from https://www.harn.ufl.edu/santos/introduction.php Carol Reed (1965). The Agony & The Ecstasy. [ONLINE] Available at: https://charltonhestonworld2.homestead.com/AgonyEcstasyPg1.html. [Last Accessed 23 August 2008]. Ian Cox (2006). Teacher Sacked Over Nude. [ONLINE] Available at: https://coxsoft.blogspot.co.uk/2006/10/teacher-sacked-over-nude.html. [Last Accessed 23 August 2008]. Pamela Dennant (1997). The Emergence of Graffiti in New York City. [ONLINE] Available at: https://www.hiphop-network.com/articles/graffitiarticles/emergenceofnycitygraffiti.asp. [Last Accessed 23 August 2008].Cite this page
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Philosophy of Aldi Essay Example for Free at Magic Help
Introduction
Marketing in simple terms can be described as offering a right product at a right place at the right time and with a right price. The Management Gurus emphasise on the four Ps of marketing which are often called the marketing mix. These four Ps are Product, Place, Price and Promotion. Marketing mix is an important tool to make an efficient marketing plan for a successful product offering. These four Ps of marketing mix can help achieving the business targets of sales, profit and consumer satisfaction. The essay examines marketing strategies of a German supermarket chain named Aldi, in the UK. The paper is divided in to four sections. The first section gives a brief history about Aldi. The second section talks about its position in the UK market. The third section analyses the marketing strategy of Aldi on the basis of the four Ps. The last section gives recommendations on marketing strategies for the future growth of the company in UK market.A brief history of Aldi
Aldi, one of the world's largest privately owned companies, is a grocery supermarket chain with a base in Germany. The name Aldi has come from the abbreviation of Albrecht (family name) Discount. The business started in 1913 with a food store in the town called Essen in Germany. By 1960s this family business was expanded to 300 stores in Germany and that is when the business was separated into two groups Aldi Nord (North) with a headquarter in Essen and Aldi SA¼d (South) with a headquarter in MA¼lheim an der Ruhr (Emsell, 2011). The business was separated over a disagreement on whether to sell cigarettes in the stores or not (Ruddick, 2012). These two organisations now operate independent to each other. On international levels, Aldi Nord operates in Portugal, Denmark, France, Belgium, Netherlands, Luxemburg, Spain, and Poland. Aldi SA¼d is functional in Ireland, United Kingdom, Hungary, Switzerland, Australia, Austria and Slovenia and United States of America with over 8000 stores in total (Aldi UK website, 2015).Aldi in the United Kingdom
Taylor and Lee (2007) have stressed the adverse effects on the international buyer behaviour due to cultural disparities. KPMG (2014) states that the shopping culture in UK is associated with the quality and not necessarily with price. It further mentions that higher level of customer services is one of the main attributes of this culture. That is the reason why in spite of the dominance of the 'big four' -Tesco, Sainsbury's, ASDA and Morrison's - M&S and Waitrose have done huge investments in the grocery industry. However Aldi has not only managed to attract the customers in the UK by overcoming the hurdles but also has acquired a significant market share. Table 1- Market share of Supermarkets in the UK in March, 2015| Supermarket | Market Share (In %) |
| Tesco | 28.4 |
| ASDA | 17.1 |
| Sainsbury's | 16.4 |
| Morrison's | 10.9 |
| The Co-operative | 6.0 |
| Aldi | 5.3 |
| Waitrose | 5.1 |
| Lidl | 3.7 |
| Iceland | 2.1 |
The Marketing Strategies of Aldi
Aldi is a discount supermarket chain and so cost control is in the culture of the business. The model of Aldi's grocery retailing has remained unchanged since its initiation in Germany (Emsell, 2011).Price, Place and Product strategies
The business philosophy of Aldi is to focus on indispensable investments and avoid the superfluous in order to give the customers maximum possible savings. According to Rudolph et al (2012, p-142), " Aldi's cost only add 13% to the procurement price, 2% each for logistics, rental, overheads and marketing plus about 5% for staff." Instead of extending its opening hours like other competitors in the UK, all Aldi stores function limited opening hours, which recently extended to 12 hours ( from 8am to 8pm). In contrast, many other competitor stores are available for shopping for 24 hours, 7 days and 365 days which seems an apparent strategic intention. One cannot see the add on services at any Aldi store, for example lottery terminals, children's play area, photo booths, lavatory, dry cleaning services, currency exchanges, news agent, tobacco counters on entry and exit, a separate customer service counter or a coffee shop. The simple reason being that these facilities have its cost which would add up to the end cost to the customer (Emsell, 2011). In a typical Aldi store, one can also observe three to seven employees to run the entire functioning of the store which is a different strategy to other supermarkets which have a high staffing level to provide high standards of customer service. The firm can achieve a low payroll to sales turnover ratio with such staffing level which can help the lower the prices. According to The Times 100 Business case studies (2010), the key idea that makes Aldi's approach work is the concept of limited assortment. The Aldi store size is relatively small in comparison to the rival grocers with an average floor space of between 650 square meters to 1000 square meters. The usual Aldi store has a common layout with only four shopping aisles also the packaging and displaying products strategy at Aldi is cost effective. However the stores generally have a free parking space which attracts customers significantly. The case study further mentions that while selecting a location for store, Aldi takes in to consideration the population of the area which should be more then 30,000. Also the stores are always at the very good visibility from a main road and with good public transport connectivity. The sales philosophy of Aldi is very different to other leading grocers in the UK. As the branded products have less operating profit, Aldi has taken an approach to sell products which are equivalent to brands (Wood, 2011). A typical large Tesco or Sainsbury's store stocks around 50,000 product lines, of which 50 per cent are their own brands (Voberda et al., 2011). The success key for any business is to attract the buyer which certainly depends largely on a competitive pricing. Being a discount retail chain, competitive pricing is at the core of Aldi's philosophy. Aldi works on economies of scale. In simpler terms it means, buying products in large quantities so it gives leverage for bargaining for the best possible price which allows Aldi to sell at the most competitive prices. Currently every week Aldi comes with a different range of products on a Thursday for example bathroom accessories, garden furniture, kitchen and other household equipment. These products are different to the usual grocery items in the stores in terms of its availability. These products are limited in stock and not permanently available in the store. One can observe a great deal of excitement in the customers in the stores due to the scarcity and affordability of the products. To promote these product ranges, posters of the items are found in the stores for the upcoming week.Promotion Strategies
According to the Times 100 Business Case studies (2010), one of the unique marketing strategies Aldi has adopted is the advertisements with brand comparisons. These adverts demonstrate that Aldi brands are of equal quality to well-established brands for example, Pampers diapers, Heinz tomato ketch up and Fairy Liquid. To prove this Aldi ran blind taste experiments amongst a section of shoppers. This experiment suggested that the majority of consumers that preferred the well-known brands also liked Aldi brands. These findings created the basis to Aldi's most popular 'Like Brands' campaign. The advertisements of the 'Like Brands' provided the business with a stand to speak about its quality and most importantly its value for money. This campaign was effective in showing the customers how much more their money can fetch by shopping from Aldi with a slogan, 'Like brands. Only cheaper.' The campaign provided a character to the Aldi products because the advertisements use humours which help to build confidence and an emotional connection with target audiences. In addition, according to Times 100 Business Case studies (2010), Aldi prints around 1 million copies of brochures per week to distribute in the store as well as to customers living in surrounding areas. These brochures promote products with limited availability and seasonal and weekly offers available in stores. Another campaign of Aldi is 'swap and save'. The newspaper adverts of Aldi promote the Aldi brands by showcasing the saving customers can have by swapping from the leading grocers to Aldi. This promotion is in the similar lines of Tesco's 'big price drop' campaign or Sainsbury's 'brand match' campaign. In this era of social media, it has become easy at the same time unavoidable to communicate directly with the targeted audience. One such online campaign of Aldi is 'Aldi Advocates'. This particular promotion is for consumers who recommend Aldi to others because of its low prices compared to other brands. For example, the 'I Love Aldi' campaign asked fans of the Aldi Facebook page, to send a virtual Aldi Valentines card to a Facebook friend, completing the sentence ' I love Aldi because...' This was encouraged by providing rewards of A£10 vouchers and a box of Aldi chocolates for their Valentine (Aldi UK Facebook Page, 2015).Recommendations
The UK grocery industry is one of the most established and competitive globally, however dynamics of such industry change rapidly (KPMG, 2014). In spite of Aldi's great stride in entering the UK grocery market and taking over a significant market share, one cannot deny the fact that the dynamics of ever changing business world can hurdle this growth. One can also not deny the fact that the competitors are also working towards increasing their market share and exploiting the resources. Though Aldi has managed to reach in to the competition with Waitrose, Cooperative and Morrison's, the market share of Tesco, ASDA and Sainsbury's is comparatively very high (Table -1). Also Lidl and Poundland have a similar market strategy of discounted products as Aldi. In such cut throat competition it is challenging to not only enhance the market share but also merely maintaining it. Morgan et al., (2004) in their study have emphasised on product quality as one of the most important determinants of market share. Thirkell and Dau, (1998) revealed that quality and add on services have positive and high correlation with business performance. Thinking on the similar lines, one can recommend the quality enhancement to give a tougher competition to the leading supermarkets. However there is a risk associated with that approach as frequent changes in the business strategy can lead to loss of grip on the monitoring and controlling of the business. Businesses with a lack of clear strategy often face difficulties in customer targeting (Lancaster et al, 2002). However Aldi has a great scope in providing value added services. Facility of online shopping is one such value added service. Home delivery of the shopping items as well as 'click and collect' services can be easily implemented in today's internet era as the other leading supermarkets are also offering such services. With plenty of options available, even with good quality and low prices, loyalty can be great issue of concern for a grocery firm. Various loyalty cards and point based reward system can be introduced to ensure the market share to be somewhat stable. UK being a culturally diverse country, a wide range of products such as Indian, Chinese, Caribbean grocery items should be added to attract more customers. The campaign of 'swap and save' can be taken a step further by upgrading the software system. Currently it is showing the price difference on the newspapers and advertisements which should be reflected on the receipt after the shopping to inform the customers personally how much they have saved by shopping in Aldi.References
Aldi UK Website (2015) https://www.aldi.co.uk/ Aldi UK Facebook page (2015). Available at https://www.facebook.com/AldiUK BBC (2015) Aldi overtakes Waitrose's market share. BBC News dated 8th April, 2015. . [Online] Available at https://www.bbc.co.uk/news/business-32218170 Emsell, P. (2011) Aldi - "The No Frills Retailer". University of Huddersfield. [Online] Available at https://eprints.hud.ac.uk/12404/1/Microsoft_Word_Aldi_case_study_for_Bus_Strategy.pdf KPMG (2014) The Future of the Grocery Sector in the UK. [Online] Available at https://www.kpmg.com/uk/en/issuesandinsights/articlespublications/newsreleases/pages/the-future-of-the-grocery-sector-in-the-uk.aspx Lancaster, G., Massingham, L. and Ashford, R. (2002) Essentials of Marketing. Fourth edition. New York: McGraw-Hill. Morgan, N., Kaleka, A., and Katsikeas, C. (2004). Antecedents of export venture performance: a theoretical model and empirical assessment. Journal of Marketing 68(1): 90- 108. Ruddick, G. (2012) Billionaire Aldi heir Berthold Albrecht dies at 58. The Telegraph, dated 7th December, 2012. [Online] Available at https://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9729434/Billionaire-Aldi-heir-Berthold-Albrecht-dies-at-58.html Rudolph, T., Schlegelmilch, B., Bauer, A., Franch, J. and Meise, J. (eds.) (2012) Diversity in European Marketing: Text and Cases. Germany: Springer Gabler. Voberda, H., Morgan, R., Reinmoeller, P., Hitt, M.A., Ireland, R.D., Hoskisson, R. (2011) Strategic Management: Competitiveness and Globalisation, South Western: Cengage Learning. Taylor, C.R. and Lee, D. (2007) Cross-cultural Buyer Behavior. Amsterdam: Elsevier. The Times 100 Business Case Studies (2010). Creating Value through the Market Mix. [Online] Available at https://businesscasestudies.co.uk/aldi/creating-value-through-the-marketing-mix/introduction.html#axzz3gTvS06RA Thirkell, P. C., and Dau, R. (1998). Export performance: Success Determinants for New Zealand Manufacturing Exporters. European Journal of Marketing, 32(9/10): 813- 829. Wallop, H. (2008) Aldi pledges to open a new store every week. The Telegraph , dated 30th June, 2008. [Online] Available at https://www.telegraph.co.uk/finance/personalfinance/2792467/Aldi-pledges-to-open-a-new-store-every-week.html Wood, Z (2011) Aldi effect is back: spending squeeze lifts discounter into profit. The Guardian , [Online] Available at https://www.theguardian.com/business/2011/oct/04/aldi-effect-back-discounter-profitCite this page
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Tesco Business Strategy Essay Example Pdf
Organisations in the current global economic landscape face both internal and external challenges within the fast, changing business environment in which they operate, and the supermarket industry is no exception. The general consensus, infact, among academics in relation to this sector, points to what Sparks (2000) in Smith and Elliot (2012, p.678) summarises as “an intensely competitive environment, where there is constant pressure to maximize profitability and reduce costs.” Studies into supermarkets that have been conducted to assess the pressures of everyday management have also concluded that the industry is results driven, with little work life balance and a hugely straining environment where those in positions of responsibility are essentially asked to run their own business. (See Grugulis, Bozkurt and Clegg, 2010; Ogbonna and Wilkinson, 2003). Clearly an industry with high expectations, the important question to answer is what are the internal and external factors which drive the business environment to be shaped in this way. More importantly, we must consider how these factors will essentially influence the future business environment for a large supermarket chain and what they will need to do to be a success in the industry. This paper will therefore analyse the current business environment for Britain's largest supermarket chain, Tesco, essentially gaining an understanding of the factors affecting its everyday operations, decisions and ultimately successes or failures. Using the frameworks of SWOT and PEST analysis in order to assess the business environment, there will also be a suggestion as to how the future looks for the most successful retail chain in Britain. Before going on to analyse Tesco, it is important to understand exactly what is meant by the term ‘business environment.' As a concept, the business environment is not easy to pin down or define, due to its ‘myriad' nature (Ward et al., 1995). Bourgoin and Pleskovic, (2006, p.197) provide a broad view calling it “the nexus of policies, institutions, physical infrastructure, human resources, and geographic features that influence the efficiency with which firms and industries operate.” In this respect, it seems as though the business environment is the way an organisation carries out all aspects of its functions. Various external and internal factors can affect this, and this is what shapes the business environment. Exactly what these factors are though, and how much they really affect the business environment for a particular business or industry is open to interpretation and a certain level of ambiguity is possible. With this thought in mind we can consider all sorts of internal and external factors that affect the operations and functions of Tesco and the environment in which it operates. Given this assumption, it seems logical to combine the use of both PEST and SWOT analysis as a tool for gaining an insight into Britain's largest supermarket chain if only to point out the possibility for a wide variety of factors affecting its operations and decisions. While PEST (Political, economic, social and technological) aids in providing what Ward and Rivani (2005) call a ‘satellite view' of the external environment, an accurate SWOT (strengths, weaknesses, opportunities, threats) enables the opportunity to assess the company from an internal perspective as well as seeking to understand the external influences which can both threaten and improve the organisation's future prospects. It is important to understand, however, that although both PEST and SWOT analysis are effective, this does not necessarily mean that the outcome of either framework analysis interlinks or in fact that any aspect of them will definitely apply to Tesco. There could potentially be a number of political factors which shape the business environment of Tesco but at the same time, only a small number of social and technological factors. Equally, there could be a limited number of opportunities with a large amount of threats, or vice versa. Ultimately, the frameworks that are being used for analysis are static, but a business environment is ever changing. This is worth noting when analysis is considered for the business environment of Tesco. As already discussed, the supermarket environment is a very volatile one. It is fast paced, cutthroat and results driven. Tesco lies at the heart of this industry and represents these traits. But more broadly, the organisation has really led the change in the supermarket industry over the last 30 years, a story which is described by Smith and Sparks (2009, p.143) as “one of the more remarkable stories in British retailing.” Its internal policies which have enabled its significant rise to the top appears to be an obvious indicator to where the companies major strengths lie. The Tesco Loyalty card and its e-commerce operations are generally considered to be world-leading (Humby et al, 2003 in Smith and Sparks, 2009) while it has an “unrivalled ability to manage vast reams of data and translate that knowledge into sales.” (Capell, K, 2008, p.1). The innovational qualities which have been at the heart of the company's success have therefore ensured that Tesco has not just shaped the way it operates in its business environment, it has in some respects, shaped the environment of the whole supermarket industry in the UK. It has become dominant in its home market and increasingly significant on the international stage (Burt and Sparks, 2003). With a number of hypermarkets, supermarkets and convenience stores, sprawled across a vast number of countries, Tesco's' sphere of influence is much more extensive than its UK competitors. Added to this international presence is the salient fact that “a number of U.S. retailers have tried to copy Tesco' strategy” (Capell, K, p.2) reflecting the incredible influence its practices have had, and with that, evidence of internal success that has shaped its business environment. The very fact that Tesco is the leading supermarket chain in the UK, with 12% of retail spending going through its tills (Retail week 2013) is in itself a huge advantage to operations. It means easier access to the most suitable employees, leverage with suppliers and a huge advertising reach to customers. Of course, this position of power in the market does not mean that the organisation is immune to a variety of potential threats, both in its internal operations and external influences. Despite expansion into international markets, Tesco has not always proved a hit with customers outside of the UK. For example, the chain of convenience store ‘Fresh & Easy' throughout the United States struggled from its implementation in 2007. International expansion has become the detriment of UK stores too, whose profits have paid for it and as a result the quality of staff, service and range of products has begun to lag behind rivals Sainsbury's and Asda in home operations. There is always also the added possibility that success could lead to the Icarus effect (Miller, 1990). This is a situation in which an organisation becomes so successful in using particular processes and procedures, that it becomes a danger to its own future business, with trajectories of decline appearing in strategy, goals, culture and structure. In essence, this means that Tesco may have the problem of developing a sense of tunnel vision, in which it sees only particular aspects of operating in the business environment rather than ensuring it continues to innovate to react to external factors which will influence its future outcomes. Of course this all depends exactly on what the external factors are. Threats come in various shapes and sizes for Tesco. The scale and size of the supermarket industry is larger and more competitive than ever before, particularly with the expansion of Morrisons, branching out into more and more parts of the country, and the rise of Aldi since the start of the economic downturn. Economic problems throughout the UK have undoubtedly been a major threat to Tesco. Despite traditionally having the capacity and advantage of catering for the majority, the recession saw the likes of Netto and Aldi increase sales significantly through even lower product prices, while Tesco has at times struggled (Retail week, 2013). These new, expanding and ultimately cheap supermarkets give consumers on a low budget an alternative, making them look likely to become major players in the future. Meeting customer needs has become increasingly important, with the speed of everyday modern day life meaning that trends and behaviour change much faster than in previous years and the variety of choice is astounding. Grocery retailers now have to adapt by being more creative and efficient than ever before (Kumar 2008). In consideration of Porter's five forces model, (Porter 1980) it is also worth considering how there is a threat to Tesco of new entrants into the supermarket industry. There are a number of reasons why this could occur. An organisation may be able to forge a stronger relationship with buyers or suppliers than that of Tesco, which would give them a significant advantage over its rivals, by limiting their access to distribution channels and reducing costs through economies of scale. However, this is more likely to occur from an already well established UK retailer within the supermarket industry, such as Sainsbury's or Asda's. The potential for new entrants, in fact, seems relatively unlikely, given the already well established number and variety of supermarket chains. A major rival of Tesco could also prove threatening through providing better services, including technological ones. Although Tesco was the first supermarket to offer online shopping to Britain, it is no longer the only one to do so. The digital economy we now live in ensures that the internet is being increasingly used for weekly shopping and it is an aspect of business which is likely only to increase rapidly over the next decade. Tesco must therefore not only ensure that its delivery is efficient and effective to households, but also that its website is appealing to the public and consumers are constantly kept abreast of the latest information on deals and product offers. More specifically, Tesco will need to adapt to the increased use of mobile phone and tablet devices and ensure their technology is up to speed and prepared for the high numbers of web traffic which could potentially make use of their website much slower. Customer experience online is becoming more and more crucial to an organisations success (Rose et al., 2011), and operating in an industry in which affects any member of the public, the best available technology could prove to be vital to the future success of Tesco. Although a potential threat, Tesco should see this technological factor which affects their business environment as a fantastic opportunity. As the market leader within the UK supermarket industry it is best placed to make use of improvements in its online facilities with more access to the right talent. As the pioneers of online supermarket retailing, (Retail Week, 2013) they also have the foundations in place to continue innovation in this area of their business, as long as they are equally able to recognise the decrease in the use of hypermarkets and react accordingly. There is also a great opportunity for Tesco to develop their diversified services in banking due to the decline in trust of UK banks since the beginning of the economic downturn. Tesco have a real chance to show the consumer that they are an alternative lender and a company to trust in. Finally, Tesco have to recognise that its UK operations are beginning to become neglected, as is its image at home. It has set aside £1bn to improve existing stores, with plans in place to increase staffing levels and to create a better environment for customers to shop in (Retail week 2013). It has also made significant steps into ensuring its brand image is improved, by hiring the agency Wieden and Kennedy to take charge of its marketing practices. There are ultimately a number of different factors, both external and internal, macro and micro, which affect the business environment of Tesco. Being the leading organisation within the supermarket industry, the company is in a good position to deal with the threats of competitors, which comes in various forms. The strength of Tesco's UK operations have at times appeared to become neglected and this provides its main rivals, Asda and Sainsbury's the opportunity to take advantage. Additionally, the weakened economic environment has allowed discounters such as Aldi and Netto to gain a firm foothold and therefore potentially take a share of Tesco's customer base. Despite new and existing competition, the reputation of Tesco and its success as Britain's largest supermarket chain means it essentially has its destiny in its own hands. It has significant resources to ensure it can enhance its in store facilities, services and quality of staff and currently has the strongest relationship with suppliers, giving it the best bargaining power and allowing economies of scale. Finally, its history of developing online retail means it has the best opportunity out of all the UK supermarket chains to ensure the best standards of technology, where the future arguably lies for the industry. The business environment of Tesco is therefore one which has a number of threats but which can be dealt with as long as the internal strengths which have made the organisation a success are continued to be realised to their full potential.
Bibliography
Bourguignon, F. and Pleskovic, B., 2006. Annual World Bank Conference on Development Economics. St Petersburg: Growth and Integration. Capell, K., 2008. Tesco: 'Wal-Mart's Worst Nightmare', [online] Business Week. Available at:< https://shawndra.pbworks.com/f/Tesco_+'Wal-Mart's+Worst+Nightmare+-+BW.pdf > [Accessed 10th May 2014].
Burt, S. and Sparks, L., 2003. Power and Competition in the UK Retail Grocery Market, British Journal of Management, 14, pp.237–254.
Grugulis, I., Bozkurt, Ö. and Clegg, J., 2010. 'No place to hide'? The realities of leadership in UK supermarket. 91. University of Oxford: SKOPE.
Kumar, S., 2008. A study of the supermarket industry and its growing logistics capabilities, International Journal of Retail and Distribution Management, 36 (3), pp 192-211.
Miller, D., 1990. The Icarus paradox: how exceptional companies bring about their own downfall: new lessons in the dynamics of corporate success, decline, and renewal. New York: HarperBusiness.
Ogbonna, E. and Wilkinson, B., 2003. The False Promise of Organizational Culture Change: A Case Study of Middle Managers in Grocery Retailing. Journal of Management Studies, 40(5), pp. 1151-1178.
Porter, M. 1980. Competitive Strategy: Techniques for analyzing industries and competitors. New York: The Free Press.
Retail Week, 2013. Profile: Tesco – The UK's largest retailer [online] Capell, K. Available at:< https://www.retail-week.com/home/profile-tesco-the-uks-largest-retailer/5046179.article > [Accessed 8th May 2014]. Rose, S., Hair, N., Clark, M., 2011. Online Customer Experience: A Review of the Business-to-Consumer Online Purchase Context. International Journal of Management, 13, 24-29.
Smith, A. and Elliot, F., 2012. The demands and challenges of being a retail store manager: ‘Handcuffed to the front doors'. Work, employment and society, 26(4), pp. 675-684.
Smith, D., and Sparks, L., 2009.Tesco Supply Chain Management. In: Fernie, J., and Sparks, L., 2009. Logistics and retail management, 3rd edition, London: Kogan Page, ch.7.
Ward, PT., Duray, R., Keong Leong, G., Sum, CC., 1995. Business environment, operations strategy, and performance: an empirical study of Singapore manufacturers , Journal of Operations Management, 13 (2), pp.99-115.
Ward, D. and Rivani E., 2005. An Overview of Strategy Development Models and the Ward-Rivani Model, Economics Working Papers.
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H&M Essay Example Pdf
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Does the Company Educate its Consumers or Does it Serve a Unique Market Segment?
- ABSTRACT
- I. INTRODUCTION
- II. LITERATURE REVIEW
- Company overview
- H&M Consumer Relations
- Shopping-Behaviour Theories
- Study Problem Statement
- III. METHOD
- Purpose Statement
- Research Questions
- Study Design, Procedures, and Timelines
- Population and Sample
- Data Collection Instrument
- Study Limitations
- Ethical Concerns
- IV. FINDINGS
- V. DISCUSSION
- VI. CONCLUSION
- VII. BIBLIOGRAPHY
Does the Company Educate its Consumers or Does it Serve a Unique Market Segment?
ABSTRACT
In the current retailing market, Hennes and Mauritz AB (H&M) remains a unique phenomenon in part due to the observable difference in the behavior of the company's customers. This study evaluates two theories attempting to explain the deviation in H&M customers' behaviour-patterns. The first theory suggests that the customers' behaviour is attitude-bound and learned-taught through the customer-company interaction. The second theory argues that H&M customers belong to a genuinely unique market segment. The researcher surveyed 160 shoppers at H&M and one of the department stores and used a grounded-theory approach to analyse the data. The results substantiated the first theory claiming that shopping behaviours were taught and learned. The study had an important practical value. However, its results were subject to l reliability and validity threats; thus, further research would be required to confirm the findings.I. INTRODUCTION
The issues of consumer relationships have been the focus of marketing research inquiries for at least a century. In the last decade, with the discovery of organizational core competences, relationship knowledge experienced a new wave of research interest and was named among the leading "strategic powers" of an organization (Hamel & Prahalad 1994, pp. 3-5; Bergenhenegouwen et al. 1986, p. 29). Hennes and Mauritz AB (H&M) stands out in its respective market largely because of the company's unique and innovative approach to serving its customers. Moreover, the company is frequently cited for its ability to create customer needs rather than address the existing market requests (Kumar 1997, p. 834). As an intangible attribute of the company's market activities, the company's relationship knowledge is invisible to the observer; therefore, H&M customer relations cannot be analysed directly (Petts 1997, p. 551). However, it is possible to explore this attribute indirectly through its effect on H&M consumers. Thus, the goal of this study was to investigate H&M consumers' shopping-behaviour patterns and to compare them to the behaviour of department-store shoppers. The outcomes of the comparison were expected to explain the foundation of H&M's consumer-relationship strategy as aimed at changing their consumers' behaviour or at serving a pre-defined market segment. To introduce the reader to the topic, the second chapter of this paper offers an overview of the company as well as a summary of the relevant theories. The third chapter describes the methodology utilized in the study. Chapters IV and V present and discuss the findings while the conclusion overviews the process to evaluate the practical and theoretical utility of the presented research.II. LITERATURE REVIEW
Company overview
H&M is a clothing retailer with its operations primarily set in Europe, North America, and Asia (Datamonitor 2006, p. 4). The company is headquartered in Stockholm, Sweden and employs 68,000 workers in more than 1,500 outlets worldwide (Datamonitor 2006, p. 4). H&M's strategic approach is to offer designer clothes to general population at affordable prices; the company works with such brand names as Stella McCartney, Karl Lagerfeld, and Roberto Cavalli (Capell & Beucke 2005, p. 16; Kroll 2004, p. 71; Zimmerman 2009, p. D1). H&M builds its strengths by operating through complementary retail channels – stores, Internet, and catalogues – in several geographic locations and by offering a balanced product mix, which appeals to a number of customer audiences (Datamonitor 2006, p. 5). However, currently, the company faces the threat of decreasing retail sales in Eurozone amplified by strong competition from Target and Wal-Mart (Datamonitor 2006, pp. 6-7).H&M Consumer Relations
According to Kumar, the new age of retailing is characterized by the changing relationships between retailers and their customers (1997, pp. 834-835). More specifically, H&M belongs to a group of retailers, which learned how to drive the market by driving the consumers' behaviours instead of being driven by them (Kumar 1997, p. 834). Kumar argues that by adopting EDLP (everyday low pricing) strategy, H&M teaches fashion buyers to not wait for department-store sales but rather buy H&M low-price brand-name products (1997, p. 834). Raugust expands the discussion to claim that, in addition to the prices, H&M changes customers' behaviour by creating a thrilling shopping experience (2004, p. S10). The company renews its store inventory daily; therefore, even the customers who come to the store every day can expect to discover new deals on each shopping trip (Raugust 2004, p. S10). Thus, H&M manages to keep their stores intriguing for its customers and to make them return more often than they would otherwise. Both media and empirical research observe behaviourist differences in H&M consumers. However, potentially, there are two explanations for the mentioned deviation. First, as suggested by Kumar, H&M strategy might persuade the consumers to adopt new behaviours. Second, H&M customers might belong to a different consumer segment characterized by unique behaviours; they choose H&M because it is a better fit for their needs. Currently, there is no research that reliably supports one or the other hypothesis.Shopping-Behaviour Theories
According to Smith and Lux, "current knowledge of how consumers behave in the market place predominantly consists of unrelated still photos depicting consumers at isolated times and places" (1993, p. 607). Bass and Talarzyk argue that there are strong causal relationships between attitudes, brand preference, and purchasing behaviour (1972, p. 93). Therefore, the attitudinal trends might serve as the link between the consumers' past, present, and forecasted behaviours and be the key to explaining these behaviours. Moreover, if attitude modification is proven to affect the behaviour then H&M is, in fact, able to transform its consumers' behaviours by altering their attitudes toward shopping. In contrast with Bass and Talarzyk, Bower and Christensen claim that by offering new "disruptive" approach to shopping, companies like H&M create value proposition for a different and less-demanding group of consumers (1995, p. 43). These consumers feel over-served by the traditional department store; they cannot adopt mainstream shopping behaviours and, thus, prefer not to shop at all (Christensen & Raynor 2003, pp. 10-12). By creating the environment in which shopping is simpler but more exciting, H&M bring these unique group of consumers back to the market (Christensen & Raynor 2003, pp. 10-12). There is one key difference between the attitude-bounded behaviour theory and the disruptive-technology theory. The former claims that consumers change their behaviour as related to one area of their activities – e.g. apparel shopping – while adhering to mainstream behaviours in other areas: e.g. grocery or house-ware shopping (Kumar 1997, p. 834). Contrary to that, the disruptive-technology theory argues that consumers attracted by H&M belong to a genially different segment and display the same behaviourist patterns regardless of the product/service, for which they shop (Christensen & Raynor 2003, pp. 10-12). The empirical support of one or the other claim will establish the validity of the respective theory.Study Problem Statement
The problem addressed in this study is the lack of theoretical consensus on the deviations in the behaviour of H&M customers. The researcher believes that this study has significant implications in the field of management as it investigates the validity of Kumar's argument (1997, p. 834). The study explores whether H&M teaches its customers to adopt new attitudes and behaviours or whether Kumar's observation is a market illusion and H&M is attracting consumers characterized by existing shopping-behaviour patterns. If proven right, either of the hypotheses would influence both the theory and practice of strategic marketing in the retail sector.III. METHOD
Purpose Statement
The purpose of this study was to explore if the behaviour of H&M customers is different from the behaviour of department store customers when shopping for goods other than clothes.Research Questions
1. Does the shopping behaviour of H&M customers differ from the behaviour of department-store consumers when shopping for beauty products? 2. Does the shopping behaviour of H&M customers differ from the behaviour of department-store consumers when shopping for home dA©cor and house-wear? 3. Does the shopping behaviour of H&M customers differ from the behaviour of department-store consumers when shopping for clothes? 4. Does the shopping behaviour of H&M customers differ from the behaviour of department-store consumers when shopping for grocery and food?Study Design, Procedures, and Timelines
The data collection for this study was performed with a help of a paper-based survey. The researcher approached potential respondents while they were shopping at H&M and a selected department store and invited them to participate in the survey. Those who agreed were given the survey, a pen, and the necessary instructions. While attempting to increase the likelihood of the respondents taking the survey, the researcher used an attractive design for the questionnaire (Robson 1993, pp. 5-15). The data collection stage of the study lasted for one week: March 9-15, 2009. It was followed by two weeks of data coding and four more weeks of data analysis. The choice in favour of a paper-based face-to-face survey was dictated by two factors. First, the populations were physically available for a face-to-face survey while the access to the populations' contact information would be restricted (Alreck & Settle 2004, pp. 15-22). Second, this method was highly effective in terms of the outcome for the monetary and time inputs (Miles & Huberman 1994, p. 28).Population and Sample
The population under study was all the consumers, who shopped at H&M regardless of the frequency of their shopping trips or the amount spent on purchases. The population was inclusive of both genders and all age groups. The shoppers at one selected department store served as a control population for the purposes of comparative analysis of the studied population's behaviour patterns. This study was categorized as marketing rather than empirical; therefore, the size of the sample was estimated at 160 participants. This number allowed the researcher to expect a liberal degree of confidence at 80% and a relatively large sampling error of 10% (Birchall, https://www.marketresearchworld.net/index.php?option=com_content&task=view&id=23&Itemid=1). The researcher chose a convenience sampling technique: the participants of the study were recruited among the volunteers, who shopped at H&M and the department store during the week of March 9-15 and who agreed to take the survey (Miles & Huberman 1994, p. 28). By selecting the research sites – H&M and the department store – the researcher attempted to ensure that the participants had the experience relevant to the study: they had shopped at both stores at least once (Creswell 2007, p. 128).Data Collection Instrument
All the participants of the study were offered to take the same questionnaire regardless of their shopping destination. The questionnaire consisted of two parts: theme questions and demographic questions. There were four themes: shopping for cloth, beauty products, grocery, and housekeeping products. The instrument had two identical questions for each theme: 1) how often do you shop for a theme product during an average month and 2) on average, what amount do you spend on a shopping trip. The answers to the first question were measured on a four-point Likert-type scale: 1 (once or twice a month), 2 (once a week), 3 (two-three times a week), 4 (every day). The second question was open-ended. The group of demographic questions inquired on the respondents' gender, age, employment status, and combined household income. The respondents' gender was defined as male or female. The questions about age and household income were open-ended. The employment-status question had six possible answers: employed part-time, employed full-time, unemployed, retired, student, and housekeeper.Study Limitations
Despite of the researcher's desire to conduct an extensive investigation, the study had to remain within a realistic framework established by its purposes as well as external forces. The problem of access to the population affected the study's data collection activities by limiting the variability of research sites (Homan 2001, p. 329). The data was collected at one H&M outlet and one department store, which permitted the surveying of their customers (Wanat 2008, p. 195). In addition, the research was limited by internal boundaries set by the researcher (Counelis 2000, p. 58). Considering the resources assigned to this study, the researcher limited the geographic location of the research populations to one specific city and the period of data collection to one week.Ethical Concerns
Several ethical concerns had to be addressed as the study progressed. First, the author had to ensure the anonymity of the participants (American Psychologist 1992, p. 1598). Any unfavourable remarks might have resulted in the disruption of the customer's relationships with H&M or the participating department store. Therefore, the researcher restrained from collecting any identifiable information and reported the data in aggregate (American Psychologist 1992, p. 1598). Next, the author had to preserve the confidentiality of the participating department store to prevent the negative effect of the consumers' statements and the findings of the study on the store's business reputation (American Psychologist 1992, pp. 1599-1600). The author omitted the name of the store throughout the study report The next ethical area was the voluntary participation in the study (American Psychologist 1992, pp. 1599-1600). To ensure the participants' voluntarism, prior to giving the respondents the questionnaire, the researcher explained to them their right to refuse to answer any question or to exit the study at any point (American Psychologist 1992, pp. 1599-1600). Finally, the study was based on the assumption that H&M was a successful retailer and the goal of the researcher was to confirm that assumption. Nevertheless, the researcher strived to provide unbiased data, which could be reliably applied in the field of marketing and management (Onwuegbuzie 2000, p.21).IV. FINDINGS
The goal of the study was to contribute to reducing the theoretical gap in understanding consumer behaviour. The aims and expected outcomes of the study justified the researcher's choice to analyse the data from the grounded theory perspective (Creswell 2007, p. 10). This approach is used to explore large groups of people and to develop an abstract framework, which can be expanded into a theory (Creswell 2007, p. 10). The data analysis was performed as a series of t-tests comparing H&M and department store shoppers in each theme question separately (Field 2005, p. 125). The relationships between the respondents' demographics and their shopping behaviour were analysed through three types of correlations: for both respondents groups together, H&M consumers separately, and department store consumers separately (Field 2005, p. 107). There were no statistically significant difference between H&M and department store consumers on their behaviour related to shopping for grocery/food and home dA©cor. However, the behaviour of these two groups was statistically significantly different when they shopped for clothes and beauty products (p<0.5). H&M consumers were shopping almost twice more often than the department store customers; moreover, the former spend more per each shopping trip than the latter. There were no statistically significant correlation between the respondents' demographics and their shopping behaviour for any of the groups. Therefore, it is reasonable to conclude that the difference in shopping behaviour was not due to demographic differences within the groups of respondents. Overall, H&M customers had proven to deviate from the mainstream shopping behaviours when they shop for clothes and beauty products but they continue to adhere to the traditional behaviours when shopping for other types of goods. Considering similar roles of beauty products and clothes in peoples' life, the findings support Kumar's theory that shopping behaviour can be taught to the consumers by their retailers.V. DISCUSSION
This research is subject to several threats to reliability and validity. First, by choosing to study a convenience sample and by limiting the number/location of sites, the researcher introduced a selection bias (Onwuegbuzie 2000, p.17). This threat is induced by convenience and volunteer samples, which members might not be representative of the overall populations (Onwuegbuzie 2000, p.17). Related to the selection bias, the convenience sample causes low generalizability of the findings (Onwuegbuzie 2000, p.30). This threat is common to most of the studies and is often a trade-off for the freedom from researcher bias (Onwuegbuzie 2000, p.30). Next, the results might be affected by the matching bias (Onwuegbuzie 2000, p.22). The researcher chose the study and control populations based on the assumption of existing similarities between the two. However, this assumption might be wrong; and the populations could be genuinely different. Finally, the study could be a subject to temporal validity in a case if the consumers' preference of H&M was due to the effect of economic downturn (Onwuegbuzie 2000, p.31). To evaluate this threat, the researcher would need to replicate the study after the current recession is over. Despite the threats listed above, this study has a practical utility because it contributes to bridging the theoretical gap in understanding the deviations of H&M consumers' behaviour (Kumar 1997, p. 834). However, to "result in an actual addition to the field of knowledge", the study has to be replicated on a different (random) sample and in a more favourable economic context (Gordon & Brown 2004, p. 3).VI. CONCLUSION
In conclusion, effective relationships with the customers are a strong competitive advantage of a retailer because they allow a company to obtain first-hand information about the changes in the consumers' needs. They help the company modify its offer in a timely manner and more successfully than its uninformed competitors. The outcomes of this study confirm the theory suggesting that the company could be an active agent in its relationships with the customers. Moreover, it can educate its customers and induce their behaviour-change instead of passively reacting to the change that happens naturally. This is a revolutionary thought, which can transform the balance of powers in retailing and lead to dramatic changes in the field of strategic marketing. However, even though this study confirms the hypothesis, suggested by the theory, the research findings are subject to several threats challenging their validity. Therefore, there is a need to conduct a longitudinal study and replicate the survey several times with several different populations. If this series of surveys produces positive outcomes, the theory can be transformed into practical models applicable to strategic marketing.VII. BIBLIOGRAPHY
Alreck, P. L. & Settle, R. B. (2004, 3rd ed.) The survey research handbook. Irwin: McGraw-Hill. Bass, F. M. and Talarzyk, W. W. (1972) "An Attitude Model for the Study of Brand Preference", Journal of Marketing Research, vol. 9 Issue 1, pp. 93-96. Bergenhenegouwen, G. J. et al. (1986) A« Competence Development – A Challenge for HRM Professionals: Core Competences of Organizations as Guidelines for the Development of Employees", Journal of European Industrial Training, vol. 20, No. 9, pp. 29-35. Birchall, J. "Sampling and Samples Written by Joan Birchall from Rainbow Research". Retrieved on April 28, 2009, from https://www.marketresearchworld.net/index.php?option=com_content&task=view&id=23&Itemid=1 Bower, J. L. and Christensen, C. M. (1995) "Disruptive Technologies: Catching the Wave", Harvard Business Review, vol. 73, No. 1, pp. 43-53. Capell, K. and Beucke, D. (2005, June 6) "Attention Frugal Fashionistas", Business Week, Issue 3936, p. 16. Christensen, C. M. and Raynor, M. E. (2003) The Innovator's Solution: Creating and Sustaining Successful Growth. New York: Harvard Business School Press. Counelis, J. S. (2000) "Generic Research Design in the Study of Education: A Systemic Typology", Systems Research and Behavioral Science, No. 17, pp. 51-63. Creswell, J. W. (2007) Qualitative Inquiry and Research Design. Thousand Oaks: Sage Publications. Datamonitor (2008, September 1) "H&M Hennes and Mauritz: Company Profile". London: Charles House. "Ethical Principles of Psychologists and Code of Conduct" (1992) American Psychologist, vol. 47, December, pp. 1597-1611. Field, A. (2005) Discovering Statistics Using SPSS. London: Sage. Gordon, W. A. and Brown, M. (2004) "Building Research Capacity: the Role of Partnerships". Retrieved on April 28, 2009, from https://www.foundationforpmr.org/summit/Gordon%20Partnerships%20Paper.doc. Hamel, G. and Prahalad, C. K. (1994) Competing for the Future. Boston: Harvard Business School Press. Homan, R. (2001) "The Principle of Assumed Consent: The Ethics of Gatekeeping", Journal of Philosophy of Education, vol. 35, No. 3, pp. 329-343. Kroll, B. (2004) "Designer Dresses for Less", Time, vol. 164, Issue 4, p. 71. Kumar, N. (1997) "The Revolution in Retailing: from Market Driven to Market Driving", Long Range Planning, vol. 30, No. 6, pp. 830-835. Miles, M. and Huberman, A. M. (1994) Qualitative Data Analysis. Thousand Oaks: Sage. Onwuegbuzie, A. J. (2000) "Expanding the Framework of Internal and External Validity in Quantitative Research", Paper presented at the annual meeting of the Association for the Advancement of Educational Research (AAER), Ponte Vedra, FL, November 21, pp. 1-61. Petts, N. (1997) "Building Growth on Core Competences: A Practical Approach", Long Range Planning, vol. 30, No. 4, pp. 551-561. Raugust, K. (2004) "Hennes and Mauritz", Advertising Age, vol. 75, Issue 44, p. S10. Robson C. (1993) Real World Research: a Resource for Social Scientists and Practitioner-Researchers, Oxford, UK; Cambridge, USA: Blackwell. Smith, R. A. and Lux, D. S (1993) "Historical Method in Consumer Research: Developing Causal Explanations of Change", Journal of Consumer Research, vol. 19, pp. 595-610. Wanat, C. L. (2008) "Getting Past the Gatekeepers: the Difference between Access and Cooperation in Public School Research", Field Methods, vol. 20, Issue 2, May, pp. 195-199. Zimmerman, A. (2009, April 21) "Do Discount Designer Duds Make The Grade?" Wall Street Journal Eastern Edition, vol. 253, Issue 92, pp. D1-D7.Cite this page
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Analyse the Business Model of Supermarket Chain Aldi
Analyse the business model of supermarket chain Aldi
Introduction
Aldi, a German supermarket chain, entered the UK market in 1990 and now operates a network of over 500 stores (Aldi, 2014). The competitive landscape for UK supermarkets is fierce (Sandberg, 2013) with many different strategies being adopted, each aligned to a different segment of the market. Aldi focuses on delivering a basic, value for money shopping experience (Naslund, 2013). Such a cost leadership strategy and lower cost structure enables discount companies to enter and take a larger percentage share of the market (Harvard Business Review, 2005). As consumers focus on saving money in times of recession, the business model used by Aldi presents an opportunity to save money on weekly food shopping whilst still buying healthy food. Supermarkets following a low cost leadership strategy often stock the same product as their rivals but deliver it under a different service model (Harvard Business Review, 2005). Smaller companies, such as Aldi, do not spend as much time publicising their plans or marketing their products, this can create competitive advantage as they are less exposed to public opinion. This leads to an information gap, however it also allows them to develop and grow quickly whilst adapting to the changing trends (Skordili, 2013). The increased demand for cheaper food is better served by discount retailers. It also removes a significant cost associated with in store branding, technology and functionality, enabling the same or similar products to be offered cheaper. The external business environment is made up of two elements; the general macro environment which takes a wide lens view of the environment in which the business operates and the micro view which focuses on the specific industry or sector in which the business operates (McLean, 2005). The external environment refers to events or trends, which are relevant to the business, as well as being uncontrollable by the business. The external environment directly contributes to the success or failure of the business, for example in 2010 Aldi left the marketplace in Greece citing unfavourable external factors as the reason (Skordili, 2013). By understanding the external environment leaders make better decisions (Kefalas, 1981); knowing the likely impact of that decision and knowing what might affect the organisation in the future. The external business environment is changing faster than ever (Mason, 2007) and therefore being able to understand, anticipate and adapt to changing trends is a key leadership skill (Kotter, 1996). This essay presents an analysis of the external business environment in which Aldi UK operates. Analysis of the general macro environment using PEST before a more focused analysis of the retail supermarket sector is conducted using Porter's Five Forces Model in order to draw conclusions.The External Business Environment
Stacey (2011) explains that the dynamic of this macro external market place can be categorised into a number of headings for the purpose of analysis. PEST allows a business to periodically scan the environment to anticipate future trends as well as identify current challenges. PEST scanning splits the environment into 4 key factors: Political, Economic, Social and Technology. This is a commonly used, simple model which allows the general market to be scanned. The micro external environment was described by Porter as being concerned with getting raw materials to consumers, suppliers to buyers and how the connection are made in a competitive way (Linstead, Fulop and Lilley, 2004). In this model the specific sector or market in which the organisation operates is analysed, this allows the specific market challenges within that sector to be understood for that organisation. To undertake this micro level analysis Porter created a model called the Five Forces which looks at the interaction between the forces. At the heart of the model is 'competitive rivalry' which is impacted by 4 other forces:- Power of suppliers
- Threat of new entrants
- Power of customers
- Threat of substitutes
PEST Analysis
There are a number of factors which Aldi need to consider as part of their PEST analysis of the UK marketplace.The Political Environment
- The UK elections in May 2015 may result in a change of government. A new government may impose new legislation, tax implications and market conditions. Furthermore, with some of the parties pledging a European referendum as part of their campaign, such a move could lead to the UK leaving the European Union which, as a German company, may present a further risk which will need to be addressed.
- Employment legislation continues to change on a regular basis, 2015 has already seen significant changes with the introduction of shared parental leave (ACAS, 2015). There are continued discussions around the extension of paternity leave. Such changes have an economic impact on the business but also create risk that staff may take a case to tribunal.
- It is proposed that zero-hour contracts will be abolished in 2015 (ACAS, 2015), as a supermarket it is likely that seasonal staffing is used in busy periods such as Christmas. Without zero hour contracts this could become harder to staff and more expensive.
- As a European company, EU legislation is also a factor to consider as any change at a EU level will also have a direct impact on the organisation.
The Economic Environment
- As the UK economy moves out of recession, there could be a change of buying behaviour from low-cost stores back to mainstream supermarkets. This shift could have a detrimental effect on market share. Aldi may need to consider how to compete in such conditions, if at all.
- During times of financial pressure consumers turn to cheaper food suppliers (Skordili, 2013), which has created an ideal market for Aldi in the UK and has contributed to its growth.
- This may in turn change demand, supply and fundamentally affect pricing creating instability in the company as customers go back to higher priced competitors.
- A change in government may also create a different in tax requirements, which could become more costly.
- Success is created through a finely tuned supply chain, with distribution and logistical capability becoming one of the key competitive weapons available (Sandberg, 2013). Aldi operates a model which has created success in Germany where the main point of competition is price, with consumers preferring lower levels of service and a narrower choice to enable a lower price (Fernie and Arnold, 2002).
The Social Environment
- Discount chains could be met with a degree of social stigma, as the economy rises individuals may want to shop at more expensive leading names such as Tesco, Sainsbury's or even Waitrose.
- The UK has an aging population (Cracknell, 2010), an older workforce may be more costly in terms of sickness and present further problems for employers. With the introduction of auto-enrolment for pension schemes this adds a further cost to the business as employers will have to contribute to employees pensions.
- As competitors such as Asda, Tesco and Sainsbury's introduce a more diverse range of products including clothing, non food items, opticians, chemists, travel agencies and more which could see a change of buying behaviour.
- Competitors also offer a 24 hour opening service, as the way people work becomes more diverse over time will this see a change in buying habits. Aldi may need to consider this strategy as a way to maintain market share. This will carry increased costs both in terms of overheads and staffing costs.
- There have been a number of international companies highlighted in the press due to their accounting practice and what this means in terms of where they pay their tax (Barford and Holt, 2013) This could lead to a change in favour by UK consumers who may feel increased loyalty to UK established firms.
- By operating a narrower product range, Aldi has moved away from abundance of choice and created a streamlined shopping experience. Busy family life may benefit from this approach of making the shopping process quicker and more focused.
The Technological Environment
- Online and mobile shopping is becoming increasingly popular (Butler, 2013), currently not offered by Aldi this may be a strategy that needs to be considered. This may also need to be enhanced with other technology led initiatives such as in-store media, self-checkout and access to Wifi.
- Technological infrastructures are a key component of the supply chain of the modern business, intelligent stock management and supply is key to success.
- Point of sale systems and checkout facilities are significantly different in larger stores, Aldi operates a traditional conveyor belt approach with no options for self service. Enhanced service from competitors such as offering to pack up bags for consumers creates a different in store experience however the average time per person will increase.
Five Forces Analysis
Within the grocery sector in the UK there is fierce competitive rivalry. A micro analysis is presented below:Threat of New Entrants – Low
The threat of new entrants is relatively low due to the cost of entry and the competitive environments.- The cost requirement for a new brand to establish itself in the market is high. Building a large retail estate network coupled with stock levels will take significant investment.
- Threat of Substitute Products – Medium / HighBy offering a narrow product range, Aldi remains agile to changing trends. Products can be changed quickly in the event of changing market trends.
- Aldi operates relatively small stores therefore limiting the number of products that can be offered. Substituted could therefore be offered by larger stores, with more space to offer an increased product range.
The Bargaining Power of Suppliers - Low
- Supermarkets have greater bargaining power than suppliers, often pushing for discounts and favourable terms due to the scale of buying power (Proud, 2015).
- Suppliers may favour larger orders from the bigger competitors, therefore are less willing to offer discounts and offers to the Aldi chain. However Aldi still operates a chain of 500 stores so has a degree of buying power in its own right. It also has the additional power to buy across multiple countries in order to get favourable terms.
The Bargaining Power of Buyers – High
- Buyers can make choices about which supermarket to use very easily based on offers, availability of items and ease of access.
- Aldi does not offer a loyalty scheme so there is no additional incentive to return week on week.
Rivalry among Existing Firms – High
- The sector is subject to intense rivalry with a focus on cost. Many brands offer to match prices of their competitors and undertake price comparison activities. This fierce rivalry leads to aggressive marketing campaigns with each player trying to win market share from the other. This increase competitive activity creates additional costs through advertising and marketing as well as leading to reduced prices (Linstead, Fulop and Lilley, 2004.
- Aldi operates on a low level of fixed costs in order to deliver lower priced products, with competitors also targeting this lower price point this presents a risk to Aldi if they are not able or willing to invest in advertising to address such activity.
Conclusions
Aldi operates in a highly competitive market place, both the macro and micro perspectives show challenging market conditions. Whilst new entrants are unlikely there is a clear need to explore changing customer buying trends and how interactive routes to market contribute to customer loyalty. With buying patterns moving towards 24 hour shopping, online marketing and self-service, consideration needs to be made around whether this needs to be included in Aldi's long term strategy. The UK election in May 2015 presents the most immediate challenge, particularly if that results in a change of government and possible European referendum. Should the UK leave the EU this is likely to present Aldi with a financial challenge as well as imposing possible import restrictions for products. Equally, such a move could also see buying trends move towards British companies. Aldi continues to thrive in the market, however a change in the disposable income of its customers may also change buying habits. Focus on retention of market share needs to be integrated into the strategic sustainability plans, particularly in the absence of any loyalty schemes. Continual development and alignment to its target market is critically important to maintain market share and ultimately survive. Consideration needs to be made around what consumers want from their experience. By undertaking market research and focus groups Aldi will be able to understand what is working and what may be useful to start to consider. In a world where change is the norm it should be expected that all businesses will have to adapt and become more agile to some degree.References:
ACAS (2015). www.acas.org Aldi (2014). www.aldisuppliers.co.uk Auyama, Y. (2007). Oligopoly and the Structural Paradox of Retail TNCs: an assessment of Carrefour and Walmart in Japan. Journal of Economic Geography. 7. P471-490. Barford, V. and Holt, G. (2013). Google, Amazon, Starbucks: The rise of tax shaming. BBC News (retrieved from https://www.bbc.co.uk/news/magazine-20560359) Butler, S. (2013). Online and Upward: UK internet shopping hits record high. The Guardian (retrieved from https://www.theguardian.com/business/2013/dec/17/online-internet-shopping-high-street-record) Cracknell, R. (2010). The Ageing Population. Key Issues for the New Parliament. House of Parliament Library Research. (retrieved from https://www.parliament.uk/documents/commons/lib/research/key_issues/Key-Issues-The-ageing-population2007.pdf) Fernie, J. and Arnold, S. (2002). Walmart in Europe; prospects for Germany, the UK and France. International Journal of Retail and Distribution Management. 30 (2). P 92–102. Harvard Business Review (2005). Strategy; create and implement the best strategy for your business. Boston, MA. Kefalas, A. G. (1981). Analysing Changes in the External Business Environment. Planning Review. 9 (4). P26-46. Kotter, J. P. (1996). Kill Complacency. Fortune. 5. P 122-4. Linstead, S., Fulop, L. and Lilley, S. (2004). Management and Organisation; a critical text. Palgrave, New York. NY. McLean, J. (2005). Management Techniques and Theories. British Journal of Administrative Management. 48. 17-17. Mason, R. B. (2007). The External Environment Effect on Management and Strategy. Management Decisions. 45 (1). P10-28. Naslund, D. (2013). Keeping the Customer (relatively) satisfied. Strategic Direction. 30 (3). P13-15. Proud, A. (2015). The decline of Tesco is a good, old-fashioned morality tale. The Guardian. (retrieved from https://www.telegraph.co.uk/men/thinking-man/11351115/The-decline-of-Tesco-is-a-good-old-fashioned-morality-tale.html) Sandberg, E. (2013). Understanding logistics-based competition in retail; a business model approach. International Journal of Retail and Distribution Management. 41(3). P.176-188. Skordili, S. (2013). The Sjourn of Aldi in Greece. Journal of Business and Retail Management Research. 8 (1). Stacey, R.D. (2011). Strategic Management and Organisational Dynamics. Laureate Education Inc. London, England.Cite this page
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Systems Essay Example for College Students
Executive Summary
The company's profits are falling and there is a build-up of inventory within the production process. This report considers three management systems which could rectify the situation. Considering theory of constraints, just in time and programme evaluation and review technique, the report recommends that more information regarding the cause of the problems is undertaken, and a suitable programme of revaluation of the business processes is undertaken.Introduction
The role of management accounting in the organisation has become so much more that the reporting of the score to managers (Hansen, Mouritsen 2006). In the wake of the decline of Western Manufacturing and the relevance crisis of management accounting to modern business as outlined by Kaplan and Johnson in ‘Relevance Lost', the traditional cost accounting approach has been largely replaced by alternative methodologies (Kee, Schmidt 2000). The role of the management accounting in the modern firm is not only to report the score, but to seek to influence the score by using techniques and theoretical approaches to improve the business processes. As such it is important for managers to understand the use and usefulness of a variety of alternatives to traditional accounting approaches, especially traditional cost accounting and look to introduce other techniques which may have practical advantages for the firm (Dugdale, Jones 1998). There is no one size fits all approach which will work in any case and the application of cost accounting can and will always provide key information about how the business is doing in terms of its goals. Indeed many of the newer techniques focus on particular applications within industry and each of them has something to offer the firm in terms of improving the business processes (Plenert 1993). This report considers three approaches in the context of practical application to a range of common problems, problems which may be responsible for the inventory build-up of the firm in question and its declining profits. The approaches are the Theory of Constraints (TOC) and the attendant logic of Throughput Accounting (TA), Just in Tim Inventory Management (JIT) and wider implications to ‘Lean' manufacturing methodologies and the Program Evaluation and Review Technique framework (PERT). The report outlines the main features of these methodologies and the advantages and limitations of them with specific reference to their usefulness in a variety of practical situations. The report concludes that each of the methodologies has something to offer and that any management decision must be based on the goals and objectives of the company and its strategic direction.Theory of Constraints and Throughput Accounting
Developed by E.M. Goldratt as a response to the criticisms of traditional cost accounting, the TOC states that the traditional variable costs of Cost Accounting do not apply, or rather, they apply with less rigour in a modern management situation (Bragg 2007). In the past Labour was seen as a totally variable cost, workers would work to the management's discretion and short time and layoffs were dictated by the level of production need. Goldratt argued that this was no longer the case as changes to society and legislation had meant that the workforce was more of a fixed cost for the organisation (Wei, Liu et al. 2002). The TOC states that even though modern managers are still evaluated by labour use, such efficiencies can lead to decisions which harm the organisation rather than help optimise production. This criticism led Goldratt to develop the TOC as an alternative system, identifying ‘constraint' as a decision relevant concept in the service or production process (Watson, Blackstone et al. 2007). The central idea to TOC and TA is that each organisation has a specific goal (or a set of specific goals) which can be effected by decision making, better decision making leads to better completion of the goals (Linhares 2009). If one takes the normative assumption of a profit orientated organisation as the maximisation of the owner's wealth, then the ‘goal unit' will be the ‘throughput contribution' (TC) which is similar to the ‘total contribution' marginal costing (Hansen, Mouritsen 2006). The difference in TA is that ‘throughput contribution' is defined in the TOC as Sales (S), less total variable cost (TVC) which is he cost of raw materials (not labour). This is placed in the context of two further conceptual mechanisms, Investment (I), which refers to money tied up in the system in terms of inventory and work in progress, as well as with machinery and buildings and the like, the second is Operating Expense (OE) which is the money spent by the system on generating goal units, but not the cost of raw materials, so items such as utilities and wages (Davies, Mabin et al. 2005). This delineation of the costs of production and services allows the processes to be viewed in terms of a number of optimization questions. Typically firms need to ask themselves how throughput (TC) can be increased, how Investment (I) can be reduced and how Operating Expense (OE) can be reduced. These questions in turn will affect the Net Profit, Return on Investment, Productivity and Investment. Therefore it can be argued that the maximisation of throughput contribution is key to the maximisation of all of the above key performance indicators. The firm can seek to maximise TC by optimising a number of aspects of the production processes. There are five common steps associated with this process;- Identify the system constraints
- Exploit the system constraints
- Subordinate everything else to the decisions made
- Elevate the system's constraints
- Restart the process if a constraint has been broken
Just In Time (JIT)
JIT Inventory Management is one of a set of ‘Lean' manufacturing methodologies which has grown out of the Japanese Approach to management accounting (Abdul-Nour, Lambert et al. 1998). In particular much of modern JIT management is based on the Kanban system of Inventory management which is a part of the Toyota Production System (TPS) which is famous the world over for its efficiency and speed to market with new products (Houghton, Portougal 1997). JIT as a part of a Lean system relies upon the pull of the market rather than the push of production targets and generally states that investment in inventory, both in terms of raw materials and work in progress, also finished goods, represents a waste to the company (White, Prybutok 2001). JIT requires the accurate organisation of the production process in terms of both processes and components of production and finds a minimum level of stock holding at every level of the process. The original Kanban system was based around a set of two cards which accompanied an individual component through the production process. At each point where a component was removed from stock to be used in a process of manufacturing one of the cards would be returned to the previous process to alert that process that another was required. This meant that without the aid of sophisticated computers the TPS managed to cut its value of stock in the factory to a fraction of what it had been, requiring less investment of working capital, lower overheads in terms of storage and warehousing, and less risk of over production of any components or of finished goods (Abdul-Nour, Lambert et al. 1998). JIT is a system which has largely been adopted in many of the larger production facilities which have adopted ‘Lean' technology. These range from most car manufacturers to manufacturers of high technology. But there is growing evidence that it may be very useful in terms of the smaller manufacturer, and even the service industry, especially as the cost of raw materials is rising in the face of increased demand for core materials (Abdul-Nour, Lambert et al. 1998, Khan, Sarker 2002). JIT is difficult to implement and requires considerable investment in the production processes (Hansen, Mouritsen 2006, Houghton, Portougal 1997). It is impossible to implement JIT unless there has been a programme of business process redesign to allow such minimum stock levels to be held, and this can present a large investment cost in the firm which may or may not ultimately benefit from such an inventory management programme. JIT requires the firm to invest heavily in partnerships with suppliers as well and to evaluate the supply chain from almost every angle to prevent a total collapse of the production system (David, Eben-Chaime 2003). This is because there is little room for error in the process, if demand is poorly predicted and is higher than expected then the firm will run out of the raw materials of production and may lose custom (Kelle, Al-khateeb et al. 2003). If lower than predicted the firm will not have the capacity to store inventory (die to process redesign). Further if suppliers fail to deliver for any reason the process will come to an abrupt halt. JIT therefore requires a significant amount of managerial information from both the external market and the internal processes to get right and there have been many cases of difficult implementation, especially in smaller companies (Abdul-Nour, Lambert et al. 1998). Notwithstanding this there is a lot of evidence that with more and sophisticated modelling techniques from increasingly advanced technology, JIT systems are getting easier to implement (White, Prybutok 2001, Yasin, Small et al. 1997). Therefore as long as the systems are set up correctly there are major advantages in reducing the waste of inventory throughout the process of manufacturing. Because of its requirements, and making everything subordinate to the level of inventory, it is not applicable for JIT systems to be used in conjunction with the Theory of Constraints, as managers are unable to subordinate all decisions within the production process to a ‘bottleneck'. Therefore some would argue that JIT systems are less flexible, or certainly allow less flexibility that TOC does (Yasin, Small et al. 1997).Programme Evaluation and Review Technique (PERT)
Put simply a PERT map is a model of complex processes which occur to facilitate an outcome (Castro, Gómez et al. 2008). The PERT framework is very similar and often used in conjunction with a critical pathway diagram which shows the key processes involved in such an outcome (Mummolo 1997). PERT modelling makes a number of assumptions and has many conventions. In drafting a PERT chart the processes will be numbered in tens, to allow for further additions as the model grows. Further the model assumes that there is a linear relationship between the processes and therefore a number of key relationships (critical pathways) are determined (Cox 1995). These are often termed predecessor events and successor events. The PERT model deals with time in a number of ways giving an optimistic time and a pessimistic time for the completion of a process. It allows managers to view a project, task or process in a way which will help to maximise the efficiency of such a task in terms of a number of variables (Shipley, de Korvin et al. 1997). Implementation of PERT requires a significant investment of time and expertise and so can have an impact on the costs of an activity, which must be weighed with the advantages or benefits such analysis brings to the process redesign (Azaron, Katagiri et al. 2006). Often PERT is a useful way to implement ‘Lean' techniques of production as it allows the mapping of existing processes to look for ‘slack' in the system. But its complexity can also be a disadvantage in terms of the time it takes to complete and the risk of errors in the model having unintended consequences to any new or redesigned process (Azaron, Katagiri et al. 2006). PERT is most useful at outlining the dependencies of a process and the identification of the critical pathways which affect the outcomes of a process. Further the methodology allows for the identification of the benefits of early, late and slack starts or a process (Cox 1995). It is also a way of organising a large and complex amount of information I a way which is relatively easy to understand by non-specialist managers, and as such allows the input of many areas of speciality in the redesign process, some of which may not be heard in terms of purely operations or accounting systems such as JIT and TOC. Yet PERT can have a number of significant disadvantages when used. First and foremost is the possibility of thousands of critical and interrelated aspect of a singly process (Mummolo 1997). The time taken to map out all of them can be considerable and even if they are all mapped out the subtle interrelationships are often difficult to place into such a restrictive framework. It is a given that in real life the process will not always work in the way in which it is modelled, and small changes across a few key aspects can vastly change the outcomes and behaviours of many of the assumptions behind PERT analysis. PERT is very useful in terms of initial investigation of a process or event, but it takes both art and science to appreciate how something will work in the real world situations of manufacturing or service industries. In this respect PERT should be seen only as an aid to understanding and not a ‘right' answer (Castro, Gómez et al. 2008).Conclusions
The three managerial tools which have been outlined in this report are all powerful providers of decision relevant information. Further all three allow the management to view not only the outcomes at the current time, but also to make significant changes to the processes of production or provision of services which can dramatically improve performance. The case given points to both poor profits and returns on investment and poor inventory management as problems for the company, as such it is important before any decisions are made about the implementation of new management practices, as to why these are occurring. If the drop in profits are due to a slackening of demand, a change to JIT and the attendant redesign of the business along ‘Lean' philosophy may be significantly advantageous, as it will allow tight control over inventory and allow the company to respond to the needs of the market more effectively. By removing overproduction and inventory as wastes to the business, profits would be expected to recover, as long as the business is still a going concern (Hansen, Mouritsen 2006). If, however, the company still has similar levels of demand for its products then the company will need to investigate where the problems in the existing processes are. TOC would be one way of looking at this problem, so too would JIT. It is felt if the levels of demand are broadly similar it may well be worth the management of the company undertaking some analysis of the business processes with a view to coming to a decision about the suitability of either TOC or JIT, but it must be appreciated that each of these approaches carry some significant costs and risk if the analysis is not well thought out. PERT analysis will map out the internal process and identify the various problems with slack and time, but it does not look in much detail at costs. Other methodologies the company may like to consider as a part of any process redesign are the Activity Based approaches to costing, management and budgeting, these fit well with JIT management, but not so well with TOC. TOC has significant limitations because it subordinates everything to the constraint, and as new constraints appear the process has to be restarted from scratch. This criticism also gives it the flexibility that the other systems mentioned herein do not possess. This report recommends that managers identify the reason for the falling profits, and look to find out why inventory is building up (are these a symptom of slack demand, or of inefficiencies within the business). Based on these findings a decision as to what further systems are needed can be made.References
Abdul-Nour, G., Lambert, S. and Drolet, J., 1998. Adaptation of jit phylosophy and kanban technique to a small-sized manufacturing firm; a project management approach. Computers & Industrial Engineering, 35(3-4), pp. 419-422. Azaron, A., Katagiri, H., Sakawa, M., Kato, K. and Memarianai, A., 2006. A multi-objective resource allocation problem in PERT networks. European Journal of Operational Research, 172(3), pp. 838-854. Bragg, S.M., 2007. Throughput accounting: a guide to constraint management. Wiley. Castro, J., Gomez, D. and Tejada, J., 2008. A rule for slack allocation proportional to the duration in a PERT network. European Journal of Operational Research, 187(2), pp. 556-570. Cox, M., 1995. Simple normal approximation to the completion time distribution for a PERT network. International Journal of Project Management, 13(4), pp. 265-270. David, I. and Eben-Chaime, M., 2003. How far should JIT vendor–buyer relationships go? International Journal of Production Economics, 81-82, pp. 361-368. Davies, J., Mabin, V.J. and Balderstone, S.J., 2005. The theory of constraints: a methodology apart?—a comparison with selected OR/MS methodologies. Omega, 33(6), pp. 506-524. Dugdale, D. and Jones, T.C., 1998. Throughout Accounting: Transforming Practices?, The British Accounting Review, 30(3), pp. 203-220. Hansen, A. and Mouritsen, J., 2006. Management Accounting and Operations Management: Understanding the Challenges from Integrated Manufacturing. In: Christopher S. Chapman, Anthony G. Hopwood and Michael D.Sheilds, ed, Handbooks of Management Accounting Research. Elsevier, pp. 729-752. Houghton, E. and Portougal, V., 1997. Trade-offs in JIT production planning for multi-stage systems: balancing work-load variations and WIP inventories. International Transactions in Operational Research, 4(5-6), pp. 315-326. Kee, R. and Schmidt, C., 2000. A comparative analysis of utilizing activity-based costing and the theory of constraints for making product-mix decisions. International Journal of Production Economics, 63(1), pp. 1-17. Kelle, P., Al-Khateeb, F. and Anders Miller, P., 2003. Partnership and negotiation support by joint optimal ordering/setup policies for JIT. International Journal of Production Economics, 81-82, pp. 431-441. Khan, L.R. and Sarker, R.A., 2002. An optimal batch size for a JIT manufacturing system. Computers & Industrial Engineering, 42(2-4), pp. 127-136. Linhares, A., 2009. Theory of constraints and the combinatorial complexity of the product-mix decision. International Journal of Production Economics, 121(1), pp. 121-129. Mummolo, G., 1997. Measuring uncertainty and criticality in network planning by PERT-path technique. International Journal of Project Management, 15(6), pp. 377-387. Plenert, G., 1993. Optimizing theory of constraints when multiple constrained resources exist. European Journal of Operational Research, 70(1), pp. 126-133. Rand, G.K., 2000. Critical chain: the theory of constraints applied to project management. International Journal of Project Management, 18(3), pp. 173-177. Shipley, M.F., De Korvin, A. and Omer, K., 1997. Bifpet methodology versus PERT in project management: fuzzy probability instead of the beta distribution. Journal of Engineering and Technology Management, 14(1), pp. 49-65. Watson, K.J., Blackstone, J.H. and Gardiner, S.C., 2007. The evolution of a management philosophy: The theory of constraints. Journal of Operations Management, 25(2), pp. 387-402. Wei, C., Liu, P. and Tsai, Y., 2002. Resource-constrained project management using enhanced theory of constraint. International Journal of Project Management, 20(7), pp. 561-567. White, R.E. and Prybutok, V., 2001. The relationship between JIT practices and type of production system. Omega, 29(2), pp. 113-124. Yasin, M.M., Small, M. and WAFA, M.A., 1997. An empirical investigation of JIT effectiveness: an organizational perspective. Omega, 25(4), pp. 461-471.Cite this page
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Analysis of Caterpillar Inc.’s International Business Strategy: Accounting Essay Example
Caterpillar’s International Strategy
The domain of international business theory contains an overwhelming array of perspectives and dimensions. International business (IB) definitions and assumptions are as diverse and ambiguous as their sources. Approaches to IB have established the fundamental perspectives as being global or organisational, but the content of these areas are immense.
The development of the global approach, or more correctly labelled as ‘macro’ (Rugman and Hodgetts 2000. pp. 24), has recently evolved in the 1990’s as a result of the mixed organisational orientated approaches, otherwise labelled as ‘micro’. This discussion takes the form of analysing Caterpillar in the international business arena by highlighting issues and theories that relate initially to the wider macro environment, then specifically towards Caterpillar as an organisation. The selected definition of IB for the basis of this discussion has been taken from an opening statement. This being ‘transactions taking place across national boarders’ (Rugman and Hodgetts 2000 pp. 5). This simple statement is considered sufficient to incorporate its entirety, however the recognition of the multi dimensional perspectives and their interrelatedness needs to be comprehended. The aim of this discussion is to explain the international strategy of Caterpillar by using its context as a platform for applying relevant literature.
Caterpillar history
For clarity reasons it is considered necessary to offer a brief introduction to Caterpillar. They have been established in the construction equipment industry for over 75 years and recorded $20.45 billion turnover in 2001 (annual report 2001). Their main products are divided as machinery with 58% of sales, engines with 33%, and financial products with 9%. The mission statement of Caterpillar is to ‘be the global leader in customer value’; this clearly indicates the attention to a high quality of service as being their competitive edge. This service is integrated through a sophisticated network of 1840 locations across all six continents, of these; Caterpillar has foreign direct investment (FDI) in 255 locations.
The corporate strategy for the future is to bolster their leadership in the market through initiatives labelled by Data monitor (2003) and the annual report (2001) as being ‘profitable growth, championing continuous quality improvement, aggressively reducing costs, and developing an integrated e-business’. In attempting to understand the reality of Caterpillar’s strategy, theories are applied to offer explanations behind the corporate publishing’s. The critical success factors associated with Caterpillar are primarily their h3 brand; this is then supported by network and service capabilities that represent reliability and consistency. Caterpillar is also renowned for product innovation; they have continually innovated which has contributed to the brand and reputation. The international market responds to positive brand vales because the nature of the industry requires trust and relationships. The macro factors present are unlimited in the current dynamic world but the important perspectives are structured as political, economic, technological and social. The elements of these perspectives are selected according to the importance for Caterpillar; therefore they are discussed in this context with reference to relevant literature. The political climate is continuously being developed and negotiated amongst the nationalities that exercise power. The current instabilities are dominated by the differences in opinion over the Palestine conflict and the Iraqi situation. As Caterpillar is active across the globe, its operations would need to be sensitively applied so that the local governments are appreciated.
The situation of Caterpillar is slightly precarious due to the fact that in political terms, the Americans are seen as the bullying nation, which is a mentality that ideally Caterpillar would like to distance themselves from. On the other hand, the American political objective may provide an opportunity as reconstruction and other Caterpillar products may experience an increase in demand as a result of the speculated war (eg. tank engines and construction products). This circumstance for Caterpillar represents a relation’s nightmare because in the home country it would need to communicate support in line with the public opinion, and in the host countries it may benefit from addressing the local perspective. E.g. the activities in China would be adjusted as to address the sensitive issues to ensure sustainability, rather than inhibiting ill feelings from enforcing the ‘American way’. Global political situations are important to Caterpillar because they could gain first mover advantage by moving into recently opened markets such as China. The extent that a region is privatised or Lasses-faire is of interest to Caterpillar because it would aid the process of negotiating a relationship. It would be beneficial for Caterpillar to tailor management to either foreign governments or foreign organisations. IB massively influences the macroeconomic environment. The recent conception is that IB is predominately concentrated around three regions rather than integrating the world.
This can be seen through the development of trade blocs that encourages IB amongst its members. The most significant research into this economic environment highlights the triad perspective as being dominant. The triad perspective as explained by Rugman (2001) states that the world economy and FDI is based around Europe, America and Japan, this also extends to FDI clusters, namely Eastern Europe, Latin America and the Pacific rim, that are supported by the dominant triad member. The evolution of this economic environment has matured into a three way economic power base that contributes significantly to the adopted international strategy.
The conclusions drawn from Rugman’s (2001) research appear to dismiss the argument of a global strategy because an organisation like Caterpillar would only have to accommodate the triad perspectives as opposed to incorporating worldwide responsiveness. The analysis of the macroeconomic environment also includes a consideration of the currency markets, and in particular the value of the US dollar against Caterpillars large foreign investments. Caterpillar’s largest FDI is in Japan; therefore the continual decline in the economy influenced the strategic decision to operate financially in the Japanese market instead of exposing themselves to exchange rate risk. In theoretical terms this strategic decision is known as ‘currency diversification’ (Rugman & Hogetts 2000 pp. 203). On the other hand Caterpillar has a favourable impact from the sales in other currencies, primarily trading with Euros and the Australian Dollar against the weaker US Dollar. The macro social issues relevant to Caterpillar are identified as originating from the animosity felt by the east towards the west. These issues include the resistance of the east in adopting the ‘western way’, this then extends into the business sector where an international business strategy involves a high degree of managing through different social contexts. This is supported by Gesteland (1999 pp. 27) who demonstrates the concept of ‘deal first or relationship first’. A relevant example of this in terms of Caterpillar is highlighted by Peppas (2002. pp. 52), which suggests that ‘differences were found in terms of attitude towards a code of ethics’. Caterpillar places a heavy bias towards its ‘code of conduct’, but is this sufficient to address social issues in international business. At present these publications are not enough, as pointed out by Mokhiber and Weissman (2002 pp. 12). This opinion labelled Caterpillar as a ‘bad apple’ because its ‘D-9 bulldozer is used by Israeli military to carry out its programme of ‘home destruction’, this is directly inconsistent with the ‘code of conduct’ (2000 pp. 2) which states that it ‘uses our strength and resources to improve, and in some cases rebuild, the lives of our neighbours’. Another important social issue involves the rate of investment into the developing world. The recent trend has been to transfer manufacturing to developing countries, which has stimulated construction and booming economies.
This suggests that the international market place is dynamic and evolving, which should influence Caterpillar to adapt in emerging markets and control in mature ones. This idea is also interrelated with the triad perspective, it could be advised that Caterpillar enter the clusters with triad adapted strategies, then encourage segmented alterations in response to market conditions. With this idea incorporated within the strategy, it would combine the economies of scale benefits through behind the scenes standardisation, and benefit from local responsiveness by empowering each of the triad bases. The technological environment is particularly significant for Caterpillar to consider. Not only does Caterpillar have to continually improve the current products but it would also be beneficial to innovate new products to overcome original construction problems.
This is highlighting the need to be more advanced than the competition, when Caterpillar enters a market it must ensure that the product offerings are compatible with the geological and business needs. For example track driven vehicles are more appropriate than tyres for working on loose sand. Caterpillar must also undertake a broad view of technological developments in order to identify issues such as alternative power, through to advantages identified in the logistical operation. A recent technological innovation has been the Advanced Combustion Emission Reduction Technology (ACERT); in short this is a more environmentally friendly engine. Along with product development and product innovation, Caterpillar must also be aware of opportunities to diversify. The most recent example of this is where Caterpillar introduced financial products to encourage a struggling economy to buy Caterpillar products. Caterpillar’s international strategy operates within an environment that is affected by the macro factors. These factors are recognised in a global context and are normally uncontrollable; therefore their management involves negotiations rather than influencing and controlling.
The strategic decisions that affect the effectiveness of Caterpillar are mainly catered towards the micro level factors. Meaning the micro level factors are at work within wider macro issues.
The discussion here extends to the most important micro factors that Caterpillar must consider when structuring their international strategy. The factors in brief are competition, structure and logistics, culture, and marketing. Each of these factors is discussed using relevant theories in the context of Caterpillar and its environment. Competition within the construction equipment industry (CEI) can be described using the industry life cycle and the five forces analysis (Porter 1985). The CEI is arguably beginning to mature internationally because the competition has been shaken down to leave only 27 organisations that are considered major competitors across all product areas (Datamontior 2003 pp. 13). This information excludes the financial products because these are largely dependent on the machines and engines. Due to the maturing nature of the industry, it implies that the customers will be repeat customers as opposed to new. This increases the value of the relationship and importance of having a h3 brand.
Caterpillar’s position is one of leadership through product quality and support servicing; this directly builds the good perception of Caterpillar in the minds of the customers. The components of the five forces model (Porter 1985) illustrate the competitive environment of the CEI. The rivalry amongst existing firms reflects the increasingly internationalised nature of the market. The basis of competition is held in the ability to offer a broad range of equipment, and build confidence through meeting changing needs. The strategy employed by Caterpillar involves creating extra value by offering an extensive range with a supporting service that provides an excuse for premium prices. The main competitors for the heavy equipment market include Komatsu Ltd, Kubota Corporation and Mitsubishi Heavy Industries Ltd. These are the most powerful competitors whose strategy also includes creating value and charging premium prices. It is noted that two triad areas, namely Japan and the US, predominantly contest the makeup of this market. Although it is conceded that European competitors are significant in the industries architecture. To some extent, the internationalisation of the industry has provided a situation that can arguably be labelled as an oligopoly (Grant 2002 pp. 71), meaning there are a few organisations that are powerful enough to be deemed sustainable.
Again this is more evidence that the industry is maturing, therefore influencing Caterpillars strategic decisions. The other main product of Caterpillar is their engine. The main competitors within this industry are identified, amongst others, as Rolls Royce, Ford Motor Company and Hino Motors Ltd. These competitors are of similar size and employ a strategy of offering reliability and supporting services. However it is noted that Ford and Hino Motors do cut costs and charge cheaper prices, but they still maintain the view of being the leaders. Again the geographical base of these organisations supports the triad perspective introduced by Rugman (2001). The basis of competition is the development of quality in terms of reliability and consistency; it is also an advantageous position to offer a wide range in products.
Caterpillar currently offers around twenty different kinds of engine (Caterpillar Product Line 2002), there are also many variances that can be offered within these product ranges. Caterpillar is also recognised for its detailed service; an example of this is that they had temporary power established at ground zero hours after the September 11 events. Rugman (2001) demonstrates organisational structure theory as a series of alternative options. This approach offers a clear indication of strategies available, however it is implied that the alternatives are one-way avenues, when in fact a holistic view of organisational structure would include the facility of a hybrid approach. A significant limitation to Rugmans (2001) approach is that it failed to recognise the decision maker’s predisposition. Whether an organisation is categorised as either ethnocentric, polycentric, regiocentric, or geocentric (Pearlmutter 2001, Rugman 2001) would influence the extent to which it could execute a structure. Can a totally integrated transnational network structure be effective if extreme ethnocentric directors excessively control it? The majority Caterpillar’s board of directors are American, but the board’s predisposition is known only by evidence in the company’s structure.
Caterpillars operations include a dealer network that is claimed to be an important competitive advantage, the dealer network comprises of relationships with local outlets totally integrated with private locations involving large amounts of FDI. This is arguably grouped as a ‘transnational network structure’, but it obviously operates to an extent with governance from the home country. To maximise efficiencies and quality of service then the structure may need to consider the triad perspective mentioned earlier. The strategy could involve different approaches relating to sensitivity, but also incorporate the logistical economies of scale and scope. In addition to the ‘transnational network structure, Caterpillar is pursuing alliances, most recently with Ford.
The aim for this partnership is to develop supply chain software based on their experience in the vehicle parts market. The American perspective dominates this strategic decision concerning the structure of Caterpillar; therefore if the alliance proves profitable then they are likely to integrate it universally. However this perspective may not be profitable in other cultures, which suggests that different locations are equipped to decide what to integrate and how. Current research by Miller and O’Leary (2002) evaluated the performance of Caterpillar factories. The conclusions supported the argument of common manufacturing recommendations, these being the trend of computerisation, multi skilling, and the encouragement of an emergent approach.
This new factory architecture represents the absence of control, this may be beneficial in the developed American labour market, but this would not be advisable in bureaucratic cultures such as the Chinese. Further American research is provided by Rao, Scheller-wolf, and Tayur (2000), here they intended to make recommendations for the development of a rapid response supply chain for the compact equipment. These recommendations included background theories such as the network theory, inventory theory and simulation theory, to reason their novel features like the ‘duel nodes of supply’, which is to benefit dealer replenishment and customer demand in terms of service speed. The point stressed from such articles is that they are only valid to the specific environment, in terms of structuring internationally then these issues would need to be addressed in each geographical location, and this would be unique in each case. Therefore the construction of an international structure is dependent on the location it chooses. Internally Caterpillar has developed a universal approach of how to operate.
They have labelled this 6 Sigma. ‘6 Sigma is about success – about being better than we’ve ever been. It’s about getting there faster’ (www.caterpillar.com/about), the fact that Caterpillar implement this universally suggests that there is an ethnocentric orientation towards the international management. The micro factor of international culture is a consideration that involves negotiation in order for an organisation to be efficient. Organisational culture on the international stage can be viewed as an extension from the four primary attitudes outlined earlier (Perlmutter 2001, Rugman 2001), these attitudes govern the perceptions of how a company organises its activities. Rugman’s (2001) ideas outline the important issues of culture as being language, religion, values and attitudes, manners and customs, material elements, aesthetics, education and social institutions. Although the attitudes of the organisations decision makers are catered for, it is felt that this is the starting point when evaluating an international culture.
The unconscious attitude of decision makers will directly affect the extent to which they can implement a strategy such as ‘polycentric’. For a pure international strategy, not only do the cultural differences need to be understood, but also the drivers that influence the culture. This opinion is supported by research undertaken by Gulbro and Herbig (1999), this conclusion states that ‘firms must be better prepared, must improve their knowledge of the other side and its culture’. This implies that cultural management is a process of negotiations rather than the encouragement of a ‘one best way’ approach. Gulbro and Herbig (1999) emphasised the need for organisations to learn from studies that show how different cultures are, therefore this would provide the resources to negotiate effectively the desired business activities. Research into Australian construction companies in Malaysia by McGrath-Champ and Carter (2001 pp. 20) found that ‘HR policies and corporate culture are used as marketing devices, not solely for management strategy’. The theory formed from this research highlighted the fact that IB in developing economies needs to provide better insights into the role of the domestic market. It is argued that international business ‘is not simply driven by cost or quality but the success the transactions it has within a host country’ (McGrath-Champ and Carter 2001 pp.). Caterpillar’s use of internal and external marketing attempts to communicate culturally consistent messages. Caterpillar regularly produces documents and articles such as the ‘code of conduct’, ‘corporate support programs’, a magazine, and network and product information.
This is evidence that Caterpillar attempts to interact with stakeholders such as the communities, customers, dealers and employees. Another suggestion that Caterpillar manages culture effectively is the resolution of the six-year strike with the United Auto Workers (UAW). However it must be highlighted that it wasn’t effective management that created the dispute, or dragged it along for six years, but since its settlement Caterpillar has recorded increasing profits year on year. However an argued reason for this maybe the weak dollar and h3 growth abroad, therefore these markets are in earlier in their life cycles which would suggests that problems may arise in the future.
Hopefully experience shall instruct Caterpillar to observe the problems at an early stage. Ba Banutu-Gomez (2002) provides an indication of how to manage culture in developing countries. His recommendation implies that the management of international culture ‘requires a h3 commitment to a high standard of conduct. Managing in this kind of situation requires being able to design and implement a bottom up system, which involves a two-way exchange’. (Ba Banutu-Gomez 2002 pp.39). Similar to Rugmans (2001) highlighted issues; Hofstede (1991) identified four dimensions of work related cultural differences, namely ‘power distance, uncertainty avoidance, individualismcollectivism, and masculinityfemininity’. This research is an extensive piece based on questionnaires; it provides validity in terms of its thoroughness and its aim is to ‘help managers to identify how to create global competitiveness from diversity’ (Hoeklin 1994). Caterpillar’s cultural situation involves the problematic issue of combining the culturally diverse network into an efficient information sharing system. The documentation to signify cultural attention is at a thin level; the vast majority of the corporate marketing is of a very directive nature.
For example ‘we are placing renewed emphasis on becoming a continual learning organisation at Caterpillar, using 6 sigma as the way we work’ (Annual Report 2001 pp. 5). The 6 sigma itself is a continuous improvement programme designed by Americans to implement internationally, this obviously does not recognise the needs to negotiate and exchange for maximum productivity and innovation, instead of enforcing a single way. The microenvironment involving marketing tactics is fairly consistent throughout its international markets. The products that are offered are broadly the same apart from simple language adaptations and alike. The important international marketing issue is the content of the supporting service; this would need to communicate in a way that is consistent with local perceptions. The constant problem for Caterpillar is learning what to communicate and where, therefore it is obvious that it should adopt a ‘polycentric’ approach as identified earlier. For implementing such a strategy techniques such as Yip and Masden’s (1996) ‘Global account management’ have been proclaimed.
Benefits associated with this technique include:
- Establishing links across regions that carry over time to build institutional relationships
- Good service leading to reputable benefits that can be transferred to new strategic regions or industries. (Yip and Marsden 1996 pp. 38)
There is evidence of this within Caterpillars strategy because firstly, they produce ‘supplier communications guidelines’. This maybe against cultural theory but nevertheless they are an attempt to establish a link within regions. The strength of the Caterpillar brand has been utilised by extending it to products associated with the core brand values, such as heavy footwear, clothing and watches. This strategy is confirmed with Chernatory, Halliburton, Bernath (1995 pp.20), where their approach ‘argued that international branding should be based on the core essence of the brand, in terms of its added values and positioning’. However it must be recognised that the associated values may need to be refined when marketing in more sensitive markets. With the product being largely standardised and economies of scale being utilised, then the marketing and servicing operations need only to appreciate the local values, instead of marketing a differentiated product.
Caterpillar largely promotes a consistent message of reliability, expertise and value for money; these are the underlying assumptions that are connected to the Caterpillar brand. Internal marketing could involve more negotiations through understanding local cultures, although this may unconsciously happen it does not get promoted through the documentation. In summary Caterpillars international strategy has evolved within a market environment that demands reliability and dynamic customer requirements. Therefore their international strategy is a unique response that matches the capabilities with customer demands. The current direction of the strategy is to ‘recalibrate our focus’ (Annual Report 2001 pp.2), meaning to concentrate on successful products and either retain or achieve leadership. Caterpillar does, and should continue to innovate in terms of products and logistics to maintain opportunities for leadership. The brand values provide a critical advantage in supporting the services because the interrelated nature of this allows prosperity. Caterpillars brand management and marketing internationally is effective in communicating the values, but it has been hinted here that the fundamental values may be ideal for the American market, but not necessarily maximising in foreign markets.
Caterpillar’s logistical network involves vast amounts of investment of money and time; therefore it poses as a significant barrier to entry. The critical aspects of this network are the working relationships.
Caterpillar manages these by documenting the ideal personality of a networked company. However, it is concluded that Caterpillar has ethnocentric characteristics, which may be inefficient by suppressing the domestic firms. The structural design of Caterpillar resembles that of a transnational network company, this network covers a large proportion of the globe, but the development of the structure extends from a triad perspective due to early investments in Japan and Europe. A criticism of this suggestion is that Caterpillar have sufficient power to influence networked companies, therefore it could be argued that there is evidence so suggest that it undertakes a global area structure. This is based on the opinion that they have a bureaucratic nature, which works against the network structure fundamentals. The competitive forces of the environment, namely the need for reliability and support service, would suggest that the network structure is more appropriate.
Caterpillar’s ability to develop and produce products is a major advantage, but to create total dominance of the construction industry, their logistical network would need continual maintenance. The resulting recommendation is to encourage an emergent approach that encourages communication and business development within the network.
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Business Strategy at ASDA Essay Online for Free
ASDA is the UK's second largest supermarket chain, holding a 17.2% market share in the UK over 2013/2014 (Kantar Worldpanel, 2014). It was purchased in 1999 and became a wholly-owned subsidiary of the US Public Limited Company, Walmart. In order to analyse the business environment, this essay will first consider the ASDA Group's internal environment, including their objectives, policies, organisational structure and reputation. The second focus will be the external environment; first the range of competitors in the market, followed by a PESTLE (Political, Economic, Socio-cultural, Legal, Environmental/Ethical) analysis, to develop a holistic summary of the external environment. Where appropriate, several sections of the PESTLE analysis have been merged to create a more accurate summary of the external environment.
Internal
Objectives and Policies
ASDA's primary operations consist of retail of food, apparel, general merchandise and other services (ASDA Group Ltd, 2013). Their strategic objectives are to provide high quality products, exceed consumer desires and reduce costs (ASDA Group Ltd, 2010; ASDA Group Ltd, 2013). They have an additional series of sustainability objectives designed to reduce environmental impact and reduce operating costs simultaneously. Walmart, ASDA's ultimate parent company, are focused on the opportunities provided by the e-commerce market (Walmart, 2014). To that end, ASDA provides both online shopping and delivery services and a "Click and Collect" programme, allowing customers to order products online for collection from a local ASDA branch (ASDA Group Ltd, 2013). ASDA have developed a growth strategy, combining expanding reach online and physically, with reduced operating costs overall. They have also identified the need for innovation and expansion into new product ranges, expanding their brand identity. As part of the Walmart group, they benefit from the research and development of other Walmart subsidiaries (ASDA Group Ltd, 2013; Walmart, 2014). In 2013, in the midst of the recession, ASDA continued to open 15 new stores and has opened more in 2014 (ASDA Group Ltd, 2013).
Structure
Walmart purchased ASDA in 1999, demonstrating a strategy of growth by acquisition. Following this, ASDA has used its core competencies of providing low-cost, good-quality products to gain market share and has become the second largest supermarket brand in the UK. As a subsidiary of Walmart, ASDA is provided with certain benefits. ASDA particularly benefits from the IT expertise from its parent company, in addition to benefitting from the research and development of other Walmart group members (ASDA Group Ltd, 2013). Walmart also benefits by adopting best practices developed by ASDA from their online grocery shopping service (Walmart, 2014). Members of the Walmart group are also able to take advantage of intercompany loans to provide internal financing opportunities. ASDA has over 500 locations in the UK, ranging from 'supercentres' down to 'supermarkets'. This range of shopping facilities is designed to meet customer needs at different levels (ASDA Group Ltd, 2010; Euromonitor International, 2014). They have implemented a price guarantee, ensuring prices remain consistent across ASDA stores, regardless of their size; this is intended to challenge other brands with higher prices in smaller, local supermarket branches (ASDA Group Ltd, 2010).
Reputation
ASDA have also been able to leverage the reputation of their US parent company and were the first major UK retailer to introduce a 'Black Friday' shopping event in 2013. This was repeated in 2014 by many retailers and drew many customers to take advantage of the low-cost goods. ASDA's reputation for low-cost, high-quality goods can also be leveraged in their growth strategy. Their efforts to reduce operating costs and subsequent price reductions for consumers is intended to be appealing to price-conscious consumers (ASDA Group Ltd, 2013). As detailed below, this is a growing attitude among the UK supermarket customer-base and provides a possible avenue for growth.
External
Competitors
ASDA faces direct from ALDI and LIDL, two supermarket chains who share similar core competencies to ALDI, in that they offer low-cost, high-quality goods. Unlike ASDA, however, ALDI and LIDL offer a range of limited availability products, alongside their food retail. ASDA, by contrast, offers a wider range of general products, available via their online services and in their larger hypermarkets. ASDA is second of the UK's four largest supermarkets. Tesco holds the largest UK market share with 28.7%, and Sainsbury's and Morrisons are next with 16.4% and 11.1% respectively (Kantar Worldpanel, 2014). ALDI and LIDL have grown significantly in recent years (Ruddick, 2014), it has been predicted that the profit margins of larger supermarkets, including ASDA, will have smaller profit margins in the short term (Beardsworth, 2014).
Political, Legal, Environmental & Ethical
The House of Lords released a report in early 2014 challenging food waste in the EU and particularly in the UK (Harriet, 2014; House of Lords European Union Committee, 2014). In their report they argued that retailers, including supermarkets such as ASDA, bear significant responsibility for preventing food waste. Specifically, retailers have a responsibility to ensure that customers are aware of how to store food, ensure date labelling is appropriate, avoid cancellation of grown food orders after it has been produced (Harriet, 2014; House of Lords European Union Committee, 2014). Additionally, it explicitly stated: "It is clear that retailers must assume a far greater responsibility for the prevention of food waste in the home. Retailers must ensure that incentives and promotions offered to consumers do not transfer waste from the store to the household. (House of Lords European Union Committee, 2014, p. 26)". The House of Commons Business Select Committee also considered investigating reports of supermarket aggression when dealing with suppliers, using their market power to demand prices that suppliers cannot sustain (Armitage, 2014). This was motivated by reports of behaviour from Tesco, a competitor of ASDA. ASDA submitted evidence to the House of Commons Environmental Audit Committee summarising their dedication to sustainability and positive mutually beneficial relations with suppliers in 2011 (House of Commons Environmental Audit Committee, 2012). Additionally, they have instituted a policy of minimising food waste by sending no food waste to landfill sites. Instead, food is either given to charities or converted into alternative products. Another source of difficulty is the Food Standards Agency's year-long survey on campylobacter contamination in supermarket chickens. This bacteria is the most common cause of food poisoning in the UK, however it can be killed via normal cooking processes as long as food is properly cooked. The interim findings of this survey showed ASDA to have the highest rate of contamination of raw chicken products across UK supermarkets, above the industry average (Food Standards Agency, 2014) ASDA has agreed to install a new steam sterilisation technology to test the efficacy in reducing contamination. The press have publicised these contamination rates in a pejorative manner, with headlines such as "Asda exposed as supermarket with 'dirtiest' chicken" (Hyde, 2014) and "Supermarket chickens: 70% affected by food bug" (BBC News, 2014). This, combined with the condemnation of consumer groups, including Which? (Which?, 2014), poses a significant threat to ASDA's reputation. This political environment could provide new difficulties for ASDA, with the need to introduce new decontamination facilities in their factories and the associated costs this entails. Additionally, the pejorative press response could have a severe impact on ASDA's reputation. The House of Lords' Committee's criticism of supermarket promotions and incentives could also impact ASDA's retail activities. If such promotions are legislated against, ASDA would be deprived of a major means of drawing price-conscious consumers.
Economic & Socio-Cultural
In 2011 Mervyn King, Governor of the Bank of England, announced that the global financial crisis had significantly impacted standards of living and would continue to do so for the foreseeable future (Bank of England, 2011). 2014 was the first time in 5 years that average pay increased more than inflation, suggesting a possible upturn in the economy (Peston, 2014). This has led to a reduction in consumers' disposable income and this in turn has impacted their spending habits in stores. ASDA has been aware of this and has taken efforts to reduce operating costs to offset inflationary pressures on prices (ASDA Group Ltd, 2013). Traditionally, supermarkets had a close link to cultural identity among UK shoppers, based on the British class system (Wallop, 2013). Supermarkets such as Waitrose and Marks & Spencer were traditionally associated with upper-middle and upper class customers, while ASDA was traditionally seen as a working class supermarket (Jeffries, 2004). In recent years however, this sense of identity has been disrupted by a combination of the global recession, and the rise of the budget supermarkets ALDI and LIDL. Both brands have been widely accepted by the British middle class, and a wider cultural attitude of thrift and pride in finding savings and low-cost products has developed. In the 2014 Christmas season, Aldi and Lidl, the discount supermarket chains drew a significant portion of the market from other supermarket brands (Butler, 2014) indicating that consumer buying decisions are motivated by price over other socio-economic factors. This could explain ASDA's recent rise to the second largest market shareholder in Britain, due to its core competency in providing low-cost, good-quality products to customers. Where previously, consumers may have had a negative association with ASDA's emphasis on low-cost products, in the recession era, consumers are more concerned with product prices.
Technological
Walmart, ASDA's ultimate parent company, have noted the rising significance of e-commerce and have begun developing this across Walmart and its subsidiaries (Walmart, 2014). In the UK, there has been a particular focus on ASDA's Click & Collect service (Walmart, 2014), through which customers order products online and can collect them from a local ASDA store, widening the range of products they can access. The strategy consultants, OC&C, identified Click and Collect as the probable largest source of growth in e-commerce in 2015 (Felsted, 2014). ASDA's competitor, Tesco, offer a similar service, available in over 350 collection points (Felsted, 2014; Tesco, 2014). ASDA is well-suited for this focus on Click & Collect and other e-commerce services; as a subsidiary of Walmart, they are provided with IT services from their parent company, giving them access to the resources of a larger firm, with a wide range of experience in e-commerce (ASDA Group Ltd, 2013).
Summary
Overall, ASDA's external environment is relatively troubled; UK standards of living were significantly reduced by the global economic crisis and only recently have signs indicated that this could improve. This has reduced the disposable income of ASDA's target markets. However, because of ASDA's focus on low-cost products, this could have actually benefitted ASDA, allowing them to become the second largest supermarket brand. The economic crisis has altered the UK's socio-cultural trends, encouraging a savings-focussed attitude, with customers altering their buying habits to pursue better deals. ASDA has also faced difficulties in its public reputation, particularly due to the Food Standards Agency's survey into campylobacter contamination in chicken. ASDA's chicken stocks and suppliers were found to have the worst contamination rates among supermarkets, above the industry average. This finding was well publicised in the press in late November and its full impact may not have been identified yet. ASDA have identified the difficult external environment of UK retail and have oriented their policies to suit the situation. They have endeavoured to gain price leadership, charging the same as or less than their competitors for many household products, in order to draw price-conscious customers. Additionally, they have taken efforts to minimise their own operating costs, using these savings to offset inflationary pressures and passing the savings on to consumers. ASDA have chosen to diversify their focus beyond store-based services. They have invested significantly into technological development, particularly with their Click and Collect service. External strategy consultants OC&C have identified these services as having high growth potential in coming years. ASDA have chosen to capitalise on the troubled economic environment by reinforcing their core competency, providing customers with low-cost, good-quality goods, leveraging their reputation as a low-cost supermarket to take advantage of the low disposable income. They have also used this period to advance their technological development, with technical support from their parent company.
References
Armitage, J. (2014, September 25). MPs considering investigation of supermarkets' dealings with suppliers in wake of Tesco crisis. Retrieved from The Independent: https://www.independent.co.uk/news/business/news/mps-considering-investigation-of-supermarkets-dealings-with-suppliers-in-wake-of-tesco-crisis-9755557.html ASDA Group Ltd. (2010). All About ASDA. Retrieved from ASDA Group Website: https://your.asda.com/system/dragonfly/production/2012/01/04/12_59_19_568_All_about_Asda.pdf ASDA Group Ltd. (2013, December 31). Report and Financial Statements. Retrieved from Companycheck: https://companycheck.co.uk/company/01396513/ASDA-GROUP-LIMITED Bank of England. (2011). Speech given by Mervyn King, Governor of the Bank of England at the Civic Centre, Newcastle. London: Bank of England. BBC News. (2014, November 27). Supermarket chickens: 70% affected by food bug. Retrieved from BBC News: https://www.bbc.co.uk/news/business-30227342 Beardsworth, T. (2014, October 17). Aldi and Lidl to Capture 10 Percent of U.K Grocery Market. Retrieved from Bloomberg: https://www.bloomberg.com/news/2014-10-17/aldi-and-lidl-to-capture-10-percent-of-u-k-grocery-market.html Butler, S. (2014, December 16). Merry Lidl Christmas for German discount supermarkets. Retrieved from The Guardian: https://www.theguardian.com/business/2014/dec/16/lidl-christmas-supermarkets-aldi-asda-tesco-morrisons-sainsburys Euromonitor International. (2014). Passport: ASDA Stores Ltd in Retailing (United Kingdom). Euromonitor International. Felsted, A. (2014, April 21). 'Click and collect' poised to overtake home delivery. Retrieved from The Financial Times: https://www.ft.com/cms/s/0/3ac9e120-c653-11e3-ba0e-00144feabdc0.html#axzz3NNAjRRvL Food Standards Agency. (2014, November 27). Retail survey on levels of campylobacter in chicken published. Retrieved from The Food Standards Agency: https://www.food.gov.uk/news-updates/news/2014/13251/campylobacter-survey Harriet, D. (2014, April 6). MPs accuse supermarkets of 'morally repugnant' food waste. Retrieved from The Telegraph: https://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10748455/MPs-accuse-supermarkets-of-morally-repugnant-food-waste.html House of Commons Environmental Audit Committee. (2012, May 10). Written evidence submitted by ASDA. Retrieved from Parliament Publications and Records: https://www.publications.parliament.uk/pa/cm201012/cmselect/cmenvaud/879/879vw21.htm House of Lords European Union Committee. (2014). Counting the Cost of Food Waste: EU Food Waste Prevention. London: The Stationery Office Limited. Hyde, D. (2014, November 27). Asda exposed as supermarket with 'dirtiest' chicken. Retrieved from The Telegraph: https://www.telegraph.co.uk/news/shopping-and-consumer-news/11257553/Asda-exposed-as-supermarket-with-dirtiest-chicken.html Jeffries, S. (2004, March 12). 'I'm rich and I'm living well. Shopping here is part of that'. Retrieved from The Guardian: https://www.theguardian.com/lifeandstyle/2004/mar/12/foodanddrink.shopping Kantar Worldpanel. (2014, November). Market share of grocery stores in Great Britain, for the 12 weeks ending November 9, 2014. Retrieved from https://www.statista.com/statistics/279900/grocery-market-share-in-the-united-kingdom-uk/ Peston, R. (2014, November 12). End of UK's long living-standards squeeze? Retrieved from BBC News: https://www.bbc.co.uk/news/business-30019567 Ruddick, G. (2014, August 28). Lidl sales to reach A£4bn as pressure on supermarkets grows. Retrieved from The Telegraph: https://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11059821/Lidl-sales-to-reach-4bn-as-pressure-on-supermarkets-grows.html Tesco. (2014). Click & Collect. Retrieved from Tesco: https://www.tesco.com/collect/ Wallop, H. (2013, January 18). How supermarkets prop up our class system. Retrieved from The Telegraph: https://www.telegraph.co.uk/foodanddrink/9808015/How-supermarkets-prop-up-our-class-system.html Walmart. (2014). Walmart 2014 Annual Report. Retrieved from Walmart Investor Relations: https://stock.walmart.com/annual-reports Which? (2014, November 27). Six in 10 consumers concerned at high levels of campylobacter in chicken. Retrieved from Which? Press Office: https://press.which.co.uk/whichpressreleases/six-in-10-consumers-concerned-at-high-levels-of-campylobacter-in-chicken/
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Television Adverts Essay Example Pdf
Consuming images
In his essays, Stuart Hall has conceptualized the production and consumption of the television message as a complex social construction of meaning within the semiotic framework. His theory of encoding/decoding is very important in the discourse of consumption of advertising in TV. The polysemic images have been encoded in a particular way and the process of decoding is not symmetrical. Looking back at the work of Barthes we understand that advertising texts are polysemic and at the connotative level of signification signs possess fluidity which enables them to be articulated in multiple ways (Barthes, 1973, pg 122). Eco argues that the viewers determination to decode the message in aberrant ways are to be found in the readers general framework of cultural references such as his ideological, ethical religious standpoint, value systems, etc, (Eco, 1998, 141). Following the same path of consumption and ideology, Baudrillard follows Althuesser in arguing that the subject is constituted through social classifications and ideological processes. Ideology converts humans into subjects. Ideology lets us mistakenly recognize ourselves as autonomous self-determining agents, whereas in fact we are subjects formed through a social physic processes. Ideology therefore is not the mirrored inversion of the real but our imaginary or symbolic to our shared conditions of existence. Watching the latest Levi jeans advertisement we are addressed as individual consumers with our own unique passion and desires. The ideological effect of the ad lies in its ability to interpellate us in this way. Althusser complicates Marx beautifully by not accepting the concept of ideology as false consciousness. It is material practice produced by ideological state apparatuses. It makes us think are sovereign consumers rather than a member of social class. (Stevenson, 2002,150) In the age of postmodernism where the product is a sign instead of a commodity, as Baudrillard argues, the way in which adverts are consumed by television viewers depend on the very same framework Eco talks about. Jean Baudrillard's essay "The Ecstasy of Communication" evokes TV and its technologies as a metaphor for the regime of simulation in the contemporary western culture. A TV screen cannot be thought simply as an object to be looked at, with all the old forms of psychic projection and investment; instead, the screen intersects responsively with our desires and representation and becomes an embodied from of our psychic worlds. What happens on the screen is neither on the screen nor in us, but in some complex, virtual space between the two. Marshall McCluhan's notion that the "medium is the message" is clearly related to consumption theory. McCluhan argues that television influences viewers' thinking processes and leads to alienation and individualism. But McCluhan sees this not as the result of television content but rather caused by the sensory nature of the medium itself. It is the form of the medium, according to McCluhan, and not its content that influence viewers (Mcluhan, 2002, pg7). TV advertising is a representative part of the arena where the post-modern scene of simulation takes on the relationship between the product and consumer. Baudrillard has contributed significantly towards the theory of consumption. He abandoned Marxist analysis after his book called the 'Symbolic Exchange and Death' (1976). He argues that through a more explicitly post-industrial analysis the real relations of production and consumption have been replaced by a sign system. According to Baudrillard the arrival of consumer society requires a radical reconstruction of critical theory. Baudrillard argues that before goods (objects) can be consumed they must become signs (Baudrillard, 1988, pg 23). The meaning of the objects is established through the organisation of signs into codes. It is only through these codes that people realise their sense of self and their needs. The codes themselves are hierarchically ordered, being used to signify distinction of statue and prestige. As Baudrillard argues "a need is not for a particular object as much as it is a 'need' for difference (the desire for social meaning) only then we will understand that satisfaction can never be fulfilled, and consequently that there can never be a definition of needs". A subject whose needs are fixed by human nature does not consume the object. Social goods are consumed not to satisfy pre-existing needs but to signify social distinctions. We have become completely absorbed by adverts, images and simulation. Baudrillard would call this simulation as an ecstasy of the real. In Baudrillard's "hyper-reality" and "simulacra" terms, the storied images of Nike sports heroes are more real than the reality of Third World workers to millions of consumers. However this consuming condition is an obsession and the product of late capitalism in Western societies.Digitally created commercials - Faking the real
When we examine television advertising we once again find art and technology being used to create simulations that tell stories in an effort to evoke desired reactions from audiences. But in advertising we see a strange new cultural creation: the 20-second 'cinematic' production full of dancing, singing and joke-telling characters playing physicians, housewives, and used car salesmen, with ultra-abbreviated plots and quick resolutions of conflict in which the characters overcome obstacles and fulfil their desires in record time with the help of the product. Unlike movies, which will evoke the wrath of the audience if the unfolding of the story is interrupted, in commercials there is virtually no story to interrupt. The entire commercial is a dynamic, graphic, field composed of images, music, theatrical performances, superimposed illustrations, narration, and other elements, which reinforce each other to achieve their effect. Commercials also include another kind of simulation in the form of digitally manipulated images that are used to portray another realm of fantasy in which the limits imposed by the physical world no longer seem to be in effect. As a result, they are full of talking dogs, giant sized children, products that zoom into space, dancing credit cards and scenes that suddenly become two-dimensional which spin out of existence, creating a virtual world that surpasses anything produced by Imax or Nintendo. Commercials take these elements - visual fantasy, deceptive images of the products, and false claims - and weave them into their various approaches. There are, perhaps, a handful of approaches that they rely on and put together in different ways, just as theme parks, video games, television and news fall into a few basic categories. The product, no longer able to offer satisfaction on its own ground ("a potato chip is a chip is a chip"), instead offers the consumer a chance to be part of a certain 'crowd' or 'scene.' They belong to a cool "product tribe," revelling in the image and sensibility that the product somehow mystically confers - the fetishism of commodities. More and more people are being sold style, image, and celebrity, since there is no substance or material satisfaction to the product-in-itself. Concealed within the jump-cut flash of post-modern advertising is a simple code: consumption is a mode of transcendence, a way to take part in something larger than yourself, the "Pepsi Generation." Today, ads are filled with a strange sort of rugged selfishness, misanthropy, and mean-spirit people ("touch my Doritos and die.") A person is told sternly to buy as much as they can of the product but never to share with friends. "Get your own," they're told. Latest ads on TV have that narrative that goes on and on and takes the form of a mini soap or a series of short cinematic films. The product is like a movie star. The product has taken the stand of the character in the commercial. It has become another simulation for audiences. Small Nokia phones that are given a character play a different role in each different Nokia commercial. Digital technology has given designers the ability to make real characters and models that we see in everyday TV. The big entities spend millions of pounds in one 60 second commercial. The commercial has the production company behind it; director, actors and the whole set that would normally be used in film production. Many television commercials thus give us another variation on Umberto Eco's absolute fakes; they are false promises that make everything seem better than it is. Like theme parks, they make mundane realities look like transcendent utopias. All cultures place people inside invented worlds, so that in itself, isn't what is new about all this. The human world is by nature full of fictionalization and metaphor and drenched in stories and metaphysical assumptions, much of it contrived by conscious and unconscious design to support the claims of those in power. But never before has a culture been scientifically invented in this way, using the tools of rationalization - including marketing studies and computers - to sell products and a way of life. These tools of rationality extract the essence of our own irrationality - our fantasies, imbued with fears and desires - and give them back to us in the form of their invented worlds. Real experiences and things have been replaced with simulacra - copies without an original. Due to the power of mass media advertising, our relationship to the signifier has changed. Now it hides the absence of a signified: conceals the inability to deliver real satisfaction by cleverly simulating it. Part of our hyper-real lives is the fact that our simulations are more real than real.Cite this page
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Venture Management Essay Example Pdf
Walton Construction (Qld) Pty Ltd v Venture Management Resources International Pty Ltd
Walton Construction Pty Ltd (Walton) entered into a building contract with Venture Management Resources International Pty Ltd (VMR) for completion of works. Walton provided VMR with an unconditional bank guarantee as security to cover its financial commitment under the contract. Walton submitted a progress payment claim toVMR and in response, the Superintendent from VMR issued a progress certificate certifying that payment was to be madeto Walton as per the existing contract. The contract required the Superintendent to allow in a payment certificate "amounts otherwise due from the Contractor to the Principal arising out of or in connection with the Contract." The Superintendent disputed the amount of the payment claim from Walton and calculated a variation to the payment of claim. The adjusted claim amount reflected the cost of resolving allegedly defective work as well as an amount of liquidated damages for late completion. In respect of calculating deductions for defective works, clause 35.3 of the Contract permitted the Superintendent to issue directions to the Contractor to correct material or work. If the Contractor failed to comply with the direction within the required notice period, then the Superintendent was entitled to request an amount due from the Contractor to the Principal for correcting the defective works based on the lowest of three quotes received from independent contractors. The Contract further provided that if the Contractor failed to make payment pursuant to the payment certificate within a stipulated time, then the Principal may have access to the security. The Contract further provided that if the Contractor failed to make payment pursuant to the payment certificate within a stipulated time, then the Principal may have access to the agreed bank guarantee security provided in the contract. Walton applied for an injunction restraining the principal from accessing the security because the superintendent failed to comply with the certification process under the contract and the superintendent was unlicensed and therefore the certification was invalid and had nil effect.[1] The court’s reasoning for granting the injunction for Walton stemmed from the superintendent failing to comply with the strict certification requirements under the payment provisions stipulated. Walton argued that the superintendent didn’t comply with a clause within the contract and therefore the payment certificate was invalid. Walton, as the contractor invoked the process of dispute against the superintendent’s certification. This was expressed through seeking an expert review of the certification, which had not yet reached completion at the time of litigation. Walton argued that the obvious commercial purpose or common sense of business was to prevent recourse to security where the contractor was in the process of disputing the Principal’s rights. The court found that the superintendent was not licensed under section 42 of the Queensland Building Services Authority Act 1992, this also contributed the court’s decision to grant an injunction and evidenced the deficiency of the certificate. The fact that Walton would suffer irreparable harm regarding the reputation of the building industry expresses the court’s reasoning for granting the injunction. It should be noted that the injunction is not a permanent resolution and awaits a full hearing in order to determine the necessity of this.[2] This is consistent with Vos Construction and Joinery Qld Pty Ltd v Sanctuary Properties Pty Ltd 2007 whereby both cases claimed loss of industry reputation and irreparable harm regarding this reputation. The cases are somewhat different as Vos Construction’s application was dismissed where Walton’s application was held. It is agreed that the findings of the court in this case are compliant with the legislative provisions relevant to the inquisition. Therefore it is also agreed that the injunction was appropriately granted in regard to Walton. The finding of this case raise implications for future precedent regarding the administration of construction contracts as well as the necessity to follow contractual processes in order for an entitlement to payment before a call upon a guarantee is made or foreshadowed. [3]Vos Construction & Joinery Qld Pty Ltd v Sanctuary Properties Pty Ltd & Anor [2007] QSC 332
In August 2005, the respondents, joint venturer’s Sanctuary Properties Pty Ltd and MIRVAC Developments Pty Ltd (Sanctuary), entered into a contract with Vos Construction & Joinery Qld Pty Ltd (Vos) for the completion of building work. The negotiated Contract price was $7,010,606 and as per the terms of the contract Vos provided security in the form of a bank guarantee as assurance of financial viability and its intention to complete. During the course of the project the architect extended the date for practical completion from 29th November 2005 to 17th January 2006. Despite the extension, on 13 February 2006, Sanctuary notified Vos of its intention to claim liquidated damages for failure to complete the project by the adjusted date for practical completion. The practical completion date was eventually achieved by Vos on 21st March 2006 and the architect issued the final certificate for the project on 8 June 2006. As a result on 12 June 2006, Vos disputed the final certificate by notifying the architect in accordance with Clause C8 of the contract. Clause C8 required the architect to assess the dispute and give a written decision to Sanctuary within 10 working days. Vos also notified Sanctuary of same. On 25 June 2006, the architect, rejected Vos’s submissions and concluded that the final certificate was valid and lawful. Sanctuary gave notice of its intention to draw on Vos’ bank guarantee in the sum of $173,800 (the sum certified by the architect) on the same day.[4] The court’s reasoning for dismissing the application was simply due to the fact that disputing the respondent’s rights under clause A8 was not enough to prevent the respondent from drawing on security. This is because the clause would lack purpose if the process could be stopped by any unsuccessful disputation of the certificate. In considering Vos’ application, the court addressed the financier’s obligation and the principle of autonomy. The Court acknowledged that the financier’s obligation in commercial instruments such as bank guarantees, is independent of the underlying contract. This means that a security provided under a construction contract mayprima faciebe called up unless there is a breach of a negative stipulation in the underlying contract which conditions the right to call it up. Rights to payment were also addressed, it was determined that they stand unless the payment certificate is negated. The court held that an unsuccessful dispute could not stall the debt recovery process because that would flout “business commonsense”. The right to payment is independent of obligation to follow dispute resolution procedures. Sanctuary’s right to draw down the security for a debt owed was independent of its obligation to resolve its dispute with Vos in accordance with the dispute resolution clauses under the Contract. The Court held that Sanctuary had the right to draw on the security even if the dispute between the parties had not proceeded to final resolution. Section 67J (2) of the Queensland Building Services Authority Act 1991, notice of a claim must be given within 28 days of a party becoming “aware, or ought reasonably to have become aware, of the contracting party’s right to obtain the amount owed”. The court determined that late application doesn’t prevent access to security because rights to such access did not accrue until the architect’s final certificate issued rejection of the dispute. This is because the respondents could not have been aware of right to obtain the amount under the contract until then. The court addressed Vos’ reputation and found that the present application turned on questions of construction and not disputed factual matters. It did not consider the argument of industry reputation as constituting a serious question to be tried. The court, for the above reasons, and in its discretion, found the balance of convenience to be in favour of not granting an interlocutory injunction.Kell & Rigby Holdings Pty Ltd v Lindsay Bennelong Developments Pty Ltd
Lindsay Bennelong Developments Pty Ltd negotiated and entered into a contract with Kell and Rigby Holdings Pty Ltd for the construction of a mixed residential and commercial development. The principal was also appointed to act as superintendent under the contract. It was agreed that the works would be completed in three stages. When the dispute arose only stage 1 had been completed with stages 2 and 3 still under construction. Two years into the project, the parties entered into an advance payment agreement, in which the principal agreed to advance the contractor a portion of the balance of the original contract sum to the value of $2 million. The deed of agreement provided for two advance payment bonds in the form of an unconditional bank guarantee of $1 million each. The contract also provided that, if the advance payments had not been repaid on or before the date of practical completion for stage 3, they would immediately become a debt due and payable by the contractor to the principal. In May 2010, stages 2 and 3 of the project sill had significant incomplete works that needed to be finished to a standard at which the sales to purchasers could be transacted. In June 2010, the principal, acting in its capacity as superintendent, issued both:- a notice of variation to works, which deleted the remaining stage 2 works and the remainder of the incomplete stage 3 works from the scope (the variation instruction); and
- A certificate of practical completion in respect of the stage 3 works.
References
Alden, S. and Eather, A. (2010). Superintendents Wearing Two Hats Risk Abuse Of Power. [online] Available at: https://www.mondaq.com/australia/x/109850/Property+Litigation/Superintendents+Wearing+Two+Hats+Risk+Abuse+Of+Power [Accessed 7 Oct. 2014]. Herbertgeer, (n.d.). Jumping through hoops: How not to call on a bank guarantee. [online] Available at: https://herbertgeer.e-newsletter.com.au/link/id/zzzz4dcb1c9dceab5234/page.html?extra=zzzz4dca0b87bf72d290 [Accessed 7 Oct. 2014]. Kell & Rigby Holdings Pty Ltd v Lindsay Bennelong Developments Pty Ltd [2014] (NSWSC). King & Wood Mallesons, (2010). Unconditional bank guarantees: not always a done deal. [online] Available at: https://www.mallesons.com/publications/marketAlerts/2010/ConstructionInsights/Pages/Unconditional-bank-guarantees-not-always-a-done-deal.aspx [Accessed 7 Oct. 2014]. Vos Construction & Joinery Qld Pty Ltd v Sanctuary Properties Pty Ltd [2007] (QSC). Walton Construction (Qld) Pty Ltd v Venture Management Resources International Pty Ltd [2010] (QSC). Wilson, J. (2010). Cashing Bank Guarantees: Not Always An Easy Process. [online] Available at: https://www.mondaq.com/australia/x/106120/Building+Construction/Cashing+Bank+Guarantees+Not+Always+An+Easy+Process [Accessed 7 Oct. 2014]. Yap, B. (2014). Vos Construction & Joinery Qld Pty Ltd v Sanctuary Properties. [online] Mallesons.com. Available at: https://www.mallesons.com/publications/marketAlerts/2008/Documents/9357337w.htm [Accessed 7 Oct. 2014].[1] https://herbertgeer.e-newsletter.com.au/link/id/zzzz4dcb0f4dde222275/page.html [2] [3] [4] https://www.mallesons.com/publications/marketAlerts/2008/Documents/9357337w.htm
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Copyright Law Protect Essay Example Pdf
Copyright Law; Software is considered a literary work in the principle act in Ireland covering copyright, the copyright and related rights act, 2000. Software copyright is a form of intellectual property law that exists to protect rights associated with tangible property of people and groups. Copyright therefore cannot exist over ideas alone. and protected works must be recorded with an authors consent to have copyright protection. The protected material does not require registration and the rights are only waived explicitly through written notice, but the rights are retained by "the person whom the arrangements necessary for the creation of the work are undertaken", and includes preparatory design materials . Although the bar is set low over what can be protected, it usually must involve a minimum amount of work and be non-trivial and original. So what rights does copyright protect and why does it protect it and why is a law necessary to do this?. Copyright prohibits:
- Copying protected works for distribution as it infringes the “reproduction right”.
- Lending copies of protected works to unlawful users without remuneration to the copyright holder.
- Renting protected works to unlawful users where the rented software is the essential object of the loan and not incidental.
- Installing the software on a network to make it available for multiple users unless it is a special network version is prohibited as it infringes the “making available right”.
- The moral right of paternity, integrity and false attribution.
- Providing material technical assistance to people who infringe on copyright.
Punishment for infringement can be pecuniary or custodial and reflects the seriousness of the infringement from personal hacking to commercial piracy. Since coding, requires the investment of considerable human, technical and financial resources while programs can be copied at a fraction of the cost this offers an uncompetitive advantage to those who would copy products for commercial reasons. The theoretical basis for copyright includes to reward labour as described by Locke, to encourage expression of the will as discussed by Hegel, and for utilitarian and economic efficiency as treated by Bentham. Copyright is not an absolute right but is a fundamental right and in Ireland its possession is in keeping with the principles of social justice espoused in article 43 of the constitution of Ireland and within the European parliament directive. Indeed the constitution of the USA in 1787 recognised the authors rights for "Limited Times" showing the universal recognition to limit the benefit to the individual for the sake of scientific progress.
A utilitarian sense of fairness provides for “the greatest happiness of the greatest number” of people and although an economic analysis will often keep copyrighted works with a few people to benefit greatly sometimes the need for social justice outweighs these reasons. Recently there was a feature of a high profile case in the European courts between the European commission and Microsoft, where Microsoft were found to have purposefully kept competing software from inter-operating with their products and this was facilitated by the derivative work restrictions of copyright law. For under a normal economic analysis of law if a party is willing to expend more of their resources in securing the protected rights, all things considered the right should reside with them.
In the case of Microsoft EU the damage done to the EU's interests by excluding competition and thereby to maintain full control over its own information was judged to be of greater value than the investment by Microsoft in its development costs and the decision went against them. Presumably in the information age the premium placed on stores of information is very high and proprietary software will not be allowed to block this path. A subsequent European directive clear includes measures to allow interoperability to be achieved even to the point of de-compiling software, provided sufficient measures have not been taken by the original author of the work. By creating protection for works through copyright personal expression of the will is encouraged. This is one of the moral reasons for copyright law and is a feature of Irish copyright laws greater harmonisation with European law such as through the 2009/24/EC European directive. By these moral rights the copyright owner may assert their right to be recognised as the author in so called “paternity”. Also to prevent protected items from having work derived from them by maintaining the right to "integrity" and to prevent false attribution for cloned or non supported distributions even where software is redistributed with the authors consent for instance with GPL code disclaimers .
This Lawsuit started with a complaint from Novell, Inc. Which is an Americanmultinationalsoftware and services company headquartered inProvo, Utah, over Microsoft's licensing practices that happened in 1993, it stated that Microsoft was blocking its competitors out of the market through anti-competitive practices, this complaint focused on the license practices at the time which required royalties from each computer sold by a supplier of Microsoft's operating system, with or without the Windows operating system and this led to Microsoft reaching a settlement in 1994. This ended some of its license practices leading to the EU ordering Microsoft to disclose certain information about its server products and release a version ofMicrosoft WindowswithoutWindows Media Player, the European Commission made more focus on the interoperability issue.
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The World of Conflicts Essay Example Pdf
- THE AIMS OF HUMANITARIAN AID
- FACTORS JEOPARDIZING THE SAFETY & SECURITY OF HUMANITARIAN AID ORGANIZATION
- External factor
- Internal factor
- PROTECTION FOR THE HUMANITARIAN AID WORKERS
- a) Protection under International Humanitarian Law.
- b) Protection under Geneva Convention.
- c) Protection under Customary International Law.
- d) Protection under the Convention on the Safety of UN and Associated Personnel.
In the world of conflicts involving interest of countries, citizen and civilians, there lays a general understanding and concept of humanitarian arising from the personal regulations. Humanitarian here shall be understood as devoting to the promotion of human welfare and the advancement of social reforms, marked by humanistic values as having the interest of mankind at heart. [1] Hence, it rises when it is promoted by those adherents to humanitarianism and here comes the role of aid workers. An aid worker are understood as those who deliver the voluntary acts and conducts which works for an international organization giving help in a place where people need it or in a country where there is war, arm conflicts, natural disasters, no food nor utilities in order to help people. [2] Being an aid worker it requires an ability to adapt to intensively challenging situations and withstand emotional strain. International and development workers focus on meeting the needs of people and communities in the developing countries where they seek to implement long-term solutions to problems by working with developing countries to help them create the capacity to provide sustainable solutions. It involves various fields like education, sanitation, health, agriculture and also small business development. Thus, an aid worker closely related with humanitarian aid where they are the mediator to all necessary supplies brought to the war-torn areas and countries by third parties, such as neutral countries or relief organizations which specialize in helping civilians during conflicts. [3] In furtherance, humanitarian aid is assistance given to people in distress by individual persons, or governments to relieve suffering. Many full time, professional humanitarian aid organizations exist, both within government and as private voluntary organizations or non-governmental organizations. In Malaysia, Mercy Malaysia is a well-known voluntary and non-profit organization focusing on relief effort and sustainable health related development for vulnerable communities [4] . Its active contributions in all over the world providing medical relief is recognize as an organization which is able to provide rapid response in crises meeting SPHERE standards in its programs and projects, namely civil war in Darfur Iran, tsunami Aceh Indonesia and aid the victims of Cyclone Nargis in Myanmar.
THE AIMS OF HUMANITARIAN AID
Generally, the most fundamental objective of humanitarian aid is to save the lives, prevent and reduce suffering and to preserve human dignity. Humanitarian aid usually does help insofar as it provides the most basic human needs of food, shelter, clothing, and medical care.A It can also help empower a group of people, enabling them to better deal with their own problems by giving them the strength to address those problems in a coherent way, without having to put all of their energy into simply maintaining themselves. One very notable assumption about the principles and objectives of humanitarianism can be seen in the statement made in agreement between the European Union countries when they established the Humanitarian Aid Office (ECHO), the statement is made out in the preamble of the EC Council Regulation 1257/1996: "..humanitarian aid, the sole aim of which is to prevent or relieve suffering, is accorded to victims without discrimination on the grounds of race, ethnic group, religion, sex, age, nationality or political affiliation and must not be guided by, or subject to, political considerations humanitarian aid decisions must be taken impartially and solely according to the victims' needs and interests the independence and impartiality of non-governmental organizations and other humanitarian institutions in the implementation of humanitarian aid must be preserved, respected and encouraged." [5] By that it can be seen that the Council Regulation (EC) No 1257/96 concerning humanitarian aid clearly states that the sole aim is to prevent or relieve human suffering and when making the humanitarian aid decisions, they must made impartially and only according to the needs and interests of the victims. And any humanitarian aid shall not be influenced by any political considerations. Humanitarian aid often comes into the pictures in the occurrence of crises like armed conflicts, natural disasters and various NGOs will step into action to provide assistance. Humanitarian aids are provided from NGOs like the International Committee of the Red Cross (ICRC), The United Nations Children's Fund (UNICEF), and Mercy Corps and so on. Humanitarian aid is said to be one of the longest established activities of NGO's like the International Committee of the Red Cross (ICRC). ICRC is an independent and neutral organization that has the aim of ensuring humanitarian support and protection for individuals affected by armed conflicts and other situation of violence. With its neutrality, the ICRC has a permanent mandate under international law like the Geneva conventions to take impartial action for prisoners, sick and wounded, and civilians affected by conflict. [6] The ICRC's main objective is to ensure respect, through its neutral and independent humanitarian work, for the lives, dignity and physical and mental well-being of victims of armed conflict and other situations of violence. All of the ICRC's works are geared towards achieving this fundamental objective and strives to fulfill this idea. [7] The UNICEF is a NGO that help worldwide children by providing nurture, and care for them whom devastated by poverty, violence, disease and discrimination. UNICEF provides education, healthcare, protective environment, nutrition and so on and it is the NGO's mission to ensure the improvement of the lives of the adversely affected children around the world. [8] Mercy Corp is also a NGO that strives to provide for those who are affected by poverty, war, famine, disease by giving the victims aid in manner of food aid, development assistance, education, healthcare, financial services, and so on to alleviate sufferings in affected countries. The Mercy Corp is prepared to render assistance in all kinds of situations and they strive to help affected individuals all over the world. [9] The different aims of different NGOs do affect the humanitarian staffs employed by them. Subject to the aims of the NGOs, the risk is very much variable. For example, NGOs that are particularly active in providing assistance in war zones are supposedly exposing their staffs to higher degree of risk. In such situations the aid workers are much more susceptible to be killed in their progress of carrying out their humanitarian work. One good example of such NGO is the ICRC where they are often deployed to conflict zones to provide aid to victims of war and usually their deployment are in the midst of intense fighting and the staffs' vulnerability to casualty will be significantly higher. If the aims of a NGO is directed at activities that are not involved in times of war like providing relief to poverty, malnutrition, famine, then the aid workers will be less exposed to danger like those faced in war zones. However, it is not too all correct if one says working out from a war zone is not exposed to risk. Aid workers that are deployed to disease stricken countries will easily exposed to risks of infectious diseases. Thus, it is a subjection to the purpose and aims of an aid organization that will determine how their staffs will be affected. Ultimately, regardless of the risks of different tasks of humanitarian work, it is still the calculated risk and choice undertaken by the aid workers in their endeavor to advance in humanitarian efforts.
FACTORS JEOPARDIZING THE SAFETY & SECURITY OF HUMANITARIAN AID ORGANIZATION
External factor
Traditionally, humanitarian workers enjoyed both international legal protection, and "de facto" immunity from attack by belligerent parties. However, when assigned to conflict zones, the humanitarian workers are vulnerable from attacks despite the existence of Geneva Conventions. Based on the research conducted by the Humanitarian Policy Group (HPG) Policy Brief 34 'Providing aid in insecure environments: 2009 Update Trends in violence against aid workers and the operational response', in the 1990s and 2000s, the attacks on humanitarian workers have risen sharply. [10] In 2008 alone, 260 humanitarian workers have been killed, kidnapped or seriously injured in violent attacks, marking the highest toll in a twelve years timeframe. When humanitarian workers carry out their duties and jobs alike especially in conflict zones, they face a significant high risk by various factors. For such an instance in conflict zones, they face physical threats from violent forces deliberated at them. Based on a research by Humanitarian Policy Group from the findings of the 2006 report 'Providing Aid in Insecure Environments: Trend in Policy and Operations'. Its analysis follows on from that report, providing global incident data for the last three years. It identifies new trends and highlights issues in the three most violent contexts for aid workers at present: Sudan (Darfur), Afghanistan, and Somalia - accounted for more than 60 percent of violent incidents and aid worker victims. Like the report of 2006, the research was based on the Aid Worker Security Database (AWSD). The AWSD recorded major security incidents affecting the staff of aid organizations working in humanitarian relief, like killings, kidnappings, and attacks that result in serious injury. The HPG Policy Brief 34 indicates that the attacks on aid workers are increasingly political motivated, such reflects a broad targeting of the aid enterprise as a whole. Based on the latest update by the HPG Policy Brief 34, three countries with the highest incidents of violent attacks on aid workers (in descending order: Sudan, Afghanistan and Somalia). Most of the attacks in Sudan are attributed to banditry. And in Afghanistan and Somalia are more of political motivations. For many incidents of the attacks on humanitarian aid workers, it is difficult to ascertain the true motives behind it. Political motivation is one of the biggest factors as to why aid workers are being targeted. Political motivated attacks increased by 208 percent over the time period analyzed. The HPG took a limited analysis in their report and indicated that many of the incidents that involved attacks against aid workers had significant political elements. Based on the AWSD, the apparent targeting of internationals and the means by which violence is being perpetrated like the emergence of suicide bombings and the use of IEDs (Improvised Explosive Devices) and the steep rise in kidnappings which link criminal and political actors. It is possible to conclude that the attacks on aid workers seen during the past 3 years from 2008 are at least partly politically motivated. Reasonable determination of the motives behind the attacks can be deduced from incident reports and the judgment of reporting entities. Incidents were classified as politically motivated based on various combinations of factors like: 1) first hand determinations and evidence cited in the original incident report; 2) explicit statements and claims of responsibility of attack by the perpetrators; 3) tactics employed (e.g. suicide bombings, targeted IEDs and so on); 4) politically/military personnel known to be perpetrators; 5) deliberate violence without aim for economic gain (i.e. aid workers seriously injured in attack without losing anything in value). [11] The political targeting of aid workers by belligerents can be associative or direct; that is, humanitarian organizations can be targeted because they are labeled as collaborators with the 'enemy', like the government, rebel forces or foreign power. For instance in Afghanistan, aid organizations that cooperated with the coalition forces in certain activities like reconstructions can be suggestive that the aid organizations are part of the 'enemy'. Attackers will use this as a valid reason to deliberate attack aid organizations by associating them with donor countries. [12] This is especially true when armed forces from donor countries are present in the case of U.S. government-funded organizations operating in Iraq and Afghanistan. In such instances, despite the differences in activities, humanitarian organizations are often viewed as providing assistance to the occupying forces and considered to be the enemies. Aid workers with connections to local governments can also make them vulnerable to attacks. In order to maintain humanitarian efforts, humanitarian staffs need to interact with local authorities to ensure that the government will continue to allow humanitarian presence in their country. For such reasons, humanitarian staffs will attend meetings, functions with local government representatives and state military leaders. These interactions between humanitarian staffs and the government personnel may cause combatant factions to view that the aid organizations are having close political ties with the local government and label the aid organizations as enemies. Thus the combatant factions may attack the aid organizations for providing assistance to the local government as a punishment or to send a stern message to the local authorities to make a more visible political statement. The Trincomalee Massacre is assumed to be politically motivated. On 4th August 2006, seventeen staffs international NGO Action Contre La Faim (Action against Hunger International, or ACFIN) were executed at their office in Muttur. The killings were assumed to be politically motivated as the Sri Lankan Monitoring Mission claimed that the act was carried out by government forces. It was questioned as to why the aid workers were targeted and execute. The guess was if the government forces were really involved, they may have killed the aid workers out of anti-Tamil sentiment since they were perceived as indirectly aiding the Tamil Tigers. Another assumption was the killings were deliberately carried out by the government in order to demonize the rebel group in the eyes of the international community. The motive behind killing of the seventeen ACFIN staffs were vague, however, political consideration was drawn as a palpable factor. [13] Apart from political motivations, economical resources can be one of the factors combatant factions carry out attacks on aid workers. Attacks can be carried out on the facilities or supply convoys of aid organizations purely to seize humanitarian goods for the attackers' own usage or selling the goods to fund their war efforts. In the humanitarian relief industry, most humanitarian workers have access to both the basic necessities and luxuries that majority of the local people lack. The humanitarian aid industry is often one of the biggest economic players in the country or region of operation, providing one of the most visible signs of wealth in war-stricken regions in the form of new vehicles, electronics, homes and offices, and the possession of seemingly endless quantities of food, clothing, and money. Therefore, a faction seeking to supply provisions to their fighters attack and rob humanitarian organizations, often injuring or killing aid workers in the process. [14] In Afghanistan, over the past year of 2009, aid workers have increasingly been attacked and harassed in Afghanistan, particularly in the volatile southern provinces. Dozens of people involved in relief work were kidnapped and/or killed in 2008 and large consignments of aid items were pillaged by insurgents and criminal groups. This suggests that the attackers may have wanted to capture the goods for their own use. [15] Other than the method of forcibly seizing humanitarian goods, combatant factions also kidnap aid workers for ransoms to increase their funds. Combatant factions sometimes attack aid organizations to prevent or disrupt the flow of humanitarian aid from reaching civilians seen as the enemy. [16]
Internal factor
Save for the external factors, there are various internal factors that poses high risk to the aid organization itself. The internal management of the aid organizations is also responsible for the safety and security of their own. The policies that aid organizations adopt will sometimes backfire at themselves. For example, the government may outline a new policy that humanitarian efforts are to be carried out in collaboration between the aid organizations and military forces. The reason may be as simple as it will increase the safety of the aid organization and an increase in effectiveness of the humanitarian aid effort. However, by linking themselves close with military forces, the aid organizations may be perceived as enemies by insurgents. The HPG report in Providing Aid in Insecure Environments: 2009Updates indicates that the surge of violence towards the aid workers maybe be rooted in the policy that aid organizations adopt that makes them appear to have close ties with the government and thus diluting the notion of neutrality that humanitarian organizations upheld since inception. The report also expressed that "the danger of association with certain governments or armed forces has a particular salience with aid workers, most of whom endeavor to be seen as separate and distinct from political actors and activities." Calling the disassociation between humanitarian groups and political and military actors "sensible and necessary steps", the report concludes that "If the greater portion of international humanitarian aid organizations were able to achieve independence and project an image of neutrality this would surely enhance operational security and benefit humanitarian action as a whole." [17] So long that aid organizations continues to associate themselves with the government or the military, there is always a high tendency that the aid organization will be a target by the insurgents or disgruntled population, and there is a risk that the humanitarian effort will be used as a mask to further facilitate political agendas. The safety measures that the aid organizations undertake is also another factor as to why the safety of the humanitarian workers was jeopardized. In recent years, many policies and procedures have been formulated and effectuated to increase the level of security and safety of aid workers. The securities measures can be categorized into three main types: acceptance, protection and deterrence. In reality, the measures also poses potential hazard to the aid workers instead of protecting them. The security measures of protection and deterrence often contain flaws in them. By the word protection itself, this measure is to increase the safety of aid workers by providing them with protective devices and employ field procedures to reduce the risk of aid workers. Equipments like Kevlar vests, ballistic helmets, armored vehicles and convoys, housing the aid workers in a protective environment, and engaging the local people to carry out the aid jobs are the common ways to keep the aid workers out of harm's way. When the situation becomes too dangerous to work in, international staffs are often evacuated and leaving the local staffs to fend for themselves. This protection measure may offer suffice protection for international staffs but the local staffs are the ones who will ultimately suffer when the protection cease to exist when resources are taken away. Deterrence is one strategy that aid organizations employ to counter the threats pose by potential attackers. The hiring of mercenaries and security details equipped with weapons to protect aid workers and properties are the common deterrence strategy implemented to increase overall security of aid workers. Often, by engaging armed personnel for protections, again such action will be perceived by insurgents as affiliation to the military or government. Thus creating a dilution of independence and neutrality of aid organizations and making them potential targets to insurgents. [18] A real life example is portrayed in Iraq and Afghanistan, where some U.S. based NGO's received protection from U.S. military forces while the military utilize this opportunity to improve their image by working with aid organizations. However, this collaboration by neutral NGOs with the military is viewed as enemies by many local citizens. Civil-military linkage only undermines filed workers long-term safety as they are increasingly associated with the occupying forces. [19]
PROTECTION FOR THE HUMANITARIAN AID WORKERS
a) Protection under International Humanitarian Law.
Protection under International Humanitarian Law for the humanitarian aid workers only can be apply when a situation can be qualified as armed conflict. An armed conflict can be defined as a situation where fighting take place between the armed forces between the two states this consider as international armed conflict or within the territory of a state between its regular armed forces and organized armed forces or when such group fight one another in internal state. [20] In situations of armed conflict, humanitarian workers should be aware of and respect a number of rules so as not to jeopardize the protection that they could be enjoy under International Humanitarian Law. Obviously, they must not take part in the hostilities and on the other hand they should always refrain from committing any act that could be construed as hostile towards one party to the conflict. Humanitarian workers should also keep in mind what constitutes a lawful military objective according to International Humanitarian Law. Objects or places which by their nature, location, purpose or use make an effective contribution to military action could become a military target. Whenever possible, members of humanitarian organizations should stay clear of such objects and places. [21] Under International Humanitarian Law, the protection to the humanitarian organization is based on the principle, 'within the context of hostilities a distinction must always be made between combatants and civilians.' Under International Humanitarian Law, it was stated that humanitarian workers are considered to be civilians. [22] They must be respected and protected in all circumstances, and must never be made the object of attack in whatever reason at all. The provisions for the protection of humanitarian personnel who are involved in relief operations such as under Articles 69, 70 and 71 of Additional Protocol I and 18 of Additional Protocol II stated under a number of conditions, relief operations that are humanitarian and impartial in character and are conducted without any adverse distinction may be undertaken. It also offers of assistance fulfilling these conditions shall not be regarded either as interference in the armed conflict or as hostile acts. In further, International Humanitarian Law also contains provisions for the protection of medical personnel and transports. This protection, which also applies to military medical units and transports, is represented visually by the Red Cross or Red Crescent emblem. However, it must be noted that in principle most humanitarian organizations which are not part of the Red Cross and Red Crescent Movement are not entitled to use that emblem. [23] However the most effective preventive measures must be taken by States to limit any risk to the security of humanitarian workers. They must suppress breaches of international law and prosecute those responsible of war crimes. Any intentional attack against members of a humanitarian organization would constitute a war crime. War crimes can also be prosecuted in another country on the basis of universal jurisdiction.
b) Protection under Geneva Convention.
The Geneva Conventions and their Additional Protocols are part of the international humanitarian law where a whole system of legal safeguards that cover the way wars may be fought and the protection of individuals. They specifically protect people who do not take part in the fighting such as civilians, medics, chaplains, aid workers and those who can no longer fight including wounded, sick and shipwrecked troops and the prisoners of war. The fundamental aim already of the historic original Geneva Convention of 1864, was to ensure acceptance of the neutral status of the sick and wounded and of military medical personnel, who needed to enjoy special protection if they were to be able to carry out their mission. It also reaffirmed and considerably developed this immunity by extending it to medical personnel and unit as well as military and civilian medical transports. The protection provided by these instruments is represented visually by the red cross/red crescent emblem, which strengthens its legal basis. To take account of developments in armed conflicts, Additional Protocol I which also gave States the option of identifying medical units and transports by distinctive signals, such as light signals or electronic means of identification. [24] In order to limit as far as possible misuses of the red cross/red crescent emblem, which are likely to impair its protective effect in the event of armed conflict, its use is subject to some very strict regulations. Thus, the emblem can be displayed only with the permission of the relevant authorities and under their control. It is essential for States to enact national legislation on the use and protection of the red cross/red crescent emblem, providing, in particular, for an effective monitoring system and punishment for grave misuse of it.A The main users of the emblem are medical and religious personnel, the medical services of the armed forces and civilian medical units and transports, such as hospitals and ambulances. [25] Under the Geneva Conventions and their Additional Protocols, National Red Cross or Red Crescent Societies and other relief societies duly recognized and authorized by their government may provide the medical services of the armed forces with personnel and equipment, which will then be subject to military laws and regulations. Ambulances and first-aid posts may display the emblem in peacetime, under certain conditions (Articles 26, 27 and 38 to 44 of the First Geneva Convention, Articles 41 to 45 of the Second Geneva Convention, Articles 18 to 22 of the Fourth Geneva Convention, Articles 8, 9 and 18 of Additional Protocol I and Article 12 of Additional Protocol II). [26] In addition, the components of the International Red Cross and Red Crescent Movement have a special tie to the emblem. The National Red Cross or Red Crescent Societies may use it at any time to indicate the affiliation of their personnel, installations and equipment. They may also use it for protective purposes when serving as auxiliaries to armed forces medical services or when working under the auspices of the ICRC (International Committee of the Red Cross). As regards the ICRC and the International Federation of Red Cross and Red Crescent Societies, they may display the emblem at any time and for all their activities. [27] However should be reminds concerning the special role which the ICRC is called upon to play in armed conflicts. The Geneva Conventions and their Additional Protocols expressly confer certain rights on the ICRC, such as that of acting as a substitute for Protecting Powers and that of access to prisoners of war and persons protected by the Fourth Geneva Convention (Articles 123 of the Third and 143 of the Fourth Geneva Conventions). [28] In addition, the Geneva Conventions give it the right to offer its services to the parties to the conflict. Generally speaking, the ICRC acts as the promoter and guardian of international humanitarian law, and in this capacity it works to ensure respect for this law, as well as its promotion, dissemination and development. In armed conflicts or other situations requiring the intervention of a specifically neutral and independent institution, the ICRC assumes the overall guidance of international Red Cross. Last but not least, another category of personnel is entitled to be respected and protected under international humanitarian law such as civil defence staff, which has their own sign, a blue triangle against an orange background.
c) Protection under Customary International Law.
The regulation of humanitarian assistance in non-international armed is also covered by customary international law. Specifically, the obligation to respect and protect humanitarian relief personnel and objects, and the obligation to allow and facilitate the rapid and unimpeded passage of humanitarian relief which is impartial in character and conducted without any adverse distinction (subject to the state's right of control) are regarded by the ICRC as rules of customary international law applying in all conflicts. With regards to the obligation to respect and protect humanitarian relief personnel, the ICRC stated in its 2005 study on the rules of customary international humanitarian law that this obligation is a 'corollary of the prohibition of starvation, as well as the rule that the wounded and sick must be collected and cared for.' [29] On the reason is that the security of humanitarian relief personnel and objects is an indispensable condition for the delivery of humanitarian relief to civilian populations in need threatened with starvation. For a legal principle to acquire the status of customary international law, it has traditionally been required that there be a consistent and general practice among states of adherence to the rule, and that there be evidence that the practice has been carried out in the belief that the practice is obligatory by referring to the principle of opinio juris. [30] Evidence of opinion juris may be gleaned from treaties as well as from non-binding instruments such as declarations and General Assembly resolutions. [31] Where the parties are acceptance of the resolution and declarations as evidence, the opinion juris is sufficient to support the existence of customary international law. However, the value of customary principles is debatable in practice. National courts, especially in states with a dualist system, are traditionally reluctant to apply customary international law, especially in criminal cases where the principle of legality mandates that the law be clearly defined. They are also likely to be influenced by the Statute of the International Criminal Court (ICC), which while affirming the existence of individual criminal responsibility for violations of common Article 3 of the Geneva Convention itself where they may claimed that "is in non-international armed conflict," [32] Limits war crimes in international armed conflict to violations of Hague law and grave breaches of the Geneva Conventions, which can only be committed against protected persons fulfilling the nationality requirement discussed above. Violations of the general customary principle underlying common Article 3 cannot, therefore, be prosecuted at the ICC. The resulting position, which may be followed in domestic jurisdictions, is rather odd, in that a larger category of people are protected by the ICC Statute in non-international conflicts than in international warfare. As far as humanitarian workers are concerned, this means that they are excluded from ICC protection against mistreatment in international wars (unless their state of nationality is involved on the opposing side), but may be covered by the provisions of common Article 3 where the conflict is non-international. [33]
d) Protection under the Convention on the Safety of UN and Associated Personnel.
In 1996 the UN General Assembly adopted the Convention on the Safety of UN and Associated Personnel, which entered into force on 15 January 1999. This provides protection for personnel of humanitarian organizations, but only as ''associated personnel.'' When they are deployed under an agreement with the Secretary- General of the United Nations or with a specialized agency or with the IAEA, to carry out activities in support of the fulfillment of the mandate of a United Nations operation and operate under United Nations control. However this excludes the activities of truly independent organizations, which see operating outside UN control as crucial to maintaining their independence from political agendas. [34] A new Optional Protocol to the Convention, extending the range of situations in which the Convention applies, was adopted on 8 December 2005. The original Convention applies only to UN operations to maintain or restore international peace and security and those declared by either the Security Council or the General Assembly, for the purposes of the application of the Convention, to constitute an exceptional safety risk. The Optional Protocol extends this to UN operations to deliver humanitarian, political or development assistance in peace building and to emergency humanitarian assistance operations. Despite the apparent focus on humanitarian assistance in the Optional Protocol, the original definition of qualifying organizations is not modified, so independent humanitarian organizations are excluded. [35] In 1998, partly inspired by the adoption of the Convention, the General Assembly adopted two separate resolutions, one on protection of United Nations personnel and the other on the safety and security of humanitarian personnel. This began a regular series of annual resolutions calling for better respect for existing law and requiring the Secretary-General to report on progress or the lack thereof. From 1999 on, a single resolution has covered humanitarian personnel and UN personnel. In 2003 a Security Council resolution exhorted states and warring parties to ensure the safety of humanitarian personnel and UN and associated personnel. The inclusion of humanitarian personnel as a group separate from the UN and associated personnel can be read as recognition of independent humanitarian action, and may leave the door open to finding a solution to appropriate legal protection, not based on political control. [36]
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College Essay Topics to Write about Legal Source
Wikipedia has been known to be an internet link that has helped various individuals in their research but it is not acceptable for law research and essays. This essay will show the brief history of Wikipedia, the reasons for and against Wikipedia being used as a source for essays especially law essays and it will also go further to show and discuss links that can be substituted for legal research and law essays, comparisons will also be made. To begin with Wikipedia is an internet source where all sorts of information can be gotten from either for research or just to obtain knowledge for general purposes. Wikipedia was formally launched on the 15th of January, 2001 by Jimmy Wales and Larry Sanger but its technological and conceptual underpinnings predate this[1]. The earliest known proposal for an online encyclopedia was made by Rick Gates in 1993, but the concept of a free online encyclopedia was proposed by Richard Stallman in December 2000.[2] In 2001, the license for Nupedia was changed to GFDL, and Wales and Sanger launched Wikipedia using the concept and technology of a wiki pioneered in 1995 by Ward Cunningham[3]. Initially, Wikipedia was intended to complement Nupedia, an online encyclopedia project edited only by experts providing additional draft articles and ideas for it. In practice, Wikipedia overtook Nupedia, becoming a global project in multiple languages and inspiring a wide range of other online reference projects.[4] As of April 2014, Wikipedia includes over 31.2 million freely usable articles in 287 languages that have been written by over 45 million registered users and numerous anonymous contributors worldwide.[5] One of the major reasons Wikipedia can be considered as good source for research is that all the information that can be found on Wikipedia is referenced which gives the researcher various links to look up the particular topic that is being researched. Wikipedia is also free for all to use online. Articles are often added quickly and, as a result, coverage of current events and new technology in particular is quite extensive. Printed encyclopedias can take years to add new entries and those entries may not cover a topic in as exhaustive detail as those in Wikipedia.[6] Wikipedia is also easy to use and it is easy to comprehend given the fact that it can be translated into different languages that people are most comfortable with which is one of the reasons it is being used worldwide. Not only this but the articles found in Wikipedia are extensive, comprehensive and most times may not be gotten from any other links which is why students may be tempted to use Wikipedia for their research. Never the less Wikipedia is not an advisable website for research especially law and legal research. This is so because most of the information gotten from Wikipedia could be edited by anyone which could put the person carrying out a research at an high risk of getting wrong facts and information. “The founder of Wikipedia, Jimmy Wales, has recently stressed that Wikipedia may not be suitable for academic uses, saying, "It is pretty good, but you have to be careful with it. It's good enough knowledge, depending on what your purpose is."”[7] This statement that was made by Jimmy Wales shows that Wikipedia is unreliable and it is not all the information in Wikipedia that should be taken into consideration. Apart from this Wikipedia is open to spam and vandalism if not properly managed which is another disadvantage[8]. As a result of these disadvantages different links have been given to students, paralegals, attorneys, librarians, law researchers and teachers to serve as an alternative link for legal and law research, some of these links are Lexis, Bloomberg, Justis, BAILII, Westlaw and Eagle-i. Lexis and Westlaw are the two biggest in subscription legal database and have been the two rival legal database providers in the US since the mid 1970s[9]. Lexis was launched in UK in 1980 while Westlaw was launched in 2000.[10]Unlike Wikipedia the information gotten from Lexis are reliable because it is academic and the full text law database covers scores of thousands of reported and unreported cases from the following jurisdictions: England and Wales, 1900; Scotland, 1944; Northern Ireland, 1945; European Court of Justice, all cases.[11]Westlaw also serves the same purpose as Lexis which are (i) includes all cases from the law reports back to 1865[12], (ii) contains full text of cases from 19 other series of UK and EU law reports, as well as the full text of all UK and EU legislation.[13] In addition to this both lexis and Westlaw provide users with a version of the CELEX database of EU legislation and case law; both systems use the standard CELEX groupings which are treaties, legislation, preparatory acts, cases, national implementation and parliamentary questions.[14] Another advantage of lexis and Westlaw is that they both provide users with the Boolean and natural language search. Both systems offer a “quick search” option, providing search forms (templates) for the most frequently used a UK database[15] which makes it easier for individuals to use. Apart from this, lexis also provides non-legal information to users which could help the individual broaden the search and expand their knowledge. The non-legal material can consist of UK newspaper files. Not only this but “Westlaw has the great advantage of access to the Sweet & Maxwell Current Law index digest system, so that an already sophisticated apparatus of summaries and cross-referencing could be combined with the Windows / internet hyper linking feature to produce a very powerful research tool”[16] BAILII which is the British and Irish Legal Information Institute is another good website that students are advised to use for law essays and legal research. BAILII provides free internet access to British and Irish legal material[17] to individuals; it also provides free internet access to legal materials of England and Wales, Scotland, Northern Ireland and Ireland[18]. As at March 6th 2000 BAILII includes 14 databases covering 5 jurisdictions.[19] Not only this, but it also contains up to 400 megabytes of legal materials and over 75,000 searchable documents with about 2 million hypertext links.[20] BAILII provides a unique service and is a full and challenging alternative to other legal databases, providing access without payment or password.[21] Apart from this, BAILII’s search mechanisms provide real advantages for practitioners, researchers, teachers and students. To take one example, it is worth looking at the recent extended Sphere Drake Insurance Plc & Anor v The Orion Insurance Company Plc [1999] EWHC 286 (QB) judgment and comparing it to that same reported judgment on other systems. On BAILII the whole text is there, formatted and with all the appendices as attachments.[22] 1
[1] History of Wikipedia, Wikipedia the free encyclopedia https://en.wikipedia.org [accessed 6th April, 2014] [2] History of Wikipedia, Wikipedia the free encyclopedia https://en.wikipedia.org [accessed 6th April, 2014] [3] History of Wikipedia, Wikipedia the free encyclopedia https://en.wikipedia.org [accessed 6th April, 2014] [4] History of Wikipedia, Wikipedia the free encyclopedia https://en.wikipedia.org [accessed 6th April, 2014] [5] History of Wikipedia, Wikipedia the free encyclopedia https://en.wikipedia.org [accessed 6th April, 2014] [6] Limitations and advantages of Wikipedia, General research guide https://apps.carleton.edu [accessed 6th April, 2014] [7] Limitations and advantages of Wikipedia, General research guide https://apps.carleton.edu [accessed 6th April, 2014] [8] Advantages and Disadvantages- wikieducator https://wikieducator.org [accessed 6th April, 2014] [9] The Big Match- Lexis v Westlaw, Paul Norman https://sas-space.sas.ac.uk [accessed 6th April, 2014] [10] The Big Match-Lexis v Westlaw, Paul Norman https://sas-space.sas.ac.uk [accessed 6th April, 2014] [11] LAW- DATABASES, https://www.library.qmul.ac.uk [accessed 7th April, 2014] [12] LAW- DATABASES, https://www.library.qmul.ac.uk [accessed 7th April, 2014] [13] LAW- DATABASES, https://www.library.qmul.ac.uk [accessed 7th April, 2014] [14] The Big Match- Lexis v Westlaw, Paul Norman https://sas-space.sas.ac.uk [accessed 7th April, 2014] [15] The Big Match- Lexis v Westlaw, Paul Norman https://sas-space.sas.ac.uk [accessed 7th April, 2014] [16] The Big Match- Lexis v Westlaw, Paul Norman https://sas-space.sas.ac.uk [accessed 7th April, 2014] [17] Bailii, digital library, University of Leicester, https://www2.le.ac.uk [accessed 7th April, 2014] [18] Bailii: the cream of legal datasets, UK Centre for Legal Education, https://www.ukcle.ac.uk [accessed 7th April, 2014] [19]Bailii, digital library, University of Leicester, https://www2.le.ac.uk [accessed 7th April, 2014] [20] Bailii, digital library, University of Leicester, https://www2.le.ac.uk [accessed 7th April, 2014] [21] Bailii: the cream of legal datasets, UK Centre for Legal Education, https://www.ukcle.ac.uk [accessed 7th April, 2014] [22]Bailii: the cream of legal datasets, UK Centre for Legal Education, https://www.ukcle.ac.uk [accessed 7th April, 2014]
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What Purposes do IPRs and Standards Serve?
- the rights of the patent owner (licensor) to enjoy the full benefits of the patent,
- the rights of third parties (licensees) to make and sell standard-compliant products, as well as
- the public interest not to lock users into specific technology platforms, while recognizing that in daily life society benefits enormously from the advanced technology that standards can bring.
- What is the conceptual relationship between standards and patents: complementary or conflict?
- How patent policies provided by SSO have failed to solve the dispute between patents and standards?
[1] See Herbert Hovenkamp, Mark D. Janis & Mark Lemley, IP and Antitrust: An Analysis of Antitrust Principles Applied to Intellectual Property Law, (2003-04) at 35.1. [2] See Janice M. Mueller, Patent Misuse through the capture of Industry Standards, Berkeley Technology Law Journal, Vol. 17, p. 623, 2002, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1346546, last accessed on 8th January 2014. [3] Carl Shapiro, Setting Compatibility Standards: Cooperation or Collusion? Available at https://faculty.haas.berkeley.edu/shapiro/standards.pdf , last accessed on 8th January 2014. [4] Mark R. Patterson, in his article asserts that patented invention and standards are two different things. Patentee is not allowed to get revenues out of the interoperatability of standards. Patentee is allowed to get revenues only for the invention that is used in the standard, available at https://www.law.berkeley.edu/journals/btlj/articles/vol17/PATTERSON.pdf , last accessed on 8th January 2014. [5] Mark Lemley and Carl Shapiro (2007), discusses how a threat to an injunction enhances the patent holders negotiating power when the patented technology is used in standards leading to royalty stacking and patent hold up, available at https://faculty.haas.berkeley.edu/shapiro/stacking.pdf , last accessed on 8th January 2013.
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Prisoner’s Dilemma Essay Online for Free
Introduction
In this report is to introduce what is the Prisoner's Dilemma and the meaning about Cartel Union. First is to analyze the correlation of manufacturers and the prisoners' dilemma due to the correlation. The effectiveness of Cartel coalition is investigated and the principle of output dispense is given. Explain the factors affecting the stability of Cartel. From the game theory it is a rational behavior for interactive decision problems. In a game, several agents strive to maximize their (expected) utility index by choosing particular courses of action, and each agent's final utility payoffs depend on the profile of courses of action chosen by all agents. The interactive situation, specified by the set of participants, the possible courses of action of each agent, and the set of all possible utility payoffs, is called a game; the agents 'playing' a game are called the players. From this precondition to understand about the prisoner's dilemma from the Dominant Strategies, Extensions of the Prisoner's Dilemma and the Issues with Respect to the Prisoners' Dilemma these three parts to analysis the problem of Prisoner's Dilemma. And used the Oligopoly Problem to explain the reason why Prisoner's Dilemma can solutions the problem of oligopoly pricing and the situation in the market. Combine whit the Cartel and the Nash equilibriumThe Prisoner's Dilemma
The Prisoner's Dilemma is one of the best-known models in game theory. In the picture, figure 1, the natural world in a ridiculous role to prove that two suspicious people help each other, or opposing each other. In this assumptive situation, two confederates have been locked up in prison, and they tried to fake evidence of a crime and not sell out the other side do not recognize the crime. And the next step is give the serious of the punishment that each receives is determined not only by his behavior, but also by the behavior of his or her accomplice. The two prisoners are separated and cannot communicate with each other. And the result should be have four different possible.- If one confesses to the crime and turns in the accomplice his sentence will be reduced.
- If one confesses while the accomplice does not, the first can make a deal with the police, and will be set free. But the information he provides will be used to incriminate his accomplice, who will receive the maximum sentence.
- If both prisoners confess to the crime, then each receives a reduced sentence, but neither is set free.
- If neither confesses to the crime, then each receives the minimum sentence because of the lack of evidence. This option may not be as attractive to either individual as the option of striking a deal with the police and being set free at the expense of one's partner. Since the prisoners cannot communicate with each other, the question of whether to "trust" the other not to confess is the critical aspect of this game.
Dominant Strategies
What has happened here is that the two prisoners have fallen into something called” dominant strategy equilibrium." The first is Dominant Strategy: Let an individual player in a game evaluate separately each of the strategy combinations he may face, and, for each combination, choose from his own strategies the one that gives the best payoff. If the same strategy is chosen for each of the different combinations of strategies the player might face, that strategy is called a "dominant strategy" for that player in that game. The second is Dominant Strategy Equilibrium: If in a game, each player has a dominant strategy, and each player plays the dominant strategy, then that combination of strategies and the corresponding payoffs are said to constitute the dominant strategy equilibrium for that game. In the Prisoners' Dilemma game to confess is a dominant strategy, and when both prisoners confess, that is dominant strategy equilibrium. This remarkable result -- that individually rational action results in both persons being made worse off in terms of their own self-interested purposes -- is what has made the wide impact in modern social science. For there are many interactions in the modern world that seem very much like that, from arms races through road congestion and pollution to the depletion of fisheries and the overexploitation of some subsurface water resources. These are all quite different interactions in detail, but are interactions in which individually rational action leads to inferior results for each person, and the Prisoners' Dilemma suggests something of what is going on in each of them. That is the source of its power.Extensions of the Prisoner's Dilemma
Few social situations can be modeled accurately by a single interaction. Rather, most situations result from a series of interactions over a long period of time. An extended version of the Prisoner's Dilemma scenario includes repeated interaction, which increases the probability of cooperative behavior. The logic of this version of Prisoner's Dilemma suggests that a player's strategy depends on his or her experience in previous interactions, and that that strategy will also affect the future behavior of one's opponent. The result is a relationship of mutual reciprocity; a player is likely to cooperate if his or her opponent previously demonstrated willingness to cooperate, and is unlikely to cooperate if the opponent previously did not. The knowledge that the game will be played again leads players to consider the consequences of their actions; one's opponent may retaliate or be unwilling to cooperate in the future, if one's strategy always seeks maximum payoffs at the expense of the other player.Issues With Respect to the Prisoners' Dilemma
This remarkable result -- that individually rational action results in both persons being made worse off in terms of their own self-interested purposes -- is what has made the wide impact in modern social science. For there are many interactions in the modern world that seem very much like that, from arms races through road congestion and pollution to the depletion of fisheries and the overexploitation of some subsurface water resources. These are all quite different interactions in detail, but are interactions in which individually rational action leads to inferior results for each person, and the Prisoners' Dilemma suggests something of what is going on in each of them. That is the source of its power. A number of critical issues can be raised with the Prisoners' Dilemma. That is a two-person game, but many of the applications of the idea are really many-person interactions. We have assumed that there is no communication between the two prisoners. If they could communicate and commit themselves to coordinated strategies, we would expect a quite different outcome. In the Prisoners' Dilemma, the two prisoners interact only once. Repetition of the interactions might lead to quite different results. Compelling as the reasoning is that leads to the dominant strategy equilibrium may be, it is not the only way this problem might be reasoned out. Perhaps it is not really the most rational answer after all. We will consider some of these points in what follows. Oligopoly prices and "Solutions" to Pricing Games there is a example to Table 1| Perrier | |||
| price = $1 | price = $2 | ||
| Apollinaris | price = $1 | 0,0 | 5000,-5000 |
| price = $2 | -5000,5000 | 0,0 | |
The Oligopoly Problem
It seems that game theory doesn't solve the oligopoly problem after all. There are at least two kinds of solutions to the problem of oligopoly pricing -- cooperative and noncooperative. Actually, it's a bit worse than that. In each of the two categories, there is actually more than one sort of solution, depending on how we approach the problem! That had become pretty clear to economists by the 1960's, and many economists lost interest in game theory. But despite its failure on this specific point, game theory has proved to be a powerful tool of economic thinking, so that it has become more influential since the 1960's, culminating in the Nobel Prize for three game theorists (including John Nash, who invented the Nash-Equilibrium) in 1994. And it is not just simply a failure in the analysis of oligopoly prices. Sometimes it's important to be confused at a higher level. We know that oligopoly pricing is a hard problem, but the reason why it is a hard problem. The pricing examples we have seen here give some insight about the reason why price competition -- when it does occur -- is so powerful in bringing prices down to the lowest stable level. And we can apply the same methods to a range of other problems, both related to imperfect competition and in other fields of economics.Cartel
Cartel union is an important form of business cooperation. So as to used price fixing and set limit to pursue the trade profits, then used the basis of equitable distribution of the profit-sharing mechanism. on the basis of the Cartel expansion of the alliance model, and analysis the repeated game mechanism; the result is that the static game under the conditions of the enterprises do not have the stability of the Cartel Union, in repeated games under the conditions of enterprises to cooperate balance in the balance between competition and choice depends on the size of the discount factor. Forgiveness policy is an effective cartel enforcement policy, it will help undermine the stability of the cartel, and the cartel will help improve the efficiency of law enforcement. Design the reasonable rule and effective policy of forgiveness play a role in the foundation of concrete and determined that forgiveness is transparent the basic requirements of the policy. Forgiveness policy and the effect of the cartel legislation, law enforcement situation is closely related to severe legal sanctions, the firm's attitude toward law enforcement and strong enforcement measures to promote the effective implementation of the policy of forgiveness. Cartel is in order to strengthen the law enforcement.Nash equilibrium
Assume N that a player involved in the game, given other people the strategy under the condition of each player to choose their own optimal strategy (personal best strategy may or may not depend on others to rely on the strategy), so to maximize their effectiveness. All in games player will make a strategic combination?Strategy Profile?. Nash equilibrium refers to a combination of strategy, this combination of strategies by all participants the best strategy component. Even given the strategy of others, no one has sufficient reason to break this balance. It has the case with the Prisoner's Dilemma. Assuming there are two A and B of the Joint thief was convicted, into private homes seized by the police. Police were placed in two different rooms within the two to trial, each of the suspects, the police are given the policy is: If you suspect a crime has been, frankly, to hand over the stolen goods, the evidence, both were convicted. If the other suspects also made frank, the two men were each sentenced 8 years; if another crime suspects but frankly did not deny, however, prevent the crime of official duties (as a result of evidence of their guilt has been) plus 2 penalty , To be honest and active 8-year sentence was immediately released. If they both deny, for lack of evidence the police can not be sentenced two of theft, but the accusal they can into the private home of the charges would be liable to imprisonment for 1 year. —————————————————————————— ??B???B?? ————————?————————?————————? ??confess???disavow?? ————————?————————?————————? A? confess???-8, -8???0, -10?? ————————?————————?————————? A? disavow???-10, 0???-1, -1?? ————————?————————?————————? On the case, clearly the best strategy is to deny both of them; the result is only sentenced to 1 year. However, due to two in isolation, should be the first from a psychological point of view, the parties will suspect the other party will sell out in order to protect themselves, followed by Adam Smith's theory, hypothesis that everyone to be " Rational economic man " and they will proceed from the purpose of self-selection. The two men will have a calculation process: If one frankly, one deny, would take a 10-year prison, a maximum of only 8 years frank; one would deny, one person will be able to be released, and he would take 10 years in prison. Taking all these circumstances into account, whether or not someone is honest, for another one, is frankly a cost-effective. The two would move such a brain, in the end, both chose to be honest; the results were sentenced to 8 years imprisonment. Rational agent-based on economics premise the assumption that the two prisoners in line with the interests of their own choice is to confess frankly, was beneficial to both sides of the strategy is not to confess and thus would not have been released. Both of this option, frankly, as well as the strategy are therefore sentenced to 8 years of the end. So "Nash equilibrium" in the lead to the "invisible hand" of the principle of a paradox: from self-serving purpose, the results Dog in the manger, not altruism or self.The relationship between the ‘Prisoners Dilemma' and the theory of cartels
Monopolize market is the reality of the existence that there is an important market structure, which refers to products in the market. With a product that only a few companies to provide production and characterized by any decision-making will Manufacturers of other vendors have an impact on production. In the monopolistic cartel Union, Cartel's output is allocated to form a key cartel. Such as the OPEC. Since the international oil price in the 1970's sharp rise year, OPEC cartel does have some of the traditional organization of the basic features, but with other traditional organizations cartel, OPEC also has some obvious differences. most of the studies can not prove that OPEC is a cartel; OPEC can only prove that there is a similarity between the members. In addition, the OPEC cartel's interests have been significantly reduced. As a result, the conclusion can be drawn: For now, OPEC is not an effective operation of the cartel's organization; or it could be argued that the international oil market, OPEC's is not entirely influence the power of the cartel. Cartel's output has a bearing on the distribution of the vital interests of manufacturers, as the productivity of firms, manufacturers. After forming cartels the ideal of production allocation should be based on the manufacturers' effect to determine the productivity of production quotas and more efficient production, Inefficient and less productive. Currently, to make the cartel of several companies as a monopoly vendor various Production plant. So the formula is: Ci = C = R (I = 1, 2... n,) “Ci” for the first “i” makers of the marginal cost “C” for the industry as a whole marginal cost “R” for the industry as whole marginal gains Actually, cartel will follow the general principles to distribute the sales quota. According to the manufacturer's production capacity to the level of sales quota allocation, the greater the scale of production, the higher ability of manufacturers will get the greater quota. According to the manufacturer's sales in the past to the level of sales quota allocation, sales in the past, the higher the level of the companies get bigger quotas. Base on location to distribute quotas, if the companies get a certain region or country market, while other manufacturers have been other regional or national markets. Through the Manufacturers together to formation of a cartel agreement and is often unstable, this instability in the cartel but also as the increased manufacturers, from the chart of analysis can identify the manufactory will leave the cartel in order to Lead to the dissolution of the cartel. From this chart, when the Manufacturers of production is mi, Ci=/=Ri, the mean is mi is not the manufacture's good output, in fact, if the manufactures reduce the price to P1, the Manufacturers amount of the request will become mtto mt', and in mt', Ci=Ri, the mean is the Manufacturers optimal output. That is to explain the manufactures Deviated from the limitative price Po, it will be increase the profit. At the same time, if there is another reality deviated from the makers of possible price-fixing. Such as the price or prices in one way to cut the price with impunity, the result is bound to deviate from the manufacturers limit price, which eventually led to the disintegration of the cartel.Conclusion
From this report we know about the Prisoner's Dilemma in game theory, what is the meaning of the Prisoner's Dilemma and the impact of economics. Different possibilities will bring different results. According to the first part of the chart there have four different the result of crime. But the both choices of strategy and frankly was sentenced to 5 years, therefore the result is called "Nash equilibrium", also called non-cooperative equilibrium. Each party in the choice of strategy when there is no "conspiracy", they just choose the most favorable to their strategy, without thinking about the benefit between each other. On other point of view through the prisoner's dilemma develop the resulting is the formation of monopolistic market and the price war. Lead the different companies have different price competition, under the Nash equilibrium and the influence of game theory will consider adopting a normal pricing strategy or the formation of high-price strategy of monopoly prices and make every effort to obtain the monopoly profits. If the monopoly can be formed, then will getting the largest mutual profit. In fact, perfectly competitive equilibrium is the "Nash equilibrium" or "non-cooperative game balanced." In this state, each manufacturers or consumers are all the others the price has been set for the decision-making.Cite this page
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What is Contract Law?
What is Contract Law?
The law of contract is a set of rules governing the relationship, content and validity of an agreement between two or more persons (individuals, companies or other institution) regarding the sale of goods, provision of services or exchange of interests or ownership. While this is a wide definition it does not cover the full ambit of situations in which contract law will apply. The reason for this is due to the vast number of examples in which contracts can arise in everyday life.
Contract law has been more formally defined as a promise or set of promises which the law will enforce. Another definition and a somewhat competing view, is that a contract is an agreement giving rise to obligations which are enforced or recognized by law. Either definition confirms the involvement of the law by way of enforcement, suggesting that should there be an infraction or breach of the terms of the agreement then the aggrieved party may seek recourse via the Courts. As is noted above, a contract can arise is a plethora of scenarios; from buying a loaf of bread in the corner shop, to the sale of a house. It is unsurprising therefore that certainty is needed before the Courts will intervene to enforce any agreement. The law of contract has confirmed the basic foundations of any contract, regardless of its complexity and substance, that it must contain to make the agreement enforceable in law.
There must be an offer and this must be accepted to make an agreement. While this would in the first instance appear to be self explanatory, it is important to distinguish between what the law says amounts to a valid offer. An offer can be made orally, in writing or by way of conduct. Regardless as to the manner of the offer, it is the willingness or intention of the person making the offer (the offeree) which is of importance, and that is clearly subjective. If a person says that I want to sell this orange for A£1.00 but then mistakenly advertises it for 1p, and that offer is accepted, then a valid agreement will be upheld. Simply because there was a mistake in the offer, it does not invalidate the contract. There was an intention to sell on the part of the offeree. It is important to distinguish at this point however between an offer and an “invitation to treat”.
Parties may enter into preliminary negotiations or pre-emptive talks before entering into a contract. The issues they cover will not necessarily form part of the contract and are considered to be invitations to treat. A classic example of this is the produce on display at Supermarkets and on shelves. The price highlighted amounts to an invitation to treat only. The offer does not materialize until the goods are taken to the checkout and the price confirmed. At that point the customer can accept the goods and pay the total amount, thereby completing the transaction and formalizing the contract. A similar situation is evidenced in auction rooms, where the offer is made when bids are put forward by prospective purchasers and acceptance once the auctioneers hammer falls.
Just as important in contract law as the offer, is the legality of the acceptance. This must be an unqualified expression of assent to the terms of an offer. An acknowledgement of an offer would not amount to acceptance, nor would a statement of intent. There must be a clear unequivocal communication of acceptance of the offer on the terms put forward by the offeree. Any attempt to amend the terms of the offer would amount to a counter offer. This would then put the parties back to square one and the offer would be open for acceptance with the offeree becoming the offeror.
The importance of contract law here may not be clear at first glance. Contract law not only governs what happens when the contract breaks down, but it also establishes what the terms of the contract are, in the event of a dispute. While the contract may be self explanatory in what the parties intend i.e. you pay A£50 and I’ll give you this washing machine, there are of course terms as to the time of payment, delivery, condition of the goods etc that need to be established. The most important terms are of course the quality of the goods and the method of payment. Certain pieces of legislation will import terms into the contract without any acknowledgement or agreement between the parties that they will be so included. An example of this is the Sale of Goods Act 1979 which ensures that in sales to consumers by anyone in the course of a business, that the goods are of satisfactory quality, fit for their purpose and correspond to their description. Contract law protects the purchaser without his knowledge. The phrase usually displayed at checkouts regarding sales and offers, “This will not affect your statutory rights” refers to such implied terms.
The offer and acceptance are the visible conditions of the contract, but perhaps even more obvious is the requirement of consideration. This term refers to the exchange of money for goods or services, or something else of value traded between the parties. It is also perhaps the most complex and contentious of the requirements for a valid agreement. Without some form of consideration, the contract is nothing more than a promise, which is unenforceable under English Law. But it is not enough that the parties make this exchange of worth, it must be “valued” consideration as opposed to inadequate consideration. This concept of “valued consideration” refers to something that is capable of estimation in terms of economic or monetary value. Furthermore it is not enough that such consideration has taken place in the past, there must be contemporaneous value by way of exchange to create a formal agreement. These technicalities have led to a raft of case law upon the issue of what amounts to consideration, hence the importance of contract law to mediate any dispute.
With the agreement between two or more people confirmed as an agreement, containing an offer and acceptance, and the exchange amount to money or something in money’s worth, there must still be the requisite intention to create legal relations. While in a commercial transaction it would appear obvious that the parties to the contract intended to create legal relations, in a more relaxed and informal setting there may be a question over how serious the parties were being? This does not mean that individuals i.e. consumers are free to return goods on the basis that they were never aware of the intention to create such legalities. The Courts may draw an inference from conduct and common knowledge that shoppers are well aware of the binding nature of any agreement to purchase goods or services. What we are referring to is the scenario where one party mistakenly believes that there is no formal intention, and the other party has knowledge of that error but fails to inform them. The Court will apply an objective test to consider all the facts of each individual case. A case involving a pupil barrister who accepted an offer from a Barristers Chambers was held to be a binding contract between the trainee and the whole chambers, not just the pupil master. The absence of specific intention on the part of the rest of chambers was irrelevant. There was clearly intent from the conduct of the parties.
More informal agreements between co-habitants living in a quasi-marital relationship can lead to dispute, particularly upon the break up of that relationship. Historically there was a question about whether a contract would form when the “stay at home mother” would find herself without recourse via matrimonial legislation. The contract was said to relate to the offer to be maintained for life by the husband, which was accepted, and the consideration would be foregoing the right to earn a living and/or providing a home for the family. The only question was relating to the formal intention of creating legal relations, a hurdle that many women could not overcome. While alternative remedies in equity exist to remedy such a scenario, it is a useful illustration of how intention can negate what at first instance appears to be a valid contract. Of course, the most obvious way to ensure that any agreement shows the intention of the parties is just to write it down. A statement of “This agreement is not entered into as a formal legal agreement” would probably suffice.
This basic overview of the law of contract demonstrates its importance and need to stay in touch with modern developments. The next section will deal more fully with this issue in terms of the scope of contract law in every day lives but it is fair to say that the need for this protection is fundamental. An unknowing party can enter into a contract without being fully aware of the implications. The development of legislation such as the Unfair Contract Terms Act 1977 and the various Consumer Credit Acts have all evolved from the basic principles of contract law and the principle of putting the parties on as equal a playing field as possible.
Where is Contract Law used today?
As was mentioned above on several occasions, contract law permeates our day-to-day lives, and often we are not aware of its presence. While legally qualified individuals may be aware every time a contract comes into existence and note phrases such as “the customer uses this at their own risk” with a wry smile, the majority of society lives in blissful ignorance of how deeply indebted to contract law they are.
In the first instance it would be a useful exercise to list a few of the various instances of contract law coming into play when we may not expect it.
- Public Transport – every ticket bought on a bus train or on the underground forms a contract. This is a contract of services and the majority of terms will be implied rather than express. If one was to state the whole list of terms on the back of a ticket as to the obligations of the provider of the transport to the customer, it would result in a piece of paper resembling an instruction sheet from Ikea rather than a ticket.
It should be mentioned here that such express terms that form part of the contract must be present at the moment it was entered into. The terms of importance will usually be on display either around the point where a ticket is bought, or it will direct the customer to a full list of the conditions elsewhere.
- Employment – every employee must have a contract of employment with their employer. While it is a fact that some employers have not bothered with the formality of drafting a document setting out the rights and expectations of both parties, the Employment Rights Act 1996 will infer a number of basic rights for the employee in any event. The offer and acceptance of taking a new job is a given, as is the consideration (days work for a days pay). The intention is not necessarily so obvious but the relationship the contract creates leaves no room for discussion as to its formality in a legal sense.
- Any purchase of goods or services – while this is dealt with in more detail below, the sale of goods or services is the most basic form of contract. While we may not appreciate the scope of the law and its impact upon a basic purchase of e.g. a new car, the terms and conditions of sale, the various pieces of legislation importing terms and the case law stretching back more than 100 years on similar issues all have a bearing upon a customers (and suppliers) rights and obligations. It is of course rare for anyone to be made aware of all the terms in existence and the “small print” usually covers most things of relevance.
- Buying a house – most people who have become involved in the conveyancing process will recall the stress of waiting for the solicitor to confirm that they have “exchanged contracts”. While the ownership of a property in England & Wales can only pass by way of deed, the contract is pivotal. The contract will set out the terms of sale, including the price, items of furniture and fixtures that are being left behind and the date of completion. Once the purchase is completed and the monies paid, any issue that may be taken between the parties will have to be raised as a breach of contract. While in the majority of cases the axiom “Caveat Emptor” (buyer beware) will apply, the specific terms of the contract must still be fulfilled and depending upon the severity of extent of the breach, this will dictate the appropriate remedy available.
What can be seen above is that Contract Law is everywhere. From the purchase of a newspaper in the morning to the service of gas and other utilities, there exists a contract to govern most relationships outside the domestic scenario. It is understandable therefore that this area of law may be the most diverse in its impact upon everyday life, yet its principles remain comparatively straightforward. There are of course complex issues and certain types of contract (acquisitions and mergers, share holders agreements etc) require specific rules to govern their application, most contracts have a quality that allows them to operate without the knowledge of their existence.
The most influential and commonly used contracts are those relating to the purchase of goods and services. The Sale of Goods Act 1979 and Supply of Goods and Services Act 1982 have developed from a background of Caveat Emptor, where consumers were unprotected from sellers able to peddle goods that were less than of merchantable quality. While the image of “Del Boy” flogging various items out of a suitcase springs to mind, it was actually the larger and more commonly used suppliers of goods that took the brunt of this legislation. We mentioned terms as to quality and fitness above, and a multitude of cases have gone as far as the House of Lords to ensure the protection granted under a contract is enforced. We have contracts for the sale of goods when we do our weekly shopping, buy a new appliance or finally get that pair of shoes. Similarly contract for the supply of services exist over the cables service for the TV, the mobile phone company or the plumber who comes into fix the leak upstairs. However they are created, the contracts that we are party to are numerous and often we are not specifically aware of our obligations under them, save to pay what we have agreed to.
While we have focused on consumers and individual contracts, that is not to say that there are any fewer contracts that exist between companies, corporations, charities or even governments. Most companies will have several contracts for the services it obtains from other companies i.e. cleaning, catering, accountancy etc. There will be contracts of employment with every member of staff, as well as contracts with each shareholder as to the money they have invested and the dividends received each period. They will in turn have contracts with the customers who retain their services, or even other companies by way of merger or shared services within a larger agreement. This is a non-exhaustive list but a good example of how contract law not only creates the basis for the relationship between individuals, companies etc, but also regulates their rights and obligations and ultimately provides a solution in the event of a dispute. The scope of this area of law clearly has no limit.
Case examples
Carlill v. Carbolic Smoke Ball Co (1893) 1 QB 256 (CA)
This case involved the defendant company who produced and advertised smoke balls as a preventative measure against influenza and the common cold. The advertisement stated that they would give A£100 to anyone who used the product for three times a day for two weeks but still contracted one of these illnesses. The defendant also stated that they had placed A£1,000 in a bank account to demonstrate their sincerity. Suffice to say that the claimant took up the challenge and after roughly 8 weeks of continuous use she contracted the flu. Mrs. Carlill claimed the A£100 but the defendant refused to pay; they claimed that there was no contract in place for her to enforce the claim.
This matter progressed to the Court of Appeal. The defendants maintained that there was no intention to create legal relations and the advert amounted to nothing more than an invitation to treat. At no stage did the claimant tell them that she had accepted their offer. Nevertheless the Court of Appeal confirmed that there was in fact a contract in effect between the parties. This situation amounted to a “unilateral contract” whereby one party offers money in exchange for the performance of a stipulated act. Whereas normally an advert would amount to nothing more than an invitation to treat, the request for the performance of an act made it an offer. There was no requirement for Mrs. Carlill to inform the defendant that she had accepted it, the undertaking of the challenge was tantamount to acceptance.
There were arguments from the defendant that the wording of the advert was too vague for it to amount to a contract. There is always a requirement that the specifics of the offer are precise so as to avoid confusion. While there was some scope for interpretation, the Court adopted a literal meaning to the advert, which simply state that providing the claimant took the smoke balls continuously and then contracted any of those illnesses she would receive A£100. The deposit of A£1,000 into an account was a demonstration of the defendants meaning and willingness to rely upon their product in light of this challenge. The Court had no hesitation is finding in these specific circumstances that there was a contract under which the claimant was due A£100.
While this case demonstrates how the law of contract protects the party who in good conscience accepts the terms put forward by the offeror, it remains something of an anomaly. This situation would only be enforceable where the offeree was required to undertake a specific task, thereby removing the need for communicating acceptance and transferring an invitation to treat into a formal offer. There is also a lesson for the nave or careless when setting challenges and making proposals to others. A contract can arise even when the intention was to make an informal offer, but in the absence of a specific statement to that effect, the conduct of the offeror may infer the requisite legal intention.
Coward v. Motor Insurers’ Bureau (1963) 1 QB 259 (CA)
In this matter Mr. Coward and Mr. Cole were work colleagues who had an arrangement regarding shared lifts to work. Cole would drive his motorbike and Coward would ride pillion in return for a weekly sum of money. Unfortunately both were killed in a road traffic accident and the wife of Mr. Coward made a claim for damages against the estate of Mr. Cole. However Cole’s insurance policy did not cover pillion passengers and as his estate had no assets or money to satisfy the judgment, Mrs. Coward pursued the Motor Insurance Bureau (MIB).
The MIB have an agreement whereby accidents and consequential claims would be satisfied by the Government in circumstances where the driver has no relevant policy of insurance. However the rules covering this situation require Mr. Coward was carried for “hire or reward”. Consequently Mrs. Coward needed to prove that there was a contract in place between Coward and Cole for the lifts to work.
There was clearly an offer of transport and this was accepted. In addition the consideration exchanged by the parties was the service of transport and the money paid by Mr. Coward. However there was a question over how formal this arrangement was so as to amount to an intention to create legal relations. Once again this matter progressed to the Court of Appeal and it was decided that notwithstanding the regular payment of money in return for the lift, it was not so formal as to create a contract. There were no terms as to how long this was to last, what would happen in default of payment or the availability of transport, or anything written down so as to at least make their intention clear.
The practice of colleagues sharing a lift to work (or “car pooling”) is an accepted and wide spread practice. Parties will usually agree that one will take their car and in return the others will make a contribution towards the petrol costs. This is usually a matter of convenience, reducing costs or even a conscious decision to reduce emissions from each separately taking a vehicle. It cannot be said however that the agreement is so formal as to form a contract for the provision of this service. The contrast is to a previous example, that of public transport. There are no tickets, conditions or terms of agreement and no business or profit making organization is involved. There can be no obligation upon people in this scenario to ensure that transport is always made available to the party that pays. What would happen when the owner of the vehicle went on holiday or there was a shift change? In these circumstances an element of common sense must come into play. Most people will make informal agreements ranging from car pooling to picking up children from school or even being the designated driver on a night out. None of these create a contract as the intention is one of informal assistance or a mutual benefit, not to create legal relations.
Olley v. Marlborough Court Ltd (1949) 1 K.B. 532
Mr. Olley visited the hotel belonging to the defendant. He had not made an in advance booking and upon arrival requested a room for the night. He signed the register and there was no mention at that stage of any other terms or conditions that might impact upon his stay at the hotel. During the course of his stay Mr. Olley discovered that someone had broken into his room and stolen certain property including a fur coat. It subsequently became known that the defendant was negligent in relation to the security within the hotel. Nevertheless, the defendant sought to rely upon an exclusion clause that was placed in the bedroom the claimant stayed in. This stated that the hotel would not accept liability for lost or stolen items belonging to customers.
The question was whether the exclusion clause that was displayed in the bedroom constituted a valid term of the contract. It was not disputed that there were all the required components to for the agreement i.e. offer, acceptance, consideration and intention, but that was not to say that all the terms the hotel sought to rely upon could actually be enforced against Mr. Olley. As we mentioned above, terms must be brought to the attention of the customer, consumer or party against whom they are trying to be enforced at the moment the contract was entered into. Otherwise it would allow parties free will to include other terms at a later stage, albeit if the customer had known of such a term they might have decided not to enter into it in the first place.
The Court decided that the contract was entered into the moment Mr. Olley arrived at reception and signed the register. That was the point when the room was offered to him and he accepted. Intention was not an issue and in consideration of the agreement, he would receive a room to stay for which the hotel would receive payment. The fact that payment would usually come after the stay was irrelevant. Consequently Mr. Olley was not given notice of this exclusion clause until he had already entered into the contract and therefore it was unenforceable against him.
Similar examples of this issue of notice and timing of the terms of any contract can be seen where clothes are purchased and notices attempting to exclude liability are put on the receipt. The example of public transport above and the terms and condition relating to the travel must be stipulated at the relevant time. It should be pointed out here however that the actual notice of these terms need not be something that is brought to someone’s attention every time they enter into a contract. If there is a course of dealing or repeated business, and in a previous transaction a term was brought to the attention of the customer, then they could be held to have been made aware of it and it becomes a term of the contract. If Mr. Olley had stayed at the hotel on a number of previous occasions, it would have been difficult for him to argue that he had no knowledge of the exclusion term. In such circumstances it is arguable that he would have been deemed to have had knowledge and the hotel could have relied upon the term within the contract.
Adams v. Lindsell (1818) 1 B. & Ald. 681
This case concerns the acceptance of an offer and the importance of how that acceptance is communicated to the offeror. Here the defendant offered to sell the claimant fleeces of wool for a certain price. They requested that the response be made by post. This letter was misdirected by the defendant so that it was not received for 3 days after it was sent. The claimant decided to accept the offer and responded on the same day. This was posted on the 5th September but not received until the 9th September. However the defendant decided on the 8th September that as they had not received a response decided to sell the wool to someone else. The claimant argued that a contract had been created as he had accepted their offer.
The Court confirmed that the delays were entirely the fault of the offeror. Had the letter been posted correctly then this scenario would in all likelihood not have arisen. Furthermore the contract was created on the 5th September when the acceptance was posted, not when it was received. While the agreement was not communicated to the offeror, it could not prevent the contract being created. To decide otherwise would be to prevent contracts being created by post completely. It would otherwise require (in this scenario) the claimant to wait until the defendant had received the offer and then written to him saying that the terms were agreed and so on. This system of acceptance was thereafter referred to as the “postal rule”.
In contrast the offer itself can only be communicated to the offeree via the post once it has been received. Any pre-emptive negotiations or discussions are likely to amount to nothing more than an invitation to treat pending the formal offer.
While there has naturally been some development in this area, the most obvious issues arise with the creation of the internet and on-line shopping. The majority of people with access to the internet have purchased something at one time or another. The question as to the formation of any contract here is when does that contract arise? While it is not important to examine the legislation and case law in that particular area (which is vast) what is crucial is how this example of a seemingly antiquated rule can be adopted into a new and totally unforeseeable system through the medium of contract law. While the rule itself remains applicable to postal orders via catalogues and other postal services, the evolution does not stop and wait for something completely new to take its place. The law of contract in this area requires modification and adaptation to meet the demand of e-commerce and a society moving towards carrying out the majority of household and social affairs through the internet. Protection for the unwary or even experienced surfer of the web, when entering into contracts on-line is clearly an important function of modern contract law.
Conclusion
We have seen how contract law permeates every section of our lives. From employment, to conveyancing or even to social and recreational activities such as buying a drink in the pub, contracts are created all around us. While the majority are short lived and the terms fairly simple and unobtrusive, breaches of such agreements may still be enforced with all the force of the law as with the more serious forms of contract.
The public perception of contracts is often misleading as many have not found it necessary to enforce such terms. As we live in a capitalist society with freedom of choice, the need to ensure quality often negates the need for a consumer to enforce their rights as to quality and fitness under a contract of sale. Standards are maintained by Government bodies and independent organizations i.e. BSI. The consumer rarely has the need to enforce breaches of contract, and even if they do, retailers are so aware of the rights of consumers that they will allow an exchange of goods without question. It is more often that not (certainly in the current financial climate) that the terms as to payment are enforced by suppliers and sellers in default of the agreement more frequently. Issues of credit are widespread at the moment and the contracts that regulate the borrowing of money against property (hire purchase) or simply under a general agreement (credit card) are being breached every day. This is the other side of the coin for contract law. There are terms and conditions for both parties. This is the essence of a legal contract, the exchange of consideration without which there is nothing more than an unenforceable promise.
The law of contract needs to change with the developments in economics, technology and social attitudes. It is usually a matter for Parliament to intervene and legislate for new situations and introduce law that will govern particular relationships and the contract that arise between them. It is impossible however to legislate for all potential eventualities as a situation may arise that was not foreseen, or the technology, issue or relationship that it was intended to regulate may have moved on. It is then for the Courts to interpret the law so as to find the solution to any dispute. This is how contract law was in 1818 with the case of Adams v. Lindsell and how it will probably remain for the foreseeable future. While the variety and scope of contracts continue to evolve and increase, the general principles that we have examined above remain applicable. It may be that in years to come there will be introduced a system that will create a standard form of agreement based upon the nature and relationship of the parties to it e.g. companies or businesses in the same market dealing between themselves but there will always be the isolated agreement, or informal shake of hands that ultimately creates a contract and the enforceable terms it grants to those party to it.
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Whiplash Claims in the UK
What, if anything, should the Government do about whiplash claims in this country? The need for our government to take action in regards to whiplash claims would depend on whether there is a problem in the first place. The problem in this respect can take on many forms, namely with either procedure, access to justice, other methods of resolving dispute (ADR[1]), policy, legislation, social dynamics and/or economical climate of the whole country. It is therefore vital to identify the problem and where it stems from, before searching for appropriate solutions. For the purposes of this essay I will be focusing on the past policy changes in regards to personal injury, such as the introduction of legal aid system and the Legal Aid Board, Lord Woolf’s review of the Civil Procedure Rules and Access to Justice Report
[2] and Lord Jackson Reforms. I will aim to demonstrate that there are considerable claims in regards to “compensation culture”
[3] and “whiplash epidemic,”
[4] but those assertions are largely unfounded and seem to serve as an excuse for political and economical goals.
Nonetheless, the current changes are both reactive and proactive, and can be seen as necessary in our current economical climate. The problem in this case is subjective, everyone involved would take a different view depending which interests they represent and the end goal they are trying to achieve. It is difficult to determine whether there has been a major increase in RTA over the years as unfortunately there is no reliable, year by year, statistical data to prove the case either way.
[5] Nonetheless, when it comes to whiplash injury, Jack Straw quoted that it is as high as 80% of all the RTAs
[6] leading to Britain being branded the “whiplash capital of Europe.”
[7] Lord Jackson’s review of PI claims found that claimants had too many benefits, making smaller claims, namely whiplash claims, an easy target for fraudsters. Unsurprisingly ABI
[8] was strongly in support of the reforms that followed and APIL
[9] were strongly against. What is plainly evident is that the two sides reflect the interests of their industries. Fault based liability seems to be turning into cost based liability. Lord Dyson suggests that claimants have “lost all sense of personal responsibility”[10] blaming the media for creating a false belief that litigation is a quick financial boost rather than a genuine solution to a problem “[t]he compensation culture is a myth; but the cost of this belief is very real.”[11] Nonetheless, Dyson diverts the blame from the system “compensation culture is not about what goes on in court, but rather about what happens outside the court room”[12] and rejecting claims that UK has developed the US style litigation culture.[13] Some of the biggest changes to affect whiplash claims have been made first through the Lord Woolf’s review which focused on the disproportion caused by the legal aid system and just recently by Jackson Reforms, which were introduced to target the imbalance generated by the Access to Justice Act 1999 between claimants and defendants. The Jackson Reforms introduced a shift between the claimant and the defendant especially in regards to the small claims track. The new model of Conditional Fee Arrangements that abolish the recoverability of success fees and API premiums mean that the claimant will be covering some of the costs through the awarded damages.[14] These reforms can be seen to not only continue maintaining access to justice through CFA, but also significantly reducing costs and disproportionate fees.[15] These reforms alter the traditional model of full compensation.
Cane draws on Lord Denning criticism of the old model in Lim Poh Choo v. Camden Health Authority[16] “it would be unfair and unreasonable to award damages for loss of earnings if the claimant was in no position to benefit from them.”[17] The new reforms do not target so much how the damages are calculated, but more how much the claimant is actually left with. The courts often find themselves in a difficult position having to calculate a value in financial terms on the injuries and possible future losses which, through their subjective judicial activism, this can result in considerably varied applications of awards. “There seems no reason why a young person should be maintained for the rest of their life by an award of damages (paid by society in one way or another) simply because their spouse or partner was killed through someone’s fault. It is surely not right that the law should reward idleness and discourage gainful activity in this way.”[18] Although Cane was talking about fatal accidents, damaged in whiplash claims are often also difficult to calculate[19] and disproportionate claims[20] can arise when calculating future losses in regards to whiplash personal injury claims, sometimes depending on the length of the claimed pain not severity.[21] The claimants must take reasonable steps to mitigate their loss, but it is difficult to prove whether or not a claimant has done all that is reasonably expected of them to reduce their costs and again it is left up to the courts to decide what is reasonable.
Currently a claimant can include private medical treatment[22] in their damages even if it is available through the NHS “(in more than a third of cases), in order to have an examination necessary for the claim.”[23] This seems to go strongly against the mitigation principle “[i]t is not at all obvious why, sixty years after the beginning of the NHS, we should continue to subsidize those who seek private treatment in the way that the tort system does.”[24] This is something the Government can potentially address in regards to whiplash injury, as these claimants are unlikely to require treatments the NHS does not already provide. Current proposals for medical whiplash panels have been accepted by the Ministry of Justice and are likely to be implemented.[25] The Civil Justice Council has indicated the need for independent panels with an accreditation model to provide skilled advice, but indicated the need for heavy regulation “are assessed and authorised on the basis of their expertise, and not organisations that can then hire or instruct individual doctors who are not then subject to any independent scrutiny or authorisation.”[26] This model looks promising and aims to be “i) flexible; ii) transparent; iii) independent.”[27] Nonetheless, with whiplash injuries being so difficult to prove, medical panels, no matter how independent, are unlikely to spot fraudsters. Their reports would produce largely subjective results. Motor Investigation Unit has been researching more modern solutions through social media and technical equipment like on board CCTV.[28] In Golden v. Dempsley[29] the courts accept the MIU[30] take a different approach to evidence, with more focus on the claimant’s credibility. In reference to Kearsley v Klarfeld[31] and Casey v Cartwright[32] the district judge also notes the need for early access to the car for inspection and medical records, but also stresses that those should not be the main focus. The recent reforms were heavily criticised by the Law Society and APIL who are disadvantaged by the new changes, “propaganda which is generated by insurers on the pretext that insurance premiums will be reduced and that this will in turn assist the country’s economic recovery.”[33] Claire McIvor takes an individualistic approach arguing that the new reforms significantly reduce claimant’s access to justice and impede on their Human Rights, primarily Article 6 “access to justice is, after all, a fundamental human right…under the terms of art.6, it is unqualified in terms of cost considerations.”[34] However, too much access to justice can create chaos, Friedman refers to this as an “Orwellian nightmare,” where access to justice is so open, that anyone can claim for anything with ease, and in effect we end up regulating each other, “we cannot have a system that provides unlimited access to justice; the pyramid must remain a pyramid.”[35] Individuals are likely to fight for their own interests with disregard of how it might affect someone in the future through policies, allowing the pyramid to lose its shape would likely result in a dysfunctional welfare state “not justice but economical inefficiency and waste.”[36] McIvor takes a normative approach, but disregards economical efficiency completely “minimum costs will consist solely of those costs which are necessary …regardless of whether they can be described economically efficient.”[37] This is a good theoretical model, but one that does not work in practice, it is quite an unrealistic model considering economy is the driving force and is what allows UK to compete on an international level pedestal with other leading economies. If we disregard economy with such ease in every area of governance and politics then we are likely to be in constant recession. McIvor states that “substantive aspect of the process should take priority over the procedural.”[38] However, Friedman argues that “[c]heapness and convenience, while obviously important, are hollow and meaningless without a working system of relevant rights.”[39] A working system is one that can continue functioning, that can sustain itself. The reforms[40] represent a give and take scenario, with the abolition of success fees and ATE premiums on the one hand and the 10% increase in general damages[41], 25% cap on success fees from damages and qualified one way cost shifting on the other. It is an attempt to distribute costs between all parties, the claimants, defendants and even the claimant’s lawyers.
Although the claimant is viewed by some as “the little guy in the face of giant corporations”[42] he is also the “one-time litigant”[43] so unlike the defendant, likely an insurance company, in the event the claimant loses their case they will only bear the costs once, if at all.[44] The costs do balance out between the parties that way, just because insurance companies have more assets at an individualistic level, does not mean that they should carry the cost burden so significantly, this would not work with every case. Many claimants do not realise that personal injury civil litigation is not funded through the state, legal aid has been cut significantly and now it is publicly funded, so the costs come back round on us in a vicious circle through insurance premiums. The Jackson Reforms have deep political roots. We have been experiencing difficult economical times and are just emerging from the deepest recession of 2008-2009s since the war time of the 1920s.[45] We cannot look at the recent changes in whiplash claims policy in isolation from the economical and political climate that evoked those changes. It is possible that the “compensation culture” is an excuse, but the problem remains and that is excessive litigation in the whiplash area of civil litigation. There are very little changes that I would advise our Government to make in relation to whiplash claims in this country. I would advise an introduction of a whiplash NHS care package to speedily deal with medical reports of claimants, this is, however, likely to be introduced together with the medical panels and the accreditation scheme. Through past history of the legal aid introduction, then the Access to Justice Act 1999, and now the Jackson Reforms, what is evident is this constant emerging imbalance between the two sides, justice and morality often lies on the side of the claimant and economical prosperity on the defendant’s side, usually a corporation. The way this imbalance is targeted is by restricting the side that is causing an imbalance, it is something that will continue to be done. Social tendencies dictate that whichever party gets better provisions, will take advantage of it and in some cases even abuse it, such as the fraudulent whiplash claims. That is not to say the system we have at the moment is the optimal, best suited system, but it is one that seems to be reflecting the current economical conditions.
The new changes introduced by way of Jackson Reforms are unlikely to stick around long enough to make a long lasting imprint in history, but it seems they are better suited for the current identified imbalance and will remain in place until the scales tip in the opposite direction. Bibliography: Lim Poh Choo v. Camden Health Authority [1980] AC 174. Motto and others v. Trafigura Ltd and another [2011] EWCA Civ 1150. Valentine v McGinty [2010] G.W.D. Langford v Hebran [2001] EWCA Civ 361. Fairley v Thomson [2004] Rep. L.R. 142. Golden v. Dempsley [2010] 9B106073. Kearsley v Klarfeld [2005] EWCA Civ 1510. Casey v Cartwright [2006] EWCA Civ 1280. Simmons v Castle [2012] EWCA Civ 1039. Access to Justice Act 1999. Legal Aid, Sentencing and Punishment of Offenders Act 2012 Law Reform (Personal Injuries) Act 1948. Conditional Fee Agreements Order 2013. C McIvor, ‘The Impact of the Jackson reforms on access to justice in personal injury litigation’ (2011) CJQ. LM Friedman ‘Access to Justice: Some Historical Comments’ 2009 37(1) Fordham Urb. LJ Article 4, 7 CFA covers legal fees; however additional costs such as medical reports and court fees might have to be covered by the claimant in the even they lose their case. Steve Hawkes , ‘Britain’s compensation culture is out of control, insurance chief warns’ (Telegraph, 4 August 2013). R. Lewis, A. Morris and K. Oliphant, ‘Tort personal injury claims statistics: is there a compensation culture in the United Kingdom?’ [2006] JPIL 103. Master of The Rolls Lord Dyson, Compensation Culture: Fact or Fantasy? (Holdsworth Club Lecture, 15 March 2013). P. Cane, Atiyah’s Accidents, Compensation and the Law (7th ed., Cambridge, 2006). Law Society, Reducing the number and costs of whiplash claims A consultation on arrangements concerning whiplash injuries in England and Wales (March 2013). Civil Justice Council, Reducing the Number & Costs of Whiplash Claims. <https://www.telegraph.co.uk/finance/newsbysector/banksandfinance/insurance/10221301/Britains-compensation-culture-is-out-of-control-insurance-chief-warns.html > Accessed 14/03/2014 to 20/03/2014 Chinwe Akomah, ‘ABI seeks ‘radical’ action to tackle whiplash epidemic’ (Post Online, 27 April 2012) <https://www.postonline.co.uk/post/news/2170911/abi-outlines-radical-plans-tackle-whiplash-epidemic> Accessed 14/03/2014 to 20/03/2014 ‘Jack Straw calls for reform of car insurance industry’ (BBC, 27 June 2011) <https://www.bbc.co.uk/news/uk-13922554 > Accessed 14/03/2014 to 20/03/2014 Ray Massey, ‘Europe’s whiplash capital: Compensation culture makes British twice as likely to claim, adding A£90 to premiums’ (Daily Mail, 20 April 2013) <https://www.dailymail.co.uk/news/article-2311979/Europes-whiplash-capital-Compensation-culture-makes-British-twice-likely-claim-adding-90-premiums.html> Accessed 14/03/2014 to 20/03/2014 John Hyde, ‘MoJ confirms plans for medical whiplash panels’ (Law Gazette, 16 January 2014) <https://www.lawgazette.co.uk/practice/moj-confirms-plans-for-medical-whiplash-panels/5039395.article > Accessed 14/03/2014 to 20/03/2014 ‘Fraud – December 2011’ (Weightmans, December 2011) <https://www.weightmans.com/library/newsletters/fraud_-_december_2011/lvi_-_a_fresh_approach.aspx > Accessed 14/03/2014 to 20/03/2014 Graham Hiscott, ‘Budget 2014: George Osborne’s recovery exposed as a con’ (Mirror, 19 March 2014) <https://www.mirror.co.uk/news/uk-news/budget-2014-george-osbornes-recovery-3258255 > Accessed 19/03/2014 to 20/03/2014
[1] Alternative Dispute Resolution.
[2] Resulting in new legislation, Access to Justice Act 1999.
[3] Steve Hawkes , ‘Britain’s compensation culture is out of control, insurance chief warns’ (Telegraph, 4 August 2013) <https://www.telegraph.co.uk/finance/newsbysector/banksandfinance/insurance/10221301/Britains-compensation-culture-is-out-of-control-insurance-chief-warns.html >
[4] Chinwe Akomah, ‘ABI seeks ‘radical’ action to tackle whiplash epidemic’ (Post Online, 27 April 2012) <https://www.postonline.co.uk/post/news/2170911/abi-outlines-radical-plans-tackle-whiplash-epidemic>
[5] R. Lewis, A. Morris and K. Oliphant, ‘Tort personal injury claims statistics: is there a compensation culture in the United Kingdom?’ [2006] JPIL 103.
[6] ‘Jack Straw calls for reform of car insurance industry’ (BBC, 27 June 2011) <https://www.bbc.co.uk/news/uk-13922554 > [7]Ray Massey, ‘Europe’s whiplash capital: Compensation culture makes British twice as likely to claim, adding A£90 to premiums’ (Daily Mail, 20 April 2013) <https://www.dailymail.co.uk/news/article-2311979/Europes-whiplash-capital-Compensation-culture-makes-British-twice-likely-claim-adding-90-premiums.html>
[8] Association of British Insurers.
[9] Association of Personal Injury Lawyers. [10] Master of The Rolls Lord Dyson, Compensation Culture: Fact or Fantasy? (Holdsworth Club Lecture, 15 March 2013) 6. [11]Ibid, Lord Dyson quoting BRTF, 4. [12] Ibid 11. [13] Ibid 8. [14] Implemented through s44 and s46 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012; and Conditional Fee Agreements Order 2013. [15] Motto and others v. Trafigura Ltd and another [2011] EWCA Civ 1150. [16] [1980] AC 174. [17] Ibid. [18] P. Cane, Atiyah’s Accidents, Compensation and the Law (7th ed., Cambridge, 2006) 155. [19] Valentine v McGinty [2010] G.W.D. [20] Langford v Hebran [2001] EWCA Civ 361. [21] Fairley v Thomson [2004] Rep. L.R. 142. [22] Law Reform (Personal Injuries) Act 1948, s. 2(4). [23] Ibid (n 17) 155. [24] Ibid (n 17) 151. [25] John Hyde, ‘MoJ confirms plans for medical whiplash panels’ (Law Gazette, 16 January 2014) <https://www.lawgazette.co.uk/practice/moj-confirms-plans-for-medical-whiplash-panels/5039395.article > [26] Civil Justice Council, Reducing the Number & Costs of Whiplash Claims. [27] Ibid. [28] ‘Fraud – December 2011’ (Weightmans, December 2011) <https://www.weightmans.com/library/newsletters/fraud_-_december_2011/lvi_-_a_fresh_approach.aspx > [29][2010] 9B106073 [30] Motor Investigation Unit. [31] [2005] EWCA Civ 1510. [32] [2006] EWCA Civ 1280. [33] Law Society, Reducing the number and costs of whiplash claims A consultation on arrangements concerning whiplash injuries in England and Wales (March 2013) 2. [34] C McIvor, ‘The Impact of the Jackson reforms on access to justice in personal injury litigation’ (2011) CJQ. [35] LM Friedman ‘Access to Justice: Some Historical Comments’ 2009 37(1) Fordham Urb. LJ Article 4, 7. [36] Ibid 9. [37] Ibid (n 30). [38] Ibid (n 30). [39] Ibid (n 31) 4. [40] Lord Jackson Reforms 2013. [41] Introduced through Simmons v Castle [2012] EWCA Civ 1039. [42] Ibid (n 31) 6. [43] Ibid (n 30). [44] CFA covers legal fees; however additional costs such as medical reports and court fees might have to be covered by the claimant in the even they lose their case. [45] Graham Hiscott, ‘Budget 2014: George Osborne’s recovery exposed as a con’ (Mirror, 19 March 2014) <https://www.mirror.co.uk/news/uk-news/budget-2014-george-osbornes-recovery-3258255 >
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Company Law Essay Example for Free at Magic Help
THE ULTRA VIRES DOCTRINE OF COMPANY LAW IN ZAMBIA INTRODUCTION This assignment examines the debate on the legal issues surrounding the abolition of the requirement to submit a Memorandum of Association when applying to incorporate a company under the Zambian Companies Act 1994 cap 388 of the Laws of Zambia. This debate has been on the “Objects Clause” which used to be a requirement under the old Companies Act 1921 and was to remain as part of the Memorandum of Association thereafter until the company ceased to exist. ORIGINS OF THE OBJECTS CLAUSE A company on incorporation under the Companies Act cap 388 gives it a corporate personality which means that it gains the status of a separate legal entity from its shareholders or members.[1] However, as an artificial person, the company cannot make decisions and as such has to rely on humans to make decisions on its behalf. Therefore, the decisions and actions by the company officers, employees or indeed its agents will be taken to be those of the company which shall bear the liability. As such, as the company is to be regarded as an artificial person, the courts developed the view that its legal capacity had to be limited to its objects[2] and on incorporation to include the objects clause in its memorandum of association[3] which formed part of the company’s constitution. This was with a view of safeguarding the interests of both the shareholders and the creditors by way of the doctrine of ultra vires. In summing up, it can be said that an objects clause is that provision in a company's constitution which provides for the purposes and the power to undertake only the activities for which the company was formed as was the case before the coming into force of the Companies Act cap 388. THE DOCTRINE OF ULTRA VIRES The doctrine of ultra vires[4] refers to those acts or decisions that a company may undertake which are beyond the scope of powers granted by the company’s objects clause in its memorandum of association. Ashbury Carriage Company v Riche (1875) The ACC was an incorporated company under the Companies Act of 1862. Clause 3 of the memorandum that: The objects for which the company is established are to make and sell, or lend on hire, railway carriages and wagons, and all kinds of railway plant, fittings, machinery, and rolling-stock; to carry on the business of mechanical engineers and general contractors; to purchase and sell, as merchants, timber, coal, metals, or other materials; and to buy and sell any such materials on commission, or as agents. The company agreed to provide Richie and his brother with finance for the construction of a railway in Belgium but later repudiated the agreement. Richie sued for damages. Held That the contract was void and that ratification, even if it had taken place, would have been wholly ineffective. PRESENT LAW Unlike before, the current Companies Act cap 388, does not have a mandatory requirement for companies incorporated under it to have a memorandum of association which should contain the objects clause. POWERS AND DUTIES OF DIRECTORS The Companies Act Cap. 388 provides under section 215 that: (1) The business of a company shall be managed by the directors, who may pay all expenses incurred in promoting and forming the company, and may exercise all such powers of the company as are not, by this Act or the articles, required to be exercised by the company by resolution. (3) Without limiting the generality of subsection (1), the directors may exercise the powers of the company to borrow money, to charge any property or business of the company or all or any of its uncalled capital and to issue debentures or give any other security for a debt, liability or obligation of the company or of any other person. VALIDITY OF ACTS However, section 23 provides that “No act of a company, including any transfer of property to or by a company, shall be invalid by reason only that the act or transfer is contrary to its articles or this Act” seems to be a contradiction to sections 7 and 22. THE ARTICLES OF ASSOCIATION Before the 1994 Act, the articles of association where classed as being inward-looking and having a purpose of setting out the rules governing the running of the company. The articles hence formed an incorporated company’s constitution[5] which may deal with any matters of the company operations. However, the present Act does not, as stated above, make it mandatory for a company to submit a memorandum of association but provides under section 7 as follows: (1) A company may have articles regulating the conduct of the company. (2) The articles may contain restrictions on the business that the company may carry on. This means that there is no need of an objects clause to be included in the articles of association so as to restrict the business operations to conform to the objects and indeed should not specify its general nature of the company business. This assertion can also be inferred from section 7(4) which provides that “a company on incorporation may adopt the regulations of the Standard Articles” which do not contain a provision for the general nature of the business to be undertaken or indeed any restrictions. Furthermore, section 7(2) provides that ‘the articles may contain restrictions on the business that a company may carry on’, thus departing from the traditional role of covering mainly issues to do with the internal management of the company for which articles of association are often known for. Therefore, it could be inferred from this section that a company on incorporation may restrict its nature of business to be undertaken as agreed by the shareholders. This inference is asserted to by section 22(3) of the Act which provides that “A company shall not carry on any business or exercise any power that it is restricted by its articles from carrying on or exercising, nor exercise any of its powers in a manner contrary to its articles.” However, the restrictions that prohibit an incorporated company from carrying on any business in its articles of incorporation are on the preferences of the shareholders and as such the doctrine of ultra-vires whilst not being abolished is not mandatory. Therefore, where a company decides to place some business restrictions in its articles of association then that company is prohibited from carrying on any business or exercising any power that it is restricted by its articles. NOTICE NOT PRESUMED 24. No person dealing with a company shall be affected by, or presumed to have notice or knowledge of, the contents of a document concerning the company….. This means that the interests of the third party who deals with a company is entitled to assume that it has the power to do anything it wishes are not affected[6] unless he was actually aware (notice or knowledge) of the restrictions. Therefore, section 24 basically abolishes the ultra vires rule against third parties who have no knowledge of the company’s objects and are meant to assume that the director, agent or company employee they deal with has the power to make decisions. This has been acknowledged in the case of Freshint Ltd & Others v Kawambwa Tea Company [2008] ZMSC 26 at (763) where it was held that “in practice most people dealing with companies rely on the rule in Turquand’s case and do not bother to inspect the articles. …… The company’s authorized agents bound the company to comply with the contract and such liability cannot be avoided……. NO DISCLAIMER ALLOWED 25. A company …..may not assert against a person dealing with the company or with any person who has acquired rights from the company that- (a) any of the articles of the company has not been complied with; (b) a shareholder agreement has not been complied with; (c) the persons named in the most recent annual return or notice under section two hundred and twenty-six are not the directors of the company; (d) the registered office of the company is not an office of the company; (e) a person held out by a company as a director, an officer or an agent of the company has no authority to exercise the powers and perform the duties that are customary in the business of the company or usual for such a director, officer or agent; (f) a document issued by any director, officer or agent of the company with actual or usual authority to issue the document is not valid or genuine; or APPLICATION FOR INCORPORATION Section 6 2(i) provides that an application for incorporation shall be in the prescribed form and shall specify ………. the nature of its proposed business….. This means that all the features which could be found in the memorandum of association have now been incorporated into the Articles of Association including but not limited to: (a) The Name Clause; (b) The Objects Clause; (c)Each subscriber confirming their intention to form a company (d)Each member also agrees to take at least one share (e)Physical address of the office to be the registered office CONCLUSION This argument hence concludes that the requirements for the objects clause have actually been retained in through both the articles of association and Companies Form 2 which requires that the applicants specify the general nature of business to include the principal business and any other business (section 2). It could further be concluded that the filing of Form 2 re-enforces the notion that the doctrine of ultra vires has been retained in Zambia through the provision at section 3 that, “The articles restrict the business that the company may conduct as follows” after which part these restriction will be specified. BIBLIOGRAPHY Davies, L. P., Principles of Modern Company Law, 8th Edn, Sweet and Maxwell, 2008 Dignam A. & Lowry J., Company Law, 4th Edn, OUP, London, 2006 1
[1] Salomon v Salomon & Co [1897] A.C 22, HL, at 51, per Lord Macnaughten [2] Ashbury Carriage Company v Riche (1875) [3] Guinness v Land Corporation of Ireland (1882) [4] Ultra vires is a Latin expression which lawyers and civil servants use to describe acts undertaken beyond (ultra) the legal powers (vires) of those who have purported to undertake them. Davies P.L., Principles of Modern Company Law, at p153. [5] Davies P.L., Principles of Modern Company Law, 8th Edn, Sweet and Maxwell, 2008, at p62 [6] Royal British Bank v Turquand (1856)
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Crime Law Essay Online for Free
- Water Resources Act 1991 s85
- Areas to be considered within the case of Brockwell
- Who will prosecute?
- Nuisance
- The Hoffmann Test - Causation
- Causation
- Negligence
- Rylands Rule
- Acts of third parties including vicarious liability
- Knowingly permitting
- Discharge
- Mitigating circumstances
- Sentencing
- Conclusion
Water Resources Act 1991 s85
S85 of the Water Resources Act 1991 (the Act) indicates Civil penalties that may assist in a more effective regulation system and this is likely to be used in areas such as illegal waste disposal. In the area of water pollution there are many grounds for assuming that the importance of criminal prosecutions is set to continue. The Environment Agency has published a detailed prosecution code3, whereas, generally the Agency issues a low level set of fines, therefore it is unusual for custodial sentences to be used. The use of custodial sentences for environmental harm applies when it is a repeated or blatant offence and where in a public place the offence is such as to subject the public to hazardous substances as in R v O'Brien and Enkel4 or even community orders for polluters as in Environment Agency v UCE Ltd (Ipswich Magistrates Court June 2010)5. This gives rise to the need to consider each case on its own merit rather than using the sentencing advisory panel's advice. 3 Environment Agency guidance for the enforcement and prosecution policy https://www.environment-agency.gov.uk/business/regulation/31851.aspx 4 R v O'Brien and Enkel [2000] Env LR 156 where illegally storing waste tyres at an unlicensed site gave rise to an eight month prison sentence for O'Brian. On appeal the Court of Appeal quashed the sentence as it was regarded to be too excessive. 5 Environment Agency v UCE Ltd (Ipswich Magistrates Court June 2010) in 2008, A trail of blue-black liquid in Flowton Brook and Belstead Brook, Ipswich, in a series of incidents led Environment Agency officers to an illegal waste site run by Paul Arthur Fenton. They found mixed waste and liquid waste being stored without environmental permits and signs that some waste had been burned nearby. Ipswich Magistrates' Court issued a community order requiring Fenton to undertake 240 hours unpaid work and ordered him to pay £8,000 towards Environment Agency costs for breaches of the Water Resources Act, Environmental Permitting Regulations and Environmental Protection Act. https://www.environment-agency.gov.uk/news/117824.aspx accessed June 2010. There is evidence that Brockwell were negligent in their operation through the actions of their employees and it is not uncommon for the environment agency to proceed with a prosecution for both s85(1) and 85(3) offences, on the proviso that elements of the case can be established. Within the case of Fred Churchill (Construction) there is a breach of Environmental Protection Act 19906 although not a breach of s85 of the Act, as there is insufficient evidence that the illegal dumping of the removed substance leached or could have leached in to the River Trent.Areas to be considered within the case of Brockwell
Who will prosecute?
The case of Brockwell will be subject to the Environment Agency (the Agency) bringing a prosecution with respect to s85(1) of the Act for a water pollution incident. Exercising its prosecutable discretion7 the Agency will likely take in to account several factors, which include the seriousness of the incident and any past polluting records from the polluter. 6 Environmental Protection Act 1990 7 Discretion to Prosecute and Judicial Review Hilson, [1993] Crim LR 739 Another area to be considered is the deterrent effect of a prosecution for both would be polluters and the actual polluter. The Environment Agency's Enforcement and Prosecution Policy8 clarifies that a prosecution will be perused when an evidence test is satisfied and that a prosecution is in the public interest. Therefore foreseeability is a relevant factor when the Agency is using its common sense to decide whether an individual caused a polluting event, as in NRA v. Wright Engineering Co. Ltd [1994]9 and Alphacell Ltd v. Woodward [1972]10. The importance as to the protection of the environment is demonstrated within Cambridge Water Co v. Eastern Counties Leather Plc. [1994]11. Therefore in the context of the Brockwell case, the common sense causation is that Brockwell caused the pollution, although it was through the act of a third party (an employee) and therefore the company is liable for a prosecution under s85(1) of the Act. Alternatively there are cases where the duty of the 'causation' rule to take precautions to prevent loss caused by third parties as identified within Stansbie v. Troman [1948]12. The example of Stansbie demonstrates that a common sense answer to the question of causation for the purpose of attributing responsibility under the same rule without knowing such rule cannot be given. 8 Environment Agency Enforcement and Prosecution Policy (November 1998) 9 NRA v. Wright Engineering Co. Ltd [1994] 4 All ER 281 10 Alphacell Ltd v. Woodward [1972] AC 824, 847 a-b 11 Cambridge Water Co v. Eastern Counties Leather Plc. [1994] 2 AC 264, 305f 12 Stansbie v. Troman [1948] 2 KB 48 Therefore is the duty of a s85(1) prosecution includes a responsibility for acts of third parties. It is clear that the liability identified within the Act is strict and therefore it does not require mens rea in the sense of intention or negligence, the offence within this case is that of public nuisance as in Alphacell Ltd v. Woodward.Nuisance
Is an interference with an occupier's use or enjoyment of land where there has been substantial injury to property or personal discomfort. This is evident within the Brockwell case, as there is evidence of death fish; this would quite possibly cause a 'nuisance' for the local angling population and therefore should be taken in to consideration when summing up of the case is commenced.The Hoffmann Test - Causation
Within Empress, Lord Hoffmann attempted to encapsulate the law on causation, by providing magistrates' guidance on s85 prosecutions therefore being able to forestall13 any likelihood of future appeals. The true common sense distinction14 which Lord Hoffmann made between causation and breaking the chain of causation by the defendants acts, omissions or polluting event has been applied to several cases and would be applied in this instance within the case of Brockwell. 13 Journal of Planning and Environment N Parpworth Law 2009, Who may be liable for an offence contrary to s85 of the Water Resources Act 1991 14 Empress [1998] 1 All ER 481 at 491 HLCausation
The meaning 'causation' is well defined within the House of Lords decision in Alphacell Ltd v. Woodward [1972] and within Empress Car Company (Abertillery) Ltd v. NRA [1998]. The test within the Alphacell decision relates to the simple decision on 'causation' and requires that the defendant simply carries on with an activity which causes a pollution incident. The courts have repeatedly indicated that the notion of causing is one of common sense. The decision and subsequent judgement from Lord Hoffman in Empress will be relevant to the proceedings within this case as Lord Hoffman laid down five key guides for magistrates and judges to follow. Firstly that the court should require that the prosecution identify what the defendant has done to cause the pollution. Secondly that the prosecution need not prove that the defendant's actions caused the immediate pollution, If it is then established that the defendant did do something, it is then up to the court to decide that the defendant did do something to cause the pollution. The defendant did something which produced a pollution event by the efforts of a third party. The decision would also take into account whether the pollution act was a normal event or something extraordinary, for example an act by a third party or by a natural event. If the matter concerned an ordinary occurrence, then a break of the chain of causation would not occur and the defendant would be liable for causing the pollution. Only abnormal or extraordinary events can break the causation chain15. The chain of causation is evident, as Brockwells employees ignored systems and procedures for the disposal of a chemical by pouring the chemical in to a sluice gate, which flowed in to the controlled water. This would indicate that the companies' procedural and employee training systems were not well controlled; therefore the company is negligent within its actions. Additionally within Brockwell there appears to be no abnormal or extraordinary events that would have caused the break of the chain of causation.Negligence
Water pollution is subject to Strict Liability under Common Law, this means that it is irrelevant if the defendant intended to cause the pollution incident. Liabilities for the pollution of groundwater may give rise to an action for negligence or nuisance as in Rylands v. Fletcher LR16, where negligence arises from a failure to exercise the care demand in the circumstances, as a plaintiff must show that he is owed a duty of care, that the duty has been breached and that any harm suffered is due to the breach that the plaintiff is owed. 15 Environmental Law Wolf and Stanley, Cavendish, 4th Edition, Chapter 4 p 141 16 Rylands v. Fletcher [1868] LR 3 HL 330 [1861 - 73] All ER Damages may be awarded upon proof that the harm caused was foreseeable by the defendant. Negligence would be placed upon Brockwell as the employees poured the chemical in to the sluice rather than disposing of the chemical correctly as per the company's operational guidelines.Rylands Rule
The rule in Rylands v. Fletcher is where the land owner is strictly liable for the consequences of escapes from his property and where the land owner is engaged in a 'non-natural' use of his land. Discussion of how the three points within Rylands apply in cases involving water pollution may be found in the land mark decision of the House of Lords in Cambridge Water Co Ltd v. Eastern Counties Leather Plc [1994]16a. This case is likely to have significant impacts in the future development of the law in this area for some considerable time and would be considered within the case of Brockwell.Acts of third parties including vicarious liability
There is a well established principle within the law of tort that an employer is vicariously liable for the omissions or acts of his / her employees which is committed during the course of their employment. 16aCambridge Water Co Ltd v. Eastern Counties Leather Plc [1994] 2AC 64 Within a criminal context vicarious liability may be found and where it does exist it will be identifiable through the words of an offence creating provision. As within s85 (1) of the Act vicarious criminal liability can be imposed, although the Act does not expressly impose vicarious liability, as in National River Authority v. Alfred McAlpine Homes East Ltd[1994]17. In the event of substances that escape and pollute controlled waters from a company's premises, the company cannot escape a conviction for causing a water pollution event by blaming one of its employees who was the cause of the pollution (on proviso that the employee was acting within the terms of their employment - something that will be raised within the BP oil spill within the Gulf of Mexico). Criminal offences may be divided in to those that require full mens rea and that of strict liability. The definition of strict liability offences is where mens rea is not required in relation to one or even more elements of actus reus. The defendant company will be held vicarious liable for the acts and omissions from its employees, as identified within NRA v. McAlpine Homes East Ltd [1994], where it was identified that it is not necessary for the prosecution to prove that the managers who control the company were directly involved in the incident. 17 National River Authority v. Alfred McAlpine Homes East Ltd[1994] 4 All ER 286 QBDKnowingly permitting
It is accepted that it is necessary to prove knowledge as to the circumstances of actus reus. S85(1) and s85(3) of the Act identify offences where actions of companies 'knowingly permitted' pollution to controlled waterways. Liability for a company's knowledge of 'knowingly permitting' is identified within the Act yet it still fails to prevent the action. As it is necessary to establish that the defendant knew about the water pollution, this offence is not an offence of strict liability as identified within Schulmans Inc v. NRA [1993]18. The case Price v. Cormack [1975]19 offers a useful insight into an offence of 'knowingly permitting'.Discharge
S 85 (3) of the Act identifies the term of 'discharge' the identification is more restricted than that of the identification of the 'entry20' term. The terminology 'discharge' is identifiable with the entry into controlled water by way of means of a pipe, channel or conduit, a substance that pollutes such a water course. It is not known as if Brockwell holds a discharge consent order, if they had then the subsequent pouring of the chemical in to the sluice would have constituted a breach of such an order which would constitute a breach of strict liability. 18 Schulmans Inc v. NRA [1993] Env LR Div 19 Price v. Cormack [1975] 1 WLR 988 20 Entry is identified within s85(1) and refers to a wide range of scenarios in which polling matter enters controlled waters. The term covers situations where polluting matter is deliberately introduced within controlled water. Each occasion a breach is identified a s85(6) offence is committed, although if the breach is minor then the Environment Agency is unlikely to prosecute as in Seven Trent Water Authority v. Express Foods Group Ltd [1988]21.Mitigating circumstances
Whilst it is evident that Brockwell did in fact cause a pollution event in to a controlled waterway, the fact remains that the employees who created the pollution act for the company have been identified and corrective actions have been initiated. These facts should be considered when sentencing is summed up. If this was the first pollution case for Brockwell, then sentencing should reflect this on off incident. Although if this a subsequent case, then sentencing should reflect a continual failing to control polluting substances therefore issuing a stiffer penalty not exceeding the sentencing guidelines as in s85(6 a,b)22 similar to Robertson v. Dean Foods Ltd Sheriff Court (Tayside, Central and Fife) (Kirkcaldy) [2010]23, a small price for polluting the environment. 21 Severn Trent Water Authority v. Express Foods Group Ltd [1988] 22 On a summary conviction, which is either imprisonment for a term not exceeding three months, or a fine not exceeding £20,000 or both, with the term of imprisonment not exceeding two years. 23 Robertson v. Dean Foods Ltd Sheriff Court (Tayside, Central and Fife) (Kirkcaldy) [2010] GWD 8-139. SEPA officers were alerted to a problem following a call on 19 July 2008 to SEPA's 24 hour pollution hotline, and on attending the officers saw dead fish, including trout, eels, minnows and sticklebacks. The source was narrowed down to a discharge point downstream of Redford Bridge. These deaths may have affected fish stocks for some time, as mature sea trout that would have spawned in the autumn were killed, having an impact far wider than the number of dead fish seen at the time. The exact charge D pled guilty to was on a controlled activity, namely an activity liable to cause pollution of the water environment in that he did discharge chicken slurry into the surface drain at Sheep Pens via the railway drain without the authority of an authorisation under the after-mentioned Regulations; contrary to the Water Environment (Controlled Activities) (Scotland) Regulations 2005 Regulation 5 and 40(1)(a) and the Water Environment and Water Services (Scotland) Act 2003 Section 20(3)(a)." D was fined £3,750Sentencing
The area of criminal litigation within the field of environmental litigation is ready for a review24 as the case of Environment Agency v UCE Ltd [2010] where 240 hours of community order were issued and a fine of £8,000. Even from this case there is evidence that we are still using an antiquated 19th century legal system rather than a 21st century one25. At present any fines which are raised against a defendant go directly in to the treasury and not back in to the benefit of the environment. As indicated by the UCE case fines are small and sentences even smaller. Similarly within R V. Milford Haven Port Authority [2000]26 where Lord Bingham LJ did not feel that he could do more than draw attention to the factors which were relevant to sentence. Within R. v. Anglian Water Services Ltd27 a case where pollutants killed fish where as a river was polluted over two kilometres and serious damage was done to the wildlife and fish that lived in it. The case had been committed to the Crown Court due to the magistrates declining jurisdiction. 24 Environmental Law, D, Hughes, T, Jewell, N, Parpworth, P, Prez, Butterworths, 4th Edition 2002 p 48 25 Environmental Law, D, Hughes, et al p 48 26 R v. Milford Haven Port Authority [2000] JPL 943 27 R. v Anglian Water Services Ltd Court of Appeal [2003] EWCA Crim 2243; [2004] 1 Cr. App. R. (S.) 62; [2004] Env. L.R. 10; [2004] J.P.L. 458; (2003) 147 S.J.L.B. 993; Times, August 18, 2003; The court had found that Anglian Water was grossly irresponsible in its failure to have a safety system in operation. Anglian water contested that the Act was not a criminal one since s85(3) did not require mens rea. Interestingly Anglian water submitted that there was no causative culpability and that a high fine would impact upon investment. It was held by the court allowing the appeal that the original fine was manifestly excessive for a single offence and was reduced to £60,000. The offence was a strict liability offence whereas cases had to be considered on their merits. Anglian water had acted promptly to limit the damage and made sure measures were taken to prevent a recurrence. Additionally Anglian Water had pleaded guilty and there was no question of Anglian Water having deliberately cut corners to save costs. However, the fine had to be at a level to make an impact on the company to overcome any suggestions that it was cheaper to pay fines than undertake any work that was necessary to prevent the offence in the first place. In this case the magistrates appeared to have been correct to refuse jurisdiction and they should always do so if they thought an offence under s 85 may warrant a fine in excess of £20,000.Conclusion
If the object of Criminal Law is to prevent the occurrence of damaging actions which affect society, then it would be non productive for the Courts to turn a blind eye to cases which are caused by accidents, carelessness or negligence. The question of motivation of Brockwells employees is in the first instance, irrelevant28. Brockwells management admitted liability for the acts of its employees and by using the Anglian Water case against the scenario of Brockwell there would appear to be a similarity. Brockwell indicated admittance to their act, the question would be as to what size is the polluting company and therefore how large would the fine be. Taking in to account the Anglia Water case it would appear that the amount could be not in excess of £20,000 and more within the region of around £3,000 to £5,000. Within the case of Fred Churchill (Construction) as previously mentioned there is a breach of Environmental Protection Act 1990 and not a breach of s85 of the Act. Within the information provided there is insufficient evidence that the illegal dumping of the removed substance leached or could have leached in to the River Trent. 28 B Wootton, Crime and Criminal Law 2nd Edition, London, Sweet and Maxwell 1981 at 47 Therefore with respect to the Act, there would be no case to bring against Churchill (Construction). Will it ever be satisfactory for environmental law to be dependable on guidelines developed for another area of law29? 29 Wasa International Insurance Co Ltd v. Lexington Insurance Co [2009] HL 40Cite this page
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