And add some economics theory which taught in lecture due to 1/3 marks will be based on it (list on the instructions as well), such as the Multitasking and perverse incentives, Performance measurement and appraisals, CEO compensation, Intrinsic motivation, Incentivising across the hierarchy, Relative performance and promotions. Beside just rephrase the source you have found, thank you.
Economics Theory and Performance Measurement
Just link some of these theories to the source you got. U don’t have to put too many papers or reference in this essay. 3 or 4 are enough and link back those references to these theories.
Moreover, the introduction and conclusion are required, Just discuss why there’s a strong growth from 1990 -2007 and instances of large payments despite poor company performance,
have fuelled community concerns that executive remuneration is out of control. maybe good training and educating? good teamwork and social environment? or whatever they mentioned in the reading.
Just give out some reasons and elaborate and explains or even bullshits some points. after that put some paper evidence(reference) to support the points, It does not have to be a very high-level essay. I’m expecting a 60/100.
But the background readings and empirical in the assignment pdf must be used. and please give the internet link at the bibliography because I need to know where u find those reference.
The word limits are 1500, I’m happy with 1400 as well.
Economics Theory and Performance Measurement Sample Answer
Abstract
Most theories in personnel economics relate to the effects of the monetary compensation or incentives that the workers received based on the output. The major conclusions to these theories are that workers in all cases react or respond to these incentives, a concept which forms the cornerstone in personal economic theory. To be more specific, it’s a fact that the payment received on the basis of the output expected will basically induce the workers to increase the output. (Lazear 2000) These paper looks at the connection between compensation and accounting performance. The link that exists between incentives pays and company performance. Incentive pay includes options, restricted stock payments, long term compensation and future stock performance.
Introduction
The last two decades has witness a steady rise in CEOs compensation that has not being directly related to their performance. The proponents of the agency theory and the CEO executive compensation have argued that the compensation should be in all occasions be aligned to the performance of the company. (Jensen and Murphy 1990) In Australia and Canada, most of the compensation systems are based on organization performance while profit sharing is not common. (Long & Shields 2007) The current compensation strategies have pushed the workers and their CEOs to take advantage of the short term risks to make huge profits without considering the long term effect on the company. As a result of these actions, most companies have taken measures to cushion the long term interest of the share holders by opting to offer long term executive compensation plans for the CEOs incentives to also act for the best interests of the share holders long term interests. The markets also do not fully incorporate the CEOs pay information at the time its made public as its intended to be a long term future incentive pay and based on future company performance.
The effects of the future stock performance in the last decade has not received any attention as a result of an implicit assumption that, given an efficient market, the investors will automatically capitalize the current present value of the company’s future performance to increase the stock price after the information on the new incentive pay goes public. (Fich and Shivdasani 2005)
These reasons may have propelled the executive compensation pay structures and incentives to rise rapidly between the years 1990 and 2007. The need to create a positive image on the company and also to influence the share prices positively besides obtaining CEOs who multitask.
However, the information on the CEO incentive compensation may not be reflected immediately on the company returns for some reasons. The first reason may be that the intrinsic compensation contracts for the CEO may in some cases incorporate both the unobservable and observable performance measures. If the performance measures that are not observable in the contract or are directly correlated with all the future performance measures that are observable then the variation in the current pay that is not basically explained by the variation found in the current performance measures that are observable should predict the future variation in all observable performance measures. (Hayes and Schaefer 2000) The extent that companies and managers draw their contracts on the net positive unobservable characteristics of the managers mostly suggests a relationship that’s positive between the pay and the future returns.
Source: Federal Reserve Economic data, St Bank of Louis,
The highest peak of average CEOs total compensation package was in 2000 at $20,172,000 and later declined to $10,394,000 in 2009. This was at the center of the global economic crisis that originated mostly from the collapse of US giant corporations due to mismanagement and financial improprieties in the years 2008 and 2009.
The empirical evidence below suggest a positive link between pay and incentives is illustrated by Lazear’s classic paper that examines the Safelite Glass Company shift to piece rate system in order to retain higher productivity employees. The diagram below indicates the shift to a piece rate system from the hourly rate with minimum guaranteed compensation. The lower productivity employees will not change or alter their behavior as a result of these changes but the higher productivity employees (illustrated by indifference curves marked X) will naturally increase their production to exploit the attractive new incentives available. Lazear argues that the change in compensation will predict the average increase in production per employee and also the average production ability per employee should also increase.
Compensation Before and After at Safelite
Compensation
(Piece work with guarantee)
B be – k
X
A X
Hourly Wages
0 eo e* Output, e
-K
After examining the production records of Safelite in detail over the change in the production levels, Lazear demonstrated that the two predictions were correct. The company’s average output was actually higher where the contract on piece rate was introduced and also the average production levels of new employees hired after the introduction of the piece rate system was higher than the surviving old employees of the hourly system. (Lazear 2000)
The design perspective in personnel economics allows companies to make optimal decisions based on varied constraints. Managerial technology Y= F (K, L, HRM) where the HRM policies have to optimized by increasing the incentive prevalence over time. The challenge however is that it’s difficult to have a uniform basis to measure incentive pay and also their varying effects on the policies of the HRM.
Employees are assumed to have the cost of effort identified as C (e). It varies with different individuals as well trained and educated employees have a less C (e) while the untrained employees have a higher C (e). Heterogeneity in employee leads to additional roles of compensation contracts that will attract the desired employee and provide the comparison between higher and the lower employee productivity.
The wage contracts are in the form 1 = α + βy. If we assume that C (e) is linked to the output and the workers options are set outside the options that are zero level utility.
There are basically two types of employees. There are employees who are risk neutral and those with the standard risk whose utility is neutral. They are identified with the following function
Ui = w – Ci (e), I = l, h
The relationship between the high CEO pay and the decline in company returns may be due to the less transparent nature of the CEOs non-cash stock option components of the compensation. Manager’s use of camouflage incentive compensation strategy to extract rent from the shareholders. For instance, the real value of the options payable may actually be distorted by such practices as option backdating and repricing. (Narayan & Seyhun 2008)
Most deferred compensations are mostly not disclosed. The relative performance and promotion is based on wage dynamics. If the deferred future pay which is mostly uncertain is also correlated with the pay that’s reported and made public then a relationship will exist between the pay and the returns in future. This kind of relationship however spells an uncertain future where the investors may under-react to the non-cash compensation just as much as they have under-reacted to other events on company affairs. (Kadiyala & Rau 2004) These would imply that there is a positive relationship that exists between the incentive compensation and the future performances of the stock prices.
The companies that compensate their CEOs highly seem also to experience the highest returns and performance levels. (Core, Holthausen and Larcker 1999) There other CEOs who may land on high compensations based on sheer lack or due to the popular press. For example, companies would also like their CEOs to be ranked among the highest paid CEOs in the world by the Fortune magazine. Most companies would not allow their investments to be managed by CEOs who are below average or compensation that are below the standard market rates. These combinations of glamour that has been characterized by very high returns and even higher operating performance has been publicized to attract the companies to pay the best they can afford as its associated with the star effects that high pay produces the best CEOs globally hence the investors react by investing more in such firms whose shares then rise. These misconception has led to the some firms reduced performance as some CEOs are chosen based on other qualifications and considerations not just on merit alone. The inability of the shareholders to distinguish merit or skill from luck has led to the negative relation or notion between the executive CEO pay and the company’s future returns.
Finally, highly paid CEOs are mostly overconfident which leads to higher pay demands. They later embarked on wasteful empire building strategies that lead to wealth destroying activities hence the negative relation between the CEO incentives for high compensation and the negative future company returns.
Economics Theory and Performance Measurement References
Core, J.E., Holthausen, R.W. and Larcker, D.F., 1999, Corporate governance, chief executive officer compensation, and firm performance, Journal of Financial Economics 51, 371- 406
Fich, E.M. & Shivdasani, A., 2005, The impact of stock-option compensation for outside directors on firm value, Journal of Business 78, 2229-2254
Long, T.R. & Shields, J.L., 2007, Performance pay in Canadian and Australian Firms: a comparative study. http://www.tandfonline.com/doi/abs/10.1080/09585190500298370#.VE7MNRYXKso
Narayanan, M. P. and Seyhun, H.N., 2008, The Dating Game: Do managers designate grant
dates to increase their compensation, Review of Financial Studies 21, 1907-1945
And add some economics theory which taught in lecture due to 1/3 marks will be based on it (list on the instructions as well), such as the Multitasking and perverse incentives, Performance measurement and appraisals, CEO compensation, Intrinsic motivation, Incentivising across the hierarchy, Relative performance and promotions. Beside just rephrase the source you have found, thank you.
Just link some of these theories to the source you got. U don’t have to put too many papers or reference in this essay. 3 or 4 are enough and link back those references to these theories.
Moreover, the introduction and conclusion are required, Just discuss why there’s a strong growth from 1990 -2007 and instances of large payments despite poor company performance,
have fuelled community concerns that executive remuneration is out of control.. maybe good training and educating? good team work and social environment? or what ever they mentioned in the reading..
Just give out some reasons and elaborate and explains or even bullshits some points. after that put some paper evidence(reference) to support the points, It does not have to be a very high level essay. im expecting a 60/100.
But the background readings and empirical in the assignment pdf must be used. and please give the internet link at the bibliography because i need to know where u find those reference.
The word limits is 1500, Im happy with 1400 as well.
SAMPLE ANSWER
Abstract
Most theories in personnel economics relate to the effects of the monetary compensation or incentives that the workers received based on the output. The major conclusions to these theories are that workers in all cases react or respond to these incentives, a concept which forms the cornerstone in personnel economic theory. To be more specific, it’s a fact that the payment received on the basis of the output expected will basically induce the workers to increase the output. (Lazear 2000) These paper looks at the connection between compensation and accounting performance. The link that exists between incentives pays and company performance. Incentive pay includes options, restricted stock payments, long term compensation and future stock performance.
Introduction
The last two decades has witness a steady rise in CEOs compensation that has not being directly related to their performance. The proponents of the agency theory and the CEO executive compensation have argued that the compensation should be in all occasions be aligned to the performance of the company. (Jensen and Murphy 1990) In Australia and Canada most of the compensation systems are based on organization performance while profit sharing is not common. (Long & Shields 2007) The current compensation strategies have pushed the workers and their CEOs to take advantage of the short term risks to make huge profits without considering the long term effect on the company. As a result of these actions most companies have taken measures to cushion the long term interest of the share holders by opting to offer long term executive compensation plans for the CEOs incentives to also act for the best interests of the share holders long term interests. The markets also do not fully incorporate the CEOs pay information at the time its made public as its intended to be a long term future incentive pay and based on future company performance.
The effects of the future stock performance in the last decade has not received any attention as a result of an implicit assumption that, given an efficient market, the investors will automatically capitalize the current present value of the company’s future performance to increase the stock price after the information on the new incentive pay goes public. (Fich and Shivdasani 2005)
These reasons may have propelled the executive compensation pay structures and incentives to rise rapidly between the years 1990 and 2007. The need to create a positive image on the company and also to influence the share prices positively besides obtaining CEOs who multitask.
However, the information on the CEO incentive compensation may not be reflected immediately on the company returns for some reasons. The first reason may be that the intrinsic compensation contracts for the CEO may in some cases incorporate both the unobservable and observable performance measures. If the performance measures that are not observable in the contract or are directly correlated with all the future performance measures that are observable then the variation in the current pay that is not basically explained by the variation found in the current performance measures that are observable should predict the future variation in all observable performance measures. (Hayes and Schaefer 2000) The extent that companies and managers draw their contracts on the net positive unobservable characteristics of the managers mostly suggests a relationship that’s positive between the pay and the future returns.
Source: Federal Reserve Economic data, St Bank of Louis,
The highest peak of average CEOs total compensation package was in 2000 at $20,172,000 and later declined to $10,394,000 in 2009. This was at the center of the global economic crisis that originated mostly from the collapse of US giant corporations due to mismanagement and financial improprieties in the years 2008 and 2009.
The empirical evidence below suggest a positive link between pay and incentives is illustrated by Lazear’s classic paper that examines the Safelite Glass Company shift to piece rate system in order to retain higher productivity employees. The diagram below indicates the shift to a piece rate system from the hourly rate with minimum guaranteed compensation. The lower productivity employees will not change or alter their behavior as a result of these changes but the higher productivity employees (illustrated by indifference curves marked X) will naturally increase their production to exploit the attractive new incentives available. Lazear argues that the change in compensation will predict the average increase in production per employee and also the average production ability per employee should also increase.
Compensation Before and After at Safelite
Compensation
(Piece work with guarantee)
B be – k
X
A X
Hourly Wages
0 eo e* Output, e
-K
After examining the production records of Safelite in detail over the change in the production levels, Lazear demonstrated that the two predictions were correct. The company’s average output was actually higher where the contract on piece rate was introduced and also the average production levels of new employees hired after the introduction of the piece rate system was higher than the surviving old employees of the hourly system. (Lazear 2000)
The design perspective in personnel economics allows companies to make optimal decisions based on varied constraints. Managerial technology Y= F (K, L, HRM) where the HRM policies have to optimized by increasing the incentive prevalence over time. The challenge however is that it’s difficult to have a uniform basis to measure incentive pay and also their varying effects on the policies of the HRM.
Employees are assumed to have the cost of effort identified as C (e). It varies with different individuals as well trained and educated employees have a less C (e) while the untrained employees have a higher C (e). Heterogeneity in employee leads to additional roles of compensation contracts that will attract the desired employee and provide the comparison between higher and the lower employee productivity.
The wage contracts are in the form 1 = α + βy. If we assume that C (e) is linked to the output and the workers options are set outside the options that are zero level utility.
There are basically two types of employees. There are employees who are risk neutral and those with the standard risk whose utility is neutral. They are identified with the following function
Ui = w – Ci (e), I = l, h
The relationship between the high CEO pay and the decline in company returns may be due to the less transparent nature of the CEOs non-cash stock option components of the compensation. Manager’s use of camouflage incentive compensation strategy to extract rent from the shareholders. For instance, the real value of the options payable may actually be distorted by such practices as option backdating and repricing. (Narayan & Seyhun 2008)
Most deferred compensations are mostly not disclosed. The relative performance and promotion is based on wage dynamics. If the deferred future pay which is mostly uncertain is also correlated with the pay that’s reported and made public then a relationship will exist between the pay and the returns in future. This kind of relationship however spells an uncertain future where the investors may under-react to the non-cash compensation just as much as they have under-reacted to other events on company affairs. (Kadiyala & Rau 2004) These would imply that there is a positive relationship that exists between the incentive compensation and the future performances of the stock prices.
The companies that compensate their CEOs highly seem also to experience the highest returns and performance levels. (Core, Holthausen and Larcker 1999) There other CEOs who may land on high compensations based on sheer lack or due to popular press. For example, companies would also like their CEOs to be ranked among the highest paid CEOs in the world by the Fortune magazine. Most companies would not allow their investments to be managed by CEOs who are below average or compensation that are below the standard market rates. These combinations of glamour that has been characterized by very high returns and even higher operating performance has been publicized to attract the companies to pay the best they can afford as its associated with the star effects that high pay produces the best CEOs globally hence the investors react by investing more in such firms whose shares then rise. These misconception has led to the some firms reduced performance as some CEOs are chosen based on other qualifications and considerations not just on merit alone. The inability of the shareholders to distinguish merit or skill from luck has led to the negative relation or notion between the executive CEO pay and the company’s future returns.
Finally highly paid CEOs are mostly overconfident which leads to higher pay demands. They later embarked on wasteful empire building strategies that lead to wealth destroying activities hence the negative relation between the CEO incentives for high compensation and the negative future company returns.
References
Core, J.E., Holthausen, R.W. and Larcker, D.F., 1999, Corporate governance, chief executive officer compensation, and firm performance, Journal of Financial Economics 51, 371- 406
Fich, E.M. & Shivdasani, A., 2005, The impact of stock-option compensation for outside directors on firm value, Journal of Business 78, 2229-2254
Hayes, R.M. & Schaefer, S., 2000, Implicit contracts and the explanatory power of top executive compensation for future performance, Rand Journal of Economics 31, 279-293.
Jensen, M.C. & Murphy, K.J. 1990, Performance pay and top-management incentives, Journal of Political Economy 98, 225-264. http://www.jstor.org/stable/2937665
Kadiyala, P. & Rau, P.R., 2004, Investor reaction to corporate event announcements, Under-reaction or over-reaction? Journal of Business 77, 357-386.
Lazear, E.P., 2000, Performance Pay and Productivity, The American Economic Review, Vol. 90 No. 5 Dec 2000.
Narayanan, M. P. and Seyhun, H.N., 2008, The Dating Game: Do managers designate grant dates to increase their compensation, Review of Financial Studies 21, 1907-1945
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From your textbook answer the following questions. Don’t copy and paste/plagiarize or I must give a zero for the entire assignment, and don’t type out an answer you don’t understand. If you need help ask me. Remember that grammar/spelling count and I will take off as much as half credit for poor writing/proofreading.
PART 1:
1) Type what you learned about FDR’s story (perhaps upbringing, education, politics, marriage, polio, Warm Springs GA, differences with Hoover, March of Dimes)
2) Define KEYNESIAN ECONOMICS such that you understand it. (How did this approach to economics permit the New Deal to exist?)
3) Describe New Deal programs that are still with us, including the FDIC, SSA, TVA, and SEC.
4) Describe 5 New Deal programs (“alphabet agencies”) no longer with us (including WPA, PWA, CCC, and two others)
Part 2:
A) Crash Course US History: The Great Depression (14:24)
www.youtube.com/watch
1) Before the stock market crashed, Americans were buying lots of new consumer goods, but often HOW? (hint: “it was totally unsustainable”)
2) What were the two reasons food prices fell so much prior to the Depression?
3) John Green: “If I had to name a single cause for the Great Depression it might be…” What?
4) And so what “froze”?
5) What is “deflation”?
6) Hoover blamed WWI and reparations for global depression, right? But as depression spiraled around the world and the world needed global TRADE more than ever before, what did the US (and then Europe) do???
7) What was the point/goal of Hawley-Smoot? That is, why enact it?
8) What country finally abandoned the gold standard in 1931?
9) Did the US do so, and did it work?
10) What was Hoover’s “President’s Organization on Unemployment Relief”?
11) Who were the “Bonus Marchers”? (This goes by fast at the end)
B) Crash Course US History: The New Deal
www.youtube.com/watch
1) What does NRA stand for in the video and re: Great Depression?
2) What were the “three R'” categories of the New Deal and what were they supposed to do? (Hint, one was NOT Run-DMC, lol…but I sure loved them in the 80s.) 😉
3) In the second phase of the New Deal, what was the “Wagner Act”?
4) Who was quoted in the “mystery document” discussing “adequate wages”?
5) Why was it believed that raised wages would help pull the nation out of depression?
6) Rather than the New Deal, some economic historians believe what really ended the Great Depression once and for all? (Hint: “another massive government spending program”)
7) FDR saw liberty as “greater…for the average…”? (what and what?)
SAMPLE ANSWER
Great Depression/1930s
PART 1:
1) Type what you learned about FDR’s story (perhaps upbringing, education, politics, marriage, polio, Warm Springs GA, differences with Hoover, March of Dimes)
FDR argued that it was the responsibility of the government to promote the life of the citizens. FDR aimed to end depression and ensure that unemployment was resolved. He was the US president that was elected four times. He ruled during World War II and the Great Depression.
The leader was born in 1882 in New York and suffered from polio in 1921. His political journey begun when he was 28 years old after being invited to run for the senate for New York State. He is known for his reform agenda through new deal. He died in 1945 from cerebral hemorrhage.
2) Define KEYNESIAN ECONOMICS such that you understand it. (How did this approach to economics permit the New Deal to exist?)
Keynesian economics is a situation where economic output is influenced by the total spending incurred in an economy in short run when the economy is experiencing recession.
The approach permitted the New Deal to exist as it aimed to stabilize the economy through the concept of demand and supply. More jobs were to be created to increase the spending hence helping to overcome the Great Depression.
3) Describe New Deal programs that are still with us, including the FDIC, SSA, TVA, and SEC. New deal made the expectations of the Americans on their government. It made government and institution experience daily American life
social Security Act (SSA) aimed to fight widespread poverty in older people. Income was given to retired wage earners. Currently the program receives funding from current wage earners and employers and still remains popular.
Tennessee Valley Authority (TVA) was created in 1933 to help develop the Tennessee Valley region economy hit greatly by the Great Depression. The federal-owned corporation is still operational today providing electricity in US.
Federal Deposit Insurance Company (FDIC) was formed in 1933 to address the bank failures experienced in 1920s and 1930s to ensure that depositors are protected. The body nowadays helps in promoting public confidence in financial system of US.
Securities Exchange Commission (SEC) was formed in 1934 to act as market watchdog. It is part of the government and oversees brokerage firms as well as ensures that organizations such as New York Stock exchange are self-regulated. The body is key in regulating and impacting on the global economic crisis.
4) Describe 5 New Deal programs (“alphabet agencies”) no longer with us (including WPA, PWA, CCC, and two others)
One of the deals was Civilian Conservation Corps (CCC), created by Franklin Roosevelt in 1933 to combat unemployment. The deal helped to create employment for many Americans during the Great Depression. Many public works and structures were created across the nation, courtesy of this deal.
Second, was Civil Works Administration (CWA), created in 1933 to provide jobs for those unemployed. The focus was on high paying jobs in the construction industry. The deal increased federal government expenses as earlier planned.
The third was the Federal Housing Administration (FHA) aimed at fighting housing crisis of the great depression. It aimed at regulating housing and mortgage conditions.
The fourth was Federal Security Agency (FSA) established in 1939 to address various important government entities. It, however, was abolished in 1953. The role it played included administration of federal education funding, social security, and food and drug safety.
The fifth was the Home Owners Loan Corporation (HOLC) created in 1933 to help in refinancing of homes. Between 1933 and 1935, a million people had long-term loans through this agency to ensure that their homes are not closed/foreclosure.
Part 2:
A) Crash Course US History: The Great Depression (14:24)
1) Before the stock market crashed, Americans were buying lots of new consumer goods, but often HOW? (hint: “it was totally unsustainable”)
Credit and installment buying
2) What were the two reasons food prices fell so much prior to the Depression?
Increase in amount of food produced for the soldiers.
Mechanization.
3) John Green: “If I had to name a single cause for the Great Depression it might be…” What?
Massive unemployment
4) And so what “froze”?
Credit
5) What is “deflation”?
Less money in circulation
6) Hoover blamed WWI and reparations for global depression, right? But as depression spiraled around the world and the world needed global TRADE more than ever before, what did the US (and then Europe) do???
Raising tariff
7) What was the point/goal of Hawley-Smoot? That is, why enact it?
Protect American industries
8) What country finally abandoned the gold standard in 1931?
Britain
9) Did the US do so, and did it work?
No, it did not work
10) What was Hoover’s “President’s Organization on Unemployment Relief”? An organization to ensure no one should starve hence, encouraged private organization /charities for poor.
11) Who were the “Bonus Marchers”? (This goes by fast at the end)
1) What does NRA stand for in the video and re: Great Depression?
National Recovery Administration
2) What were the “three R'” categories of the New Deal and what were they supposed to do? (Hint, one was NOT Run-DMC, lol…but I sure loved them in the 80s.)
Relief programs- gave money to poor people
Recovery programs- recover the economy
Reform program- regulate economy in the future to prevent depression
To fix depression and prevent future depression
3) In the second phase of the New Deal, what was the “Wagner Act”?
Guaranteed workers the right to unionize. It created platforms for the workers to form unions
4) Who was quoted in the “mystery document” discussing “adequate wages”? Eleanor Roosevelt
5) Why was it believed that raised wages would help pull the nation out of depression?
Under consumption
6) Rather than the New Deal, some economic historians believe what really ended the Great Depression once and for all? (Hint: “another massive government spending program”)
World war two program- massive government spending program
7) FDR saw liberty as “greater…for the average…”? (what and what?)
We can write this or a similar paper for you! Simply fill the order form!
Word count: maximum 2,000 words (not including bibliography)
Referencing Requirements:
1. Read chapter 13 entitled ‘The Taxation of Household Savings’ (pp. 283 – 317)from the second volume of the Mirrlees review. A copy of the second volume can
be found on Blackboard in the ‘Assignments’ folder.
A full copy of the report (volumes one and two) can be found by following the link below, but this is for information only and you are not required to read
both volumes for the purposes of the assignment: http://www.ifs.org.uk/mirrleesReview
2. Evaluate the recommendation to provide a tax system with a neutral treatment of life-cycle savings for the vast majority of taxpayers (as described in
chapter 13). Your evaluation should include:
a) A description of the current system (taxation of household savings in general);
b) a description of the proposed recommendations;
c) the purpose for providing a tax system with a neutral treatment of life-cycle savings for the vast majority of taxpayers.
d) your opinion on the strengths and weaknesses of the proposals; and
e) a description and explanation of the type of potential winners and losers of such a move (certain groups of individuals and organisations).
Additional marks will be provided for:
i. Strength of your evaluation;
ii. other relevant points made by you as part of your evaluation; PTO
iii. inclusion of relevant theories and concepts to support your work; and
iv. use of referencing to other academic research relevant to this particular topic.
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Please type all answers. Page numbers. Bibliography. No title page. You can have as many sources as you want. I put down a minimum of (6) sources however, that?s just a minimum. If you need to add more, please do so. Answer All Questions and Clearly Define Your Terms Place your answer to each question on a separate sheet of paper and type answers to all questions. Document your answers and show your work. Read each question carefully and answer all parts. The number in parentheses is the point weight for the question. Make sure you label your questions, ex. 1.) A:, 1.) D: ?. And so on. You may add another page for graphs or figures. Number each page and clearly indicate the question number.
(50) 1. (a) Aggregate Demand is defined as:
AD = C + I + G + NX
Where AD is aggregate demand, C is consumption expenditures, G is government (federal and state and local) expenditures, and NX is net exports (Exports ? Imports).
To encourage the growth of AD, fiscal policy can influence G through changes is expenditures, such as the fiscal stimulus of 2008 and 2009, and on C by changes in transfer payments such as Medicaid, Medicare, unemployment benefits and Social Security that change disposable income. If such changes take place, how are they transmitted to increase both GDP and employment? When are they least effective and most effective in changing GDP and Employment? Has the large fiscal stimulus in 2009 had the benefits that Congress and the Administration had anticipated?
(b) Suppose the Fed has already decided that it wants to target the money stock.
(1) Will the Fed come closer to its target by setting the interest rate at a given level, or will it do better by fixing the money supply through open market operations? In your analysis, think in terms of the Fed’s horizon from one Open Market Committee meeting to another — about 4-6 weeks. This analysis involves the relative stability of money demand and the money multiplier. Consider two alternative cases: (1) a stable demand for money allows the Fed to set an interest rate that ensures it will come close to the target money supply; and (2) an unstable demand for money.
(2) In your analysis, discuss the proposition that the Fed may need to target interest rates in the short run in order to meet its target money stock while in the long run it may need to pay attention to interest rates and bank reserves and currency growth. NOTE: Shifts in money demand may reveal themselves first in movements in interest rates — and if the Fed wants to stabilize the economy, it should respond to shifts in money demand.
(c) Within the same general context, discuss why the Fed, if it wants to stabilize and grow GDP and employment, has chosen a quantitative easing (QE) approach by growing bank reserves though purchases of Treasury securities and mortgage-backed securities and the monetary base rather than an interest rate policy (presently QE2 policy is to purchase $85 billion per month of Treasury and mortgage-backed securities? Why has the European Central Bank (EU) and Japan followed the same policy? How does this process work to stimulate economic growth? Has the QE policy since 2011 worked to increase GDP growth and employment?
(d) In the case of a liquidity trap, what is it that makes monetary policy ineffective in such a case? Recall that effective monetary policy requires that banks lend to willing borrowers. What does it mean for an effective monetary policy if the velocity of money declines substantially?
Velocity (V) = Price Level (P)*Real Output (Y) / Money Supply(M)
V = P*Y/M2
Or to look at it another way: P*Y = V*M2
So a change in M2 will lead to smaller changes in P*Y the smaller is V.
(50) 2. There are many views of the state of the global economy in the late Summer early Fall of 1998. Below are some of these views. From your reading of Commanding Heights (Yergin and Stanislaw), current news accounts, research into various economies and Macroeconomics (Dornbusch and Fischer), critically analyze these statements as to the type of policies that national economies and the IMF should pursue over the course of the next few years. Has the free market system of capitalism failed and the “battle between government and the marketplace that is remaking the modern world” (Yergin and Stanislaw) tilting toward government? Or, is there a middle ground that needs to be reached with a global regulatory structure created that makes countries and their financial systems more transparent and less tied to “crony capitalism”? Express your views, but back them up with fact and supporting argument.
The Economist (September 5, 1998) “The World Economy on the Edge: The risks of a deep global recession are increasing. But it can be avoided so long as policymakers heed some lessons from history.”
The Economist (September 5, 1998) “The Economist all-items commodity-price index has fallen by 30 percent since mid-1997, to its lowest level in real terms for over 25 years. The prices of industrial commodities are now at their lowest in real terms since the 1930s. This has severely hurt commodity producers, not just in Latin America and Africa, but also in Australia and Canada.” (add in the U.S. farmers).
The Economist (September 5, 1998) “Capitalism in retreat? A related and more worrying backlash against the free markets is the increasing interest on the part of politicians and economists in market intervention or capital controls as a solution to the crisis…..On September 1st, Malaysia imposed strict controls on capital movements. And respected American economists are also now arguing the virtues of capital controls. This, he (Paul Krugman) suggests, would break the link between domestic interest rates and exchange rates to get their economies growing again….Indeed, the biggest risk now to the world economy may lie not so much in a deep recession, which could be averted. It is that there may be a wholesale retreat for free markets.”
Robert Kuttner (Washington Post, September 7, 1998, p. A25) “Free Markets and a Free Fall World Economy. Economic reconstruction after World War II accepted the necessity of a mixed economy. In that era, the United States and the International Monetary Fund recognized that emergent economies could no be the prisoners of private speculative capital. The postwar system regulated private money flows and stabilized currencies to allow nations to develop. Today’s IMF, perversely demands exposure to speculators as a precondition of assistance….What we need is a program of stabilization and reconstruction in the spirit of the post-World War II years, with limits on speculative money flows and more development aid.”
Washington Post, December 22, 1997, p. A1) “IMF Credibility Is on the Line In Asia Bailout, Agency Should Rethink Rescues, Some Critics Say, ‘Since the time the IMF has signed each Asian bailout program, the respective Asian currencies have continued to plummet,’ said Jeffrey Sachs.”
Jeffrey Sachs (The Economist, September 12, 1998, p. 23) “Global Capitalism, Making It Work. “Global capitalism genuinely is the best chance for the developing world to gain a foothold on the economic-growth ladder; but with current institutions, global capitalism will not succeed widely enough or credibly enough to create a stable world system…. The IMF bought into the investment bankers’ mantra: exchange-rate stability above all else…. The more these economies tried to defend their currencies, the more they incited panic.”
George Soros (The Wall Street Journal, September 15, 1998, Op. Ed) “The Crisis of Global Capitalism. …there remains the urgent need for Congress to authorize an increase in the capital for the IMF….Bailouts did encourage foolish behavior by banks and other lenders, which could count on the IMF when a country got into difficulties (a moral hazard problem). But, the moral hazard now operates in the opposite direction, in not enabling the IMF to do its work when it is most needed.”
Henry Kissinger (Washington Post, October 5, 1998, p. A21) “Perils of Globalism, The IMF is no longer suited for dealing with economic crises. The IMF must be transformed. It should be returned to its original purpose as a provider of expert advice and judgement, supplemented by short-term liquidity support…. Regulatory systems should be strengthened and harmonized; the risks that investors are taking should be made more transparent.
John Maynard Keynes, 1931 “We are today in the middle of the greatest economic catastrophe of the modern world…the view is held in Moscow that this is the last, the culminating crisis of capitalism and that the existing order of society will not survive it.” As quoted in The Economist (September 5, 1998), page 19.
(15) 3.) The growth accounting equation is (Y is aggregate GDP in real terms):
Growth rates of K (capital) and N (labor) are weighted by their respective income shares, so that each input contributes an amount equal to the product of the input?s growth rate and their share of income to output growth. The ? indicates the change in the variable.
Growth Accounting Equation In Per Capita Terms:
(a) Define the notion of steady state equilibrium for the economy that is the combination of per capita GDP (y) and per capita capital (k) where the economy will remain at rest, or where per capita economic variables are no longer changing OR
In steady state, at what rate will GDP (Y) grow?
(b) Explain why, in the Neoclassical growth model, an increase in the savings rate does not increase the growth rate of per capita output in the long run.
(c) Explain why:
(1) An increase in the rate of growth of the population, n, reduces the steady state level of k and y
(2) An increase in n increases the steady state rate of growth of aggregate output
and
(1) A decrease in n increases the steady state level of k and y
(2) A decrease in n decreases the steady state rate of growth of aggregate output.
SAMPLE ANSWER
Question one
Fiscal policy
Fiscal policy is a combination of the policies of the government spending that influence a country’s macroeconomic conditions. Therefore, through fiscal policy, unemployment rates are improved, control inflation is controlled, business cycles are stabilized and interest rates are influenced by regulators in an attempt to control the economy (Dornbusch & Fischer, 1994).
Therefore, changes in government expenditures and consumption expenditures are likely to significantly influence the rate at which the GDP grows. For instance, increased government expenditures both state and federal means that the funds are either invested or directed into improvement of the infrastructure especially construction of more highways for improved movement of goods or increasing electricity supply which ensures that both companies and individuals can produce goods with ease (Krugman & Wells, 2006). As a result more companies tend to be created meaning that the GDP is eventually increased. This implies that additional government (state and federal) expenditures lead to increased GDP, creation of job opportunities as well as lowering of the unemployment rates. This a clear indication that government expenditures are directly proportional to the GDP, whereby an increase in government expenditures results to an increase in the GDP while a decrease in government expenditures results to a decrease in the GDP. A combination of increased government expenditures with increased GDP subsequently boosts production and demand as well as reducing the rate of unemployment.
Alternatively, a decrease in the consumption expenditures also translates to increased GDP and employment mainly because it reduces the proportion of funds the government consumes and which cannot be invested or directly used to improve the investment environment for both local and foreign investors. Moreover, the changes in government expenditures are most effective when a balance is achieved between the government expenditures and consumption expenditures. For example, when the government expenditures are increased and directed towards improving investment environment or invested while at the same time ensuring that consumption expenditures are maintained low (Krugman, 1990). On the other hand these changes are least effective in changing GDP and employment sometimes because the government usually obtains all its funds from the taxes i.e. from the productive activities’ of the private sector. Moreover, these changes are also perceived to disproportionately affect particular groups where, for instance, increased government expenditures greatly influence the group where the spending is directed, which in the case of government spending on building highways construction workers are significantly influenced (Krugman & Wells, 2006).
Even if not all the benefits anticipated by Congress and the Administration were accrued from the large fiscal stimulus in 2009, there are significant benefits that were achieved. According to Bartlett (2010) the entire stimulus package resulted to 2.8% real GDP growth in the third quarter as well as employment of between 600,000 and 1.6 million people as a result of the stimulus package. The stimulus package was also found to have benefits in terms of transfer payments and tax cuts, for example, tax cuts for individuals in the low-income group raised the GDP by $1.70 for every $1 or revenue loss; whereas the tax cuts for the corporations and the rich raised the GDP by about 50 cents for every $1 or revenue loss (Bartlett, 2010).
Money stock
The Fed would come closer to its target by fixing the money supply through open market operations because the targeted supply of money is not directly related to the interest rate. Therefore, this means that an increase in the quantity of produced goods and/or the price level increases, there will be an outright increase in the demand for money. However, if there is a decline in the economic activity and/or prices go down, then there will be an outright decrease in the demand for money. The money supply through open market operations means the demand for money is unstable which implies that the interest rate cannot be set at a certain level (Krugman & Wells, 2006).
The Fed may need to target interest rates in the short run in order to meet its target money stock while in the long run it may need to pay attention to interest rates and bank reserves and currency growth. This is mainly because the interaction between the quantity of supplied and demanded money is the one which determines the interest rates. This is mainly because when the interest rate is too high, then people will purchase bonds meaning the money will definitely be reduced. However, a greater demand for the bonds reduces the interest rates which push them towards the equilibrium (Krugman & Wells, 1989).
Quantitative Easing (QE)
In order for Fed to stabilize and grow GDP and employment, quantitative easing (QE) approach by growing bank reserves though purchases of Treasury securities and mortgage-backed securities and the monetary base should be the most preferred approach rather than an interest rate policy (Krugman & Wells, 2006). This is mainly because the banks target the supply of money by either selling of purchasing government bonds which results to promotion of the economic growth eventually lowering short-term interest rates while at the same time increasing money supply. As a result of this, the European Central Bank (EU) and Japan have followed this policy since its acts as an easy way through which money supply can be increased and also short-term interest rates can be lowered (Duncan, 2009). However, quantitative easing (QE) policy usually promote economic growth mainly because it targets private sector assets and commercial banks which encourages the banks to lend money which is then invested to meet the demand created by the increased purchasing power. QE policy has significantly worked since 2011 to increase GDP growth and employment because more money has been available at low short-term interest rate which is then invested leading to increased GDP growth and employment (Krugman & Wells, 1989).
Liquidity trap
In the case of liquidity trap, a monetary policy becomes ineffective on either the level of income, or the interest rate hence making it powerless to affect the interest rate. This situation occurs because the general public is willing to hold on to the amount of money supplied, at any particular rate of interest mainly due the fear of foreseen adverse events such as war or deflation. Moreover, monetary policy may also be ineffective when the interest rate is zero meaning that the general public will not be willing to hold any bond but the money in which zero percent interest rate is also accrued, but with an advantage of being usable in transactions (Krugman & Wells, 2006).
When the velocity of money declines substantially it means that there is very little money in circulation that is used to buy goods and services meaning the economy becomes less robust. So an effective monetary policy will definitely increase the interest rate in order to encourage people to release the money they are holding which eventually results to an increase in velocity of money thereby making the economy vibrant again (Krugman & Wells, 2006).
Question two
There are different types of policies that national economies and the IMF should pursue over the course of the next few years in order to effectively tackle the problem of global economy. For instance, in order to stabilize the international financial system crisis prevention as well as crisis mitigation policies need to be implemented by national economies and the IMF (Krugman & Helpman, 1985). However, the IMF needs to implement other policies which are aimed at addressing the problem of global economy entirely including implementing stringent policies on surveillance, information provision, and technical assistance in order to collaboratively contribute to the prevention of crises. Moreover, the IMF should also implement policies that encourage lending in support of an adjustment program of a country in order to eventually contribute to the mitigation of crises (Sachs, 1998; The Economist, 1998).
Considering the free market system of capitalism and how it operates nowadays, it is evident that it can not be sustained for long (Dornbusch & Fischer, 1994). For instance, free market system in capitalism is perceived to be an exploitative system where the workers are paid peanuts at the expense of companies to make large profit margins (Sachs, 1998; Yergin & Stanislaw, 1998). Moreover, nowadays we cannot attribute the existence of the “free market” mainly because gigantic corporations that are in possession of immense power dominate the market through unfair competition. In addition it is also evident that this system disregards many ethical issues in pursuit of demand and supply hence it only works in the short-term while hurting the economies in the long-run (Dornbusch & Fischer, 1994; Soros, 1998). Therefore, the current free market system in capitalism is ineffective mainly because of its vicious cycles of deflation and inflation that in most cases tend to be very difficult to control. Furthermore, the free market system in capitalism encourages non-recycling of large sum of the GDP back into the economy, thus leading to unemployment as well as a very unstable CPI (Soros, 1998; Yergin & Stanislaw, 1998).
The battle between government and the marketplace that is remaking the modern world seems to be tilted towards the side of government mainly through government regulations, tariffs as well as other infringements on pure system of free market (Yergin & Stanislaw, 1998). Thus there has been emphasis on the futility of utilizing monetary policies that are inflationary by the governments in order to influence the rates at which the economy grows. Moreover, this battle has continued through income tax reforms and policies through expansion of rebates tax write-offs, and subsidies as a way of titling the markets (Yergin & Stanislaw, 1998).
In order to have effectively working global economy there needs to be adoption of alternative to the free market system in capitalism which would encourage smaller governments with tighter price controls alongside increased minimum wage in helping to solve some of the CPI problems (The Economist, 1998). Thus, free market system in capitalism needs to be blended with other systems such as the socialism and collectivization, in the attempts of creating a fairly decent economy without vicious cycles of deflation, inflation, financial crises as well as unemployment (Kissinger, 1998).
Question three
A steady state economy is an economy structured to balance economic growth with population growth whereby it seeks to find equilibrium between population growth and production growth. In a steady state economy the rate of GDP growth should be equal to the rate of population growth (Krugman & Wells, 2006).
In Neoclassical growth model the reason why an increase in the savings rate does not increase the growth rate of per capita output in the long run is because a higher saving rate does result in a higher steady-state capital stock and a higher level of output mainly because there is no investment in technology and labor which are two significant factors attributable to long-term growth rate of per capita.
An increase in the rate of growth of the population, n, reduces the steady state level of k and y because the population is growing at a rate higher than the rate at which the GDP and per capita are growing eventually failing to sustain them causing them to reduce (Krugman & Wells, 1989).
An increase in population increases the steady state rate of growth of aggregate output mainly because the output of the entire population is considered. Hence since increased population provides labor then the aggregate output is increased (Krugman & Wells, 2006).
A decrease in population increases the steady state level of k and y because the country produces more than it consumes and the surplus is used to invest in technology eventually increasing the GDP and per capita.
A decrease in population decreases the steady state rate of growth of aggregate output mainly because there is a decrease in labor which is most significant factor attributable to aggregate output (Krugman & Wells, 2006).
Kissinger, H. (Washington Post, October 5, 1998, p. A21) “Perils of Globalism: The IMF is no longer suited for dealing with economic crises”.
Krugman, P. & Helpman, E. (1985). Market Structure and Foreign Trade: Increasing Returns, Imperfect Competition, and the International Economy. Massachusetts: MIT Press.
Krugman, P. & Helpman, E. (1989). Trade Policy and Market Structure. Massachusetts: MIT Press.
Krugman, P. (1990). Rethinking International Trade. Massachusetts: MIT Press.
Krugman, P. & Wells, R. (2006). Macroeconomics. New York, NY: Worth Publishers.
Kuttner, R. (Washington Post, September 7, 1998, p. A25) “Free Markets and a Free Fall World Economy. Economic reconstruction after World War II accepted the necessity of a mixed economy”.
Soros, G. (The Wall Street Journal, September 15, 1998, Op. Ed) “The Crisis of Global Capitalism”.
The Economist (September 5, 1998) “Capitalism in retreat? A related and more worrying backlash against the free markets is the increasing interest on the part of politicians and economists in market intervention or capital controls as a solution to the crisis”.
The Economist (September 5, 1998) “The Economist all-items commodity-price index has fallen by 30 percent since mid-1997, to its lowest level in real terms for over 25 years”.
The Economist (September 5, 1998) “The World Economy on the Edge: The risks of a deep global recession are increasing”. Retrieved on 13th October 2014 from: http://www.economist.com/node/163310
Washington Post, (December 22, 1997, p. A1) “IMF Credibility Is on the Line in Asia Bailout, Agency Should Rethink Rescues”.
Yergin, D. & Stanislaw, J. (1998). The Commanding Heights: The Battle for the World Economy. London: Free Press.
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Each member will be allocated a phase of the Marketing Project and will provide a progress report on that particular phase.
The assignment acts as a progress report of the final project to demonstrate understanding of the relevant Phase of the Group Marketing Project and as such detailed feedback will be provided by tutors.
You are required to complete an analysis of the marketing strategy of our Client Partner – Price Waterhouse Coopers, focusing on the particular marketing issue (what does PWC look like in 2-5 years?) related to the organisation. Blue Ocean Strategy (BOS) will be applied to the marketing issue and the framework provided by BOS used to formulate a marketing solution supported by other marketing concepts and analytical tools.
The analysis must demonstrate:
(a) understanding of the predominant marketing systems in the Client Partner industry
(b) the potential to develop ‘blue-ocean’ strategies for the Client Partner
(c) application of the analysis to the Client Partner.
Report Phase 3 – Supply Conditions and Intermediaries, Environment and Observers
Supply Conditions including for example:
• What are the conditions for supplying the product? Number, type, size and location of direct and indirect competitors supplying the product or service (including both domestic based and international import suppliers) i.e. What are the supplier alternatives?
• What is the concentration or lack of concentration of ownership and trends in supply. Use Supplier Power analysis from Porter’s 5 Forces.
• Nature of value creation and delivery system linking producers and consumers for this type of product or service (including channels of distribution, key input suppliers, key complimentors and other relevant intermediaries that impact on the cost of the product)
• Government actors involved and their role
• Environmental Impacts on Supply – contraints and enablers: Including, socio-cultural, economic and material environment, regulations, technology, and relevant infrastructure (transport, communication, finance etc)
• Any marketing models or frameworks applied to the supply conditions you consider appropriate.
• Use appropriate Blue Ocean Strategy theory and models to evaluate the supply conditions. (See Appendix 3 for Model and Chapter Table)
Intermediaries, Environment and Observers
• Nature of Intermediaries (e.g. distributors, transportation, logistics, warehousing, retailers) predominant in the industry and their role.
• Industry Observers Outside the Firm and Service Organisations and their influence/role such as: Industry Studies, Unions, Business Press (BRW), Local Org. Chambers of Commerce, State Governments, Federal Government, Domestic Trade Bodies/Statistics and International Organisations, e.g. OECD; World Bank, etc. Service organisations such as trade associations, investment banks, consultants, advertising agencies, etc
Suppliers and Intermediaries
(Supply Side) Other Marketing Frameworks
– Relevant macro level impacts on industry competition (PESTL)
– Porter’s 5 Forces: Supplier Power
– Porter’s Value Chain
Phase 3 – Nature of Industry Marketing and Competitive Positioning Strategies
Identify the kinds of strategy selection in your industry. (e.g. six basic strategies can be the starting point for your own custom strategy :
– Cost leader with Product Life Cycle Focus
– Differentiation with Product Life Cycle Focus
– Broad Cost Leader
– Broad Differentiator
– Niche Cost Leader
– Niche Differentiator
Models to use: product Life cycle. Four basic stages
Porters Generic Strategies
Phase 3 – Competitors
Review the market positioning and differentiation of competitors.
Consider the kinds of marketing mix strategies:
– branding, before and after sales services
– product/service design, packaging
– prices, margins, finance and contractual arrangements – advertising and promotion marketing channels, logistics, margins, role of e- commerce.
Other aspects of trade and marketing practices and issues not elsewhere covered
Environmental factors affecting competitive and cooperative strategies Including, socio-cultural, economic and material environment, government and regulations (taxes, tariffs, trade practices act), technology (standards bodies), professional bodies and relevant infrastructure (media, transport, finance etc.)
Any marketing models or frameworks applied to the supply conditions you consider appropriate.
Use appropriate Blue Ocean Strategy theory and models to evaluate the competitive position.
IT service industry Marketing and Competitive Positioning Strategies
IT service market (demand condition)
• – The market for green IT services is pushed by businesses to save money and improve efficiencies
• – IT services market will grow 60 percent per year into 2013
• – More enterprises are investigating hiring IT services firms to help plan and implement
• – Large number of outsourcing and hosting IT services market (e.g. “cloud computing”)
• IT Service Trend (supply condition)
– Outsourcing (offshore)
• – high-value, innovative and consultative services
• – Seeking cost savings and management centralization
competitor analysis:
• Aim: To identify market and competitive strategies of major competitors
• Implication of competitors:
• – Fast-cycle business
• – Hypercompetitive
• – Most emphasis on differentiation, cost leadership
• – Strength the relationship between company and clients
• – Value maximization
• Strategy selection (sustainable): • Cost leadership
– Lowering price relative to competitors and still create value to customers
• Differentiation with PLC focus: Provide distinguishing services through
-high awareness and easy accessibility product
-Value chain management: Cornerstone of business
Competitive advantage/ Differentiation of competitors.
Marketing Mix Strategy
Branding: Image, message, interaction, prospects
• Product/Service: Differentiation, competitive response, market testing
Packaging: Sustainable view
Before and after sales service: Building relationships with customers, handling feed backs, delivery original promises
Price: • Set up based on different variables
Advertising and promotion
Appropriate,budget,unique, design
Marketing channels and e commerce
Efficiency.
Right place, easy to use, technical control
Cooperative Strategies
– To establish strong position against external threat, minimizing weaknesses and maximizing core competencies through strategy alliance
• Customer
– Contract alliance
– Loyalty and Retention
• Distributor
– Joint Venture/partnership
– “FujiXerox’s Triangle Corporation”
• Complementor relations
– Synergistic
– E.g.HP technical alliance
Service market Matrix.
Environmental Factors
• Economic
– Domestic/Global economic climate
• Market Standards
– ACCC, ITIL, ISO
• Technology
• Corporation infrastructure – Media
– Skilled human resource – Finance
– Security
Conclusion
1. Marketing approaches: strategy selection.
Cost leadership:
Differentiation with PLC
Value chain management
2. Marketing mix strategy
-Setup 4P’s based on specific niche market
3. Cooperative strategy:
– Speeding up the development of services & market entry
– Maintaining market leadership
– Overcoming uncertainty/sharing risk
•4. Environmental factors
– Identifying external threat factors and choosing right strategies
Intermediaries, Environment and Observers
• Nature of Intermediaries (e.g. distributors, transportation, logistics, warehousing, retailers) predominant in the industry and their role.
• Industry Observers Outside the Firm and Service Organisations and their influence/role such as: Industry Studies, Unions, Business Press (BRW), Local Org. Chambers of Commerce, State Governments, Federal Government, Domestic Trade Bodies/Statistics and International Organisations, e.g. OECD; World Bank, etc. Service organisations such as trade associations, investment banks, consultants, advertising agencies, etc
This Assessment Task relates to the following Learning Outcomes:
• Articulate frameworks and approaches to harness the power of marketing-oriented thinking for the creation of long-term advantage of any organisation.
• Be able to conduct an industry and market analysis to assess market opportunities by analysing customers, competitors, collaborators, and other external forces
Enhance awareness of marketing’s contribution to society through discussion of ethical and professional conduct and issues in corporate social responsibility
SAMPLE ANSWER
Report: Price Waterhouse Coopers Supply Side
In this paper, an analysis of the marketing strategy of Price Waterhouse Coopers (PwC) is provided that focuses on the particular marketing issue – that is, what PwC looks like in the next 2 to 5 years – related to the organization. The supply conditions, intermediaries, the environment and observers are analyzed exhaustively. PESTL and Porter’s Supplier Power are described pertaining to PwC’s supply side. The Blue Ocean Strategy (BOS) will be employed to the marketing issue and the framework provided by BOS used in formulating a marketing solution supported by other concepts and analytical tools.
1.0 Supply Conditions and Intermediaries, Environment and Observers
PwC is an international professional services network, and it is currently the second largest professional services network in the world as measured by its revenues of the year 2014. Along with Ernst & Young, KPMG, and Deloitte, PwC is one of the Big 4 auditors worldwide (PwC 2014). With regard to the conditions for supplying the service – auditing, tax, advisory, and consulting services –, the main competitors to PwC include KPMG, Deloitte, and Ernst & Young. Out of four biggest auditors in the world, Deloitte is the largest. In the year 2012, the world revenue of Deloitte was $32.4 billion; PwC had aggregated gross revenues of $32.09 billion; Ernst & Young had combined revenue of $25.83 billion; and in the fourth place was KPMG with worldwide revenue of $23.42 billion (Saito & Takeda 2014, p. 205).
Deloitte, KPMG, and Ernst & Young are each a network of firms, and they are managed and owned independently. They have entered into accords with other member companies in the network to share common quality standards, brand and name. Each of these networks has created an entity for co-coordinating the network’s activities. In most instances, these 3 major competitors to PwC have member firms in countries all over the world. Deloitte, KPMG, and Ernst & Young have separate legal entities in India, Europe, Americas, Africa, the Middle East, as well as the Asia-Pacific region in countries such as Japan (Strahler 2013, p. 19). As such, Deloitte, KPMG, and Ernst & Young are the main direct competitors to PwC not only nationally in Australia, but also internationally. Besides these three main competitors, PwC also faces direct competition from many small auditing firms nationally and this impacts on PwC’s financial bottom-line.
The main environmental impacts on supply consist of regulations, economic, socio-cultural environments. Accounting firms and auditors face market discipline that works towards a decreased likelihood of future accounting scandals. The Auditing and Assurance Standards Board develops guidance and standards for auditors and accountants. The regulations set by the Australian Securities and Investments Commission must be observed, which are intended to ensure that Australia’s fiscal markets are transparent and fair, supported by informed and confident consumers and investors (Francis, Michas & Yu 2013, p. 1629).
Blue Ocean Strategy (BOS) theory
This theory postulates that there are unexploited markets as well as the opportunity for higher growth without having to eat away at the competitors’ profits. Competition is not relevant according to the Blue Ocean Strategy, since the rules of the game are yet to be laid down. With supply being more than the demand in many industries, to compete for contracting markets would not be adequate in sustaining high performance (Kim & Mauborgne, 2005). With the use of BOS, PwC can be able to succeed not by fighting with the competitors in the marketplace, but through the creation of blue oceans of uncontested market space. Such strategic moves would lead to a leap in value for Price waterhouseCoopers, its staffs, and clients, whilst unlocking new demand and rendering the competitors irrelevant.
2.0 Intermediaries, Environment and Observers
Industry Observers Outside the firm
There are several organizations that have a considerable influence to the auditing industry in Australia. The Australian Securities & Investments Commission (ASIC) administers the requirements of the Corporations Act as it pertains to auditor independence as well as audit quality. ASIC’s audit oversight activities assist with maintaining and raising the standard of conduct in the profession of auditing. It is of note that whilst these activities have both a compliance and educational focus, enforcement action could be taken when considerable non-compliance is identified (Australian Securities & Investments Commission 2014).
The other industry observers are the Australian and Assurance Standards Board and Australian Auditing Standards, which set the requirements and offer application on other explanatory material regarding: (i) the form as well as content of the auditor’s report. (ii) The responsibilities and duties of an auditor when engaged to carry out an audit of a fiscal report, or complete set of fiscal statements, or any other historical fiscal information (Auditing and Assurance Standards Board 2014). Another industry observer is the Australian Accounting Standards Board (AASB), a statutory, independent agency with the responsibility of creating standards and guidance for auditors as well as providers of other assurance services. The Australian Financial Security Authority (AFSA) administers and regulates the proceeds of crime, personal insolvency system, and trustee services. The Financial Reporting Council (FRC) provides board oversight of the process for establishing standards of accounting in Australia (Australian Government 2014).
PESTL
A scan of an organization’s external macro-environment may be described in terms of Legal, Political, Economic, Technological, Environmental, and Social factors (Porter 1998). Political: at present, there is political stability in Australia and in a lot of other countries in which PwC operates in, and this is favorable to PwC and other auditors. Economic factors: the economic growth in Australia was 2.8% in 2013 and the rate of inflation is 3% (World Bank 2014). This is favorable to PwC and other auditors since it illustrates that there is a growing market and opportunity of the services offered by PwC.
Social factors: in terms of demographics, Australia. has a population of about 23.13 million, with 89 percent living in suburbs, cities and other urban areas as of the year 2014. The rate of population growth is currently 1.4 percent, and the education level in the Australia is very high (World Bank 2014). Technological factors: technology has a substantial influence and impact on auditing. The incessant evolution of software and hardware provides auditors with the capacity to do more complex calculations with greater accuracy, speed, ease and mobility. Now, auditors can speedily collect data, produce reports, and explicitly communicate the results (Montgomery 2010, p. 50). Some of the new technology available to auditors include IDEA from CaseWare IDEA Inc., and ACL from ACL Services Ltd which are software programs for data mining and data extraction.
Legal factors: these include consumer protection, rules on monopolies and mergers, international trade regulations and restriction, as well as national employment laws in Australia and in other nations around the world wherein PwC operates in. In the Australia, PwC must pay its workers no less than the stipulated minimum wage of $16.87 per hour or $640.90 per week as mandated by the Fair Work Commission (Montgomery 2010, p. 42). Auditors must also comply with the regulations established by the government and government bodies such as the Australian Securities and Investments Commission, and the Australian Accounting Standards on auditing quality, standards, and integrity.
Porter’s 5 Forces: Supplier Power – Low
In Porter’s 5 Forces, the supplier power is understood as the pressure that suppliers can exert on business organizations by raising the prices (Gurau 2007, p. 380). At present, the bargaining power of suppliers is not a significant force in such a fragmented industry. Essentially, universities are suppliers considering that nearly all employees in this market come out of business schools. The auditing firms can obtain workers from the many universities and business schools across Australia, and therefore this makes the supplier power to remain low.
3.0 Nature of Industry Marketing and Competitive Positioning Strategies
Kinds of strategy selection
Cost leader with Product Life Cycle Focus: in essence, this would entail seeking to reduce the costs through expertise and efficiency (Montgomery 2010, p. 58). The services offered by PwC would be allowed to age and alter in appeal from High End, to Traditional, and ultimately Low End clients. The firm will focus on profits, return on investment, and ROS, and the company will spend moderately on promotion and sales. Moreover, the firm will spend low on research and development, and invest in technology early enough in the life-cycle of the product (Porter 1998). Differentiation with Product Life Cycle Focus: with this strategy, the company will be seeking to be recognized everywhere as the auditing firm that provides best quality auditing and consulting services in terms of objectivity, integrity, and competence. The firm will offer several product lines in targeted segments – Low End, Traditional, and High End. There will also be high investments in promotion and sales with the aim of creating maximum awareness as well as accessibility. The focus will be on Asset Turnover and ROA (Montgomery 2010, p. 61).
Broad Cost Leader: the firm will strive to be the low-cost producer in all segments of the market. The company would enjoy good profit margins on all sales whilst keeping prices low for clients who are price-sensitive (Murray 2008, p. 390). The firm will be more probable to reposition its services than introduce new services to the marketplace, and it will tend to spend less on sales and promotion. The focus will be on profits and market share, and capacity improvements are not likely to be undertaken. In addition, the firm would finance investments using stock issues and/or debt (Porter 1998). Broad Differentiator: the firm aims at creating maximum awareness as well as brand equity, and wants to be known as an auditing firm which provides high-quality and very sought-after auditing and consulting services. The firm focuses on profits and market share, maintains a presence in every market segment, and it spends greatly on sales and advertising with the purpose of creating maximum awareness and accessibility. The firm will tend to charge higher prices for its services (Montgomery 2010, p. 62).
Niche Cost Leader: the firm will be seeking to dominate each of the price sensitive market segment, and it will aim at setting prices below that of all the competitors in the marketplace, and still remain profitable. The company focuses on profits, returns on investment and ROS, and invests in several service lines within the low-tech segments – traditional and Low End segments. The firm will also spend moderately on advertising to clients who are cost sensitive (Porter 1998). Niche Differentiator: the firm will be seeking to be recognized as the best provider of high quality consulting and auditing services in all the targeted segments. It will offer several product/service lines in segments that are high-tech, and there is little focus in the other segments (Montgomery 2010, p. 61). The business also focuses on ROI, asset turnover, as well as ROE.
Product Life cycle: this is essentially a concept of how a particular product moves through 4 basic stages which are (i) introduction; (ii) growth; (iii) maturity; and (iv) decline. Introduction: this is when the service is introduced into a marketplace. Growth stage: the marketplace has accepted the new service and demand of the auditing and consulting services provided by the company start to increase along with sales. Maturity: sales attain their peak. Decline: sales start to reduce as the product/service gets to its saturation point (Murray 2008, p. 392).
4.0 Competitors: KPMG, Deloitte, and Ernst & Young
Market Positioning and differentiation of competitors
As noted earlier, the main competitors to PwC are KPMG, Deloitte, and Ernst & Young. The 4Ps of marketing strategy include product, price, place/distribution, and promotion. Product: product is the auditing and accounting services offered by PwC’s competitors. Ernst & Young, KPMG, and Deloitte all provide high quality accounting and auditing services and consulting practice, which has contributed to their wide popularity not only in Australia, but internationally. Deloitte focuses on providing uniquely high-quality and innovative auditing and consulting services, and this has enabled it to hit global revenues record of $34 billion (Saito & Takeda 2014, p. 205). KPMG provides exceptional professional services and provides 3 basic service lines including advisory, audit and tax. Ernst & Young also offers high-quality audit services to clients in more than 150 countries worldwide (Francis, Michas & Yu 2013, p. 1644). The auditing and consulting services provided by each of these firms is virtually the same, and there is little differentiation.
Price: the pricing of the services offered by the competitors is dependent on various variables and thus it is always updated. The main consideration is costing of the service, the expenses incurred in marketing and advertising, as well as price fluctuations in the marketplace. Since the three main competitors are all prestigious and highly-respected firms, they tend to price their services highly. Smaller competitors, however, tend to charge less expensively for auditing and consulting services (Saito & Takeda 2014, p. 205). Place/distribution: this pertains to how companies get their products/services to the clients and customers. KPMG, Deloitte, and Ernst & Young have member firms throughout Australia and in countries all over the world. They have separate legal entities in India, Europe, Americas, Africa, the Middle East, as well as the Asia-Pacific region, and they use these member firms to get their services to clients worldwide. Promotion: this is when a company communicates the value and benefits of its services/products to the consumers. KPMG, Deloitte, Ernst & Young and other competitors of PwC often make use of personal selling to promote themselves (Robson & Roseman 2009, p. 76).
Cooperative strategies
The three top competitors of PwC have established cooperation with customers and suppliers in Australia and in many other nations the world over. Ernst & Young works with various universities and business schools which supply the firm with employees. Some of these universities and business schools include Warwick Business School; Nottingham University; Leeds University Business School; Bangor University’s Bangor Business School; Pace University’s Lubin School of Business; and School of Business, University at Albany. Ernst & Young cooperates with various customers including Lehman Brothers and PNC Financial Services Group. KPMG cooperates with the University of Exeter Business School, Birmingham Business School, and also works together with Durham University Business School which are some of its suppliers. KPMG also works with the Institute of Chartered Accountants of England and Wales (ICAEW). Deloitte cooperates with many customers and a lot of these clients are among the FTSE 250 corporations. It has also partnered with various suppliers such as Columbia University’s Columbia Business School; and School of Business, University at Albany in New York (Francis, Michas & Yu 2013, p. 16).
Environmental factors affecting competitive and cooperative strategies
The key environmental factors that affect competitive as well as cooperative strategies include state and national governments and regulations considering that policies established by the government can enhance or impede competition strategies and cooperation strategies. All the competitors in this industry must observe the ASIC, and AASB standards, rules and regulations. The companies in this industry take into account the Blue Ocean Strategy and understand that there are unexploited markets as well as the opportunity for higher growth without having to eat into the profits of other players in the industry. KPMG, Deloitte, Ernst & Young have been able to succeed not by fighting with each other and other auditors in the marketplace, but through the creation of blue oceans of uncontested market space (Kim & Mauborgne 2005).
5.0 Conclusion
In conclusion, regarding the conditions for supplying the service – auditing, tax, advisory, and consulting services –, the main competitors to PwC include KPMG, Deloitte, and Ernst & Young. Each of these networks has created an entity for co-coordinating the network’s activities both in the Australia and in more than 150 nations globally hence they are PwC’s competitors both nationally and globally. The main industry observers are Australian Accounting Standards Board, Australian Prudential Regulation Authority, and Australian Securities and Investments Commission. The competitors have partnered with suppliers and clients including universities and business schools across Australia. By using Blue Ocean Strategy, PwC can be able to succeed not by fighting with the competitors in the marketplace, but through the creation of blue oceans of uncontested market space.
Australian Securities & Investments Commission 2014. Financial Reports & Audit: For Auditors. Available at http://asic.gov.au/auditors (Accessed October 14, 2014).
Francis, J, Michas, P, & Yu, M 2013, ‘Office Size of Big 4 Auditors and Client Restatements’, Contemporary Accounting Research, 30, 4, pp. 1626-1661, Business Source Complete, EBSCOhost, viewed 12 October 2014.
Gurǎu, C 2007, ‘Porter’s generic strategies: a re-interpretation from a relationship marketing perspective’, Marketing Review, 7, 4, pp. 369-383, Business Source Complete, EBSCOhost, viewed 12 October 2014.
Kim, W, & Mauborgne, R 2005, Blue Ocean Strategy : How To Create Uncontested Market Space And Make The Competition Irrelevant, Boston, Mass: Harvard Business School Press, Discovery eBooks, EBSCOhost, viewed 12 October 2014.
Montgomery, A 2010, ‘Price Waterhouse Coopers shrinks to PwC’, Design Week Online, 2010, Business Insights: Essentials, EBSCOhost, viewed 12 October 2014.
Murray, AI 2008, ‘A Contingency View of Porter’s “Generic Strategies”‘, Academy Of Management Review, 13, 3, pp. 390-400, Business Source Complete, EBSCOhost, viewed 12 October 2014.
Porter, M 1998, Competitive Strategy. New York: Free Press.
Robson, GS., & Roseman, GH 2009, Is Government Regulation of Auditors Redundant? Boca Raton, FL: Penguin Publishers.
Saito, Y, & Takeda, F 2014, ‘Global Audit Firm Networks and Their Reputation Risk’, Journal Of Accounting, Auditing & Finance, 29, 3, pp. 203-237, Business Source Complete, EBSCOhost, viewed 12 October 2014.
Strahler, SR 2013, The Big Four’s New Math, Crain’s Chicago Business, 36, 40, p. 0019, Regional Business News, EBSCOhost, viewed 12 October 2014.
World Bank 2014, Country Profile: Australia. The World Bank.
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Organizational Development in Apple Company Order Instructions: Students will complete an 8-10 page research paper on a topic of interest in the field of Organizational Development. (Apple Company)
Organizational Development in Apple Company
Students may go into more depth in an area covered during the eight weeks.
The topic choice for the final should be based on intellectual or professional interests and the paper should address the basic concepts of the course.
This includes an overview of organizational development, dynamics of organizations, organizational change, and interventions.
Students may want to choose an organization and evaluate their current Organizational Development processes. Papers should synthesize insights from readings, class discussions as well as outside research (interviews, published documents).
Theoretical and empirical research is required.
A minimum of 6-8 peer-reviewed references is required.
Papers need to have an abstract page and should be 12 points, double-spaced, and should adhere to APA style 6th edition.
Organizational Development in Apple Company Sample Answer
Abstract
Apple has annual product launches for its products. In September 2014, it released the iPhone 6. This paper analyses the production process of the company with special attention to the iPhone 6. The research paper has been prepared through the research of past materials that relate to the iPhone company including research papers, news articles, and the company’s website. It follows the iPhone 6 from its earliest stages when the company considered improving the iPhone 5C/S to the time of launching the product into the market.
Organizational Development in Apple Company and the Apple’s Product Improvement
Apple Inc. is in the habit of launching its products periodically. This helps to increase the sales of the company without having to increase its customer share. For product launches to be successful, companies must have a strategic approach to the entire production.
Specifically, Apple Inc. performs a constant product improvement (Mallin & Finkle, 2011). This paper analyzes how the production process is managed to ensure a successful launch. Special attention will be given to the recently released iPhone 6.
The iPhone 6
As is to be expected, iPhone 6 is an improvement of earlier models of the iPhone. One area that has been improved is the screen size. iPhone 6 is slightly bigger than earlier models of iPhone (McCormack & Plus, 2014). iPhone is also faster; it has been recreated to offer speed and reliability. Third, the iPhone is also more sustainable.
It uses less power due to its possession of two accelerometers. Finally, iPhone 6 is stronger. It contains a better camera that is invaluable when taking videos and photos.
Organizational Development in Apple Company Research
Research at Apple is a continuous process. To be able to keep improving its products all along, Apple has a method of ensuring that its employees are always research on new improvements for the iPhone. This way, the company is always able to offer a little improvement at a time (Mallin & Finkle, 2011; O’Grady, 2008).
The company is also wise not to hurry improvements. If an improvement will not be met without causing inconveniences, then the company does not insist on using this improvement until on the next launch before which time the company completes the research process.
The company rewards innovation. It is the culture of Apple to ensure that innovative employees are highly rewarded. The company also keeps spaces available for new employees if they can offer innovation to the company
This culture prompts employees who are involved in software development to stay awake for days while they polish the ultimate products. Teamwork is also encouraged. Throughout the research process, the entire team is aware of the need to stay intact.
They also stay on the ready in case someone needed to call a consultative meeting (Mallin & Finkle, 2011). With self-driven individuals, it is very easy for employees to call others to a meeting. This way, if an employee discovers something that is likely to make an impact on the next launch, the employee may contact others for consultation.
Finally, studies show that employees are selected on a passion to work for Apple. Those who are selected are all individuals who would want to contribute to the next product.
For the recently released iPhone 6, for example, employees may all have worked very hard towards the improvement of the former devices (Finkle & Mallin, 2010). While all employees may not be in a place make an improvement, they understand it is their role to make differences on the old product by identifying weaknesses and ways to get off them.
Once employees discover something that can be used to the advantage of the company, they introduce this concept to their team. The team then furthers the research on the concept and probably identifies ways that this concept can be improved (Mallin & Finkle, 2011).
They then work together as a team towards the improvement of that idea until they are sure that this is the best option for the company. The team then communicates this information to the management of the team. This is now presented to the company in the form of a report and request for funding.
The request for funding is often taken positively within Apple. While the company understands that not all research projects will end up with something of value, the company allocates each department with funds for research.
This concept allows the company to take advantage of the capabilities of its employees maximally (Han & Park, 2010). As these employees study, they come up with ideas that may be used to improve the products. Again, the ideas of the research are communicated to the rest of the company through a report. The rest of the company by request form the management look into the report and either recommend or oppose the content of the report.
Organizational Development in Apple Company Integration of the iPhone 6
The iPhone 6 as mentioned earlier is an improvement of the earlier version of the iPhone. Once the various ideas are obtained assessed and accepted, models are formed with available materials.
Materials that are unavailable at the moment are also outsourced (Han & Park, 2010). This having been done, the company tests the models created and determines which areas need to be improved.
If there are areas that need to be improved, the company goes ahead and makes the improvements that are needed (Rogers, 2014). Since the releases are annual, the company is sometimes in a position to make improvements to these models until a decision is reached at.
Organizational Development in Apple Company Outsourcing
Once the final version of the model is completed, Apple starts to outsource the components and the services of the new product.
Apple outsources for various reasons. The most recognized reason for outsourcing is to reduce costs. Most of the outsourcing is done in the East. In those countries, it is possible to obtain cheaper labor (Eadicicco, 2014). Apple also outsources to get more expert services. It is generally accepted that those countries are also better in the production of electronics.
For Apple speed is everything. The launched products are usually in high demand and a slow production process implies that demand will not be met. According to reports, it is much faster to do production in the East (Heracleous, 2013). In some cases, Apple may opt to outsource to get access to resources that are otherwise not available to it. The unavailability could be as a result of restrictions by governments as is the in China.
Apple itself produces some of the elements that will be required for the manufacture of the product. These include:
The A8 chip which is the brain of the iPhone 6
Software(first party applications and iOS 8)
Music applications
Other elements are outsourced from different producers from the USA and abroad. In the US the company obtains the following elements:
Radiofrequency which is obtained from OR-based TriQuint Semi Contactor, Inc
Audio chip obtained from a Texas-based company known as Cirrus logic
Controller chips obtained from Broadcom Corp from California and PMC Sierra
Gorilla 2 glass manufactured by a company based in Kentucky
Marketing campaigns provided by TBWA
Apple also outsources from China and Inner Mongolia. These two Countries have an advantage of owning over 90% of rare earth minerals (Eadicicco, 2014). Most of the components that require rare earth minerals are outsourced from these two countries. They include:
A vibration unit
Speakers
Glass polishing
Color screens
Phone circuitry
Korea and Taiwan are also major outsourcing destination for Apple. The World’s largest chip makers are Samsung electronics SK Hynix. While Samsung remains the largest competitor to Apple, the company still outsources from them (Heracleous, 2013).
For the iPhone 6, Apple has outsourced over 40% of its computer chips from Samsung. Samsung also produces the batteries that are used in iPhones. Other elements that are outsourced from these two countries include:
DRAM,
LCD panels and
flash memory
Fingerprint sensor chip and assembly by ASE, Xintec, and TMSC
In Italy, Apple Inc. outsources a gyroscope from STMicroelectronics. This is the mechanism that allows an iPhone user to rotate their iPhone vertically and horizontally.
China obtains the lines share of the production process. Foxconn is Apple’s largest manufacturer and produces over 85 % of all of Apple’s iPhones. Foxconn has multiple lines of production.
Each line is capable of producing over 72000 factory workers. Foxconn also produces for other companies like Nokia, HP, Nintendo, Motorola, and Sony. It produces over 40 % of the world’s electronics. During peak periods, one Foxconn factory can employ over 230,000 (Heracleous, 2013).
Organizational Development in Apple Company Advertising
Before the launch date, the company runs advertisements to ensure that their customers are set for the new products.
Complemented by the consumerism of Apple’s customers, the release dates are looked forward to. Apple has often changed the focus of its advertisements. Initially, Apple focused on the music aspects of its iPhones. iPhones are superior as far as the quality of music is concerned (Bergen, 2014). This along with the music download service of iTunes made the music aspect of iPhones a reason to advertise.
Recently, however, Apple has moved from its former idea to a completely new aspect. Today, just before the release date, they advertise the new features of the iPhones.
The recently released iPhone 6 saw to the advertisement of features such as sharing through swapping, the superior 3D camera, the slim architecture and the wider screen size. As always, the features advertised mean a lot to the consumers (Diaz & Morrison, 2014). On top of the consumerism that advertisement has brought about, the features could mean something to the clients.
Apple uses a variety of ways to advertise. The first method is the use of an advertising agency to advertise for the company. The advertising agency is known as TBWA.
The company offers all the advertising needs of the company, including advertising creating adverts for the company and placing them on the right platform (Diaz & Morrison, 2014).
The second method is the use of network operators to advertise its product (Hinds et al., 2010). Apple creates a set of requirements for the adverts that are to be placed by the various network operators. As these companies advertise for Apple, they gain a customer share simply because of selling Apple’s product.
The last method that Apple has used to advertise is through the word of mouth. Apple has always had a lower supply than the demand for its products.
This has resulted in some form of conflict between those who possess iPhone and those who do not (Hinds et al., 2010). The conflict can be seen on various platforms for example internet forums. As these two groups conflict, they attract the interest of those who had no interest in the beginning. This way the company ends up creating a new market for its products.
Organizational Development in Apple Company Conclusion
In conclusion, Apple has developed a clear path on the way it creates, improves and launches its products. This has been made possible by the fact that the company has laid down a mechanism for making most of the company processes flawless (Hinds et al., 2010).
Organization culture within Apple is an important ingredient in the development of products that surpass the expectations of the products. The company employs selectively only those people who want and are able o make an impact in the company’s processes. These individuals are further improved by training that shapes them with regard to the needs of the company.
Once the employees are picked, they join a highly innovative group of individuals. Employees have a culture of being self-driven to the extent of being able to call meetings once individuals discover something that may be important for the company (McCormack & Plus, 2014).
Employees are also highly encouraged to work within their teams. This enables employees to consult and have access to a wider amount of human resource to their exposure. With this, it is possible for the company to annually make improvements to its products.
Improvement of products goes through a thorough process that is intended to produce a flawless product. Moreover, the products produced by Apple are supposed to be of superior quality. Apple sells its products at higher prices and its products must, therefore, be of high quality that its competitors’ (Miller, Vandome & McBrewster, 2009).
It is, therefore, very careful when doing its research as to identify as many errors as possible before the product moves to the product line. The company, therefore, chooses to employ all the tactics at its disposal to ensure its success.
The company outsources most of its services rather than creating them internally. While the company employs the services of various companies, it also ensures that no one single company is able to produce the products. The main reason why Apple outsources is to save time.
It uses the services of those companies that are able to meet its high demand early enough. One such company is Foxconn. Apple outsources the manufacturing services of this company due to its vast capabilities.
This company has hundreds of factories to create the products. Furthermore, the company is also is able to employ over 230,000 employees to work for it. With such vast numbers, Apple’s productivity cannot be limited, hence, assuring its success.
Organizational Development in Apple Company References
Bergen, M. (2014). A History of Apple’s Product Launch Marketing. Adage.com. Retrieved 7 October 2014, from http://adage.com/article/media/a-history-apple-s-product-launch-marketing/294843/
Diaz, A., & Morrison, M. (2014). For Apple, Marketing Is a Whole New Game. Adage.com. Retrieved 7 October 2014, from http://adage.com/article/agency-news/apple-marketing-a-game/293605/
Eadicicco, L. (2014). Apple’s 2014 Product Roadmap: A Closer Look At What The Company May Release Before Year’s End. Business Insider. Retrieved 7 October 2014, from http://www.businessinsider.com/apple-iphone-iwatch-rumors-2014-6
Finkle, T., & Mallin, M. (2010). Steve Jobs and Apple, Inc. Journal Of The International Academy For Case Studies, 16(7), 31–40.
Han, W., & Park, Y. (2010). Mapping the relations between technology, product, and service: Case of Apple inc., 127–131.
Heracleous, L. (2013). Quantum Strategy at Apple Inc. Organizational Dynamics, 42(2), 92–99.
Hinds, P., Sutton, B., Barley, S., Boose, J., Bailey, D., & Cook, C. et al. (2010). Apple Inc. in 2010.
Mallin, M., & Finkle, T. (2011). Apple Inc.: Product Portfolio Analysis. Journal Of The International Academy For Case Studies, 17(7), 86.
McCormack, F., & Plus, F. (2014). Apple’s iPhone Marketing Strategy Exposed. Business 2 Community. Retrieved 7 October 2014, from http://www.business2community.com/marketing/apples-iphone-marketing-strategy-exposed-0661613
Miller, F., Vandome, A., & McBrewster, J. (2009). App Store: iPod Touch, Apple Inc., iTunes Store, iPhone OS, Itunes, Piper Jaffray, List of digital distribution platforms for mobile devices, I Am Rich. Alpha Press.
O’Grady, J. (2008). Apple Inc. (Corporations That Changed the World). Greenwood.
Rogers, J. (2014). What to expect from Apple’s big product launch. Fox News. Retrieved 7 October 2014, from http://www.foxnews.com/tech/2014/09/09/what-to-expect-from-apples-big-product-launch/
It is important for a firm to get its pricing strategy right because the potential impact on its net revenue is enormous. Traditional pricing models advocate an economic approach that involves computing the firm’s cost of goods sold (COGS) and a required profit margin that is added on top of the costs to determine the price of the product.
Recently there has been an abundance of journal articles that advocate a perceived value approach, whereby the value of the product to the consumer is quantified and then a profit margin is added on top of this quantified value to determine the price of the product. For example, if the cost to make a gallon of a radically new biocide product is $5 and the required profit margin is 100% of cost, then, using the economic approach, the suggested price per gallon would be $10.
On the other hand, if consumers perceive that the biocide is valued at $100 because of cost savings to the consumers, and a margin, say $10, is added on top of it, this perceived value approach would suggest pricing the biocide at $110. Five-dollar cups of coffee or three-dollar bottles of water are prime examples of this perceived value approach. The assumption with the perceived value approach is that the consumers are not likely to know the cost structure of the product.
After reviewing the resources for this week, respond to the following:
• Should prices reflect the cost of making the product, as suggested by the economic value approach, or should prices reflect the perceived value of the product?
• What are some advantages and risks of each approach, and what implications do they have when crafting marketing strategy?
• How does the approach differ if you are marketing a service rather than a product?
• Be sure to give specific examples to illustrate your answers.
Resources:
Articles
Garbarino, E., & Lee, O. (2003). Dynamic pricing in Internet retail: Effects on consumer trust. Psychology & Marketing, 20(6), 495–513. Retrieved from Business Source Premier database.
This article discusses individual price discrimination, particularly on the Internet, as well the affect this type of pricing has on the trust level of the consumer.
Vesanen, J. (2007). What is personalization? A conceptual framework. European Journal of Marketing, 41(5/6), 409–418. Retrieved from Business Source Premier database.
The new buzzword in marketing is personalization. This article presents a framework for the concept of personalization as this term tends to be defined differently by different marketers, causing confusion.
Avlonitis, G., & Indounas, K. (2007). An empirical examination of the pricing policies and their antecedents in the services sector. European Journal of Marketing, 41(7/8), 740–764. doi:10.1108/03090560710752384
After surveying 170 service companies regarding factors that influence and determine pricing, the authors conclude that a unique combination of environmental and organizational characteristics affects each individual pricing decision.
Balabanis, G., & Diamantopoulos, A. (2008). Brand origin identification by consumers: A classification perspective. Journal of International Marketing, 16(1), 39–71. doi:10.1509/jimk.16.1.39
This paper focuses on the ability of consumers to identify the country where an item is produced, the factors that help or hinder the identification, and the consequences of the brand origin on consumer behavior.
Calantone, R., & Di Benedetto, C. (2007). Clustering product launches by price and launch strategy. Journal of Business & Industrial Marketing, 22(1), 4–19. doi:10.1108/08858620710722789
In this research, the authors study over 200 new product launches to look for similarities in launch strategies and methods of pricing.
SAMPLE ANSWER
Decision on whether prices should reflect the cost of making the product, as suggested by the economic value approach, or whether prices should reflect the perceived value of the product
Pricing is a critical strategy that influences the demand for a company’s products or services and hence affects its profitability at the end of each financial year. Price plays a very important role in influencing the buying decisions of customers. Competition, costs and price sensitivity are some of the known parameters that influence the pricing strategy of a company. Economic value approach is one the methods that companies use to set prices for their products and /or services (Vesanen, 2007). This method uses accounting data which enables a company to set prices that will enable it to achieve a certain mark up on costs which in turn assist in realizing a desired return on investment. The main advantage of this price setting method is that it is easy to calculate since accounting data is readily available. It is easy to forecast into the future and to budget. It however ignores certain aspects of demand as it does not take into account consumer willingness to pay the price and price elasticity of demand. It also ignores industry forces such as the competition. Perceived value pricing quantifies data on perceived customer value of a product in setting prices for a product (Smith, 2011). This method is concerned with creating additional customer value to increase customers’ willingness to pay more in spite of competitor prices. This approach is driven by a deep understanding of customers’ needs, customers’ willingness to pay, price elasticity and customers’ perception of value. The main weakness of perceived value pricing is that data on customer preferences, willingness to pay and price elasticity are not readily available and tends to be subjective. This approach also tends to set ridiculously high prices that encourage entry into the industry by new players. It is apparent that none of the two pricing strategies is without weaknesses. The best pricing strategy is one that takes into account costs of goods sold, competitors pricing and price sensitivity parameters (Pancras, 2010).
The advantages and risks of each approach, and implications they have when crafting marketing strategy?
Economic value approach is very easy to use as it relies on readily available accounting data on costs. The approach also aids in planning and is a good method in countering competitors pricing strategies. This strategy can assist in achieving a cost leadership marketing strategy. In the event that a company wants to offer its products at the lowest price possible, this strategy will assist in achieving this goal. This strategy can however ignite unsustainable price wars that may be detrimental to the company. It should therefore take into consideration competitor pricing strategies before setting prices. This strategy is most ideal in fast moving consumer goods targeting the mass market (Avlonitis &Indounas, 2007). Perceive value pricing is a subjective pricing method since it is difficult to quantify perceived customer value. Getting data from all actual and prospective customers of a product or service is difficult. However the method is ideal for differentiation marketing strategy. This strategy is whereby a company intends to differentiate itself and the products it serves in a given market segment. This strategy is ideal for unique and specialized products and services targeting distinct market segments. It can be used in high end markets offering unique products such as high end wines and super luxurious cars (Garbarino & Lee, 2003).
How the approach differs if you are marketing a service rather than a product Unlike products which are tangible, services are intangible. It is therefore difficult to calculate costs of goods sold in a service to enable a cost accountant set a mark up. Perceived value pricing is most ideal for services since the quality of a service is mainly perceived but cannot be measured(Vesanen, 2007). Economic value approach even though easy to use may not be ideal because of challenges in getting data on costs. Even when the costs can be found, the value that clients attach to a service will definitely determine whether they will buy a service or not. For example in a hotel, the aesthetics, ambience, friendliness of waiters, speed at which service is offered and manner in which complaints are addressed will influence the prices set for the various services (Calantone & Di Benedetto, 2007). Perceived value pricing even though ideal for service should not ignore competitor pricing strategies since competitive pricing can bring down a company. The other reason why perceived value pricing is ideal for services is because this method is concerned with creating additional customer value to increase customers’ willingness to pay. This approach is also driven by a deep understanding of customers’ needs, customers’ willingness to pay, price elasticity and customers’ perception of value (Anuwichanont, 2011).
References
Anuwichanont, J., PhD. (2011). The impact of price perception on customer loyalty in the airline
This paper is critical and it is a continuation of the policy change proposal paper that you have been written for me . Take a look at the details below and most importantly base on the two examples provided complete the paper. It is critical that it must be written in expository style , that’s part of the requirement of this paper and the writer must follow that . You will use chose one of the examples below and write the paper base on my propose amendment that is also included hear below. I will strongly advice that the writer read my previous paper with references below to fully understand the other parts of the paper. I will also send the instructions as a word document in the file section just if the table doesn’t come out when I copy and paste as it will be very important to also include the table in the completed paper since it is the scorecard.
I will send the details of the assignment as an attached file under the file upload instead of copying and pasting hear.
SAMPLE ANSWER
Scoring the Financial Criteria Against the Policy Change Options
Policy change option
These policy change options include, major changes, incremental changes and do-nothing change. Incremental changes are best when the issue is complex and takes place in stages (Mason, Lavitt & Chaffee, 2013). Do nothing change is where things are left to run as usual while major changes happens ones as here is no re-evaluation stages.
Measurable goals
Public education in regard to use of the contraceptives as well their side effects and other benefits
Worker engagement to determine whether or not they understanding the implication of the amendments
Engagement of organizations opposed to the bill to enable them support the bill
Financial Criteria
Instituting policy change requires financial support. Substantive funding stream is the funds available to support policy amendment. For the federal government to amend section 5316 of PL 111-148, it will be obliged to fund the amending section through taxes, Medicaid and Medicare. Taxes will directly affect the middle class while other category of population will be indirectly affected through higher insurance premiums, increased cost of goods and low wages. Taxpayers and government agencies will continue to support the funding for section 5316 of PL 11-148 n to meet both current and future demands. Political feasibility is a situation where a bill is sustainable after legislation to warrant its enactment. The bill must therefore have enough votes to pass a legislative body to be implemented within a certain period for it to be considered politically feasible (Sullivan, 2014).
Pros and Cons for Policy Change Options
Pros for Doing Nothing
If nothing is done, the plan cannot precede immediately, hence time to ponder about its viability again
If nothing is done, funding of the previous programs will go on as earlier planned
Cons for Doing Nothing
If nothing is done, there will be no funding, hence, status quo remains
If nothing is done, workers will shoulder the burden of paying for their birth control cover.
If nothing is done, birth control would not be provided to workers as part of their employment insurance cover.
Pros for Incremental Change
An incremental change will allow continuous evolution of the policy during the phases
An incremental change will increase the number of workers under insurance cover
An incremental change will maintain productivity hence impact positively on employment opportunities
Cons for Incremental Change
An incremental change means high expenses through evaluations and institutions of other changes.
This will require more time compared to major changes
With this kind of changes, policy makers have adequate time to repeal
Pros for Major Change
Major changes will makes it easier for the workers to take cover
Major changes will help the workers and the employee to agree on the modalities quickly
Major changes will ensure regulation of birth among workers
Cons for Major Change
Major changes may not be well thought ought to take longer to create.
Major changes may require long period to develop
Major change will result in increased employee deductions.
Policy Option Analysis Scorecard
Do Nothing Option
Incremental Change
Major Change
Criteria
Substantive Funding Stream
+
+
–
Likelihood of Ongoing Funding
+
+
–
Ability to Meet Current/Future Demands
–
+
+
Political Feasibility
+
+
–
3+/1-
4+
1+/3-
Score for Each Alternative
2
4
-2
(Mason, Leavit, & Chaffee, 2012)
Summary
As based on the scorecard analysis provided above and pros and cons analysis, the incremental change policy option will be used to implement the proposed amendment because the option totaled a plus four. Implementing the policy through incremental change policy will ensure that all the stakeholders understand the process and appreciate the same. They will therefore render their support to the process.
This assignment requires you to read “Moral Criticisms of the Market” by Ken S. Ewert Note that in his article, Ewert is defending the free market from “Christian Socialists.” He states their position and then gives a rebuttal. Do you agree with the critique of the market in Ewert’s article? Why or why not? Read carefully and offer cogent reasons.
Consider the context of the article; the Berlin Wall fell months after the article was published. The USSR followed shortly thereafter.
SAMPLE ANSWER
The Free Market System
In his article Moral Criticisms of the Market, Ewert (1989) looks at the condemnation of the free market by Christians as morally wanting and criticizes it. I agree with this article on various points.
First, he accepts that most systems accommodate selfishness. It is for this reason that both a socialist and a capitalist will both take a bribe. However, the free market system does not encourage selfishness. Instead, the free market system promotes competition. Competition on the other hand, competition has been shown to promote productivity. It is of course the intention of every system to encourage productivity.
Second, the free market encourages free choice. This way, it does not encourage individuals to market their products selfishly but rather gives them a chance to act as they please. The socialist approach on the other hand gives the will to a central system. This system is to blame for the Berlin wall. The Berlin Wall was intended to divide the socialists in Germany from their capitalist counterparts (Taylor, 2007). It took away the concept of free will from individuals forcefully. This implies that capitalist systems are more likely to promote free will and peaceful co-existence than socialist ones.
Thirdly, the socialist systems are intended to benefit one party while neglecting others. The alternative to the free market is the state-led systems. These systems often permit for the creation of channels that promote the oppression of certain individuals rather than others. This implies that they are more likely to be oppressive compared to capitalist systems.
Finally, the free market does not give any reasonable economic power to the wealthy. The economic power it confers to the wealthy is the ability to negotiate. Since they have money, they are able to offer better terms to those from whom they are buying from. It does not however promote cases of slavery and oppression.
