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Margin of safety (financial)
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Margin of safety (safety margin) is the difference between the intrinsic value of a stock and its market price. Another definition: In Break even analysis (accounting), margin of safety is how much output or sales level can fall before a business reaches its breakeven point.

[edit] History
Benjamin Graham and David Dodd, founders of value investing, coined the term margin of safety in their seminal 1934 book, Security Analysis. The term is also described in Graham's The Intelligent Investor. Graham said that "the margin of safety is always dependent on the price paid" (The

Intelligent Investor, Benjamin Graham, HarperBusiness Essentials, 2003).

[edit] Application to investing
Using margin of safety, one should buy a stock when it is worth more than its price on the market. This is the central thesis of value investing philosophy which espouses preservation of capital as its first rule of investing. Benjamin Graham suggested to look at unpopular or neglected companies with low P/E and P/B ratios. One should also analyze financial statements and footnotes to understand whether companies have hidden assets (e.g., investments in other companies) that are potentially unnoticed by the market. The margin of safety protects the investor from both poor decisions and downturns in the market. Because fair value is difficult to accurately compute, the margin of safety gives the investor room for error. A common interpretation of margin of safety is how far below intrinsic value one is paying for a stock. For high quality issues, value investors typically want to pay 90 cents for a dollar (90% of intrinsic value) while more speculative stocks should be purchased for up to a 50 percent discount to intrinsic value (pay 50 cents for a dollar).[1]

[edit] Application to accounting
In investing parlance, margin of safety is the difference between the expected (or actual) sales level and the breakeven sales level. It can be expressed in the equation form as follows: Margin of Safety = Expected (or) Actual Sales Level (quantity or dollar amount) - Breakeven sales Level (quantity or dollar amount)

[edit] Rare book
Also, Margin of Safety is a rare and out-of-print book written by Seth Klarman, founder of Baupost Limited Partners, a value investing focused hedge fund based in Boston, MA. Copies of his book are considered something of a collector's item and it can regularly be found on eBay or in the $1200-$2000 price range.

[edit] References

• • •

Graham, Benjamin. Dodd, David. Security Analysis: The Classic 1934 Edition. McGraw-Hill. 1996. ISBN 0-07-024496-0.

Break even analysis
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The break-even point for a product is the point where total revenue received equals the total costs associated with the sale of the product (TR = TC).[1] A break-even point is typically calculated in order for businesses to determine if it would be profitable to sell a proposed product, as opposed to attempting to modify an existing product instead so it can be made lucrative. Break even analysis can also be used to analyze the potential profitability of an expenditure in a sales-based business. break even point (for output) = fixed cost / contribution per unit contribution (p.u) = selling price (p.u.) - variable cost (p.u) break even point (for sales) = fixed cost / contribution (pu) * selling price (pu)

[hide] • • • • 1 Margin of Safety 2 In unit sales 3 Internet research 4 Limitations

An example: • • • • Assume we are selling a product for £2 a loss leader. But if a product does not break even. then the firm will not sell. [2] margin of safety = (current output . Explanation . Break-even quantity is calculated by: Total fixed costs / (selling price . for example those not fitting well into their sales mix. "price minus average variable cost" is the variable profit per unit. the quantity of product at break even is Total fixed costs / (selling price .average variable costs). the firm would have to sell (1000 / (2. the denominator. It enables a business to know what is the exact amount he/ she has gained or lost and whether they are over or below the break even point.average variable costs).0. Profit = (selling price * quantity) . that product. In this example. to offer a complete line of products.60) = 715) 715 units to break even. the firm will make a loss. Firms may also sell products that lose money . then the firm will make a profit.breakeven output) margin of safety% = (current output .• • • 5 References 6 Bibliography 7 External links [edit] Margin of Safety Margin of safety represents the strength of the business. or a potential product looks like it clearly will not sell better than the break even point.breakeven output)/current output x 100 If P/V ratio is given then profit/ PV ratio [edit] In unit sales If the product can be sold in a larger quantity than occurs at the break even point. Assume that the variable cost associated with producing and selling the product is 60p. Solving for Quantity of product at the breakeven point when Profit equals zero.00 . Assume that the fixed cost related to the product (the basic costs that are incurred in operating the business even if no product is produced) is £1000. This relationship is derived from the profit equation: Profit = Revenues Costs where Revenues = (selling price * quantity of product) and Costs = (average variable costs * quantity) + total fixed costs.(average variable costs * quantity + total fixed costs). etc. below this point. Firms may still decide not to sell low-profit products. or will stop selling. or contribution margin of each unit that is sold. Total Income (Net profit) = Total expenses (costs) .

rather than 715.6))= 589 units to break even. R2. then it would have to sell only (1000/(2.e. in the example above. as it tells you nothing about what sales are actually likely to be for the product at these various prices. given the price you will be charging.B.0. from $2 to $2. To make the results clearer. axis and the break even price at each selling price can be read off the vertical axis. total revenue. the fixed cost curve (FC) which shows the costs that do not vary with output level. [edit] Limitations • Break-even analysis is only a supply side (i. For example. If the firm changes the selling price for its product. or R3). the total revenue curve is simply the product of selling price times quantity for each output quantity. and fixed cost curves can each be constructed with simple formulae. costs only) analysis. R2.NI = TC = Fixed cost + Variable cost Selling Price x Quantity = Fixed cost + Quantity x Variable cost (cost/unit) SP x Q = FC + Q x VC Quantity x (SP-V) = Fc Break Even = FC / (SP − VC) where FC is Fixed Cost. and finally the various total revenue lines (R1.30. The data used in these formulae come either from accounting records or from various estimation techniques such as regression analysis. and R3) which show the total amount of revenue received at each output level. they can be graphed. The break even points (A.3 .C) are the points of intersection between the total cost curve (TC) and a total revenue curve (R1. you draw the total cost curve (TC in the diagram) which shows the total cost associated with each possible level of output. SP is Selling Price and VC is Variable Cost [edit] Internet research By inserting different prices into the formula. The total cost. . one for each possible price charged. The break even quantity at each selling price can be read off the horizontal. To do this. you will obtain a number of break even points.

The earliest roots of emotional intelligence can be traced to Darwin's work on the importance of emotional expression for survival and second adaptation. E. the ability EI and trait EI models (but not the mixed models) enjoy support in the literature and have successful applications in different domains. courage. this is true in the short run. several influential researchers in the intelligence field of study had begun to recognize the importance of the non-cognitive aspects. These differ from Terminal values which are convictions about the end state of existence. and of groups. Basic Conviction that a specific mode of conduct is preferable over an opposite or converse mode of existence. Howard Gardner's Frames of Mind: The Theory of . skill or.L. rather than the means. at least in the range of likely quantities of sales. • • • Wikipedia English . capacity. which are often highly technical. persistence. a self-perceived grand ability to identify. in 1940 David Wechsler described the influence of non-intellective factors on intelligent behavior. it assumes that the relative proportions of each product sold and produced are constant (i. and further argued that our models of intelligence would not be complete until we can adequately describe these factors. politeness etc. linearity) It assumes that the quantity of goods produced is equal to the quantity of goods sold (i.[3] In 1983. manage and control the emotions of one's self. assess.[4] Similarly. For instance.[2] Despite these disagreements. In multi-product companies. (i. in the case of the trait EI model..• It assumes that fixed costs (FC) are constant. the free encyclopedia Jump to:navigation. even though traditional definitions of intelligence emphasized cognitive aspects such as memory and problem-solving.e. an increase in the scale of production is likely to cause fixed costs to rise. search Emotional intelligence (EI) describes the ability. as early as 1920.The Free Encyclopedia Instrumental values are values like ambition.e.e.[1] Different models have been proposed for the definition of EI and disagreement exists as to how the term should be used. They are not the end but a mean of achieving Terminal values. Although. Emotional intelligence From Wikipedia. It assumes average variable costs are constant per unit of output. of others. there is no change in the quantity of goods held in inventory at the beginning of the period and the quantity of goods held in inventory at the end of the period).. the sales mix is constant). Thorndike used the term social intelligence to describe the skill of understanding and managing other people.[3] In the 1900s.

The first use of the term "emotional intelligence" is usually attributed to Wayne Payne's doctoral thesis.[8] As a result of the growing acknowledgement by professionals of the importance and relevance of emotions to work outcomes. . prior to this. motivations and desires of other people) and Intrapersonal intelligence (the capacity to understand oneself. understand emotions and to regulate emotions to promote personal growth. This ability is seen to manifest itself in certain adaptive behaviors.[11] The model proposes that individuals vary in their ability to process information of an emotional nature and in their ability to relate emotional processing to a wider cognition. fail to fully explain cognitive ability.[9] the research on the topic continued to gain momentum. and the field is growing so rapidly. Perceiving emotions – the ability to detect and decipher emotions in faces. as it makes all other processing of emotional information possible. Following their continuing research. Greenspan (1989) also put forward an EI model. their initial definition of EI was revised to "The ability to perceive emotion. followed by Salovey and Mayer (1990). and cultural artifacts—including the ability to identify one's own emotions.Multiple Intelligences[5] introduced the idea of multiple intelligences which included both Interpersonal intelligence (the capacity to understand the intentions.[6] Thus. such as IQ. There has been much confusion regarding the exact meaning of this construct.[10] Nancy Gibbs' 1995 Time magazine article highlighted Goleman's book and was the first in a string of mainstream media interest in EI. The model claims that EI includes four types of abilities: 1. but it wasn't until the publication of Daniel Goleman's best seller Emotional Intelligence: Why It Can Matter More Than IQ that the term became widely popularized. to appreciate one's feelings. At the present time. and Goleman (1995). even though the names given to the concept varied. fears and motivations). the term "emotional intelligence" had appeared in Leuner (1966).[7] However. In Gardner's view. integrate emotion to facilitate thought." The ability based model views emotions as useful sources of information that help one to make sense of and navigate the social environment. traditional types of intelligence. pictures. [edit] Defining emotional intelligence Substantial disagreement exists regarding the definition of EI. with respect to both terminology and operationalizations. The distinction between trait emotional intelligence and ability emotional intelligence was introduced in 2000. that researchers are constantly amending even their own definitions of the construct. Perceiving emotions represents a basic aspect of emotional intelligence. A Study of Emotion: Developing Emotional Intelligence from 1985. The definitions are so varied. voices. there was a common belief that traditional definitions of intelligence are lacking in ability to fully explain performance outcomes. there are three main models of EI: • • • Ability EI models Mixed models of EI Trait EI model [edit] The ability-based model Salovey and Mayer's conception of EI strives to define EI within the confines of the standard criteria for a new intelligence.

the test is modeled on ability-based IQ tests. and the ability to recognize and describe how emotions evolve over time. Managing emotions – the ability to regulate emotions in both ourselves and in others.2. the Mayer-Salovey-Caruso Emotional Intelligence Test (MSCEIT) is based on a series of emotionbased problem-solving items. with higher scores indicating higher overlap between an individual's answers and those provided by a worldwide sample of respondents. such as thinking and problem solving. most researchers agree that they tap slightly different constructs. While some of these measures may overlap. It was found that there were no correlations between a leader's test results and how he or she was rated by the employees. and leader effectiveness. Føllesdal also criticized the Canadian company Multi-Health Systems. with regard to empathy. This has led Multi-Health Systems to remove answers to these 19 questions before scoring. ability to motivate. and manage them to achieve intended goals.[13] the MSCEIT test results of 111 business leaders were compared with how their employees described their leader. even negative ones. Therefore. it generates scores for each of the branches as well as a total score. responses are deemed emotionally "intelligent" only if the majority of the sample has endorsed them. Among other problems. which administers the MSCEIT test. The MSCEIT can also be expert-scored. The test contains 141 questions but it was found after publishing the test that 19 of these did not give the expected answers. This and other similar problems have led cognitive ability experts to question the definition of EI as a genuine intelligence. but without stating this officially. understanding emotions encompasses the ability to be sensitive to slight variations between emotions. the MSCEIT is most unlike standard IQ tests in that its items do not have objectively correct responses. . the emotionally intelligent person can harness emotions. Using emotions – the ability to harness emotions to facilitate various cognitive activities. 4. The emotionally intelligent person can capitalize fully upon his or her changing moods in order to best fit the task at hand. For example. so that the amount of overlap is calculated between an individual's answers and those provided by a group of 21 emotion researchers. the MSCEIT is scored in a consensus fashion. The current measure of Mayer and Salovey's model of EI. because. In a study by Føllesdal. The ability-based model has been criticized in the research for lacking face and predictive validity in the workplace. the consensus scoring criterion means that it is impossible to create items (questions) that only a minority of respondents can solve. Understanding emotions – the ability to comprehend emotion language and to appreciate complicated relationships among emotions. By testing a person's abilities on each of the four branches of emotional intelligence. by definition.[11] Although promoted as an ability test. Central to the four-branch model is the idea that EI requires attunement to social norms. Therefore. 3.[11] Consistent with the model's claim of EI as a type of intelligence.[12] [edit] Measurement of the ability-based model Different models of EI have led to the development of various instruments for the assessment of the construct.

[15] Goleman's model of EI has been criticized in the research literature as mere "pop psychology" (Mayer. Goleman includes a set of emotional competencies within each construct of EI.[edit] Mixed models of EI The model introduced by Daniel Goleman[14] focuses on EI as a wide array of competencies and skills that drive leadership performance. 4. but rather learned capabilities that must be worked on and can be developed to achieve outstanding performance. which was created in 1999. and react to others' emotions while comprehending social networks. Goleman's model outlines four main EI constructs:[1] 1. which was created in 2001 and which can be taken as a self-report or 360-degree assessment. Relationship management – the ability to inspire. by Bar-On. influence. which then offers an indication of one's potential to succeed in life. Self-management – involves controlling one's emotions and impulses and adapting to changing circumstances. and therapy. it is being replaced by the trait EI model discussed below.[18] [edit] Measurement of the ESI Model The Bar-On Emotion Quotient Inventory (EQ-i). 2008). problem solving. Problems in coping with one's environment are thought. understand. Self-awareness – the ability to read one's emotions and recognize their impact while using gut feelings to guide decisions. Roberts. and adapting to and coping with the immediate surroundings to be more successful in dealing with environmental demands. & Barsade.[16] [edit] The Bar-On model of Emotional-Social Intelligence (ESI) Bar-On[3] defines emotional intelligence as being concerned with effectively understanding oneself and others. 3. Social awareness – the ability to sense.[3] Bar-On hypothesizes that those individuals with higher than average EQs are in general more successful in meeting environmental demands and pressures. which was created in 2007.[3] However. Bar-On considers emotional intelligence and cognitive intelligence to contribute equally to a person's general intelligence. 2. The Emotional Competency Inventory (ECI). [edit] Measurement of the Emotional Competencies (Goleman) model Two measurement tools are based on the Goleman model: 1. He also notes that a deficiency in EI can mean a lack of success and the existence of emotional problems. 2.[17] Bar-On posits that EI develops over time and that it can be improved through training. Emotional competencies are not innate talents. and impulse control. and develop others while managing conflict. to be especially common among those individuals lacking in the subscales of reality testing. is a self-report measure of EI developed as a measure of emotionally and socially competent behavior that provides an estimate of one's . stress tolerance. programming. doubts have been expressed about this model in the research literature (in particular about the validity of self-report as an index of emotional intelligence) and in scientific settings. The Emotional Intelligence Appraisal. In general. and the Emotional and Social Competency Inventory (ESCI).[1] Goleman posits that individuals are born with a general emotional intelligence that determines their potential for learning emotional competencies. relating well to people.

Furnham. TEIQue scores were positively related to some of the Big Five personality traits (extraversion. 2007).[8] Trait EI is "a constellation of emotional self-perceptions located at the lower levels of personality". which have revealed significant genetic effects and heritabilities for all trait EI scores. This definition of EI encompasses behavioral dispositions and self perceived abilities and is measured by self report.[3] One hundred and thirty three items (questions or factors) are used to obtain a Total EQ (Total Emotional Quotient) and to produce five composite scale scores. The EQ-i is not meant to measure personality traits or cognitive capacity. the Swinburne University Emotional Intelligence Test (SUEIT). neuroticism). conscientiousness) as well as inversely related to others (alexithymia. Grubb & McDaniel. . which is an open-access measure that was specifically designed to measure the construct comprehensively and is currently available in many languages. As expected. see Matthews. trait EI refers to an individual's self-perceptions of their emotional abilities. abilities. Zeidner.[21] including the EQ-i. The EQ-i has been found to be highly susceptible to faking (Day & Carroll. The psychometric properties of the TEIQue were investigated in a study on a French-speaking population. which have proven highly resistant to scientific measurement. or skills (as their authors often claim). but rather.[20] An alternative label for the same construct is trait emotional self-efficacy. and Wang (2005). where it was reported that TEIQue scores were globally normally distributed and reliable. This is an important distinction in as much as it bears directly on the operationalization of the construct and the theories and hypotheses that are formulated about it. & Roberts. A limitation of this model is that it claims to measure some kind of ability through self-report items (for a discussion. agreeableness. From the perspective of the trait EI model. 2007). & Mavroveli. 2001). none of these assess intelligence.[8] [edit] Measurement of the trait EI model There are many self-report measures of EI.[22] The test encompasses 15 subscales organized under four factors: Well-Being. In lay terms. a measure by Tett. corresponding to the five main components of the Bar-On model. The trait EI model is general and subsumes the Goleman and Bar-On models discussed above.emotional and social intelligence. but rather the mental ability to be successful in dealing with environmental demands and pressures. Fox. One of the more comprehensive and widely researched measures of this construct is the Trait Emotional Intelligence Questionnaire (TEIQue). The conceptualization of EI as a personality trait leads to a construct that lies outside the taxonomy of human cognitive ability.[24]. they are limited measures of trait emotional intelligence (Petrides. Emotionality. and Sociability. which they interpreted as support for the personality trait view of EI (as opposed to a form of intelligence). A number of quantitative genetic studies have been carried out within the trait EI model. Self-Control. as opposed to the ability based model which refers to actual abilities. openness.[23] The researchers also found TEIQue scores were unrelated to nonverbal reasoning (Raven's matrices). Trait EI should be investigated within a personality framework. 2009) proposed a conceptual distinction between the ability based model and a trait based model of EI. [edit] The trait EI model Petrides and colleagues[19] (see also Petrides. 2008. The TEIQue provides an operationalization for Petrides and colleagues' model that conceptualizes EI in terms of personality.the Schutte Self-Report Emotional Intelligence Test (SSEIT).

Landy proposes that the reason some studies have found a small increase in predictive validity is in fact a methodological fallacy— incomplete consideration of alternative explanations: "EI is compared and contrasted with a measure of abstract intelligence but not with a personality measure. or with a personality measure but not with a measure of academic intelligence.[27] The individual's level of alexithymia can be measured with selfscored questionnaires such as the Toronto Alexithymia Scale (TAS-20) or the Bermond-Vorst Alexithymia Questionnaire (BVAQ)[28] or by observer rated measures such as the Observer Alexithymia Scale (OAS). and in any case if we cannot measure them. Viewed as a spectrum between high and low EI. [edit] EI has no substantial predictive value Landy (2005)[31] has claimed that the few incremental validity studies conducted on EI have demonstrated that it adds little or nothing to the explanation or prediction of some common outcomes (most notably academic and work success). or describing their emotions. and that in advance of the introduction of the term EI.." Landy (2005) In accordance with this suggestion. and that it even runs contrary to what researchers have come to expect when studying types of intelligence: "Goleman exemplifies more clearly than most the fundamental absurdity of the tendency to class almost any type of behaviour as an 'intelligence'. representing its lower range. other researchers have raised concerns about the extent to which self-report EI measures correlate with established personality dimensions. Generally. Locke (2005)[29] claims that the concept of EI is in itself a misinterpretation of the intelligence construct. psychologists had established theoretical distinctions between factors such as abilities and achievements. and he offers an alternative interpretation: it is not another form or type of intelligence.[30] The term EI is viewed by some as having merged and conflated accepted concepts and definitions. but intelligence—the ability to grasp abstractions—applied to a particular life domain: emotions. and personality traits and emotional states. Goleman admits that they might be quite uncorrelated. Eysenck ‹See Tfd› (2000) writes that Goleman's description of EI contains assumptions about intelligence in general.. skills and habits. processing. Alexithymia [edit] Criticism of the theoretical foundation of EI [edit] EI cannot be recognized as a form of intelligence Goleman's early work has been criticized for assuming from the beginning that EI is a type of intelligence. The essence of this criticism is that scientific inquiry depends on valid and consistent construct utilization. If these five 'abilities' define 'emotional intelligence'. the alexithymia construct is strongly inversely related to EI. we would expect some evidence that they are highly correlated. selfreport EI measures and personality measures have been said to converge because they both . how do we know they are related? So the whole theory is built on quicksand: there is no sound scientific basis." Similarly. attitudes and values. He suggests the concept should be re-labeled and referred to as a skill.[edit] Alexithymia and EI from the Greek words "λέξις" (lexis) and "θυμός" (thumos) (literally "lack of words for emotions") is a term coined by Peter Sifneos in 1973[25][26] to describe people who appeared to have deficiencies in understanding.

McFarland. 2004. Considering the contexts some selfreport EI inventories are used in (e. Peebles & Moore. 1987). McFarland & Ryan. basing this distinction on the alleged predictive power of EI as seen by the two currents. Some researchers believe it is necessary to warn test-takers not to fake good before taking a personality test (e. the MSCEIT "tests knowledge of emotions but not necessarily the ability to perform tasks that are related to the knowledge that is assessed". (2001).purport to measure traits. as measured by the MSCEIT. and because they are both measured in the self-report form. acting as a mediator of the relationships between selfreport measures (Nichols & Greene.[32] Specifically. [edit] Claims for the predictive power of EI are too extreme Landy[31] distinguishes between the "commercial wing" and "the academic wing" of the EI movement. employment settings).g. [edit] Self report measures are susceptible to faking good More formally termed socially desirable responding (SDR). neuroticism has been said to relate to negative emotionality and anxiety. which is a situational and temporary response pattern (Pauls & Crost. Paulhus. Gangster et al. 1997. In particular. It has been suggested that responding in a desirable way is a response set.[33][34][35] [edit] Criticism on measurement issues [edit] Ability based measures are measuring conformity. the former makes expansive claims on the applied value of EI. This argument is rooted in the MSCEIT's use of consensus-based assessment. Zerbe & Paulhus. faking good is defined as a response pattern in which test-takers systematically represent themselves with an excessive positive bias (Paulhus. This is contrasted with a response style. There are a few methods to prevent socially desirable responding on behavior inventories. the problems of response sets in high-stakes scenarios become clear (Paulhus & Reid. there appear to be two dimensions of the Big Five that stand out as most related to self-report EI – neuroticism and extraversion. Intuitively. [edit] Ability based measures are measuring knowledge (not actual ability) Further criticism has been offered by Brody (2004). with the trait EI view that re-intrprets EI as a collection of personality traits being prominent in the scientific literature.g. 1983). Nichols & Greene.[36] which suggests that the EI. . and in the fact that scores on the MSCEIT are negatively distributed (meaning that its scores differentiate between people with low EI better than people with high EI).. which is a more long-term trait-like quality. Some inventories use validity scales in order to determine the likelihood or consistency of the responses across all items.[37] who claimed that unlike tests of cognitive ability.[32] The interpretations of the correlations between EI questionnaires and personality have been varied. 2002).. not ability One criticism of the works of Mayer and Salovey comes from a study by Roberts et al. 2003). According to Landy. 2001). 2004. 1997. may only be measuring conformity. The main argument is that even though someone knows how he should behave in an emotionally laden situation. it doesn't necessarily follow that he could actually carry out the reported behavior. This bias has long been known to contaminate responses on personality inventories (Holtgraves. are likely to score low on self-report EI measures. 2000. 1998. individuals scoring high on neuroticism.. 1991).

the credibility of the findings cannot be substantiated in a scientific manner. Goleman (1998) asserts that "the most effective leaders are alike in one crucial way: they all have a high degree of what has come to be known as emotional intelligence.[31] Thus." Landy further reinforces this argument by noting that the data upon which these claims are based are held in "proprietary databases". or predicting.. such as executive-level positions. the skills and abilities of current employees are assessed to see which future positions they may take within the organization when other employees leave their positions. . an idea first proposed in the context of academic performance (Petrides. For instance.. IQ and job performance Research of EI and job performance show mixed results: a positive relation has been found in some of the studies. With succession planning. HRP involves forecasting. Human resources planning (HRP) is the process of having the right number of employees in the right positions in the organization at the time that they are needed. Succession planning involves using the supply of labor within the organization for future staffing needs. 2004). The results of the former study supported the compensatory model: employees with low IQ get higher task performance and organizational citizenship behavior directed at the organization. As an example. .emotional intelligence is the sine qua non of leadership". In contrast. This led researchers Cote and Miners (2006)[38] to offer a compensatory model between EI and IQ. the organization's needs for labor and supply of labor and then taking steps to move people into positions in which they are needed. Succession planning is typically used in higher-level organizational positions. unless those datasets are made public and available for independent analysis. if a company predicts that its Chief Executive Officer will retire in the near future. the organization may begin looking months or even years in advance to determine which current employee might be capable of taking over the position of the CEO. Mayer (1999) cautions "the popular literature's implication—that highly emotionally intelligent people possess an unqualified advantage in life—appears overly enthusiastic at present and unsubstantiated by reasonable scientific standards. that posits that the association between EI and job performance becomes more positive as cognitive intelligence decreases. & Furnham. Succession planning is the systematic process of defining future management requirements and identifying candidates who best meet those requirements.while the latter is trying to warn users against these claims. in others there was no relation or an inconsistent one. replication. Frederickson. which means they are unavailable to independent researchers for reanalysis. or verification. the higher their EI (Emotional Intelligence Succession planning is a critical part of the human resources planning process. [edit] EI.

Having an employee who has been trained and socialized by the organization may limit the availability of skills. has a number of benefits and drawbacks. or creativity that may be found when new employees are brought in from the outside. However. With internal selection. not all organizations take a formal approach to it. and therefore is often better able to predict future performance than when hiring from the outside. the company can have a fairly accurate assessment of the employee's work capabilities. the organization has trained and socialized the employee for a period of time already. internal selection still leaves a position at a lower level that must be staffed from the outside. can have negative organizational consequences. Informal succession planning is likely to result in managers who are promoted due to criteria that are unrelated to performance. Because of access to annual performance appraisals and the opinions of the employee's current managers. such as networking within and outside of the organization. Additionally. the organization is aware of current employees' skills and abilities.Succession planning is aimed at promoting individuals within the organization and thus makes use of internal selection. internal selection can also have some drawbacks. innovation. Internal selection. and instead do so very informally. using the opinions of managers as the basis for promotion. Research indicates that poor preparation for advancement . such as just described. with little consideration of the actual requirements of future positions. those employees who feel that they have been passed over for promotion or are at a career plateau are likely to become discouraged and may choose to leave the organization. Despite its many advantages. Finally. Many companies organize their management training and development efforts around succession planning. While the opportunities for advancement may be motivating to employees who believe that they can move up within the organization at a future date. Poor succession planning. Organizations would be better served by promoting managers who were able to successfully engage in human resource management activities and communicate with employees. which may not reduce recruitment and selection costs. as opposed to hiring employees from outside the organization. so the employee is likely to be better prepared for a position within the organization than someone who does not have that organizational experience. internal selection is often motivating to others in the organization—opportunities for advancement may encourage employees to perform at a high level. Finally.

This may have negative repercussions for the newly promoted manager. HUMAN RESOURCES PLANNING.into managerial positions leaves almost one-third of new executives unable to meet company expectations for job performance. assessing needs. The organization should do its best to have staff available to move up in the organization even when unexpected circumstances arise. staffing needs are often less predictable—organizational members may leave for other companies. The second major step for succession planning is to define and measure individual qualifications needed for each targeted position. However. ASSESSING NEEDS AND DEVELOPING REPLACEMENT CHARTS. To determine the level of abilities of employees within the organization. If a lower-level manager has excellent abilities but little interest in advancement within the organization. However. and developing replacement charts and identifying career paths. personality tests. the company has an advantage in that it has much more data on . many of the same selection tools that are used for assessing external candidates can be used. Once these qualifications are defined. such as a known upcoming retirement or transfer. such as general mental ability tests. then development efforts aimed at promotion will be a poor investment. employees must be evaluated on these qualifications to identify those with a high potential for promotion. This may involve assessing both the abilities and the career interests of employees. resulting in a need to hire from outside or promote from within. STEPS IN SUCCESSION PLANNING There are several steps in effective succession planning: human resources planning. Such qualifications should be based on information from a recent job analysis. and the company's bottom line. the other employees. accurate and timely forecasting is critical. retire unexpectedly. Thus. Engaging in human resources planning by forecasting the organization's needs for employees at upper levels is the first step in succession planning. Some staffing needs can be anticipated. developing managers. when selecting internally. and assessment centers. or even die.

it is a road map of positions and . the organization identifies a career path for each high-potential candidate—those who have the interest and ability to move upward in the organization.internal candidates. such as records of an employee's career progress. A career path is the typical set of positions that an employee might hold in the course of his or her career. Additionally. past performance. • Performance-related training and development for current and future roles. which are expected to provide managers with knowledge that they could not otherwise gain from the company's own training and development programs. Specific training and development provided by the company may be required for managers to excel in their current positions and to give them skills that they need in higher-level positions. is the development of the managers who are identified as having promotion potential. The third step of succession planning. • Education. Many multinational companies now include an overseas assignment as a way for managers to both learn more about the company and to test their potential for advancement within the company. and self-reported interests regarding future career steps. which is actually ongoing throughout the process. In the final step of succession planning. experience. the performance of this manager at the executive level can be assessed before further promotions are awarded. Formal courses may improve managers' abilities to understand the financial and operational aspects of business management. DEVELOPING MANAGERS. In succession planning. In order to prepare these lower-level managers for higher positions. Managers who are successful at leading an overseas branch of the company are assumed to be prepared to take an executive position in the home country. Many companies will pay for managers to pursue degrees such as Masters in Business Administration (MBAs). By working in different executive positions throughout the organization. they need to engage in development activities to improve their skills. the manager gains insight into the overall strategic workings of the company. • Overseas assignments. DEVELOPING REPLACEMENT CHARTS AND IDENTIFYING CAREER PATHS. Some of these activities may include: • Job rotation through key executive positions.

but also the motivation of current employees may suffer if they feel that their high performance has been overlooked. and difficulties associated with managing large amounts of human resources information. Along with career paths. These charts are depicted as organizational charts in which possible candidates to replacement others are listed in rank order for each management position. which indicate the availability of candidates and their readiness to step into the various management positions. These rank orders are based on the candidates' potential scores. There are often employees throughout the organization who are capable of and interested in promotion who may be overlooked because of the more visible and obvious "crowned prince. and other relevant qualifications. the talent drain. or has networked well with organizational leaders. The charts indicate who is currently ready for promotion and who needs further grooming to be prepared for an upper-level position. can be beneficial to organizational performance. those employees who have become visible to them. PROBLEMS WITH SUCCESSION PLANNING Succession planning is typically useful to the organization in its human resource planning. CROWNED PRINCE SYNDROME." who is likely to be promoted even if these other employees are available. The first potential problem in succession planning is the crowned prince syndrome. In other words.experiences designed to prepare the individual for an upper-level management position. However. and when done properly. has a powerful and prominent mentor. rather than looking at a wider array of individual employees and their capabilities. experience. ." This person is often one who has been involved in high-profile projects. upper management focuses only on one person—the "crowned prince. Not only are performance problems a potential outcome of this syndrome. This may result in turnover of high quality employees who have been overlooked for promotion. which occurs when upper management only considers for advancement. there are potential problems associated with the use of succession planning: the crowned prince syndrome. the organization should develop replacement charts. which are derived on the basis of their past performance.

which is identifying and preparing managers for future promotions within the organization is one element of successful human resource planning. many organizations do a poor job of succession planning. Succession planning. thus creating increased competition for their former company. Effective succession planning. it is typically best to store and manage it on a computer. and this information overload is likely to increase the difficulty of successful succession planning. The final problem that can occur in succession planning is the concern with managing large amounts of human resources information. Exacerbating this problem is that these talented managers may work for a competing firm or start their own business. is likely to improve overall firm performance and to reward and motivate employees within the organization. . Because succession planning requires retention of a great deal of information. MANAGING HUMAN RESOURCE INFORMATION. This turnover may reduce the number of talented managers that the organization has at the lower and middle levels of the hierarchy. Even on the computer. Even when it is done properly. Unfortunately.TALENT DRAIN. Attempting to maintain such records by hand may prove daunting. however. The talent drain is the second potential problem that may occur in succession planning. succession planning has some potential problems that can harm employee motivation and the company's bottom line. those managers who are not assigned to development activities may feel overlooked and therefore leave the organization. Add to that the challenges of comparing distinct records of performance to judge promotion capability. Because upper management must identify only a small group of managers to receive training and development for promotion. identifying and evaluating many years' worth of information about employees' performance and experiences may be difficult.

It includes: 1. induction and internal mobility. change. It involves *Estimation of present and future requirement and supply of human resources basing on objectives and long range plans of the organization. 2. selection.The operative functions of personnel management are related to specific activities of personnel management viz. employment. *Calculation of net human resources requirement based on present inventory of human resources.Preparation of job description. All these functions are interacted by managerial functions. Employment It is the first operative function of HRM. (c)Stimulating the candidates to apply for jobs in the organization. development.Providing the guides. Human Resources Planning: It is a process for determination and assuring that the organization will have an adequate number of qualified persons. facts and ideas relating to various aspects of jobs including men. . compensation and relations. 3. Employment is concerned with securing and employing the people possessing required kind and level of human resources necessary to achieve the organizational objectives. placement. information. It covers the functions such as job analysis. available at proper times. job specification. and develop the strength of existing employees in the organization so as to meet the future human resources requirements.. plans and basis for job design and for all operative functions of HRM. *Preparation of action programs to get the rest of human resources from outside the organization and to develop the human resources of existing employees. Job Analysis: It is the process of study and collection of information relating to the operations and responsibilities of a specific job. human resources planning. (d)Striking a balance between internal and external sources. machines and materials. performing jobs which would meet the needs of the organization and which would provide satisfaction for the individuals involved. Further these functions are to be performed in conjunction with management functions. job requirements and employee specification which help in identifying the nature. It deals with: (a)Identification of existing sources of applicants and developing them.Collection of data. levels and quantum of human resources. recruitment. Recruitment: It is the process of searching for prospective employees and stimulating them to apply for jobs in an organization. *Taking steps to mould. (b)Creation / Identification of new sources of applicants.

policies. (d)Checking of references. purposes and people etc. Human resource management always is deep rooted comprehensive activity taken up to improve that quality of human beings who are vital assets of the organizations competence and capability of the employees will be improved by adopting scientific methods which enable them to play their assigned roles effectively. (b)Introduce the employee to the people with whom he has to work such as peers. policies. opportunities. (g)Sending letters of appointment and rejection. skill. Induction and Orientation: Induction and orientation are the techniques by which a new employee is rehabilitated in the changed surroundings and introduced to the practices.Selection: It is the process of ascertaining the qualifications. It is matching of employees specifications with job requirements. experience. of the organization. Placement: It is the process of assigning the selected candidate with the most suitable job in terms of job requirements. administration. market share. training and development. of the enterprise. payments or training the people "Human resource………… Management is related to the continues process of man power planning selection performance appraisal. social and community standing. career planning and development. Human resource Management Human resource management deals with the management of people in an organization it is assessed and accepted that Human resource are the main components of an organization and the human or failure of an organization depends on how effectively this components is managed. product. Human resource management is dedicated to develop a suitable corporate.. company history. of an applicant with a view to appraising his / her suitability to a job appraising. "Human resource management is proactive rather than waiting to be told what to do about recruiting. objectives. (c)Formulating interviewing techniques. if any. (c)Correcting misplacements.. This function includes: (a)Framing and developing application blanks. culture etc.. (h)Employing the selected candidates who report for duty. knowledge etc. (f)Line manager’s decision. (a)Acquaint the employee with the company philosophy. appraising employee performance in order to determine employee’s adjustment with the job. . This function includes: (a)Counseling the functional managers regarding placement. (b)Conducting follow-up study. culture programs or design and implement to reflect core values. (e)Setting up medical examination policy and procedure. which is integrated and involving the entire human force of that organization to work together with a sense of common purpose that how to be infused to the organization. This is the concept. supervisors and subordinates. (b)Creating and developing valid and reliable testing techniques. (c)Mould the employee attitude by orienting him to the new working and social environment.

"Actuating is getting all the members of the group to work and to strive to archive objectives of the enterprises. organizing. and people in an organization it forces on people in organization. Human resource development manager has to actuate every being that works in the organizations. development and compensation. directing. Developing and maintaining motivating for workers by providing certain incentives. relations. recruitment selection. organization. Human resource management functions helps in the managers in recruiting.Today management techniques in corporate enterprise are changing very fast it is more so in Human resource management. DEFINITION According to Leon C meginson Human resource management is "The total knowledge of skills. Human resource resulting in the creations and development of human relations resulting with a view to contribute proportionately to the organizational. creative abilities. and placement. According to Flippo Human resource management is "The planning. Human resource management is also concerned with hiring motivating. performance appraisal and job evaluations. compensation. All major activities in the working life of worker from the time of his or her entry into an organization until he specifically the activities included are Human resource planning job analysis and design. His job is to created a team spirit in the minds of the His job is to create a team spirit in the minds of the corporate enterprise before has actuates his workers he should be able to self actuate and work with his group of workers. MEANING In simple sense Human resource management means employing people and development their resource utilizing maintaining people and compensation their services in tune with the jobs and organization requirements with a view to achieve the goal of the organization individual and the society. and co-ordinating and controlling of the procurement. integration. SCOPE OF HUMAN RESOURCE MANAGEMENT Scope of Human resource is indeed vast. talents and aptitudes of an organization workforce as well as the value attitude and beliefs of the individuals involved". creative abilities. DEFINITIONS According to Leon C meginson Human resource management is "The total knowledge of skills. development. Collective bargaining contract negotiation. • • • • Setting general and specific management policy for organizations relationship and establishing and maintaining a suitable organization for better cooperation. Aiding in the self-development of employees at all levels providing opportunities for personal development and growth as for acquiring requisite skill and experience. maintenance. and coordinating and controlling of the procurement. OBJECTIVES . training and development. According to Flippo Human resource management is "The planning organizing. training and development the members for an organization. organization and social objective are accomplished. directing. individual and social goals. contract administration and grievance handling. Human resource management can be defined as managing production organizing and controlling the functions of employing. talents and aptitudes of an organization workforce as well as the value attitude and beliefs of the individuals involved.

2. • Planning. Improving the employees skills and capacity. and controlling all these functions influences the operative functions. PERSONAL OBJECTIVES To assist employees in achieving their personnel goals which enhance the individual contribution to the organization personal objective of employees have to meet if workers are to be maintained. directing. Along with the organizational objectives it has to set certain other social objectives in order to help the society the primary objective of the organization is to be ethically and socially responsible to meet the need and challenges of the society while minimizing the negative impact of such demands upon the organization the failure of organizations to use there resource for the society benefits in ethical ways may led to restrictions. 3. functional and personal. social organizational. By helping people to make their own decisions that are in their interests. . Human resource management is not an end in itself it is only a mean to assist the organization with its primary objectives the department exists to serve the rest of the organization. FUNCTIONS OF HUMAN RESOURCE MANAGEMENT The functions of human resource management can be broadly classified into two categories viz. FUNCTIONAL OBJECTIVES Functional objective should not become too expensive at the cost of the organization it serves while personal objectives assist employees in achieving their personal goals to maintain the departments contributed at the level appropriate to the organization needs resource are wasted when HRM is either more or less sophisticated to suit the organizations demands. SOCIAL OBJECTIVE Every organization has to set objective keeping the society in mind. SOCIAL SIGNIFICANCE: Proper management is that which enhance their dignity by satisfying their social needs it is done by… Maintaining balance between the jobs available and the job seekers according to their needs and qualification. Beyond this there are another objective too specifically Human resource management objective are divided into four fractions i. It is a pre-determined course of actions planning pertains to formulating strategies of personnel programs and changes in advance that will contribute to the organization goals. Creating right attitude among the employees Utilizing the Human resource to the maximum extent Attaining cooperation among the employees. Providing suitable and most productive employment. ORGANIZATIONAL OBJECTIVES To recognize the role of human resource management is burning about organizational effectiveness. Managerial functions. 2.Primary objective of Human resource management is to ensure the availability of a component and willing workforce to an organization. Providing maximum opportunity for personal development. 1. Correcting the errors and reallocation of work.. 1. PROFESSIONAL SIGNIFICANCE: By providing a healthy working environment it promotes team works in the employees.e. Eliminating waste or unwanted Human resource. MANAGERIAL FUNCTION: Managerial functions of personnel management involves planning. organizing. IMPORTANCE OF HUMAN RESOURCE MANAGEMENT Yodder" and other discuss the importance of Human resource management from three standpoints. this is done by maintaining the dignity of the employees as a Human resource being. 1. Operational functions. retained and otherwise employee performance and satisfactions may decline and the employee may try to leave the organization. SIGNIFICANCE OF INDIVIDUAL ENTERPRISE: It can help the organization in accomplishing its goals by.

the term compensation is a comprehensive one including pay. recreational. Generally. and benefits offered by employers for hiring the services of employees. INTRODUCTION EMPLOYEE COMPENSATION Compensation is what employees receive in exchange for their contribution to the organization. The next logical function after completing planning and organizing is the execution of the plan. Compensation forms such as bonuses. incentives. mounding and changing the skills. which emerged as a planned and systematic functions of the HRM. it is basic compensation an employee gets. employees offer their service for three types of rewards. stock options) . commissions and profit sharing plans are incentives designed to encourage employees to produce results beyond normal expections. Benefits such as insurance. Controlling. creative ability. Base pay. fringe benefits social security measure etc. human resource are simply people. values. Compensation: It is the process of providing adequate. The basic function of personal management at any level is motivating. commitment etc on present and future job and organizational requirements. attitude. wages and salary administration. Human resource development can be applied both for the organizational and national level the concepts of human resource development was formally introduced by LEONARD NADLER in 1989 in a conference organized by the American society for training and development. 1. commanding. usually as a wage or salary. Employment: It is the operative functions of Human resource management.• Organizing. Human resource and human resource management are related to human resource development. maintain and retain an effective workforce. So. human resource development compensation and relations all these functions are interacted with managerial functions. VARIABLE PAY: it is the compensation that is linked directly to perform accomplishment (bonuses. related to specific activities of personnel management viz employment. 1. Organizing is a structure and a process by which a cooperative group of human beings allocates its task among its members identifies relationships and integrates its activities towards common objective. Compensation offered by an organization can come both directly through base pay and variable pay and indirectly through benefits.2 HUMAN RESOURCE DEVELOPMENT The concept of human resource development is a new concept of the 20 th century and is called as human resource development.3. Pay refers to the base wages and salaries employees normally receive. Human resource development: It is the process of improving. managers have to observe legal formalities for offering physical as well as financial security to employees. human resource management is the activity of managing people and the business of an organization.1 NATURE OF COMPENSATION. After planning organizing and directing various activities of personal management is to be verified in order to know that the personal functions are performed in conformity with the plans and directing of an organization.3. • • 1. equitable and fair remuneration. incentives. and activating people the willing and effective cooperation of employees for the attainment of organization goals is possible through proper directing. knowledge and competencies of people and it is people oriented concept. employment is concerned with securing the employing the people possessing the required kind and level of Human resource necessary to archive the organizational objective. organizing is essential to carry out the determined course of action. All these play an important role in any HR department efforts to obtain. medical. represent a more indirect type of compensation. Human resource development appears to the systematic process of changing within as organization it is a specialized process that assists people to reach their potential and further strengths the goals of a organization. lending. OPERATIVE FUNCTION: The operative functional human resource management are • • • 1. Human resource development is mainly concerned with developing the skills. Directing. retirement etc. knowledge. In addition to these. bonus.

2 OBJECTIVES OF COMPENSATION AND COMPENSATION PLANNING. overtime. 6. 3. however. 1. when prices go down DA can be always be reduced.3. To identify the relationships of performance with compensation methods in the organizations.3 COMPENSATION PLANNING In addition there are other objectives also they are. as sort of insurance against increasing in price levels of commodities. employees may quit in frustration. similar get similar pay. .4 Attract talent. Training needed. 2. 1. WAGE AND SALARY ADMINISTRATION. Then only will it promote understand regarding pay-related matters between employees union and management. EASE OF OPERATION: The compensation management system should be easy to understand and operate. 1. remained a hypothetical situation as price never come down to necessitate a cut in dearness allowance payable to employees. medical attendance. Bonus or other payments under a profit-sharing schemes which do not form a part of contract of employees. RETAIN TALENTS: If compensation levels fall below the expectations of employees or are not competitive. 4. 4. 5. more qualified people should get better wages. Instead of increasing wages every time there is a rise in price levels. Value of any house accommodation supply of light. To analysis employees level of satisfaction towards compensation provided by company. Hazardous nature of job. different Acts include different items under wages. 2. Skill need of the job: Experience needed. 4. Difficulty of work mentally as well as physical. water. These has. Basic compensation refers to monetary payments in the form of wages and salaries the term wage implies remuneration to works doing manual work. Employees compensation may be classified into two types basic compensation and supplementary compensation.3. 3. compensation needs to be high enough to attract talented people since many firms compete to hire the services of competent people. 2. 4. and good conduct bonus "form part of wages. Any sum paid to defray special expenses entailed by the nature of security and social insurance benefits. managerial.BENEFITS: These are indirect rewards given to an employee or group employees as a part organization membership (health insurance vacantion pay. the salaries offered must be high enough to motivate them to apply. WAGES. To check the level of motivation the employees get through compensation provided. BASIC WAGE: The basic wage in India corresponds with what has been recommended by the fair wages committee (1948) and the 15 th Indian labor conference (1957) The various awards by wages tribunals wages board. ENSURE EQUITY: Pay should equal the worth of a job. traveling allowance. It service as a cushion. 5. 1. pension etc) 1. Any contribution to pension. Under the workman's compensation act 1923 wages for holiday pay. 3. In India. or payment in lieu thereof or any other concession. CONTROL COSTS: The cost of hiring people should not be too high. provided fund or a scheme of social securities and social insurance benefits. bonus attendance bonus. pay commission reports and job evolutions also serve as guiding principle in determining basic wage they are: 1. COMPONENTS OF PAY STRUCTURE IN INDIA. 3. 2. DA is paid to neutralize the effects of inflation. 1. Effective compensation management ensures that worker are nether over paid nor underpaid. To analyze various compensation methods existing in the organization. technical and professional staff. The term salaries is usually defined to mean compensation to office. DEARNESS ALLOWANCE: It is the allowance paid to employee in order to enable them to face the increasing dearness of essential commodities.3. 5. To identify process of interlink between performance and compensation method. Responsibilities involved. likewise.

Some need high levels of skills and knowledge while other can be handled by almost anyone simple. To overcome this. challenging tasks that can be done by few people with high skill levels generally received high pay. • • • • To attract qualified and competent personnel. 1. PRINCIPLES OF WAGE AND SALARY ADMINISTRATION • • • • Wage and salary plans should be sufficiently flexible. complexity and challenges. To control labour and administrative costs in line with the ability of the organization units. Accompany that does not pay comparable wages may find it difficult to attract and retain talented employees. To improve motivation and moral of employees and to improve unionmanagement to pay.5 OBJECTIVES: A sound plan of compensation administration seeks to achieve the following objectives.3. When the index rises due to raising prices. PREVAILING WAGS RATES: This wages rates in competing firms within an industry are taken into account while fixing wages. complex. 2. To retain the present employees by keeping wages levels in tune with competing units. FACTORS INFLUENCING COMPENSATION LEVELS The amount of compensation received by an employee should reflect the efforts put in by the employee. unions and workers prefer to link wages to that cost of living index. 3. the degree of difficulty and the demand – supply position within the country. routine task that can be done by many people with minimal skills received relatively low pay… on the other hand. JOB NEEDS: Jobs vary greatly in their difficulty. These plans should simplify and expedite other administrative processes. wages follow suit. . These are discussed below. Wages and salary administration plans and programmers should be responsive to the changing local and national conditions. Job evaluation must be done scientifically.1. etc. Ability to pay: Inflation reduces the purchasing power of employees..

bonus was claimed as DA during world war. besides salary. for perfect attendance or merits payment based on supervisory appraisal. as started pensively. profit sharing programmes have been implemented with a view to link growth in compensation results. It is the bare minimum that a worker can expect to get for services rendered by him. JOB INDIVIDUAL PAY: most tradition organization even today – decide the minimum and maximum values of each job independently of individual worker. In the course of labor history. etc: determine the wages structure in an industry. WAGS POLICY IN INDIA Minimum wages: minimum wages is that wage which must invariably be paid whether the company. 1. is achieved when the compensation received is equal to the value of the work done.3. makes profits or not. compensation policies are internally equitable when employee believe that the wage rates for their approximate job's worth to the organization.8. potential and to take up multiple job. UNIONS: High unionized sector generally have high because well organized unions can exert presence on management and obtain all sort of benefits and concessions to workers. 5.3. 3. bonus DA. PERFORMANCE MEMBERSHIP: Konwledge-based organization these days follow a performance – based payment plans offering awards to employees for cost saving suggestions. into a defendable right and a just claim. Bonus: An important components the employees earning. big or small.9 CHOICE IN DESIGNING A COMPENSATION SYSTEM: The compensation system that is followed by a firm should be in tune with its own unique character and culture and allow the firm to achieve its strategic objectives A wider variety of options a firm while designing such a system. 2. it has metamorphosed from a reward or an incentives for good work.4. 1. 1. Stating as an adhoc and excretion payments. FIXED VARIABLE PAY: Now a days variable pay programs are widely followed through out many organizations and for all levels of employees widespread use various incentives plans team bonuses. ignoring their abilities. bonus. . STATE REGULATION: The legal stipulations in respect of minimum wages. 4. INTERAL AND EXTERAL PAY: Pay equity.

. It constitutes the blue print for the collection and analysis of data in a manner that aims to combine relevance to research purpose with economy in procedure. RESEARCH DESIGN RESEARCH DESIGN Research designs decides the fate decides the fact of the proposal and its outcome if the designs is defective the whole outcome and report will be faulty and undependable.5. sex. OPEN SECRET PAY: In the real world. the issue of paying compensation openly or in a secret way may often become a bone of contention between employer current research evidence indicates that pay openness is likely to be more successful in organization. 6. Research design is the conceptual structure of research project. nature of work and year of experience of the respondent this research design is also useful to analyze the level of job satisfactions and its impact on work performance of the respondent. PROCTER in order to attract (and retain)" the crop To grow rapidly and to get ahead of other in the race. BWLOW MARKET AND ABOVE MARKET COMPENSATION: In higher terms R & D workers might be paid better than counterparts in the manufacturing divisions. Designing is preliminary step in every activity it is at designing stage that the purpose for which research is to be used will also have to be decided to the designing stage. and education background. especially in knowledge – based industries most companies prefer to pay above-market salaries. Designing thus provides a picture for the whole before starting the work. Blue chips such as HLL. NESTLE. Keeping the objective hypothesis of the study descriptive research has been adopted descriptive reach studies are those studies which are concerned with descriptive research studies are those studies which are concerned with descriptive research studies are those studies which are concerned with describing the characteristic of a particular divided or group so the research has adopted this design to known the age.

The present study title employee compensation covers BANGALORE MILK UNION (BAMUL) The study comprises middle and contract level of employees The survey was conducted on emplyee's compensation. To analyse various compensation methods existing in the organization. 1. It is way to systematically solve research problem.STATEMETN OF PROBLEM. SCOPE OF THE STUDY This project research selected the company within the location Bangalore. To analyse employees. level of satisfaction towards compensation provided by company. The state of problem is the whether the company is providing effective compensation for their employees and to check whether employees are satisfied with compensation provided to them. 2. OBJECTIVES OF STUDY. 5. "A research design is the arrangement of condition for collection and analysis of data in a manner that aims to combine relevance to the research purpose with the economy in procedure Intact the research design is the conceptual structure within which research is conducted it constitutes the blue prints for the collection. RESEARCH DESIGN IN BAMUL. To check the level compensation provided. To identify process of interlink between performance and compensation method. This project is entitled with effectiveness of employee compensation of employee in BANGALORE MILK UNION (BAMUL). measurement and . To identify the relationships of performance with compensation methods in the organization. Respondents for the study are only the employees of the company and the time involved in this project were as prescribed by the university. 3. of motivation the employees get through 4. METHODOLOGY Research methodology may be under started as science of studying how research is done scientifically.

it includes survey and fact-findings. enquires of different kinds. discuss or clarify the reasons for the termination. you may learn that a supervisor is not leading employees as well as you thought. the employer may learn about the reasons leading to the employee's decision. Allow enough time for discussion. Thus. in a very small company. and other documents.analysis of data. . explaining the reasons for the dismissal. If you don't have a formal human resources department. Information exchanged at exit interviews may benefit both the company and employee. Listed below are steps to guide you through the exit interview process. you might want to provide the employee with a simple exit interview survey. For example. As such the design include an outline of what the researcher will do from writing the hypothesis and its operational implication to the final analysis of data. • • Prepare for the interview by briefly talking with the employee's manager and reading the employee's personnel file. In the case of a terminated employee. a senior manager other than the employee's immediate supervisor should conduct the interview. A termination interview should be brief. Of course. and ask them to complete and mail it back to you. as it exists at preset. Or. Employee Termination: Exit Interviews An exit interview is separate from the termination meeting. you may find that your employees need more training in a particular area. In this method the reach has no control over the variable he/she can only report what had happened and what is happening this study tries to describe the effectiveness of job satisfaction in Bangalore milk union (bamul). and giving details of whether a notice period should be worked and whetherâ€"especially in the case of a layoffâ€"additional assistance will be forthcoming from the employer. Set a meeting agenda. A representative from the human resources department typically conducts exit interviews. The major purpose of descriptive research is description of the state of affairs. For this research work descriptive design is used. the objectivity desired from an exit interview is lost if you have also conducted the termination meeting. Business Definition for: Termination Interview • a meeting between an employee and a management representative in order to dismiss the employee. For employees that have resigned. performance appraisals.

provide opinions or defend the company and its actions. Your role is to gather information and stay objective. Many companies plan this as the last stop for departing employees. Document the exit interview. Modigliani-Miller theorem From Wikipedia. Assure the employee that comments made during the exit interview will remain anonymous except in the case of allegations of misconduct.• Prepare questions similar to those of an employee attitude survey such as: Do you feel management communicates well? What changes would help employees do their jobs better? • • • • • • • • Schedule the meeting as close as possible to the employee's departure from the company. Set the right tone. Investopedia explains Dividend Irrelevance Theory The dividend irrelevance theory essentially indicates that an issuance of dividends should have little to no impact on stock price. the free encyclopedia Jump to:navigation. Review any noncompetition or nondisclosure agreements they may have signed. Gather or verify that all company property and material has been returned. Listen. Explain the purpose of the interview to the employee that is to gather information about the employee's perception of the company and how it treats employees. search . receptive and interested in what the employee has to say. Dividend Irrelevance Theory What Does Dividend Irrelevance Theory Mean? A theory that investors are not concerned with a company's dividend policy since they can sell a portion of their portfolio of equities if they want cash. Many companies develop an exit interview form that is completed by the interviewer. Be prepared to answer employee's questions. Be warm. Don't insert personal comments.

The result of this was the article in the American Economic Review and what has later been known as the M&M theorem. Merton Miller) forms the basis for modern thinking on capital structure. and partly by debt. for their "work in the theory of financial economics. To see why this should be true. Modigliani was awarded the 1985 Nobel Prize in Economics for this and other contributions. Consider two firms which are identical except for their financial structures." [edit] Historical background Miller and Modigliani derived the theorem and wrote their groundbreaking article when they were both professors at the Graduate School of Industrial Administration (GSIA) of Carnegie Mellon University. Miller was awarded the 1990 Nobel Prize in Economics. The first (Firm U) is unlevered: that is. Instead of purchasing the shares of the levered firm L. the Modigliani-Miller theorem is also often called the capital structure irrelevance principle. The basic theorem states that. Therefore. and VL is the value of a levered firm = price of buying a firm that is composed of some mix of debt and equity. suppose an investor is considering buying one of the two firms U or L. When they read the material that existed they found it inconsistent so they sat down together to try to figure it out. The eventual returns to either of . [edit] Without taxes Proposition I: where VU is the value of an unlevered firm = price of buying a firm composed only of equity. It is made up of two propositions which can also be extended to a situation with taxes. [edit] Propositions This article or section reads like a textbook and may need a cleanup." with Miller specifically cited for "fundamental contributions to the theory of corporate finance. The story goes that Miller and Modigliani were set to teach corporate finance for business students despite the fact that they had no prior experience in corporate finance. along with Harry Markowitz and William Sharpe.The Modigliani-Miller theorem (of Franco Modigliani. it is financed by equity only. The other (Firm L) is levered: it is financed partly by equity.[1] It does not matter if the firm's capital is raised by issuing stock or selling debt. he could purchase the shares of firm U and borrow the same amount of money B that firm L does. under a certain market price process (the classical random walk). the value of a firm is unaffected by how that firm is financed. Please help to improve this article to meet Wikipedia's quality standards. bankruptcy costs. It does not matter what the firm's dividend policy is. and asymmetric information. and in an efficient market. The Modigliani-Miller theorem states that the value of the two firms is the same. which has the same meaning[2]. The theorem was originally proven under the assumption of no taxes. Another word for levered is geared. in the absence of taxes.

kd is the required rate of return on borrowings. Proposition II: Proposition II with risky debt.these investments would be the same. which need not be true in the presence of asymmetric information or in the absence of efficient markets. That is. and individuals and corporations borrow at the same rates. or cost of equity. k0 is the company unlevered cost of capital (ie assume no leverage). We have implicitly assumed that the investor's cost of borrowing money is the same as that of the firm. The formula is derived from the theory of weighted average cost of capital (WACC). It tells where to . none of the conditions is met in the real world). the WACC (k0) stays constant. which is the value of L's debt. no transaction costs exist. or cost of debt. capital structure matters precisely because one or more of these assumptions is violated. These propositions are true assuming the following assumptions: • • • no taxes exist. because of the higher risk involved for equity-holders in a company with debt. D / E is the debt-to-equity ratio. A higher debt-to-equity ratio leads to a higher required return on equity. • • • • ke is the required rate of return on equity. This discussion also clarifies the role of some of the theorem's assumptions. These results might seem irrelevant (after all. As leverage (D/E) increases. Therefore the price of L must be the same as the price of U minus the money borrowed B. but the theorem is still taught and studied because it tells something very important.

and individuals and corporations borrow at the same rate TC on earnings after interest. Therefore leverage lowers tax payments. because the risk to equity rises. still holds. Dividend payments are nondeductible. . Their second attempt on capital structure included taxes has identified that as the level of gearing increases by replacing equity with cheap debt the level of the WACC drops and an optimal capital structure does indeed exist at a point where debt is 100% The following assumptions are made in the propositions with taxes: • • • corporations are taxed at the rate no transaction costs exist. r0 is the company cost of equity capital with no leverage(unlevered cost of equity. rD is the required rate of return on borrowings. or return on assets with D/E = 0). Proposition II: where • • • • • rE is the required rate of return on equity. Tc is the tax rate. or cost of debt. since corporations can deduct interest payments. or cost of levered equity = unlevered equity + financing premium.look for determinants of optimal capital structure and how those factors might affect optimal capital structure. [edit] With taxes Proposition I: where • • • • VL is the value of a levered firm. The same relationship as earlier described stating that the cost of equity rises with leverage. TCD is the tax rate (TC) x the value of debt (D) the term TCD assumes debt is perpetual This means that there are advantages for firms to be levered. VU is the value of an unlevered firm. D / E is the debt-to-equity ratio. The formula however has implications for the difference with the WACC.

despite their previous eminence. The marketing concept holds that the desires and needs of the target market must be determined and satisfied in order to successfully achieve the goals of the producer. Theodore C. and disappear. The theorem was first proposed by F. Because of its shortsightedness.' in JulyAugust 1960 issue of Harvard Business Review) by Harvard Business School emeritus professor of marketing. Such self-centered firms fail to see and adjust to the rapid changes in their markets and. fall. See also marketing concept Related Terms: Dictionary of Marketing Terms marketing concept goal-oriented. Modigliani and M.Miller and Modigliani published a number of follow-up papers discussing some of these issues. Miller in 1958. integrated philosophy practiced by producers of goods and services that focuses on satisfying the needs of consumers over the needs of the producing company. marketing myopia Hide links within definitionsShow links within definitions Definition Short sighted and inward looking approach to marketing that focuses on the needs of the firm instead of defining the firm and its products in terms of the customers' needs and wants. Levitt (1925-). This concept was discussed in an article (titled 'Marketing Myopia. marketing myopia is an inefficient marketing approach. falter. . "What business are we in?" marketing myopia Dictionary of Marketing Terms marketing myopia narrow-minded approach to a marketing situation where only short-range goals are considered or where the marketing focuses on only one aspect out of many possible marketing attributes. who suggests that firms get trapped in this bind because they omit to ask the vital question.

Product Mix Decisions Often firms take decisions to change their product mix. washing machines. and microwave ovens . One of the realities of business is that most firms deal with multi-products .it sought to satisfy the needs of the middle and upper middle income group of consumers.Product Mix Product mix is a combination of products manufactured or traded by the same business house to reinforce their presence in the market. took a major decision to convert one of its theatre buildings in the western suburbs of Bombay into a large garments and accessories store for men .a household name in India.This helps a firm diffuse its risk across different product groups/Also it enables the firm to appeal to a much larger group of customers or to different needs of the same customer group . perhaps the first of its kind in India to have almost all products required by these customer groups Competition from low priced washing powders (mainly Nirma) forced Hindustan Levers to launch different brands of detergent powder at different price levels positioned at different market segments . The product mix of a company.So. it is the changes or anticipated changes in the market place that motivates a firm to consider changes in its product mix. Like the changing lifestyles of Indian consumers led BPL-Sanyo to launch an entire range of white goods like refrigerators . Bajaj Electricals.It also motivate the firm to launch other entertainment electronics. has almost ninety products in i8ts portfolio ranging from low value items like bulbs to high priced consumer durables like mixers and luminaires and lighting projects . Normally the product mix is within the synergy of other products for a medium size organization. a well-known builders firm in Bombay.Customer preferences for herbs. increase market share and increase the turnover for more profitability. Rahejas. which is generally defined as the total composite of products offered by a particular organization. or some other attribute.The number of products carried by a firm at a given point of time is called its product mix. Reliance in India are some of the examples.women and children. A product is a distinct unit within the product line that is distinguishable by size. A product line is a group of products within the product mix that are closely related. are sold to the same customer groups. are marketed through the same types of outlets. mainly shikakai motivated Lever to launch black Sunsilk Shampoo .Also . This product mix contains product lines and product items . For example.low purchasing power. or fall within given price ranges. These decisions are dictated by the above factors and also by the changes occurring in the market place.which has shikakai .In other words it’s a composite of products offered for sale by a firm. consists of both product lines and individual products. price. appearance. all the courses a university offers constitute its product mix. Larsen & Toubro Ltd. However large groups of Industries may have diversified products within core competency. courses in the marketing .washing machines and refrigerators . either because they function in a similar manner.So when Videocon chose to diversify into other consumer durables like music systems . Likewise . Godrej. and cultural bias against shampoo market made Hindustan Lever consider smaller packaging mainly sachets . for single use .

and the basic marketing course is a product item. The depth (assortment) of the product mix refers to the number of product items offered Hypothetical State University Product Mix WIDE WIDTH. Product decisions at these three levels are generally of two types: those that involve width (variety) and depth (assortment) of the product line and those that involve changes in the product mix occur over time.department constitute a product line. AVERAGE DEPTH Political Science Political Theory American Government International Relations Education Mathematic s Calculus I Elementary Teaching Secondary Teaching Teaching Internship Post Secondary Teaching Engineerin g Calculus II Trigonometry State Math Theory Government Nursing English Biology Physics English Literature European Writers Hemingway Seminar Creative Chemistry Advanced Math Electrical Concepts Logic Design Organic Chemistry Statistics .

it can appeal to a large cross-section of potential students. and products. consider a smaller college that focuses on the sciences represented in Table 2. (The examples represent only a partial listing of what a real university would offer. The product lines are defined in terms of academic departments.) The state university has made the strategic decision to offer a diverse market mix. This college has decided to concentrate its resources in a few departments (again. the width (variety) refers to the number of product lines a company carries. For example. this is Hypothetical Small College Product Mix NARROW WIDTH. LARGE DEPTH Mathematics Geometric Concepts Analytic Geometry and Calculus Calculus II Topics on Physics and Astronomy Calculus III Numerical Analysis Differential Equations Matrix Theory Thermodynamics Condensed Matter Physics II Electromagnetic Theory Quantum Mechanics II Physics Intermediate Physics Advanced Physics . but the depth of each department (course offerings) is only average. In order to see the difference in product mix.Political Science Education Mathematic s Writing within each line. This university has decided to offer a wide product line (academic departments). Table 1 illustrates the hypothetical product mix of a major state university. Because the university has numerous academic departments. product line. The depth of each line is shown by the number of different product items—course offerings—offered within each product line.

(4) determining the appropriate emphasis on internal development versus external acquisition in the product mix. The plan for a new brand would specify price level.only a partial listing). (3) determining the relative emphasis on new versus existing product lines in the mix. coupons. product characteristics. PRODUCT-MIX MANAGEMENT AND RESPONSIBILITIES It is extremely important for any organization to have a well-managed product mix. Product-line managers formulate objectives for their line to guide brand managers in developing the marketing mix for individual brands. This product mix would most likely appeal to a much narrower group of potential students—those students who are interested in pursuing intensive studies in math and science. that is. which is in turn incorporated into the corporate plan. Product-mix decisions are concerned with the combination of product lines offered by the company. advertising expenditures for the coming year. Some of these changes might include the product's target market. and (6) forecasting the effects of future external change on the company's product mix. The corporate plan details changes in the firm's product lines and specifies strategies for growth. Generally. Management of the companies' product mix is the responsibility of top management. These decisions are the responsibility of a brand manager (sometimes called a product manager). GENERAL MANAGEMENT WORKFLOW Top management formulates corporate objectives that become the basis for planning the product line. advertising and promotional expenditures. and a five-year statement of projected sales and earnings. The product-line manager supervises several product managers who are responsible for individual products in the line. trade discounts. Product-line decisions are concerned with the combination of individual products offered within a given line. Once plans have been formulated. Decisions regarding the marketing mix for a brand are represented in the product's marketing plan. and actual product into three different levels. Decisions at the first level of product management involve the marketing mix for an individual brand/product. product line. Such a plan specifies changes in the product lines and allocations to products in each line. financial allocations flow from top management to product line and then to brand management for implementation. it has chosen a concentrated market strategy (focus on limited markets). (2) adding new lines to and deleting existing lines from the product mix. Most organizations break down managing the product mix. and recommended distribution strategy. and (4) allocating resources to individual products in the line on the basis of marketing strategies recommended by product managers. Some basic product-mix decisions include: (1) reviewing the mix of existing product lines. Decisions about a product line are usually incorporated into a marketing plan at the divisional level. (3) evaluating the effects of product additions and deletions on the profitability of other items in the line. (2) considering candidates for deletion from the product line. Brand strategies are then formulated and incorporated into the product-line plan. (5) gauging the effects of adding or deleting a product line in relationship to other lines in the product mix. distribution facilities. This college offers narrow product line (academic departments) with a large product depth (extensive course offerings within each department). The plan for an existing product would focus on any changes in the marketing strategy. price level. product-line managers have the following responsibilities: (1) considering expansion of a given product line. Implementation of the plan requires .

Opportunity is generally defined in terms of current industry growth or potential attractiveness as an investment. product line. Once the analysis has been done using the market growth rate and relative market share. 3. 2. The second criterion is the company's ability to exploit opportunity. Market share is compared to that of the leading competitor. they should be given top priority in financing. Proper analysis and conclusions may lead to significant changes to the company's product mix. Relative market share represents the company's competitive strength (or estimated strength for a new entry). This analysis may cause the product mix to change.g.tracking performance and providing data from brand to product line to top management for evaluation and control. These two factors —opportunity and the company's ability to exploit it—provide four different options for a company to follow. and distribution. and product offerings. and distribution. depending on what management decides. or in terms of its resources if it is considering entering the market. product positioning. Low opportunity but a strong current market position will generally result in the company's attempting to maintain its position to ensure current profitability. The company's position can be measured in terms of market share if it is currently in the market. The most widely used approach to product portfolio analysis is the model developed by the Boston Consulting Group (BCG). since it provides a basis for examining the company's current offerings and recommending modifications as a result of past performance. advertising. Evaluation of the current plan then becomes the first step in the next planning cycle. The BCG analysis emphasizes two main criteria in evaluating the firm's product mix: the market growth rate and the product's relative market share. This category is also regarded as a high-growth area (e. The market growth rate represents the products' category position in the product life cycle. • Stars: Products with high growth and market share are know as stars. the Internet). selling. 1. As a result. BCG uses these two criteria because they are closely related to profitability. 4. . products are placed into one of four categories. High opportunity but a lack of ability to exploit it results in either (a) attempting to acquire the necessary resources or (b) deciding not to further pursue opportunity in these markets. Products in the introductory and growth phases require more investment because of research and development and initial marketing costs for advertising. Low opportunity and a weak market position will result in either (a) avoiding these markets or (b) divesting existing products in them. they often analyze the company product mix. The first assessment involves the area of opportunity in a particular industry or market.. High opportunity and ability to exploit it result in the firm's introducing new products or expanding markets for existing products to ensure future growth. These options provide a basis for the firm to evaluate new and existing products in an attempt to achieve balance between current and future growth. which is based on its current or potential position in the industry. they need significant amounts of cash to finance rapid growth and frequently show an initial negative cash flow. PRODUCT-MIX ANALYSIS Since top management is ultimately responsible for the product mix and the resulting profits or losses. Because these products have high potential for profitability. which is why top management often uses the BCG analysis.

These strategies involve "harvesting" these products by eliminating marketing support and selling the product only to intensely loyal consumers who will buy in the absence of advertising. Eliminating a dog is not always necessary. Products with a positive cash flow will finance high-opportunity products that need cash. staffing. The firm should invest heavily in those that sales forecasts indicate might have a reasonable chance to become stars. Excess cash should be used to finance high-opportunity areas (stars or problem children). Dogs: Products in the category are clearly candidates for deletion. products are evaluated as producers or users of cash. Strategies for cash cows should be designed to sustain current market share rather than to expand it. equipment and other resources are distributed—is typically established at the corporate level. • • As can be seen from the description of the four BCG alternatives. thus decreasing the existing positive cash flow. For multi-business firms. . The hope is that the stars will turn into cash cows and the problem children will turn into stars. Otherwise divestment is the best course. Based on this belief. Problem children: These products have low relative market share but are in a high-growth situation. The dogs will continue to receive lower funding and eventually be dropped. since there are strategies for dogs that could make them profitable in the short term. have no real prospect for growth. Top management must provide accurate and timely analysis (BCG) of their company's product mix so the appropriate adjustments can be made to the product line and individual products. Such products have low market shares and unlike problem children. CONCLUSION Managing the product mix for a company is very demanding and requires constant attention. the resource allocation process—how cash. This is the "big picture" view of the organization and includes deciding in which product or service markets to compete and in which geographic regions to operate. They are called "problem children" because their eventual direction is not yet clear. These are profitable products that generate more cash than is required to produce and market them. companies will normally take money from cash cows and divert it to stars and to some problem children. An expansion strategy would require additional investment. In addition. since problem children may become dogs and thereby candidates for deletion.• Cash cows: Products with a high relative market share but in a low growth position are cash cows. CORPORATE-LEVEL STRATEGY Corporate-level strategies address the entire strategic scope of the enterprise. over the long term companies will seek to eliminate dogs. However. The emphasis on cash flow stems from management's belief that it is better to finance new entries and to support existing products with internally produced funds than to increase debt or equity in the company.

. the responsibility for diversification. Critical questions answered by corporate-level strategists thus include: 1. Business. also falls within the realm of corporate-level strategy.e. what businesses should the firm be in? 2. How should the firm allocate its resources among existing businesses? . i. and Functional Strategy Level of Strategy Corporate strategy Business strategy Definition Example Market definition Diversification into new product or geographic markets Attempts to secure competitive advantage in existing product or geographic markets Information systems. What should be the scope of operations. or the addition of new products or services to the existing product/service line-up. whether to compete directly with other firms or to selectively establish cooperative relationships—strategic alliances—falls within the purview corporate-level strategy.because market definition is the domain of corporate-level strategists. and production processes that facilitate achievement of corporate and business strategy Market navigation Functional strategy Support of corporate strategy and business strategy business-level managers. while requiring ongoing input from Table 1 Corporate. human resource practices. Similarly.

divestment. for what reasons? If not. Corporate strategies deal with plans for the entire organization and change as industry and specific market conditions warrant. how will the firm leverage potential cross-business synergies? In other words. The role of the board of directors is to ensure that top managers actually represent these shareholder interests.. How should the firm be structured? Where should the boundaries of the firm be drawn and how will these boundaries affect relationships across businesses. corporate strategists are paralyzed without accurate and up-to-date information from managers at the business-level. similar products and service markets. What level of diversification should the firm pursue. customers and other constituents? Do the organizational components such as research and development. How diversified should the corporation's business be? Should we pursue related diversification. a more suitable approach given current and projected industry conditions? If we pursue related diversification.e. or is unrelated diversification. etc. Top management has primary decision making responsibility in developing corporate strategies and these managers are directly responsible to shareholders. CORPORATE PORTFOLIO ANALYSIS .. i. fit together? Are the responsibilities or each business unit clearly identified and is accountability established? 6. marketing. i. customer service. Issues addressed as part of corporate strategy include those concerning diversification. with suppliers. how will adding new product or service businesses benefit the existing product/service line-up? 5.. mutually-beneficial relationships with other firms? If so. acquisition. which businesses represent the company's future? Are there additional businesses the firm should enter or are there businesses that should be targeted for termination or divestment? 4. and formulation of new business ventures. i. although as a subsequent section notes.e.e. what impact might this have on future profitability? As the previous questions illustrate. strategic alliances. corporate strategies represent the long-term direction for the organization. corporate-level strategists have the most advantageous perspective for assessing organization-wide competitive strengths and weaknesses. With information from the corporation's multiple businesses and a view of the entire scope of operations and markets. dissimilar product and service markets.3. Should the firm enter into strategic alliances—cooperative. finance.

Thus. it becomes a BCG matrix star. What typically happens in an organization is that management is faced with a number of these types of products but with too few resources to develop all of them. Early in their life. Stars generate large cash flows for the business. The Boston Consulting Group (BCG) matrix is a relatively simple technique for assessing the performance of various segments of the business. Question marks are cash users in the organization. Just as the individual investor must evaluate each individual investment in the portfolio to determine whether or not the investment is currently performing to expectations and what the future prospects are for the investment. If the product is new. The BCG matrix classifies business-unit performance on the basis of the unit's relative market share and the rate of market growth as shown in Figure 1. The typical starting point for a new business is as a question mark. managers must make similar decisions about the current and future performances of various businesses constituting the firm's portfolio. and advertising to build consumer awareness. If the correct decision is made and the product selected achieves a high market share.One way to think of corporate-level strategy is to compare it to an individual managing a portfolio of investments. test marketing. but the predicted growth rate is good. the strategic decision-maker must determine which of the products to attempt to develop into commercially viable products and which ones to drop from consideration. it has no market share. Stars have high market share in high-growth markets. they contribute no revenues and require expenditures for market research. but also require large infusions of money to . Figure 1 BCG Model of Portfolio Analysis Products and their respective strategies fall into one of four quadrants.

Now consider how many other factors contribute to business success or failure. question marks and stars. These are often products in the maturity stage of the product life cycle. With a market share for its Macintosh-based computers below ten percent in a market notoriously saturated with a number of low-cost competitors and growth rates well-below that of other technology pursuits such as biotechnology and medical device products. i. Stars are often the targets of large expenditures for advertising and research and development to improve the product and to enable it to establish a dominant position in the industry. The BCG matrix is best used. then.e. though. and a host of others determine ultimate business viability. Apple Computer. Management talent. Dogs are businesses with low market share in low-growth markets.. but certainly not as the final determination for resource allocation decisions as it was originally intended. Consider. the BCG matrix would suggest Apple divest its computer business and focus instead on the rapidly growing iPod business (its music download business). The strategy for such products is to invest little money into maintaining the product and divert the large profits generated into products with more long-term earnings potential. Clearly. These are often cash cows that have lost their market share or question marks the company has elected not to develop. employee commitment. for instance. They are usually wellestablished products with wide consumer acceptance. there are both technological and market synergies between Apple's Macintosh computers and its fast- .sustain their growth. as a beginning point. Notice that the only two variables composing the matrix are relative market share and the rate of market growth. so sales revenues are usually high. industry forces such as buyer and supplier power and the introduction of strategically-equivalent substitute products or services. The recommended strategy for these businesses is to dispose of them for whatever revenue they will generate and reinvest the money in more attractive businesses (question marks or stars). the BCG matrix suffers from limited variables on which to base resource allocation decisions among the business making up the corporate portfolio. changes in consumer preferences. Cash cows are business units that have high market share in a low-growth market. Despite its simplicity.

The main thing is to maintain consistency across organizations. or 1 to 10. successful advertising campaigns may. be weighted more heavily than after-sale product support.growing iPod business. 4. Weighting can be on a scale of 1 to 5. 3. however. There is no limit to the number of variables managers may select. Divesting the computer business would likely be tantamount to destroying the iPod business. These steps include: 1. the idea. A competitive assessment is a technique for ranking an organization relative to its peers in the industry. This step allows managers to select the most appropriate variables for its situation. Multiplying the weighted importance by the key success factor rating. 6. This step brings an element of realism to the analysis by recognizing that not all critical success factors are equally important. A more stringent approach. for example. is a competitive assessment. Identifying key success factors. Identifying main industry rivals. Managers rating their organization against competitors. 2. 1 to 7. is used to develop a table that shows a businesses ranking relative to the critical success factors that managers identify as the key factors influencing failure or success. is to use those that are key in determining competitive strength. A six-step process that allows corporate strategist to define appropriate variables. This step helps managers focus on one of the most common external threats. Weighing the importance of key success factors. The advantage of a competitive assessment over the BCG matrix for corporate-level strategy is that the competitive assessment includes critical success factors. or factors that are crucial for an organizational to prevail when all organizational members are competing for the same customers. The sum of the values for a manager's organization versus competitors gives a rough idea if the manager's firm is ahead or behind the competition on weighted key success factors that are critical for market success. . 5. rather than being locked into the market share and market growth variables of the BCG matrix. Depending on industry conditions. Adding the values. competitors who want the organization's market share. or whatever scale managers believe is appropriate. but still one with weaknesses.

decrease the scope of business operations (retrenchment strategies). A firm with a score of four is not twice as good as one with a score of two. market coverage. or maintain the status quo (stability strategies). or grand strategies. . these variables are weighted in importance in contrast to the BCG matrix's equal weighting of market share and market growth. 2. GROWTH STRATEGIES Growth strategies are designed to expand an organization's performance. product mix. These grand strategies involve efforts to expand business operations (growth strategies). or other accounting and market-based variables. CORPORATE GRAND STRATEGIES As the previous discussion implies. is not known. One weakness is that these data are ordinal: they can be ranked. but it is better. each organization has a number assigned to it. market share. profits. When the values are summed in step six.g. competitive strength assessments are still limited by the type of data they provide. With a concentration strategy the firm attempts to achieve greater market penetration by becoming highly efficient at servicing its market with a limited product line (e. one categorization scheme is to classify corporate-level strategy decisions into three different types. The degree of "betterness. In addition. Typical growth strategies involve one or more of the following: 1. This number is compared against other firms to determine which is competitively the strongest. Regardless of these advantages." however.. but the differences among them are not meaningful. corporate-level strategists have a tremendous amount of both latitude and responsibility. the firm attempts to expand the scope of its current operations by undertaking business activities formerly performed by one of its suppliers (backward integration) or by undertaking business activities performed by a business in its channel of distribution (forward integration). usually as measured by sales. By using a vertical integration strategy.A competitive strength assessment is superior to a BCG matrix because it adds more variables to the mix. The myriad decisions required of these managers can be overwhelming considering the potential consequences of incorrect decisions. One way to deal with this complexity is through categorization. McDonalds in fast foods).

typically in a way that temporarily increases cash flow. • Firms pursue a turnaround strategy by undertaking a temporary reduction in operations in an effort to make the business stronger and more viable in the future. Such restructuring allows the firm time to attempt a turnaround strategy. The firm is often making a comfortable income operating a business that they know. which also generally necessitates a reduction in number of employees. RETRENCHMENT STRATEGIES Retrenchment strategies involve a reduction in the scope of a corporation's activities. possible restructuring of debt through bankruptcy proceedings. sale of assets associated with discontinued product or service lines. STABILITY STRATEGIES When firms are satisfied with their current rate of growth and profits. 2001. Such strategies are typically found in industries having relatively stable environments. Typically. the diversification is called conglomerate diversification. a poorly performing unit is sold to another company and the money is reinvested in another business within the portfolio that has greater potential. A diversification strategy entails moving into different markets or adding different products to its mix. they may decide to use a stability strategy. These moves are popularly called downsizing or rightsizing.S. many of the airlines based in the U. The hope is that going through a temporary belt-tightening will allow the firm to pursue a growth strategy at some future point. liquidation of the firm. For example. • Bankruptcy involves legal protection against creditors or others allowing the firm to restructure its debt obligations or other payments. and see no need to make the psychological and financial investment that would be required to undertake a growth strategy. • A divestment decision occurs when a firm elects to sell one or more of the businesses in its corporate portfolio. since the airline hijackings and the subsequent tragic events of September 11.3. If the products or markets are related to existing product or service offerings. the strategy is called concentric diversification. and in the most extreme cases. This strategy is essentially a continuation of existing strategies. If expansion is into products or services unrelated to the firm's existing business. have filed for bankruptcy to .

business-level managers must provide ongoing. • Liquidation is the most extreme form of retrenchment. This is a strategy of last resort and one that most managers work hard to avoid. Liquidation involves the selling or closing of the entire operation. One product may contribute to corporate-level strategy by generating a large positive cash flow for new product development. A common focus of business-level strategies are sometimes on a particular product or service line and business-level strategies commonly involve decisions regarding individual products within this product or service line. each responsible to corporate head-quarters for its own profits and losses. BUSINESS-LEVEL STRATEGIES Business-level strategies are similar to corporate-strategies in that they focus on overall performance.avoid liquidation as a result of stymied demand for air travel and rising fuel prices. Business units represent individual entities oriented toward a particular industry. they focus on only one rather than a portfolio of businesses. however. 2. Without such crucial information. There is no future for the firm. buildings and equipment are sold. Developing distinctive competencies and competitive advantage in each unit. and customers no longer have access to the product or service. product. while another product uses the cash to increase sales and expand market share of existing businesses. intensive information to corporate-level managers. Each strategic business unit will likely have its' own competitors and its own unique strategy. Coordinating and integrating unit activities so they conform to organizational strategies (achieving synergy). An SBU represents a group of related business divisions. Business-level strategies are thus primarily concerned with: 1. In large multi-product or multi-industry organizations. employees are released. In contrast to corporate-level strategy. There are also strategies regarding relationships between products. corporatelevel managers are prevented from best managing overall organizational direction. At least one airline has asked the courts to allow it to permanently suspend payments to its employee pension plan to free up positive cash flow. . individual business units may be combined to form strategic business units (SBUs). Given this potential for business-level strategies to impact other business-level strategies. or market.

4. in single-business organizations. The strategies are (1) overall cost leadership. corporate and business-level strategies overlap to the point that they should be treated as one united strategy. Identifying product or service-market niches and developing strategies for competing in each. For example. In a single-product company. ANALYSIS OF BUSINESS-LEVEL STRATEGIES PORTER'S GENERIC STRATEGIES. for most organizations. and (3) focus on a particular market niche. but its business is still the same. The generic strategies provide direction for business units in designing incentive systems. not on the corporate portfolio. Monitoring product or service markets so that strategies conform to the needs of the markets at the current stage of evolution. Business-level strategies thus support corporate-level strategies. or the individual business-level strategies within a corporate portfolio. wholesale furniture. The product made by a unit of a diversified company would face many of the same challenges and opportunities faced by a one-product company. and competitive advantage much like corporate-level strategies. a furniture manufacturer producing only one line of furniture has its corporate strategy chosen by its market definition. (2) differentiation. corporate-level and business-level strategies are the same. except the focus for business-level strategies is on the product or service. Thus.3. but business-level strategies are concerned with (1) matching their activities with the overall goals of corporate-level strategy while simultaneously (2) navigating the markets in which they compete in such a way that they have a financial or market edge-a competitive advantage-relative to the other businesses in their industry. competitive environment. wholesale furniture. Corporate-level strategies attempt to maximize the wealth of shareholders through profitability of the overall corporate portfolio. business-unit strategies are designed to support corporate strategies. Harvard Business School's Michael Porter developed a framework of generic strategies that can be applied to strategies for various products and services. However. Business-level strategies look at the product's life cycle. control .

Such strategies concentrate on construction of efficient-scale facilities. A large market share combined with concentrating selling efforts on large customers may contribute to reduced costs. Note here that the focus is on cost leadership. tight cost and overhead control. and interactions with suppliers and buyers. but consider how this fine-grained definition places emphases on controlling costs while giving firms alternatives when it comes to pricing (thus ultimately influencing total revenues). more of the price contributes to the firm's gross profit margin. but with a lower cost of production and sales. Extensive investment in state-of-the-art facilities may also lead to long run cost reductions. such as beef or steel. They place heavy emphasis on quantitative standards and measuring performance toward goal accomplishment. with the goal of gaining market share and thus increasing sales volume to offset the decrease in gross margin. tight control of labor costs. minimization of operating expenses. avoidance of marginal customer accounts that cost more to maintain than they offer in profits. and with making other product decisions. Cost-leadership strategies require firms to develop policies aimed at becoming and remaining the lowest cost producer and/or distributor in the industry. not price leadership. Cost leadership provides firms above-average returns even with strong competitive pressures. This may at first appear to be only a semantic difference. The low-cost leader gains competitive advantage by getting its costs of production or distribution lower than the costs of the other firms in its relevant market.procedures. . reduction of input costs. A second alternative is to price lower than competitors and accept slimmer gross profit margins. and lower distribution costs. Low-cost production further limits pressures from customers to lower price. as the customers are unable to purchase cheaper from a competitor. This strategy is especially important for firms selling unbranded products viewed as commodities. Lower costs allow the firm to earn profits after competitors have reduced their profit margin to zero. operations. Companies that successfully use this strategy tend to be highly centralized in their structure. A firm with a cost advantage may price at or near competitors prices. Products can be designed to simplify manufacturing. Cost leadership may be attained via a number of techniques.

and dealer network (Caterpillar construction equipment). firms must remain sensitive to cost differences. nondifferentiated product. brand image (Coach handbags. low costs reduce the likely impact of substitutes. In many instances. The customers also must be relatively priceinsensitive. They . Tommy Hilfiger sportswear). Differentiation does not allow a firm to ignore costs. Thus. Differentiation strategies require a firm to create something about its product that is perceived as unique within its market. Whirlpool appliances). the necessity to climb up the experience curve inhibits a new entrants ability to pursue this tactic. among other dimensions. customers must perceive the product as having desirable features not commonly found in competing products. Possible strategies for achieving differentiation may include warranty (Sears tools have lifetime guarantee against breakage). technology (Hewlett-Packard laser printers). Substitutes are more likely to replace products of the more expensive producers first. or just in the mind of the customer. it makes a firm's products less susceptible to cost pressures from competitors because customers see the product as unique and are willing to pay extra to have the product with the desirable features. Differentiation often forces a firm to accept higher costs in order to make a product or service appear unique. The uniqueness can be achieved through real product features or advertising that causes the customer to perceive that the product is unique. Adding product features means that the production or distribution costs of a differentiated product will be somewhat higher than the price of a generic. costs for the differentiated product will be higher than for nondifferentiated products. service (Makita hand tools). before significantly harming sales of the cost leader unless producers of substitutes can simultaneously develop a substitute product or service at a lower cost than competitors. Differentiation may be attained through many features that make the product or service appear unique. Whether the difference is achieved through adding more vegetables to the soup or effective advertising.Efficiencies that allow a firm to be the cost leader also allow it to compete effectively with both existing competitors and potential new entrants. features (Jenn-Air ranges. Finally. Customers must be willing to pay more than the marginal cost of adding the differentiating feature if a differentiation strategy is to succeed. Whether the features are real.

Other dealers advertise that they have the highest customer-satisfaction scores or the most awards for their service department of any dealer within their defined market. Firms utilizing a focus strategy may also be better able to tailor advertising and promotional efforts to a particular market niche. it was able to expand throughout the South. geographical area. Tailor-made clothing and custom-built houses include the customer in all aspects of production from product design to final acceptance. channel of distribution.must carefully monitor the incremental costs of differentiating their product and make certain the difference is reflected in the price. Key decisions are made with customer input. A focus strategy is often appropriate for small. product line. Firms may thus be able to differentiate themselves based on meeting customer needs through differentiation or through low costs and competitive pricing for specialty goods. stage in the production process. firms may be able to design products specifically for a customer. then nationally. Similarly. Many firms start small and expand into a national organization. Providing such individualized attention to customers may not be feasible for firms with an industry-wide orientation. aggressive businesses that do not have the ability or resources to engage in a nation-wide marketing effort. Firms using a focus strategy simply apply a cost-leader or differentiation strategy to a segment of the larger market. As the firm gained in market knowledge and acceptance. The underlying premise of the focus strategy is that the firm is better able to serve its limited segment than competitors serving a broader range of customers. Focus. The company started with a focused cost-leader strategy in its limited market and was able to expand beyond its initial market segment. Such a strategy may also be appropriate if the target market is too small to support a large-scale operation. Wal-Mart started in small towns in the South and Midwest. or market niche. involves concentrating on a particular customer. . and now internationally. Customization may range from individually designing a product for a customer to allowing the customer input into the finished product. Many automobile dealers advertise that they are the largest-volume dealer for a specific geographic area. the third generic strategy.

etc. manufacturer. for instance. This involves coordinating the various functions and operations needed to design. finance. finance.. Functional strategies address problems commonly faced by lower-level managers and deal with strategies for the major organizational functions (e.FUNCTIONAL-LEVEL STRATEGIES. advertising for a new product could be expected to begin sixty days prior to shipment of the first product. and marketing research in marketing. or purchasing. inventory control. Strategies for an organization may be categorized by the level of the organization addressed by the strategy. Production could then start thirty days before shipping begins. research and development.) so that each functional area upholds and contributes to individual business-level strategies and the overall corporate-level strategy. promotion. Corporate-level strategies involve top management and address issues of concern to the entire organization. production. For example. Business-level strategies are generally developed by upper and middle-level managers and are intended to help the organization achieve its corporate strategies. marketing.. Accountability is also easiest to establish with functional strategies because results of actions occur sooner and are more easily attributed to the function than is possible at other levels of strategy. Functional strategies are primarily concerned with: • • Efficiently utilizing specialists within the functional area. may require that orders are placed at least two weeks before production is to start. Lower-level managers are most directly involved with the implementation of functional strategies. deliver. Functional strategies are frequently concerned with appropriate timing. Business-level strategies deal with major business units or divisions of the corporate portfolio. and support the product or service of each business within the corporate portfolio. Functional-level strategies are concerned with coordinating the functional areas of the organization (marketing. functional strategies have a shorter time orientation than either business-level or corporate-level strategies. • Assuring that functional strategies mesh with business-level strategies and the overall corporate-level strategy. production) considered relevant for . Integrating activities within the functional area (e. coordinating advertising. Thus.g. and shipping in production/operations). human resources. Raw materials.g.

Peters & Waterman. 1982). they used the model to analyse over 70 large organisations. McKinsey and Company. some sources for further information on the model and case studies available on this website are mentioned. whereas the skills variable refers to the capabilities of the staff within the organisation . skills. The authors describe strategy as the plan or course of action in allocating resources to achieve identified goals over time. all begin with the letter "S": These seven variables include structure. The systems are the routine processes and procedures followed within the organisation. in the 1980s. The McKinsey 7S model was named after a consulting company. The seven variables. Market definition is thus the domain of corporate-level strategy.achieving the business strategies and supporting the corporate-level strategy.g. Structure is defined as the skeleton of the organisation or the organisational chart. but integrated. The McKinsey 7S Framework was created as a recognisable and easily remembered model in business. Staff are described in terms of personnel categories within the organisation (e. and support of business and corporate-level strategy by individual. market navigation the domain of business-level strategy. engineers). It also includes practical guidance and advice for the students to analyse organisations using this model. staff and shared values. strategy. All of the authors worked as consultants at McKinsey and Company. 1981. At the end. which has conducted applied research in business and industry (Pascale & Athos. which the authors term "levers". The paper explains each of the seven components of the model and the links between them. functional level strategies Guide on How to Write University Essay McKinsey 7S Framework Introduction This paper discusses McKinsey's 7S Model that was created by the consulting company McKinsey and Company in the early 1980s. Since then it has been widely used by practitioners and academics alike in analysing hundreds of organisations. style. systems.

These other variables (e. The way in which key managers behave in achieving organisational goals is considered to be the style variable.g.g. The authors have concluded that a company cannot merely change one or two variables to change the whole organisation. skills. The analysis of several organisations using the model revealed that American companies tend to focus on those variables which they feel they can change (e. strategy and systems with the soft variables. strategy is designed to transform . this variable is thought to encompass the cultural style of the organisation. staff and shared values) are considered to be "soft" variables. or anticipation of. they feel that the variables should be changed to become more congruent as a system. It deals with essentially three questions (as shown in figure 2): 1) where the organisation is at this moment in time. changes in its external environment. The shared values variable. The shape of the model (as shown in figure 1) was also designed to illustrate the interdependency of the variables. 2) where the organisation wants to be in a particular length of time and 3) how to get there. While the authors thought that other variables existed within complex organisations. refers to the significant meanings or guiding concepts that organisational members share (Peters and Waterman. although the authors do acknowledge that other variables exist and that they depict only the most crucial variables in the model. the notion of performance or effectiveness is not made explicit in the model. structure. While alluded to in their discussion of the model. strategy and systems) while neglecting the other variables. style. the variables represented in the model were considered to be of crucial importance to managers and practitioners (Peters and Waterman. The external environment is not mentioned in the McKinsey 7S Framework. Description of 7 Ss Strategy: Strategy is the plan of action an organisation prepares in response to. This is illustrated by the model also being termed as the "Managerial Molecule". For long-term benefit. Thus. 1982). originally termed superordinate goals. well thought through and often practically rehearsed. Strategy is differentiated by tactics or operational actions by its nature of being premeditated. 1982). Japanese and a few excellent American companies are reportedly successful at linking their a whole.

Special emphasis is on the customers with the intention to make the processes that involve customers as user friendly as possible (Lynch. 2007).the firm from the present position to the new position described by objectives. the recent trend is increasingly towards a flat structure where the work is done in teams of specialists rather than fixed departments. Although this is still the most widely used organisational structure. Organisations are structured in a variety of ways. a company may follow a particular process for recruitment. 2005). Traditionally. beliefs and norms which develop over time and become relatively enduring features of the organisational life.g. procurement of daily use goods) to be taken. Style/Culture: All organisations have their own distinct culture and management style. For example. The structure of the company often dictates the way it operates and performs (Waterman et al. each responsible for a specific task such as human resources management. 1965). Systems: Every organisation has some systems or internal processes to support and implement the strategy and run day-to-day affairs.. Traditionally the organisations have been following a bureaucratic-style process model where most decisions are taken at the higher management level and there are various and sometimes unnecessary requirements for a specific decision (e. Structure: Business needs to be organised in a specific form of shape that is generally referred to as organisational structure. Increasingly. The idea is to make the organisation more flexible and devolve the power by empowering the employees and eliminate the middle management layers (Boyle. Many layers of management controlled the operations. It also entails the way managers interact with the employees and the . These processes are normally strictly followed and are designed to achieve maximum effectiveness. It includes the dominant values. with each answerable to the upper layer of management. the organisations are simplifying and modernising their process by innovation and use of new technology to make the decision-making process quicker. 1980). subject to constraints of the capabilities or the potential (Ansoff. dependent on their objectives and culture. the businesses have been structured in a hierarchical way with several divisions and departments. production or marketing.

etc put extraordinary emphasis on hiring the best staff. there have been extensive efforts in the past couple of decades to change to culture to a more open. However. and this forms the basis of these organisations' strategy and competitive advantage over their competitors. All leading organisations such as IBM. providing them with rigorous training and mentoring support. It is also important for the organisation to instil confidence among the employees about their future in the organisation and future career growth as an incentive for hard work (Purcell and Boxal. Microsoft. Staff: Organisations are made up of humans and it's the people who make the real difference to the success of the organisation in the increasingly knowledge-based society. This may be to make money or to achieve excellence in a particular field. 2003). Shared Values/Superordinate Goals: All members of the organisation share some common fundamental ideas or guiding concepts around which the business is built. The businesses have traditionally been influenced by the military style of management and culture where strict adherence to the upper management and procedures was expected from the lower-rank employees. Cisco. innovative and friendly environment with fewer hierarchies and smaller chain of command. These values and common goals keep the employees working towards a common destination as a coherent team and are important to keep the team spirit alive. The organisations with weak values and common goals often find their employees following their own personal goals that may be different or even in conflict with those of the organisation or their fellow colleagues (Martins and Terblanche. The importance of human resources has thus got the central position in the strategy of the organisation. Culture remains an important consideration in the implementation of any strategy in the organisation (Martins and Terblanche. Using the 7S Model to Analyse an Organisation A detailed case study or comprehensive material on the organisation under study is required to analyse it using the 7S model. away from the traditional model of capital and land. This is because the model covers almost all aspects of the business and all major parts of the . 2003). and pushing their staff to limits in achieving professional excellence.way they spend their time. 2003).

However. they can have a great impact on the structure. are continuously developing and are altered by the people at work in the organisation. organisational charts and other documents. This is. corporate plans. Changing the culture and overcoming the staff resistance to changes. Over the last few years. can be made between the hard and soft components. It is therefore only possible to understand these aspects by studying the organisation very closely. flexible and dynamic culture in the organisation where the employees are valued and innovation encouraged. It is also noted that the softer components of the model are difficult to change and are the most challenging elements of any changemanagement strategy. using interviews along with literature review is more suited. The researcher also needs to consider a variety of facts about the 7S model. normally through observations and/or through conducting interviews. For example. values and elements of corporate culture. not easy to achieve where the traditional culture is been dominant for decades and therefore many organisations are in a state of flux in managing this change. The remaining four Ss. structure and systems which are normally feasible and easy to identify in an organisation as they are normally well documented and seen in the form of tangible objects or reports such as strategy statements. especially the one that alters the power structure in the organisation and the inherent values of the organisation. The seven components described above are normally categorised as soft and hard components. however. strategies and the systems of the organisation. What compounds their problems is their focus on only the hard components and . are more difficult to comprehend. The hard components are the strategy.organisation. however. news and press releases although primary research. for example. It is therefore highly important to gather as much information about the organisation as possible from all available sources such as organisational reports. Some of these are detailed in the paragraphs to follow. The capabilities. it is seen that a rigid. Some linkages. there has been a trend to have a more open. if these factors are altered.g. is generally difficult to manage. e. however. hierarchical organisational structure normally leads to a bureaucratic organisational culture where the power is centralised at the higher management level.

neglecting the softer issues identified in the model which is without doubt a recipe for failure. (1980. to achieve higher marks. for example the analyses of Coca-Cola and energy giant Centrica (Owner of British Gas). the student should not just write about these components individually but also highlight how they interact and affect each other. Many such case studies can be obtained from the academic journals and the books written on the topic. Similarly. Or in other words. how one component is affected by changes in the other. Sources for Data on McKinsey's 7S Model The main source of academic work on the 7S model has to be the writings of Waterman et al. it is important for the researcher to give more time and effort to understanding the real dynamics of the organisation's soft aspects as these underlying values in reality drive the organisations by affecting the decision-making at all levels. For even advanced analysis. it has been used by hundreds of organisations and academics for analytical purposes. Especially the "cause and effect" analyses of soft and hard components often yield a very interesting analysis and provides readers with an in-depth understanding of what caused the change. and Pascale and Athos (1981) who came up with the idea and applied it to analyse over 70 large organisations. processes and decision made in an organisation. A few case studies. are also available at this website. It is too easy to fall into the trap of only concentrating on the hard factors as they are readily available from organisations' reports etc. when analysing an organisation using the 7S model. Since then. . 1982). students must analyse in depth the cultural dimension of the structure. However.

S. or rightsizing. reengineering. the free encyclopedia Downsizing and Rightsizing Downsizing refers to the permanent reduction of a company's workforce and is generally associated with corporate reorganization.. Downsizing is certainly not limited to the U. Regardless of the label applied. or creating a "leaner. downsizing essentially refers to layoffs . however. restructuring. the database developer Oracle Corporation reduced its number of employees by 5.File:McKinsey 7S framework From Wikipedia. Downsizings such as these are also commonly called reorganizing. Jamaica Air cut 15 percent of its workforce in an effort to trim expenses and anticipated revenue shortfalls. meaner" company.000 after acquiring rival PeopleSoft. For example.

127. Table 1 compares the number of temporarily downsized workers with the number of permanently downsized workers. Downsizing affects most sectors of the labor market. many of the country's largest corporations participated in the trend. The following sections discuss trends in downsizing. Corporate downsizing results from both poor economic conditions and company decisions to eliminate jobs in order to cut costs and maintain or achieve specific levels of profitability.124. announcements of downsizing are well received in the stock markets. Roebuck and Company. and some economists.000 . IBM. unions.S. support for downsizing. and to use part-time and temporary workers to complete tasks previously performed by full-time workers in order to trim payroll costs. distributors forcing price concessions from suppliers. to focus on core business functions and outsource non-core functions. and downsizing and management. downsizing is a controversial corporate practice that receives support and even praise from executives. industrial. the cutting of product or service lines.000 3. and criticism from employees.000 965. Companies may lay off a percentage of their employees in response to these changes: a slowed economy. plant or office closings. including retail. or a multitude of other events that have a negative impact on specific organizations or entire industries. merging with or acquiring other companies. even when companies themselves are doing well. Consequently.082.015. In addition. Reports of executive salaries growing in the face of downsizing and stagnant wages for retained employees only fan the flames of this criticism. downsizing may stem from restructuring efforts to maximize efficiency. competitors grabbing a higher proportion of market share.000 966.000 3. 2002. or other forms of reducing payroll expenses. While layoffs are a customary measure for companies to help compensate for the effects of recessions. impacting workers in a wide range of income levels. and community activists. Type of Downsizing Temporary downsizing Permanent downsizing October 2004 November 2004 December 2004 January 2005 February 2005 947. departmental consolidations. such as staff reductions.144. managerial. downsizing also occurs during periods of economic prosperity. downsizing continued after a sharp decline in the stock market early in the century and followed by continued pressure on corporate earnings in the aftermath of the September 11. businesses. criticisms of downsizing.000 941. Delta Airlines. In contrast. During this time. downsizing and restructuring.that may or may not be accompanied by systematic restructuring programs.000 3. AT&T. to cut corporate bureaucracy and hierarchy and thereby reduce costs. and office jobs. It is not uncommon for a company's stock value to rise following a downsizing announcement. shareholders. and Sears.00 0 3. In the twenty-first century. TRENDS IN DOWNSIZING As a major trend among U.000 965.000 3. including General Motors. downsizing began in the 1980s and continued through the 1990s largely unabated and even growing. terrorist attacks. the growth of downsizing. Eastman Kodak.

Some economists. U. as did some U. These jobs are not actually eliminated. Other U. this trend is projected to be particularly prevalent through 2012. employees. jobs as resulting corporate operating efficiencies allow for more employment of higher-tier (and thus higherwage) positions. and steel industries. Occupation Projected Decline -12% Chemical plant and system operators Travel agents Brokerage clerks Fisheries workers Textile workers Word processors and typists Telephone operators -14% -15% -27% -34% -39% -56% THE GROWTH OF DOWNSIZING The corporate downsizing trend grew out of the economic conditions of the late 1970s. but labor costs were among the first to be cut despite other costs associated with the general structure of the auto companies and their oversupply of middle managers and engineers.S. A trend toward outsourcing jobs overseas to countries with lower labor costs is a form of downsizing that affects some U. In contrast to their major competitors—Japanese manufacturers—U.S. however. companies had significantly higher costs.However. suggest that the overall net effect of such outsourced jobs will actually be an increase in U. companies continue to downsize and the trend shows few signs of slowing down. like those in the auto industry. automobile manufacturers had approximately a $1.S.S. machine tool. manufacturing industries faced similar competitive problems during this period. suffered from higher per-unit costs and greater overhead than their Japanese counterparts due to lower labor productivity and a glut of whitecollar workers in many U. as shown in Table 2. however. economists remain optimistic about downsizing and the effects of downsizing on the economy when the rate of overall job growth outpaces the rate of job elimination. Regardless of whether downsizing is good or bad for the national economy. Only a small percentage of this cost difference could be attributed to labor costs. For example. Auto workers were among the first to be laid off during the initial wave of downsizing. electronics. but instead moved out of reach of the employees who lose their jobs to outsourcing. Companies in these industries. technology industries. when direct international competition began to increase.S. For some sectors.S. companies. . The major industries affected by this stiffer competition included the automotive.000 cost disadvantage for their cars compared to similar classes of Japanese cars.S.

contemporary measures of performance such as cost. Hence. In essence." While discussion of reengineering is common and reengineering is often associated with downsizing. service. selling non-core operations. acquiring or merging with related companies. by Michael Hammer and James Champy. such as secretaries. DOWNSIZING AND RESTRUCTURING Downsizing generally accompanies some kind of restructuring and reorganizing. such as poor customer service. the introduction of the personal computer into the office has facilitated instantaneous communication and has thus reduced the need for office support positions. they contend that downsizing is over-applied and often used as a quick fix without sufficient planning to bring about long-term benefits. downsizing can lead to additional problems. and speed. Since companies frequently lose a significant amount of employees when downsizing. downsizing often accompanies corporate calls for concentration on "core capabilities" or "core businesses. Eliminating non-core aspects of a business may also include the reduction of bureaucracy and the number of corporate layers. low employee morale. quality. The jobs and responsibilities that are not considered part of the primary revenue-generating functions are the ones that are frequently downsized. restructuring efforts attempt to increase the amount of work output relative to the amount of work input. characterizes the process as the "fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical. and over-hauling the internal structure of a company. Consequently. In essence. the reduction of bureaucracy may help bring about a more efficient and responsive corporate structure that can implement new ideas more quickly. Besides laying off workers. Although critics of downsizing do not rule out the benefits in all cases. CRITICISM OF DOWNSIZING While companies frequently implement downsizing plans to increase profitability and productivity. some companies began simply to cut their workforce without determining whether or not it was necessary and without any kind of accompanying strategy. they usually must reallocate tasks and responsibilities. these efforts frequently have mixed results. The seminal work on restructuring or reengineering. These jobs might then be outsourced or handled by outside consultants and workers on a contract basis. Downsizing and reengineering programs may result from the implementation of new. Reinventing the Corporation. either as part of the downsizing plan or as a consequence of downsizing. Laying workers off to improve competitiveness often fails to produce the intended results because downsizing can lead to the following unforeseen problems and difficulties: ." which refers to the interest in focusing on the primary revenue-generating aspects of a business. companies implemented a couple of key changes: they formed partnerships with Japanese companies to learn the methods behind their cost efficiencies and they strove to reduce costs and expedite decision-making by getting rid of unnecessary layers of bureaucracy and management. Nevertheless. they downsized because they lacked new products that would have stimulated growth and because their existing product markets were decreasing.S. restructuring efforts may involve closing plants. laborsaving technology. downsizing does not always yield these results. U. Since dense bureaucracy frequently causes delays in communication and decision-making. For example. Moreover. Hammer and Champy argue that reengineering efforts are not always as profound. and bad employee attitudes.To remedy these problems.

For example. not as a quick fix when profits fail to meet quarterly projections. A decline in customer service because workers feel they lack job security after layoffs. Advocates of downsizing also argue that job creation from technological advances offsets job declines from downsizing. some workers are able to locate new jobs and companies are able to achieve greater efficiency. governments must sometimes enact programs to help displaced workers obtain training and receive job placement assistance. and one that ultimately saves the larger number of jobs that would be lost if a company went out business. productivity. some executives and economists see downsizing as a necessary albeit painful task. Hence. and other such techniques. In other words. They reason that without downsizing. and corporate investment have grown at a healthy pace. companies would not remain profitable and hence would go bankrupt when there is fierce competition and slow growth. advocates of downsizing contend that staff-reduction efforts help move workers . which tends to occur after downsizing episodes.• • • • • • The loss of highly-skilled and reliable workers and the added expense of finding new workers. and competitiveness through quality initiatives such as Six Sigma. critics recommend that companies eliminate jobs only as a last resort. and profitability. empowering employees through progressive human resource strategies that encourage employee loyalty and stability. despite the admitted discomfort and difficulties that downsizing has on displaced workers. and reduced productivity. An increase in the number of lawsuits and disability claims. Economists point out that despite the downsizing that has become commonplace since the 1970s. absenteeism. Therefore. An increase in overtime wages. Some studies have indicated that the economic advantages of downsizing have failed to come about in many cases. productivity. Restructuring programs sometimes take years to bear fruit because of ensuing employee confusion and the amount of time it takes for employees to adjust to their new roles and responsibilities. displaced workers are able find new jobs relatively easily. In addition. some analysts suggest that companies can improve their efficiency. competitiveness. possibly leading to tardiness. overall U. even though downsizing may not solve all of a company's competitive problems or bolster a company's profits indefinitely. SUPPORT FOR DOWNSIZING Advocates of downsizing counter critics' claims by arguing that. downsizing can help reduce costs. especially if those workers have skills that enhance the technological competence of prospective employers. Labor groups have reacted to the frequency and magnitude of downsizing. and unions have taken tougher stances in negotiations because of it. standards of living. which can lead to greater short-term profitability.S. Moreover. Employee attitudes that may change for the worse. the United States has maintained its position as one of the world's leading economies. Downsizing has repercussions that extend beyond the companies and their employees. and that downsizing may have had a negative impact on company competitiveness and profitability in some cases. Furthermore. Suggested alternatives to downsizing include early retirement packages and voluntary severance programs. through downsizing. Instead of laying employees off.

the flow of information and communication no longer requires the effort needed prior to restructuring. can be eliminated. for example. and a host of other problems. when companies decide that downsizing is the best course of action. DOWNSIZING AND MANAGEMENT Downsizing poses the immediate managerial problem of dismissing a large number of employees in a dignified manner in order to help minimize the trauma associated with downsizing. anxiety. instead of laying them off quickly and impersonally. Downsizing appears to be an ongoing practice for the foreseeable future. Therefore. Thus. Since downsizing often brings about a flatter corporate structure. If redundant but nonessential work cannot be completely eliminated. Managers should confer with employees regularly to discuss performance and strategies for meeting the goals. Failure to downsize may result in inefficiencies. Employees who are laid off tend to suffer from depression. moribund.from mature. while downsizing clearly has a number of potentially negative effects on individuals and communities. and obsolete industries to emerging and growing industries. This process also enables companies with growing competitive advantages to maintain their positions in the market in the face of greater domestic and global competition. where they are needed. insomnia. Top managers with responsibility for making downsizing decisions are in a difficult predicament. In addition. The aftermath of downsizing also places greater demands on managers to make do with less. Finding the balance between these outcomes is the primary challenge facing these managers. In other words. Economists argue that this process strengthens the economy and helps it grow. By studying particular tasks and determining their essential components. high blood pressure. reports used for communication between layers of the old corporate hierarchy. managers can help restore employee trust and commitment and help increase employee motivation. par value . By promoting employee initiative and even employee involvement in decision-making. This involves providing employees with clear indications of what is expected of them and how they can meet increased productivity goals. managers should do so in a way that does the least harm to employees and their families. managers can get rid of unnecessary tasks and eliminate unnecessary jobs altogether. managers should encourage employee initiative and communication and provide employees with rewards for excellent work. and providing assistance in finding new jobs. marital discord. it perhaps can be reduced. and it is the difficult but necessary result of the transition toward a global economy. managers may have to implement measures to counteract employee apathy. Because of the possible negative effects that occur after downsizing. This includes taking the time to allow dismissed employees to air their thoughts. improve customer service. Analysts of downsized companies argue that managers should take steps immediately after workforce reductions to provide the remaining workers with the support and guidance they need. managers must strive to maintain or increase productivity and quality levels despite having a smaller workforce. and restore employee trust.

It allows the company to put a de minimis value for the stock on the company's financial statement. Par Value is a nominal value of a security which is determined by an issuing company as a minimum price. over par (over par value) and under par (under par value). the free encyclopedia Jump to:navigation. If interest rates have fallen. except for preferred stock. When a bond is worth less than its par value. it is priced at a discount. For a debt security. search Par value. the price will be Par value From Wikipedia. . par value is the amount repaid to the investor when the bond matures (usually.S. and federal bonds $10. From this comes the expressions at par (at the par value). the Par Value (as stated on the face of the bond) is the amount that the issuing firm is to pay to the bond holder at the maturity date. conversely when a bond is valued above its par value. In the secondary market. par value is usually a very small amount that bears no relationship to its market price. For an equity security. Many common stocks issued today do not have par values. [edit] Stock Par value stock has no relation to market value and. those that do (usually only in jurisdictions where par values are required by law) have extremely low par values (often the smallest unit of currency in circulation).000). in which case par value is used to calculate dividend payments. This was far more important in unregulated equity markets than in the regulated markets that exist today. as a concept. is somewhat archaic. municipal bonds $5000. corporate bonds have a par value of $1000. for example a penny par value on a stock issued at USD$25/share. A bond is worth its par value when the price is equal to the face value. means stated value or face value. Thus. a bond's price fluctuates with interest rates. the bond will be sold below par value (at a "discount"). The par value of a stock was the share price upon initial offering. The present value of the Par Value plus the present value of annuity of the interest payments equal the bond price. If interest rates are higher than the coupon rate on a bond. [edit] Bonds In the U. the issuing company promised not to issue further shares below par value. in finance and accounting. The term "par value" has several meanings depending on context and geography. Par value also has bookkeeping purposes. so investors could be confident that no one else was receiving a more favorable issue price. bond markets. the bond is priced at a premium.Hide links within definitionsShow links within definitions Definition The nominal dollar amount assigned to a security by the issuer. Most states do not allow a company to issue stock below par value.

It is the interest rate that a bond issuer will pay to a bondholder. par value remains relevant. some U. and that switch was "at par". When held to maturity. and tends to reflect issue price. search Uncut bond coupons on 1922 Mecca Temple (NY. Preferred stock Also.) construction bond The coupon or coupon rate of a bond is the amount of interest paid per year expressed as a percentage of the face value of the bond. Zero-coupon bonds are those which do not pay interest. Coupon (bond) From Wikipedia.S. NY.S. but are sold at the initial offering to investors at a price less than the par value.A. the bond is redeemed for par value. In the United States.No-par stocks have "no par value" printed on their certificates. meaning that the Central Bank of Trinidad and Tobago replaced each old dollar with a new). However. par values are no longer required for common stocks. states allow no-par stocks to have a stated value. Trinidad and Tobago switched from British West Indies dollar to the new Trinidad and Tobago dollar. Today. the purchasers of "watered" shares incur an accounting liability to the corporation for the difference between the par value and the price they paid. Instead of par value.000 nominal of a bond described as a 4. [edit] Currency The term "at par" is also used when two currencies are exchanged at equal value (for instance. a semi-annual payment). set by the board of directors of the corporation. U. in 1964. it is legal for a corporation to issue "watered" shares below par value. . the free encyclopedia Jump to:navigation.5% loan stock. Dividends on preferred stocks are calculated as a percentage of par value.[1] [edit] Overview For example if you hold $10. par value still matters for a callable common stock: the call price is usually either par value or a small fixed percentage over par value. Not all bonds have coupons. which serves the same purpose as par value in setting the minimum legal capital that the corporation must have after paying any dividends or buying back its stock. you will receive $450 in interest each year (probably in two installments of $225 each. in many jurisdictions.

taking into account among other things: • • • • The amount and date of the redemption payment at maturity. the principal. Principal-agent relationship A situation that can be modeled as one person. The principal-only portion of a stripped MBS. For PO securities. par value or face value. . the price of a bond will be determined by the market. maturity value. At the due date the owner would physically detach the coupon and present it for payment of the interest (known as "clipping the coupon"). so that possession of the certificate was conclusive proof of ownership. The amounts and dates of the coupons. The yield offered by other similar bonds in the market. Similar financial terms Principal Orders Principal orders refers to hte activity by a broker or dealer who buys or sells for his or her own account and risk. Principal value The amount that the issuer of a bond agrees to repay the bondholder at the maturity date. unsystematic risks disappear in portfolios. the predetermined dollar principal on which the exchanged interest payments are based. one for each scheduled interest payment covering a number of years. were printed on the certificate. the principle that the net present value of a set of independent projects is just the sum of the net present values of the individual projects. who acts on the behalf of another person. Remaining principal balance The amount of principal dollars remaining to be paid under the mortgage as of a given point in time.[2] Between the issue date and the redemption date. Principal only (PO) A mortgage-backed security (MBS) in which the holder receives only principal cash flows on the underlying mortgage pool. an agent. Stated differently. In other words.The origin of the expression "coupon" is that bonds were historically issued as bearer certificates. Principal The par or face value of a debt instrument Value additivity principal Prevails when the value of a whole group of assets exactly equals the sum of the values of the individual assets that make up the group of assets. Several coupons. Principal of diversification Highly diversified portfolios will have negligible unsystematic risk. all of the principal distribution due from the underlying collateral pool is paid to the registered holder of the stripped MBS based on the current face value of the underlying collateral pool. and only systematic risks survive. The principal is also referred to redemption value. Notional principal amount In an interest rate swap. The ability of the issuer to pay interest and repay the principal at maturity.

plus the present value of any financing decisions (levered cash flows). and volatilities. BVPS is calculated by dividing tangible capital dollar value by the number of outstanding shares of common stock. the value of organization learning and reputation. Standardized value Also called the normal deviate. value date refers to the delivery date of funds traded. This analysis is often used for highly leveraged transactions such as a leverage buy-out. correlations. Straight value Also called investment value. Time value is generally equal to the difference between the premium and the intrinsic value. Value dating Refers to when value or credit is given for funds transferred between banks. Normally it is on spot transactions two days after a transaction is agreed upon and the future date in the case of a forward foreign exchange trade. Time value of an option The portion of an option's premium that is based on the amount of time remaining until the expiration date of the option contract. Book value per share The intrinsic value of a company's stock. Utility value The welfare a given investor assigns to an investment with a particular return and risk. and that the underlying components that determine the value of the option may change during that time. Value date In the market for eurodollar deposits and foreign exchange. Value manager A manager who seeks to buy stocks that are at a discount to their "fair value" and sell them at or in excess of that value. Face value Alternative name for par value. because the dollar received today can earn interest up until the time the future dollar is received. Going-concern value The value of a company as a whole over and above the sum of the values of each of its parts. Adjusted present value (APV) The net present value analysis of an asset if financed solely by equity (present value of un-levered cash flows). divided by the standard deviation of the distribution.Original principal balance The total amount of principal owed on a mortgage before any payments are made. Often a value stock is one with a low price to book value ratio. the distance of one data point from the mean. Value-at-Risk A value-at-risk (VAR) model is a procedure for estimating the probability of portfolio losses exceeding some specified proportion based on a statistical analysis of historical market price trends. the various tax shields provided by the deductibility of interest and the benefits of other investment tax credits are calculated separately. Time value of money The idea that a dollar today is worth more than a dollar in the future. In other words. the value of a convertible security without the con-version option. Back-end value The amount paid to remaining shareholders in the second stage of a two-tier or partial tender offer. . Terminal value The value at maturity. Value-added tax Value-added tax (VAT) is a method of indirect taxation whereby a tax is levied at each stage of production on the value added at that specific stage.

its original book value net of any accounting adjustments such as depreciation. Net salvage value The after-tax net cash flow for terminating the project.Salvage value Scrap value of plant and equipment. the amount that the issuer agrees to pay at the maturity date. Net adjusted present value The adjusted present value minus the initial cost of an investment. Projects with negative NPVs should be rejected. a measure of the change in the price of the bond if the required yield changes by one basis point. the net asset value per share usually represents the fund's market price. Residual value Usually refers to the value of a lessor's property at the time the lease expires. and return of one instrument relative to another. Present value The amount of cash today that is equivalent in value to a payment. Net present value of future investments The present value of the total sum of NPVs expected to result from all of the firm's future investments. Market value-weighted index An index of a group of securities computed by calculating a weighted average of the returns on each security in the index. Present value of growth opportunities (PVGO) The net present value (NPV) of investments the firm is expected to make in the future. Net asset value (NAV) The value of a fund's investments. Replacement value Current cost of replacing the firm's assets. to be received in the future. liquidity. Present value factor Factor used to calculate an estimate of the present value of an amount to be received in a future period. Relative value The attractiveness measured in terms of risk. or for a given instrument. with the weights proportional to outstanding market value. For a closed end fund. Original face value The principal amount of the mortgage as of its issue date. that is. the market price may vary significantly from the net asset value. of one maturity relative to another. subject to a possible sales or redemption charge. or to a stream of payments. Price value of a basis point (PVBP) Also called the dollar value of a basis point. Net book value The current book value of an asset or liability. Net present value of growth opportunities A model valuing a firm in which net present value of new investment opportunities is explicitly examined. Net present value rule An investment is worth making if it has a positive NPV. . For a mutual fund. Par value Also called the maturity value or face value. Net present value (NPV) The present value of the expected future cash flows minus the cost.

for example the level of target surplus. This adjustment would lower the gross salvage value. A company's book value might be more or less than its market value. Salvage Value Is the amount remaining after a depreciated useful life.. Liquidation value Net amount that could be realized by selling the assets of a firm after paying the debt. (b) The value investors believe a firm is worth. Cash-surrender value An amount the insurance company will pay if the policyholder ends a whole life insurance policy. Bond value With respect to convertible bonds. Termbox Popular terms Present value of growth opportunit. Embedded value equals the free surplus plus the value of inforce business.. calculated by multiplying the number of shares outstanding by the current market price of a firm's shares. Market value (a) The price at which a security is trading and could presumably be purchased or sold. the value of a convertible security if it is converted immediately. Conversion value Also called parity value. the value the security would have if it were not convertible apart from the conversion option. Embedded value A methodology that reflects future shareholder profits in the life insurance business. Book value A company's book value is its total assets minus intangible assets and liabilities. Times-interest-earned ratio Return on equity (ROE) Long-term debt ratio BIS ratio Long-term debt to equity ratio Internal Rate of Return (IRR) Weighted average portfolio yield Payment-In-Kind (PIK) bond . Embedded value is hard to compare with different companies since each company determines its own input parameters.Market value ratios Ratios that relate the market price of the firm's common stock to selected financial statement items. It refers to the residual or recoverable value of a depreciated asset. Loan value The amount a policyholder may borrow against a whole life insurance policy at the interest rate specified in the policy. It should be noted that the gross salvage value may be adjusted by a removal or disposal cost. Extrinsic Value The time value component of an option premium. such as debt.

under which the distributor agrees to provide ice cream stock under the terms "Net 60" with a ten percent discount on payment within 30 days.. This means that the operator has 60 days to pay the invoice in full. The ice cream distributor can do the same thing. If sales are good within the first week. Various industries use various specialized forms. Herfindahl index Money market hedge Dept/equity ratio Plain vanilla bond Realized compound yield Flat Organisational Structure Price value of a basis point (PVBP. and make an extra 20% on the ice cream sold. There are many reasons and ways to manage trade credit terms for the benefit of a business.. leading to a month of low cash flow. the largest retailer in the world. search Trade credit For example. Security market line NPVGO Total return swap Trade credit From Wikipedia. then the operator may decide to pay within 30 days. 2% discount if paid within ten days. [edit] Example The operator of an ice cream stand may sign a franchising agreement. Wal-Mart. They all have.Risk-adjusted return on capital (R. the collaboration of businesses to make efficient use of capital to accomplish various business objectives. Receiving trade credit from milk and sugar suppliers on terms of Net 30. means they are apparently taking a loss or disadvantageous position in this web of trade credit balances. the operator may be able to send a cheque for all or part of the invoice.. and a 20% discount on payment within 10 days.. trade credit for Wal-Mart is 8 times the amount of capital invested by shareholders. has used trade credit as a larger source of capital than bank borrowings.[1] There are many forms of trade credit in common use. in common. if sales are slow. Why would they do this? First. The ice cream distributor may be well-capitalized either from . or use the money another 30 days and pay the full invoice amount within 60 days. obtaining a 10% discount. However. the free encyclopedia Jump to:navigation. they have a substantial markup on the ingredients and other costs of production of the ice cream they sell to the operator.

By tracking who pays. If you miss your net payment date for an entire year. Allow startup ice cream parlors the ability to mismanage their investment in inventory for a while. This is in effect. by forfeiting the two-percent discount. On an annualized basis. however. this is actually costing you 36 percent of the total cost of the items you are purchasing from this supplier! (360 ( 20 days = 18 times per year without discount. Trade credit is the credit extended to you by suppliers who let you buy now and pay later.d. Tell the owner or financial officer about your business. When you visit your supplier to set up your order during your startup period. Introduce yourself. the distributor can see potential problems developing and take steps to reduce or increase the allowed amount of trade credit he extends to prospering or faltering businesses. and may be looking to expand his markets. While this is a fairly normal practice. Show the officer the financial plan you've prepared. . These can usually run between one and two percent on a monthly basis. The terms the supplier offers you are two-percent cash discount with 10 days and a net date of 30 days. They're going to want to make every order c. For example. the cost of trade credit can be quite high. the suppliers is saying that if you pay within 10 days. equipment or other valuables without paying cash on the spot. One of the things that will help you in these negotiations is a properly prepared financial plan. without making immediate cash payment For many businesses. It is not on their interests for customers to go out of business from cash flow instabilities. trade credit is an essential tool for financing growth. while learning their markets. that can cost you as much as 12 to 24 percent in penalty interest. If it's a larger business. Essentially. ask to speak to the CFO or any other person who approves credit. assume you make a purchase from a supplier who decides to extend credit to you. On the other hand. They may be aggressive in attempting to locate new customers or to help them get established. and when. the purchase price will be discounted by two percent. you're using trade credit. you're able to use your money for 20 more days. Trade Credit Definition: An arrangement to buy goods or services on account. and explain that you need to get your first orders on credit in order to launch your venture. Effective use of trade credit requires intelligent planning to avoid unnecessary costs through forfeiture of cash discounts or the incurring of delinquency penalties. Depending on the terms available from your suppliers. This limits the exposure to losses from customers going bankrupt who would never pay for the ice cream delivered. you can still try and negotiate trade credit with suppliers. When you're first starting your business.) Cash discounts aren't the only factor you have to consider in the equation. 2. Any time you take delivery of materials. suppliers most likely aren't going to offer you trade credit. ask to speak directly to the owner of the business if it's a small company. without having a dramatic negative balance in their bank account which could put them out of business.o. so their financial terms aim to accomplish two things: 1. that is. (cash or check on delivery) or paid by credit card in advance until you've established that you can pay your bills on time. But every business should take full advantage of trade that is available without additional cost in order to reduce its need for capital from other sources. a short term business loan made to help expand the distributor's market and customer base. 18 ( 2 percent discount = 36 percent discount missed. There are also late-payment or delinquency penalties should you extend payment beyond the agreed-upon terms.the owners' investment or from accumualated profits.

response. Please help improve this article by adding reliable references. One of Pavlov’s dogs with a surgically implanted cannula to measure salivation. Conversely. often reflexive. From this observation he predicted that. Unsourced material may be challenged and removed.[1] The typical procedure for inducing classical conditioning involves presentations of a neutral stimulus along with a stimulus of some significance. During his research on the physiology of digestion in dogs. Pavlov referred to this as a conditioned stimulus (CS). presentation of the significant stimulus necessarily evokes an innate.Classical conditioning From Wikipedia. and the foot contraction conditioning of Hermissenda crassicornis. 2005 The original and most famous example of classical conditioning involved the salivary conditioning of Pavlov's dogs. eyeblink conditioning. if a particular stimulus in the dog’s surroundings were . respectively. search This article needs additional citations for verification. Pavlov called these the unconditioned stimulus (US) and unconditioned response (UR). Pavlovian reinforcement) is a form of associative learning that was first demonstrated by Ivan Pavlov. eventually the two stimuli become associated and the organism begins to produce a behavioral response to the CS. the dogs began to salivate in the presence of the lab technician who normally fed them. Pavlov noticed that. (May 2010) Classical conditioning (also Pavlovian or respondent conditioning. Pavlov called these psychic secretions. Pavlov called this the conditioned response (CR). rather than simply salivating in the presence of meat powder (an innate response to food that he called the unconditioned response). Pavlov Museum. Popular forms of classical conditioning that are used to study neural structures and functions that underlie learning and memory include fear conditioning. The neutral stimulus could be any event that does not result in an overt behavioral response from the organism under investigation. the free encyclopedia Jump to:navigation. If the CS and the US are repeatedly paired.

the CS and US are presented and terminated at the same time. the dogs started to salivate in response to the metronome. It may also be called the "conditioning interval" Simultaneous conditioning: During simultaneous conditioning. rather than a reliable method of predicting the future occurrence of the unconditioned stimulus. CS-alone extinction: The CS is presented in the absence of the US. Backward conditioning: Backward conditioning occurs when a conditioned stimulus immediately follows an unconditioned stimulus. a period of time is allowed to elapse during which no stimuli are presented. then this stimulus would become associated with food and cause salivation on its own. and then the US is presented. the conditioned response tends to be inhibitory. Temporal conditioning: The US is presented at regularly timed intervals. the CS is presented.present when the dog was presented with meat powder. This procedure is used to study non-associative behavioral responses. Delay Conditioning: In delay conditioning the CS is presented and is overlapped by the presentation of the US Trace conditioning: During trace conditioning the CS and US do not overlap. can serve as the CS in this example. or pseudo-random. [edit] Procedure variations . This is because the conditioned stimulus serves as a signal that the unconditioned stimulus has ended. This procedure is usually done after the CR has been acquired through Forward conditioning training. Two common forms of forward conditioning are delay and trace conditioning. after a few repetitions. and CR acquisition is dependent upon correct timing of the interval between US presentations. or context. interval. Unpaired conditioning: The CS and US are not presented together. In his initial experiment. in which the conditioned stimulus precedes the unconditioned stimulus. The background. [edit] Types Diagram representing forward conditioning. The stimulus free period is called the trace interval. Forward conditioning: During forward conditioning the onset of the CS precedes the onset of the US. Usually they are presented as independent trials that are separated by a variable. Eventually. Unlike traditional conditioning models. Pavlov used a metronome to call the dogs to their food and. Instead. The time interval increases from left to right. the CR frequency is reduced to pre-training levels. such as sensitization.

but suppress responding on CS+/CS. while a very bright light is presented 2 minutes before the US. [edit] Classical ISI discrimination conditioning This is a discrimination procedure in which two different CSs are used to signal two different interstimulus intervals. In this procedure. a dim light may be presented 30 seconds before a US.are reversed and subjects learn to suppress responding to the previous CS+ and show CRs to the previous CS-.e. organisms show CRs on CS+/US trials. The pre-exposure of the subject to the CS before paired training slows the rate of CR acquisition relative to organisms that are not CS pre-exposed. the previous CS. Also see Latent inhibition for applications.trials). [edit] Classical discrimination/reversal conditioning In this paired with the US. the organism learns to discriminate CS+ trials and CS. For example.and its presentation is never followed by the US.trials such that CRs are only observed on CS+ trials. CS+/CS. but not with the US (i. The CSs may be the same modality (such as lights of different intensity). [edit] Conditioned inhibition conditioning Three phases of conditioning are typically used: Phase 1: A CS (CS+) is not paired with a US until asymptotic CR levels are reached. a CS is presented several times before paired CS-US training commences. [edit] Latent inhibition conditioning In this procedure. the rate of acquisition to the previous CS. The other CS is designated CS. one of the CSs is designated CS+ and its presentation is always followed by the US. During Reversal Training. Phase 2: CS+/US trials are continued. [edit] Blocking Main article: Blocking effect . If conditioned inhibition has occurred.should be impaired relative to organisms that did not experience Phase 2. Using this technique. or they may be different modalities (such as auditory CS and visual CS). Phase 3: In this retention test. After a number of trials. Some common variations are discussed below. the CS+ and CS. two CSs and one US are typically used.In addition to the simple procedures described above.trials. but interspersed with trials on which the CS+ in compound with a second CS.. Typically. organisms can learn to perform CRs that are appropriately timed for the two distinct CSs. some classical conditioning studies are designed to tap into more complex learning processes.

Test: A separate test for each CS (CS1 and CS2) is performed. implications for therapies and treatments using classical conditioning differ from operant conditioning. the child demonstrated generalization of stimulus associations. but without involving conscious thought. [edit] Theories of classical conditioning There are two competing theories of how classical conditioning works. flooding and systematic desensitization. Watson. jarring noise caused by clanging two pipes together behind the child's head (US). Phase 1: A CS (CS1) is paired with a US. The second theory stimulus-stimulus theory involves cognitive activity. Stimulus-response theory. suggesting that the first phase of training blocked the acquisition of the second CS. As the trials progressed. the experimentors paired the presence of the rat with a loud. stimulusresponse theory. [edit] Behavioral therapies Main article: Behaviour therapy In human psychology. and a Santa Claus mask with hair. in which the conditioned stimulus is associated to the concept of the unconditioned stimulus. [edit] Applications [edit] Little Albert Main article: Little Albert experiment John B. founder of behaviourism. suggests that an association to the unconditioned stimulus is made with the conditioned stimulus within the brain. Furthermore. Classical conditioning is short-term.This form of classical conditioning involves two phases. referred to as S-R theory. demonstrated classical conditioning empirically through experimentation using the Little Albert experiment in which a child ("Albert") was presented with a white rat (CS). dog. even when unaccompanied by the frightening noise. and showed distress when presented with any white. is a theoretical model of behavioral psychology that suggests humans and other animals can learn to associate a new stimulus — the . Phase 2: A compound CS (CS1+CS2) is paired with a US. unlike humanistic therapies. or to reduce unwanted fear and aversion. furry object–even such things as a rabbit.[citation needed] The therapies mentioned are designed to cause either aversive feelings toward something. a fur coat. usually requiring less time with therapists and less effort from patients. The first. the child began showing signs of distress at the sight of the rat. a subtle but important distinction. The blocking effect is observed in a lack of conditioned response to CS2. Therapies associated with classical conditioning are aversion therapy. After a control period in which the child reacted normally to the presence of the rat.

is stimulus-stimulus theory (S-S theory).[1] [edit] General Modern industrial manufacturing plants involve a complex mix of functions and operations. What would happen then if the rats were habituated to the US? S-R theory would suggest that the rats would continue to respond to the CS. psychologist Robert Rescorla undertook the following experiment [2]. feel or respond to the CS as if it were actually the US. and other signal items) Utilities (electrical. but if S-S theory is correct. sitework) [edit] Product Considerations The intended products to be manufactured have an impact on the choice of layout. telemetry. water. S-R theory suggests that an animal can learn to associate a conditioned stimulus (CS) such as a bell. as the rats no longer froze when exposed to the signal light. Various techniques exist. data. put forward by cognitive behaviorists. The experimental results suggest that S-S was correct. and a light as the conditioned stimulus. gas. and other utility services) Buildings (structural and architectural forms. It proposes that a cognitive component is at play. which is a very fine but important distinction. they would be habituated to the concept of a loud sound (danger). the free encyclopedia Jump to:navigation. The response of the rats was to freeze and cease movement. Stimulus-stimulus theory suggests that instead the animal salivates to the bell because it is associated with the concept of food. is a theoretical model of classical conditioning that suggests a cognitive component is required to understand classical conditioning and that stimulus-response theory is an inadequate model. resulting in an observable behavior such as salivation.[3] His theory still continues and is applied in everyday life. steam. and can think. Stimulus-stimulus theory. with the impending arrival of food termed the unconditioned stimulus. and so would not freeze to the CS. To test this theory. The opposing theory. . search A plant layout study is an engineering study used to analyze different physical configurations for an industrial plant. Rats learned to associate a loud noise as the unconditioned stimulus. referred to as S-S theory. but general areas of concern include the following:[2] • • • • • • Space (adequate area to house each function) Affinity (functions located in close proximity to other related functions) Material handling Communications (telephone.[1] Plant layout study From Wikipedia. sewer.conditioned stimulus (CS) — with a pre-existing stimulus — the unconditioned stimulus (US).

search The acceptable quality limit (AQL) is the worst tolerable process average in percentage or ratio. This is particularly utilised along side Just In Time systems. a process is said to be at an acceptable quality level if the appropriate statistic used to construct a control chart does not fall outside the bounds of the acceptable quality limits.[1] Closely related terms are the rejectable quality limit and level (RQL). but the underlying meaning remains the same. Otherwise. a typical example of this is a hospital. that is still considered acceptable: that is. the process is said to be at a rejectable control level. it is at an acceptable quality level. In order to avoid argument. Different companies maintain different interpretations of each defect type. • • • Acceptable quality limit From Wikipedia. such as ship building or construction of a bridge. Major defects can result in the product's failure. Critical defects are those that render the product unsafe or hazardous for the end user or that contravene mandatory regulations. An acceptable quality level is an inspection standard describing the maximum number of defects that could be considered acceptable during the random sampling of an inspection. which they use as a reference during pre-shipment inspection. buyers and sellers agree on an AQL standard.[3][4] It is unclear whether this interpretation will be brought into general usage. A cellular layout seeks to gain the benefits of both the flexibility of a functional layout and the efficiency product layout by grouping machines into autonomous work groups. A product layout focuses on maximising plant efficiency through techniques such as mass production. reducing its marketability.• A fixed position layout would be chosen where large or unique items are worked on individually. minor defects do not affect the product's marketability or usability. Lastly. but represent workmanship defects that make the product fall short of defined quality standards. The defects found during inspection are sometimes classified into three levels: critical. the free encyclopedia Jump to:navigation. usability or saleability.[1][2] In a quality control procedure. The usage of the abbreviation AQL for the term Acceptable Quality Level has recently been changed in the standards issued by at least one national standards organization (ANSI/ASQ) to relate to the term Acceptance Quality Level. A functional layout is a multiple purpose layout designed to facilitate a variety of products. . major and minor. chosen according to the level of risk each party assumes.

1 Example cases [edit] Types of profiteering • • price fixing price gouging Michael Porter From Wikipedia. Contents [hide] • • • 1 Types of profiteering 2 Laws 3 See also ○ 3. the free encyclopedia Jump to:navigation. such as price fixing syndicates and other anti-competitive behaviour. or restricted by industry codes of conduct such as aggressive marketing of products in the third world such as baby milk (see Nestlé boycott). the free encyclopedia Jump to:navigation. see Mick Porter. search Profiteering is a pejorative term for the act of making a profit by methods considered unethical. Michael Porter . Business owners may be accused of profiteering when they raise prices during an emergency (especially a war). for example on fuel subsidies (see British Airways price-fixing allegations). Some types of profiteering are illegal. search For the English footballer. The term is also applied to businesses that play on political corruption to obtain government contracts.Profiteering (business) From Wikipedia.

and a Ph.B. Contents [hide] [edit] Early life Michael Eugene Porter received a B. with high distinction in 1971 from the Harvard Business School. He received an M. in Business Economics from Harvard University in 1973. [edit] Career . He is a leading authority on company strategy and the competitiveness of nations and regions. Management Consultant Michael Eugene Porter (born 1947) is the Bishop William Lawrence University Professor at Harvard Business School. with high honors in aerospace and mechanical engineering from Princeton University in 1969. where he was a George F. Michael Porter’s work is recognized in many governments. He chairs Harvard Business School's program dedicated for newly appointed CEOs of very large corporations. corporations and academic circles globally.A.E. Porter was an outstanding intercollegiate golfer while at Princeton.D.S. Baker Scholar. where he was elected to Phi Beta Kappa and Tau Beta Pi.Born 1947 (1947) Occupation Author.

ICIC in 1994. employers. the highest professional recognition that can be awarded to a Harvard faculty member. Michael Porter is one of the co-founders of The Monitor Group consultancy. Jim Yong Kim and the Harvard Medical School and Harvard School of Public Health. and FSG-Social Impact Advisors. economic development. Michael Porter has founded three major non-profit organizations: Initiative for a Competitive Inner City . and teaching. He also currently serves on the Board of Trustees of Princeton University. and has led national economic strategy programs in numerous countries. Porter serves as an advisor to business. Professor Porter also plays an active role in U. Competitive Advantage. and international companies. He is currently working with the Presidents of Rwanda and South Korea. economic policy with the Executive Branch and Congress. His work on health care is being extended to address the problems of health care delivery in developing countries. and Taiwan Semiconductor. Redefining Health Care (written with Elizabeth Teisberg). a leading non-profit strategy firm serving NGOs. with implications for providers. He has served as strategy advisor to numerous leading U. In 2000.S. Porter has devoted considerable attention to understanding and addressing the pressing problems in health care delivery in the United States and other countries. the Center for Effective Philanthropy. and foundations in the area of creating social value. among other actors. develops a new strategic framework for transforming the value delivered by the health care system. Royal Dutch Shell. Professor Porter serves on two public boards of directors. He is generally recognized as the father of the modern strategy field. His New England Journal of Medicine research article. environmental policy. Recently. Thermo Fisher Scientific and Parametric Technology Corporation. and the social sector. which addresses economic development in distressed urban communities. The book received the James A. lays out a health reform strategy for the U.S. government. and government. Michael Porter was appointed a Harvard University Professor. corporations. in collaboration with Dr. His book. which creates rigorous tools for measuring foundation effectiveness. and the role of corporations in society. and On Competition. He is also a Fellow Member of the Strategic Management Society. “A Strategy for Health Care Reform— Toward a Value-Based System” (June 2009). economically distressed urban communities. Hamilton award of the American College of Healthcare Executives in 2007 for book of the year. His main academic objectives focus on how a firm or a region can build a competitive advantage and develop competitive strategy. Competitive Advantage of Nations. writing.[citation needed] Michael Porter’s core field is competition and company strategy. Scotts Miracle-Gro. In addition to his research. A six-time winner of the McKinsey Award for the best Harvard Business Review article of the year. including Caterpillar. Procter & Gamble. One of his most significant contributions is the five forces.S. health plans. His work has also re-defined thinking about competitiveness. Porter's strategic system consists primarily of: • • • Competitive advantage Porter's Five Forces Analysis strategic groups (also called strategic sets) .Michael Porter is the author of 18 books and numerous articles including Competitive Strategy. Professor Porter is the most cited author in business and economics. and his ideas are taught in virtually every business school in the world.

and access based market positions global strategy Porter's clusters of competence for regional economic development Diamond model [edit] Works Competititve Strategy • • • • • • • • • • • • Porter. Porter ME. Porter. Porter. Harvard Business Review. and focus the market positioning strategies of variety based. Porter.O. New York.E. Delivering Global Health.) (1986) Competition in Global Industries. Porter. M. March/April 1979. Porter. Harvard Business Review. M. E. Nov/Dec 1996. 12 (Winter Special Issue).E. M. Student British Medical Journal 2008. M. (1996) "What is Strategy". & Porter.E.E. (2001) "Strategy and the Internet". Rhatigan J. Porter. McGahan. Glob Public Health. M. 1998. M. Jain SH. Strategic Management Journal. (1980) Competitive Strategy. M. 1998) "The Competitive Advantage of Nations". & Teisberg. M.E. pp. Boston: Harvard Business School. pp. 18 (Summer Special Issue). (1987) "From Competitive Advantage to Corporate Strategy". product differentiation. pp 43-59. 2006.E. (1991) "Towards a Dynamic Theory of Strategy". Porter ME. M. 62-78. 2010 Mar. pp. Porter. needs based. A. 1985.E. (1997) "How Much Does Industry Matter. Porter. 1980. Harvard Business School Press. Domestic Health Care • Global Health Care • • . Porter. 15-30. 1986. (1990.E. Harvard business Review. (ed. 1990. M.[1] Kim JY. & Kramer. (1998) On Competition.E. Weintraub R. 16:27.E. (2006) "Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility". (2006) "Redefining Health Care: Creating Value-Based Competition On Results". Porter. Harvard Business School Press. Boston.E. Weintraub R. (1985) Competitive Advantage.E. M. Porter.E. From a declaration of values to the creation of value in global health: a report from Harvard University's Global Health Delivery Project. Free Press.5(2):181-8. New York. 95-117. Really?" Strategic Management Journal. (1979) "How competitive forces shape strategy". March 2001. Harvard Business Review. Jain SH. M. May/June 1987. December 2006.R.• • • • • • the value chain the generic strategies of cost leadership. pp. 78-92. M. M. New York. Harvard Business Review. Kim JY.M. Free Press. Rhatigan J. Porter. Free Press.

Traditional / Narrow or old Concept of Marketing 2. and Michael E. Joseph. Sachin H Jain.• Rhatigan. Joia S. In Latin. however. Porter. it has been practiced in one form or the other since the days of Adam & Eve. it has gained so much importance & stature that today most management thinkers & practitioners throughout the world view it as the most important of all management functions in any business. As a result of it marketing has become a necessity as well as a challenge. Earlier market used to be “Seller centred” but now it is “Consumer or buyer centred”. Meaning & Definitions of Marketing The evolution of word “market” is from Latin word “Marcatus”. According to Edward and David“Marketing is the economic process by means of which goods and services are exchanged and their values determined in terms of money. “Marcatus” means a special place where business related activities take place. At present all producers concentrate their efforts on evolving various marketing strategies. Now its scope is so wide that it encompasses all the activities from production to consumption. Mukherjee. “Supply creates its own demand” has lost its relevance now. Marketing functions start much before production process and carries over after sales also. We now witness dynamism in many similar products in market. each product is branded & there is a cut throat competition to grab the market share advertising. So we can see that word marketing has got different meaning in traditional and modern concept. is of relatively recent origin. Its emergence as a management discipline.” . and within this relatively short period. For a layman. so as to grab the maximum marked share. Marketing means. Modern / Broad or New Concept of Marketing a) Traditional / Narrow or old Concept of Marketing – 1. February 2009.[2][3][4][5] Marketing Introduction – “Marketing is the process of identifying and translating consumer’s needs and wants into products and services and then satisfying the same”. [1] Critics have also labeled Porter's conclusions as lacking in empirical support and as justified with selective case studies. but this is very narrow concept of marketing which has lost its relevance in today’s time. "Applying the Care Delivery Value Chain: HIV/AIDS Care in Resource Poor Settings." Harvard Business School Working Paper. application of various new & innovative sales promotion activities. Marketing has evolved into a vast concept from “Sale-purchase of goods and services”. The definitions of Marketing in two types: 1. Marketing is indeed an ancient art. Famous saying. [edit] Criticisms Porter has been criticized by some academics for inconsistent logical argument in his assertions. “Sale and Purchase of goods and services”. No. 09-093.

sales displays and other marketing systems to effectuate consumer satisfaction. place.2.” 2. Stanton— “Marketing is the total system of interacting business activities designed to plan. According to Philip Kotler— “Marketing is human activity directed at satisfying needs and wants through exchange processes.” 8.” 3. According to Connerse and Michell— “Marketing includes activities involved in the flow of goods and services from production to consumption.” 5. According to Duddy and Reuzon – “Marketing is the economic process by means of which goods and services art exchanged and their values determined in terms of money.” 6.” 5.” 4. pricing. According to E.” 9. Jerome Mc Carthy— “Marketing is the response of the business to the need to adjust production capabilities to the requirements of consumer’s demands. According to Buskirk— “Marketing is the integrated system of action that creates values in goods by creating form. distribution. According to Clark and Clark— “Marketing consists of these efforts which effect transfers in the ownership of goods and services and which provide for their physical distribution. time and ownership utility. According to AMA’s Improved definition— “Marketing is the process and plan of action of a business connected with distribution and exchange of goods through marketing research.” 4.” . According to Paul Mazur— “Marketing is the delivery of standard of living. 3. According to William J. According to J. price.” b) Modern / Broad or New Concept of Marketing— 1. According to Cundiff. promote and distribute want satisfying products to present and potential customers. advertising. According to American Marketing Association (AMA)— “Marketing is the performance of business activities that direct the flow of goods and service from producers to consumers or users.” 6. Still and Govoni— “Marketing is the managerial process by which products are matched with market and through which transfers of ownership are affected. According to Malcom McNair— “Marketing is the creation and delivery of a standard of living.F Pyle— “Marketing comprises both and selling activities”.

demographics. or lifestyles. – Serving the consumer demand (through planned physical distribution) with the help of marketing channels. search In the field of marketing. Psychographic From Wikipedia. and social research in general. After sale service and customer satisfaction are the focal point of modern view of marketing. – Expanding the market even in the face of keep competition. interests. the Boomer definition is based on a demographic variable: the fertility rates of its members' parents. When a relatively complete profile of a person or group's psychographic make-up is constructed. Activities. and Opinions). Some categories of psychographic factors used in market segmentation include: • • • Activity. Interest. develop the marketing plan or programme (marketing mix) and control the marketing programme to assure the accomplishment of the set marketing objectives. and firmographic variables (such as industry. Opinion (AIO) Attitudes Values • • 3 Strategies of Market Leaders Customers for Life . The traditional definition of the "Baby Boom Generation" has been the subject of much criticism because it is based on demographic variables where it should be based on psychographic variables. The modern marketer is called upon to set the marketing objective. historical generations are defined by psychographic variables like attitudes.So we can say that marketing is the process of discovering bundle of utilities for the consumer and exchanging. They can be contrasted with demographic variables (such as age and gender). opinion research. For example. behavioral variables (such as usage rate or loyalty). it for a price in the monetary terms through proper channels and after that developing a life long relationship. seniority and functional area). this is called a psychographic profile. an ongoing process of— – Discovering and translating consumer needs and desire to products and services (through planning and producing the planned products). – Creating demands for these products and services (through promotion and pricing). Psychographics are often confused with demographics. and cultural touchstones. attitudes. values. While all other generations are defined by psychographic variables. Psychographic profiles are used in market segmentation as well as in advertising. This confusion can create fundamentally flawed definitions. personality formation. psychographic variables are any attributes relating to personality. the free encyclopedia Jump to:navigation. They are also called IAO variables (for Interests. Marketing is a focal system of business.

such as: Inventory Control Models Remember: two important issues in inventory control: order quantity and order timing. Continuous Review or Fixed Order Quantity Systems (Q-systems) a. Variable order quantity. Multi period models (1) Fixed order quantity. How Much To Order: Basic Model . variable time between orders (EOQ. a physical inventory count is taken. and a target inventory of TI units. The two most important words to keep in mind in developing a successful customer base are Positioning and Differentiation. EPQ. Periodic count d. And it is the key to building and maintaining a competitive advantage. OH.• • • • • By: Brian Tracy The purpose of a business is to create and keep a customer.the Economic Order Quantity (EOQ or QSystem) . and Quantity Discount) (2) On-hand inventory balance serves as order trigger (R) (3) Perpetual inventory count (4) 2-bin system b. Single period Model 2. Based upon the number of units in stock at that time. Process: When a predetermined amount of time has elapsed. Cost Objective: Minimize sum of relevant costs 2. Fixed Order Quantity Systems (Q-systems): How Much to Order (Q) and When to Order (R) 1. Periodic Review or Fixed Order Period Systems (P-systems) a. Two general classes of models: continuous review (fixed order quantity) and periodic review (fixed order period). Differentiation refers to your ability to separate yourself and your product or service from that of your competitors. an order is placed for Q = (TI-OH) units. 1. Service Objective: desired customer service levels significantly impact inventory levels. This is the advantage that you and your company have over your competitors in the same marketplace – the unique and special benefits that no one else can give your custome Objectives of inventory control 1) Maximize customer service (2) Minimize costs 1. Time serves as order trigger c. fixed time between orders b. Service level may be defined in a number of ways. Multi Period Inventory Models: Order decisions for infinite length inventory planning address how much to order a.

executing and controlling your supply chain network. Worse. only 19 of the 20 part numbers are available. the product can’t be shipped to create revenue and the customer is not serviced. it is how you use the information that your system provides. Think for a moment about the complexities of making products that require hundreds and maybe thousands of part numbers to be available in the right quantity. There are proven methods that can help you accurately project customer demand and to calculate the inventory you will need to meet your defined level of customer service. practices and antiquated support systems. inventory control is no small matter. inventory is the largest asset item on a manufacturer’s or distributor’s balance sheet. but unnecessary. . you know how critical the function is to business success and the complexities involved in planning. Oftentimes. The likely result of this approach to inventory control is lots of material shortages. Having a sophisticated tracking system alone does not improve your bottom line. The right approach to inventory control can produce dramatic benefits in customer service with lower inventory. Inventory Control Problems In actual practice the vast majority of manufacturing and distribution companies suffer from lower customer service. high costs and poor customer service. no matter how complex your network is. products processed. In fact. For example. If your job responsibilities involve inventory control. at the right place and at the right time to make products to satisfy customer orders. higher costs and excessive inventories than are necessary. Using the right techniques for sales forecasting and inventory management will allow you to monitor changes and respond to alerts when action needs to be taken. These improved approaches to inventory management are of major consequence to overall competitiveness where the highest level of customer service and delivered value can favorably impact market share and profits. and products stored and ready for shipment. Modern inventory management processes utilize new and more refined techniques that provide for dynamic optimization of inventories to maximize customer service with decreased inventory and lower costs. excessive inventories. Inventory control problems are usually the result of using poor processes. It is a complex network to control and a set of inventory management tasks that must be performed with precision. What Should Be Done? Too much inventory and not high enough customer service is very common. in many companies the inventory control department is perceived as little more than a clerical function. The objectives of inventory reduction and minimization are more easily accomplished with modern inventory management processes that are working effectively. The inventory management process is much more complex than the uninitiated understand. the fact is the function is probably not very effective. if a customer orders a product that requires a manufacturer to acquire 20 part numbers to assemble a product and then.Inventory Control: Improving the Bottom Line Inventory control requires the tracking of all parts and materials purchased. From a financial perspective. you have nineteen part numbers which are excess inventory. there is a lot of management emphasis on keeping inventories down so they do not consume too much cash. As a result. When this is the case.

often referred to by its acronym MRP or in a lean manufacturing environment kanban ordering is used to effect deliveries of material. 1. There are yet other aspects to the corporate governance subject. with a strong emphasis on shareholders' welfare. movement. management. The effectiveness of inventory control is directly measurable by how successful a company is in providing high levels of customer service. 3. <b>Inventory Con Corporate governance From Wikipedia. suppliers. Other stakeholders include employees. The principal stakeholders are the shareholders.[1] An important theme of corporate governance is to ensure the accountability of certain individuals in an organization through mechanisms that try to reduce or eliminate the principal-agent problem. search Not to be confused with a corporate state. a corporative government rather than the government of a corporation Corporate governance is the set of processes. Inventory planning and ordering which is often accomplished with material requirements planning. the free encyclopedia Jump to:navigation. and institutions affecting the way a corporation (or company) is directed. administered or controlled. Inventory optimization systems are being advocated by some as the supply chain management mechanism that should be used to mathematically calculate where inventory should be deployed to satisfy predetermined supply chain management objectives. low inventory investment. creditors. such as the stakeholder view and the corporate governance models around the world (see section 9 below). 2. and the community at large. customers. customs. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. Physical inventory control is a phrase that describes the receiving. maximum throughput and low costs. . Effective inventory control is a vital function to help insure the success of manufacturing and distribution companies. regulators.Understanding the Process Overall inventory control crosses a number of functions. laws. an area where management should apply a philosophy of aggressive improvement. Corporate governance is a multi-faceted subject. policies. and the board of directors. stocking and overall physical control of inventories. sales forecasting and finished goods inventory deployment planning. The inventory control process can be divided into the following general categories: Demand management which covers the processes for sales and operations planning. A related but separate thread of discussions focuses on the impact of a corporate governance system in economic efficiency. Certainly.

plus a healthy board culture which safeguards policies and processes. This notion stems from traditional philosophical ideas of virtue (or self governance) [3]and represents a "bottom-up" approach to corporate governance (agency) which supports the more obvious "top-down" (systems and processes. Report of SEBI committee (India) on Corporate Governance defines corporate governance as the acceptance by management of the inalienable rights of shareholders as the true owners of the corporation and of their own role as trustees on behalf of the shareholders. Corporate Governance is viewed as business ethics and a moral duty. federal government passed the Sarbanes-Oxley Act. about ethical business conduct and about making a distinction between personal & corporate funds in the management of a company. and because most large publicly traded corporations in the US are incorporated under corporate administration friendly Delaware law. O'Donovan goes on to say that 'the perceived quality of a company's corporate governance can influence its share price as well as the cost of raising capital. objectivity. (formerly WorldCom). legislation and other external market forces plus how policies and processes are implemented and how people are led. state corporation laws enhanced the rights of corporate boards to govern without unanimous consent of shareholders in exchange for statutory benefits like appraisal rights. See also Corporate Social Entrepreneurship regarding employees who are driven by their sense of integrity (moral conscience) and duty to society. the U. External forces are. accountability and integrity. [edit] Definition In A Board Culture of Corporate Governance. to deter fraudulent activities and transparency policy which misleads executives to treat the symptoms and not the cause. and offers companies the opportunity to differentiate from competitors through their board culture. and because the US's wealth has been increasingly securitized into various corporate entities and institutions. employees. particularly due to the high-profile collapses of a number of large U. and complying with the legal and regulatory requirements. Sound corporate governance is reliant on external marketplace commitment and legislation.United States In the 19th century. which serves the needs of shareholders and other stakeholders. customers and suppliers.There has been renewed interest in the corporate governance practices of modern corporations since 2001. operating and controlling a company with a view to achieve long term strategic goals to satisfy shareholders. processes and people.” The definition is drawn from the Gandhian principle of trusteeship and the Directive Principles of the Indian Constitution. To date.e. i. [edit] History . Quality is determined by the financial markets. outside the circle of control of any board. structural) perspective. too much of corporate governance debate has centred on legislative policy. by directing and controlling management activities with good business savvy. the rights of individual owners and shareholders have become . firms such as Enron Corporation and MCI Inc. to make corporate governance more efficient.'[2] It is a system of structuring.S. to a large extent. apart from meeting environmental and local community needs.S. In 2002. Since that time. It is about commitment to values. business author Gabrielle O'Donovan defines corporate governance as 'an internal system encompassing policies. intending to restore public confidence in corporate governance. The internal environment is quite a different matter. creditors.

" Since the late 1970’s. corporate governance has been the subject of significant debate in the U. corporate directors’ duties have expanded greatly beyond their traditional legal responsibility of duty of loyalty to the corporation and its shareowners. and around the globe. Over the past three decades. Ronald Coase's "The Nature of the Firm" (1937) introduced the notion of transaction costs into the understanding of why firms are founded and how they continue to behave. Accordingly. Honeywell) by their boards. AOL. According to Lorsch and MacIver "many large corporations have dominant control over business affairs without sufficient accountability or monitoring by their board of directors. therefore. South Korea. In 1997. Journal of Law and Economics) firmly established agency theory as a way of understanding corporate governance: the firm is seen as a series of contracts. Bold. Kodak.S. received considerable press attention due to the wave of CEO dismissals (e. as a way of ensuring that corporate value would not be destroyed by the now traditionally cozy relationships between the CEO and the board of directors (e.g. Chandler. Malaysia and The Philippines severely affected by the exit of foreign capital after property assets collapsed. Means pondered on the changing role of the modern corporation in society. such as Adelphia Communications.. Alfred D.S.[3] . the issue of corporate governance in the U. Tyco. broad efforts to reform corporate governance have been driven. in part. the East Asian Financial Crisis saw the economies of Thailand. as well as lesser corporate debacles.increasingly derivative and dissipated. Macmillan) continues to have a profound influence on the conception of corporate governance in scholarly debates today. Jay Lorsch (organizational behavior) and Elizabeth MacIver (organizational behavior). Jr. Berle and Means' monograph "The Modern Corporation and Private Property" (1932.: IBM. In the early 2000s. Edwin Dodd. and Gardiner C. not infrequently back dated). The California Public Employees' Retirement System (CalPERS) led a wave of institutional shareholder activism (something only very rarely seen before). (business history). The concerns of shareholders over administration pay and stock losses periodically has led to more frequent calls for corporate governance reforms. Agency theory's dominance was highlighted in a 1989 article by Kathleen Eisenhardt ("Agency theory: an assessement and review". Indonesia. wealth. by the unrestrained issuance of stock options. Academy of Management Review). Eugene Fama and Michael Jensen's "The Separation of Ownership and Control" (1983. From the Chicago school of economics. In the 20th century in the immediate aftermath of the Wall Street Crash of 1929 legal scholars such as Adolf Augustus Berle. Global Crossing. the massive bankruptcies (and criminal malfeasance) of Enron and Worldcom. led to increased shareholder and governmental interest in corporate governance. US expansion after World War II through the emergence of multinational corporations saw the establishment of the managerial class.g. by the needs and desires of shareowners to exercise their rights of corporate ownership and to increase the value of their shares and. The lack of corporate governance mechanisms in these countries highlighted the weaknesses of the institutions in their economies. Arthur Andersen. This is reflected in the passage of the Sarbanes-Oxley Act of 2002.[4] In the first half of the 1990s. the following Harvard Business School management professors published influential monographs studying their prominence: Myles Mace (entrepreneurship). Fifty years later.

However this growth occurred primarily by way of individuals turning over their funds to 'professionals' to manage. such as officers of the corporation or business colleagues. [4] (Moreover. pension funds. such as wealthy businessmen or families. or Chief Executive Officer— CEO). mutual funds. the President/CEO generally takes the Chair of the Board position for his/herself (which makes it much more difficult for the institutional owners to "fire" him/her). Note that this process occurred simultaneously with the direct growth of individuals investing indirectly in the market (for example individuals have twice as much money in mutual funds as they do in bank accounts). of which there are many). Over time. and may be made up primarily of their friends and associates. and hence good corporate governance is a tool for socio-economic development.. "Look beyond Six Sigma and the latest technology fad. personal and emotional interest in the corporations whose shares they owned. they will simply sell out their interest. other investor groups. but rarely.1 A recent study by Credit Suisse found that companies in which "founding families retain a stake of more than 10% of the company's capital enjoyed a superior performance over their respective sectorial peers. and the Board diligently kept an eye on the company and its principal executives (they usually hired and fired the President. The Board is now mostly chosen by the President/CEO. if the owning institutions don't like what the President/CEO is doing and they feel that firing them will likely be costly (think "golden handshake") and/or time consuming. brokers. the majority of investment now is described as "institutional investment" even though the vast majority of the funds are for the benefit of individual investors. these statistics do not reveal the full extent of the practice. buyers and sellers of corporation stocks were individual investors. The Board of Directors of large corporations used to be chosen by the principal shareholders. See Quantity and display instructions under last reference. Program trading." See also. In this way." Since 1996. the hallmark of institutional trading. worldwide.[5] [edit] Role of Institutional Investors Many years ago. One of the biggest strategic advantages a company can have. banks.) Unfortunately. such as in mutual funds. there has been a concurrent lapse in the oversight of large corporations.who often had a vested. exchange-traded funds. because of so-called 'iceberg' orders. Not all are qualities unique to enterprises with retained family interests.[5] Forget the celebrity CEO. The rise of the institutional investor has brought with it some increase of professional diligence which has tended to improve regulation of the stock market (but not necessarily in the interest of the small investor or even of the naïve institutions. "BW identified five key ingredients that contribute to superior performance. which are now almost all owned by large institutions. hedge funds. Nowadays. institutional investors support . "Revolt in the Boardroom. this superior performance amounts to 8% per year. But they do go far to explain why it helps to have someone at the helm— or active behind the scenes— who has more than a mere paycheck and the prospect of a cozy retirement at stake.g." [6] In that last study. is blood lines." by Alan Murray. Since the (institutional) shareholders rarely object. Occasionally. averaged over 80% of NYSE trades in some months of 2007. and other financial institutions). [BusinessWeek has found]. markets have become largely institutionalized: buyers and sellers are largely institutions (e. insurance companies. who usually had an emotional as well as monetary investment in the company (think Ford).[edit] Impact of Corporate Governance The positive effect of corporate governance on different stakeholders ultimately is a strengthened economy.

. the largest pools of invested money (such as the mutual fund 'Vanguard 500'. social and other forms of capital. It is their responsibility to endorse the organisation's strategy. etc. supervise and remunerate senior executives and to ensure accountability of the organisation to its owners and authorities. aka. exchange-traded funds (ETFs). management.shareholder resolutions on such matters as executive pay and anti-takeover. develop directional policy. whether direct or indirect. customers and the community at large. the majority of the shares in the Japanese market are held by financial companies and industrial corporations (there is a large and deliberate amount of cross-holding among Japanese keiretsu corporations and within S. Korean chaebol 'groups') [8]. In corporations. based on the idea that this strategy will largely eliminate individual company financial or other risk and. With the significant increase in equity holdings of investors. known as a Corporate Secretary in the US and often referred to as a Chartered Secretary if qualified by the Institute of Chartered Secretaries and Administrators (ICSA). Directors. compliance and administration. The Company Secretary. the interests of most investors are now increasingly rarely tied to the fortunes of individual corporations. Since the marked rise in the use of Internet transactions from the 1990s.g. But. these investors have even less interest in a particular company's governance. the shareholder delegates decision rights to the manager to act in the principal's best interests. A board of directors often plays a key role in corporate governance. whereas stock in the USA or the UK and Europe are much more broadly owned. "poison pill" measures. the ownership of stocks in markets around the world varies. appoint. benefits and reputation. employees. in the effective performance of the organization. the board of directors. A key factor is an individual's decision to participate in an organisation e. there has been an opportunity for a reversal of the separation of ownership and control problems because ownership is not so diffuse. This separation of ownership from control implies a loss of effective control by shareholders over managerial decisions. Stock market index options [7].) has soared. workers and management receive salaries. the sale of derivatives (e. often still by large individual investors.g. [edit] Parties to corporate governance Parties involved in corporate governance include the regulatory body (e. State Street Corp. If some . while shareholders receive capital return. Even as the purchase of individual shares in any one corporation by individual investors diminishes. All parties to corporate governance have an interest. or the largest investment management firm for corporations. So.) are designed simply to invest in a very large number of different companies with sufficient liquidity. for example. Finally. creditors. human. In return these individuals provide value in the form of natural. is a high ranking professional who is trained to uphold the highest standards of corporate governance. a system of corporate governance controls is implemented to assist in aligning the incentives of managers with those of shareholders. effective operations. through providing financial capital and trust that they will receive a fair share of the organisational returns. the Chief Executive Officer. Partly as a result of this separation between the two parties. suppliers receive compensation for their goods or services.g. therefore. shareholders and Auditors). both individual and professional stock investors around the world have emerged as a potential new kind of major (short term) force in the direct or indirect ownership of corporations and in the markets: the casual participant. Customers receive goods and services. Other stakeholders who take part include suppliers.

Commonly accepted principles of corporate governance include: • Rights and equitable treatment of shareholders: Organizations should respect the rights of shareholders and help shareholders to exercise those rights. There are issues about the appropriate mix of executive and non-executive directors. senior executives should conduct themselves honestly and ethically. They should also implement procedures to independently verify and safeguard the integrity of the company's financial reporting. openness. Disclosure and transparency: Organizations should clarify and make publicly known the roles and responsibilities of board and management to provide shareholders with a level of accountability. and disclosure in financial reports. It needs to be of sufficient size and have an appropriate level of commitment to fulfill its responsibilities and duties. though. In particular. factual information. Role and responsibilities of the board: The board needs a range of skills and understanding to be able to deal with various business issues and have the ability to review and challenge management performance.parties are receiving more than their fair return then participants may choose to not continue participating leading to organizational collapse. that reliance by a company on the integrity and ethics of individuals is bound to eventual failure. mutual respect. internal controls and internal auditors the independence of the entity's external auditors and the quality of their audits • • • • Issues involving corporate governance principles include: • • . Integrity and ethical behaviour: Ethical and responsible decision making is not only important for public relations. responsibility and accountability. especially concerning actual or apparent conflicts of interest. many organizations establish Compliance and Ethics Programs to minimize the risk that the firm steps outside of ethical and legal boundaries. but it is also a necessary element in risk management and avoiding lawsuits. Organizations should develop a code of conduct for their directors and executives that promotes ethical and responsible decision making. Interests of other stakeholders: Organizations should recognize that they have legal and other obligations to all legitimate stakeholders. They can help shareholders exercise their rights by effectively communicating information that is understandable and accessible and encouraging shareholders to participate in general meetings. performance orientation. and commitment to the organization. [edit] Principles Key elements of good corporate governance principles include honesty. It is important to understand. trust and integrity. Disclosure of material matters concerning the organization should be timely and balanced to ensure that all investors have access to clear. Because of this. Of importance is how directors and management develop a model of governance that aligns the values of the corporate participants and then evaluate this model periodically for its effectiveness.

Corporate governance must go well beyond law. [edit] Internal corporate governance controls Internal corporate governance controls monitor activities and then take corrective action to accomplish organisational goals. John G. For quite some time it was confined only to corporate management. quality and frequency of financial and managerial disclosure. efficient and transparent administration and strive to meet certain well defined. discussed and avoided. [edit] Mechanisms and controls Corporate governance mechanisms and controls are designed to reduce the inefficiencies that arise from moral hazard and adverse selection." despite some feeble attempts from various quarters. to monitor managers' behaviour. a former member of the General Motors board of directors.[7] Different board structures are optimal for different firms. fire and compensate top management. the ability of the board to monitor the firm's executives is a function of its access to information. An ideal control system should regulate both motivation and ability. with its legal authority to hire. ex ante. The quantity. audit • .these should be constantly evolving due to interplay of many factors and the roles played by the more progressive/responsible elements within the corporate sector. an independent third party (the external auditor) attests the accuracy of information provided by management to investors. safeguards invested capital. That responsibility cannot be relegated to management."[6] However it should be noted that a corporation should cease to exist if that is in the best interests of its stakeholders. wrote: "The Board is responsible for the successful perpetuation of the corporation. they may not always result in more effective corporate governance and may not increase performance. the degree and extent to which the board of Director (BOD) exercise their trustee responsibilities (largely an ethical commitment). That is not so. for it must include a fair. written objectives. Moreover. It is something much broader. For example. therefore. Executive directors possess superior knowledge of the decision-making process and therefore evaluate top management on the basis of the quality of its decisions that lead to financial performance outcomes. and the commitment to run a transparent organization. Whilst non-executive directors are thought to be more independent. that executive directors look beyond the financial criteria. remains an ambiguous and often misunderstood phrase.• • • • • • oversight and management of risk oversight of the preparation of the entity's financial statements review of the compensation arrangements for the chief executive officer and other senior executives the resources made available to directors in carrying out their duties the way in which individuals are nominated for positions on the board dividend policy Nevertheless "corporate governance. Examples include: • Monitoring by the board of directors: The board of directors. Smale. Regular board meetings allow potential problems to be identified. It could be argued. Internal control procedures and internal auditors: Internal control procedures are policies implemented by an entity's board of directors. Perpetuation for its own sake may be counterproductive.

require that the President be a different person from the Treasurer. the shareholders must combine with others to form a significant voting group which can pose a real threat of carrying resolutions or appointing directors at a general meeting. Internal auditors are personnel within an organization who test the design and implementation of the entity's internal control procedures and the reliability of its financial reporting • Balance of power: The simplest balance of power is very common.committee. however. Remuneration: Performance-based remuneration is designed to relate some proportion of salary to individual performance. It may be in the form of cash or non-cash payments such as shares and share options. Monitoring costs: A barrier to shareholders using good information is the cost of processing it. and compliance with laws and regulations. especially to a small shareholder. another group review and can veto the changes. and other personnel to provide reasonable assurance of the entity achieving its objectives related to reliable financial reporting. employees) outside the three groups are being met. superannuation or other benefits. Supply of accounting information: Financial accounts form a crucial link in enabling providers of finance to monitor directors. This application of separation of power is further developed in companies where separate divisions check and balance each other's actions. and can elicit myopic behaviour. are reactive in the sense that they provide no mechanism for preventing mistakes or opportunistic behaviour. Imperfections in the • • . One group may propose company-wide administrative changes. The traditional answer to this problem is the efficient market hypothesis (in finance. • [edit] External corporate governance controls External corporate governance controls encompass the controls external stakeholders exercise over the organisation. Examples include: • • • • • • • competition debt covenants demand for and assessment of performance information (especially financial statements) government regulations managerial labour market media pressure takeovers [edit] Systemic problems of corporate governance • Demand for information: In order to influence the directors. Such incentive schemes. which suggests that the small shareholder will free ride on the judgements of larger professional investors. shareholders. the efficient market hypothesis (EMH) asserts that financial markets are efficient). management. and a third group check that the interests of people (customers. operating efficiency.

financial reporting process will cause imperfections in the effectiveness of corporate governance. views inevitably led to the client prevailing. However.[8] Accountants and auditors are the primary providers of information to capital market participants. The exercise of this choice to improve apparent performance (popularly known as creative accounting) imposes extra information costs on users. This should. The directors of the company should be entitled to expect that management prepare the financial information in compliance with statutory and ethical obligations. and rely on auditors' competence. In discussions of accounting practices with Arthur Andersen.[citation needed] [edit] Regulation Companies law Company · Business . and even the definition of the accounting entity. it can involve non-disclosure of information. Enron concealed huge losses by creating illusions that a third party was contractually obliged to pay the amount of any losses. good financial reporting is not a sufficient condition for the effectiveness of corporate governance if users don't process it. This may result in a conflict of interest which places the integrity of financial reports in doubt due to client pressure to appease management. [edit] Role of the accountant Financial reporting is a crucial element necessary for the corporate governance system to function effectively. However. ideally. or if the informed user is unable to exercise a monitoring role due to high costs (see Systemic problems of corporate governance above). The power of the corporate client to initiate and terminate management consulting services and. Similar provisions are in place under clause 49 of SEBI Act in India. The Enron collapse is an example of misleading financial reporting. In the extreme. more fundamentally. Changes enacted in the United States in the form of the SarbanesOxley Act (in response to the Enron situation as noted below) prohibit accounting firms from providing both auditing and management consulting services. One area of concern is whether the auditing firm acts as both the independent auditor and management consultant to the firm they are auditing. the partner in charge of auditing. be corrected by the working of the external auditing process. Current accounting practice allows a degree of choice of method in determining the method of measurement. to select and dismiss accounting firms contradicts the concept of an independent auditor. the third party was an entity in which Enron had a substantial economic stake. criteria for recognition.

K.V.Sole proprietorship Partnership (General · Limited · LLP) Corporation Cooperative United States S corporation · C corporation LLC · LLLP · Series LLC Delaware corporation Nevada corporation Massachusetts business trust UK / Ireland / Commonwealth Limited company (by shares · by guarantee Public · Proprietary) Unlimited company Community interest company European Union / EEA SE · SCE · SPE · EEIG Elsewhere AB · AG · ANS · A/S · AS · GmbH K. · more Doctrines . · N.A. · OY · S.

Principles on the other hand is a form of self regulation. risk and compliance solutions available to capture information in order to evaluate risk and to identify gaps in the organization’s principles and processes. as opposed to a real.Corporate governance Limited liability · Ultra vires Business judgment rule Internal affairs doctrine De facto corporation and corporation by estoppel Piercing the corporate veil Rochdale Principles Related areas Contract · Civil procedure v • d • e [edit] Rules versus principles Rules are typically thought to be simpler to follow than principles. This type of software is based on project management style methodologies such as the ABACUS methodology which attempts to unify the management of these areas. [edit] Enforcement Enforcement can affect the overall credibility of a regulatory system. . Rules also reduce discretion on the part of individual managers or auditors. for taken too far it can dampen valuable risk-taking. risk. They may be ill-equipped to deal with new types of transactions not covered by the code. rather than treat them as separate entities. however. Nevertheless. Moreover. They both deter bad actors and level the competitive playing field. It also pre-empts over zealous legislations that might not be practical. even if clear rules are followed. It allows the sector to determine what standards are acceptable or unacceptable. one can still find a way to circumvent their underlying purpose . In practice. greater enforcement is not always better. demarcating a clear line between acceptable and unacceptable behaviour.this is harder to achieve if one is bound by a broader principle. this is largely a theoretical. There are various integrated governance. In practice rules can be more complex than principles.

the chaebols in South Korea and many others are examples of arrangements which try to respond to the same corporate governance challenges as in the US. and the community. complex companies. directors have to cover more of their own legal bills and are frequently sued by bankruptcy trustees as well as investors. The intricated shareholding structures of keiretsus in Japan. enlightened directors recognize that it is not their role to be involved in the day-to-day operations of the corporation. In the United States. customers. where the controlling families favor subsidiaries for which they have higher cash flow rights. The liberal model that is common in Anglo-American countries tends to give priority to the interests of shareholders. These differ according to the variety of capitalism in which they are embedded. suppliers. most of the time. managers.[10] Another proposal is for the government to allow poorly-managed businesses to go bankrupt. the main problem is that the voting ownership is tightly-held by families through pyramidal ownership and dual shares (voting and nonvoting). the main problem is the conflict of interest between widely-dispersed shareholders and powerful managers.[edit] Action Beyond Obligation Enlightened boards regard their mission as helping management lead the company. They are more likely to be supportive of the senior management team. the enlightened board is aligned on the critically important issues facing the company. At the same time. what most distinguishes enlightened directors from traditional and standard directors is the passionate obligation they feel to engage in the day-to-day challenges and strategizing of the company. They do not need Sarbanes-Oxley to mandate that they protect values and ethics or monitor CEO performance. enlightened boards regard compliance with regulations as merely a baseline for board performance. Because enlightened directors strongly believe that it is their duty to involve themselves in an intellectual analysis of how the company should move forward into the future. Unlike traditional boards. since after a filing. The coordinated model that one finds in Continental Europe and Japan also recognizes the interests of workers. enlightened boards do not feel hampered by the rules and regulations of the Sarbanes-Oxley Act.[12] [edit] Anglo-American Model There are many different models of corporate governance around the world.[9] [edit] Proposals The book Money for Nothing suggests importing from England the concept of term limits to prevent independent directors from becoming too close to management and demanding that directors invest a meaningful amount of their own money (not grants of stock or options that they receive free) to ensure that the directors' interests align with those of average investors. They lead by example. Enlightened boards can be found in very large. Unlike standard boards that aim to comply with regulations. Each model has its own distinct . In Europe. the heavy presence of banks in the equity of German firms [9]. Enlightened directors go far beyond merely meeting the requirements on a checklist. This can lead to "self-dealing". Overall. there is a considerable variation in corporate governance models around the world.[11] [edit] Corporate governance models around the world Although the US model of corporate governance is the most notorious. as well as smaller companies.

competitive advantage. The liberal model of corporate governance encourages radical innovation and cost competition, whereas the coordinated model of corporate governance facilitates incremental innovation and quality competition. However, there are important differences between the U.S. recent approach to governance issues and what has happened in the UK. In the United States, a corporation is governed by a board of directors, which has the power to choose an executive officer, usually known as the chief executive officer. The CEO has broad power to manage the corporation on a daily basis, but needs to get board approval for certain major actions, such as hiring his/her immediate subordinates, raising money, acquiring another company, major capital expansions, or other expensive projects. Other duties of the board may include policy setting, decision making, monitoring management's performance, or corporate control. The board of directors is nominally selected by and responsible to the shareholders, but the bylaws of many companies make it difficult for all but the largest shareholders to have any influence over the makeup of the board; normally, individual shareholders are not offered a choice of board nominees among which to choose, but are merely asked to rubberstamp the nominees of the sitting board. Perverse incentives have pervaded many corporate boards in the developed world, with board members beholden to the chief executive whose actions they are intended to oversee. Frequently, members of the boards of directors are CEOs of other corporations, which some[13] see as a conflict of interest.

[edit] Codes and guidelines
Corporate governance principles and codes have been developed in different countries and issued from stock exchanges, corporations, institutional investors, or associations (institutes) of directors and managers with the support of governments and international organizations. As a rule, compliance with these governance recommendations is not mandated by law, although the codes linked to stock exchange listing requirements may have a coercive effect. For example, companies quoted on the London and Toronto Stock Exchanges formally need not follow the recommendations of their respective national codes. However, they must disclose whether they follow the recommendations in those documents and, where not, they should provide explanations concerning divergent practices. Such disclosure requirements exert a significant pressure on listed companies for compliance. In the United States, companies are primarily regulated by the state in which they incorporate though they are also regulated by the federal government and, if they are public, by their stock exchange. The highest number of companies are incorporated in Delaware, including more than half of the Fortune 500. This is due to Delaware's generally business-friendly corporate legal environment and the existence of a state court dedicated solely to business issues (Delaware Court of Chancery). Most states' corporate law generally follow the American Bar Association's Model Business Corporation Act. While Delaware does not follow the Act, it still considers its provisions and several prominent Delaware justices, including former Delaware Supreme Court Chief Justice E. Norman Veasey, participate on ABA committees. One issue that has been raised since the Disney decision[14] in 2005 is the degree to which companies manage their governance responsibilities; in other words, do they merely try to supersede the legal threshold, or should they create governance guidelines that ascend to the level of best practice. For example, the guidelines issued by associations of directors (see Section 3 above), corporate managers and individual companies tend to be wholly voluntary. For

example, The GM Board Guidelines reflect the company’s efforts to improve its own governance capacity. Such documents, however, may have a wider multiplying effect prompting other companies to adopt similar documents and standards of best practice. One of the most influential guidelines has been the 1999 OECD Principles of Corporate Governance. This was revised in 2004. The OECD remains a proponent of corporate governance principles throughout the world. Building on the work of the OECD, other international organisations, private sector associations and more than 20 national corporate governance codes, the United Nations Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) has produced voluntary Guidance on Good Practices in Corporate Governance Disclosure. This internationally agreed[15] benchmark consists of more than fifty distinct disclosure items across five broad categories:[16]
• • • • • Auditing Board and management structure and process Corporate responsibility and compliance Financial transparency and information disclosure Ownership structure and exercise of control rights

The World Business Council for Sustainable Development WBCSD has done work on corporate governance, particularly on accountability and reporting, and in 2004 created an Issue Management
Tool: Strategic challenges for business in the use of corporate responsibility codes, standards, and frameworks.This document aims to provide general information, a "snap-shot" of the landscape

and a perspective from a think-tank/professional association on a few key codes, standards and frameworks relevant to the sustainability agenda.

[edit] Ownership structures
Ownership structures refers to the various patterns in which shareholders seem to set up with respect to a certain group of firms. It is a tool frequently employed by policy-makers and researchers in their analyses of corporate governance within a country or business group.And ownership can be changed by the stakeholders of the company. Generally, ownership structures are identified by using some observable measures of ownership concentration (i.e. concentration ratios) and then making a sketch showing its visual representation. The idea behind the concept of ownership structures is to be able to understand the way in which shareholders interact with firms and, whenever possible, to locate the ultimate owner of a particular group of firms. Some examples of ownership structures include pyramids, cross-share holdings, rings, and webs.

[edit] Corporate governance and firm performance
In its 'Global Investor Opinion Survey' of over 200 institutional investors first undertaken in 2000 and updated in 2002, McKinsey found that 80% of the respondents would pay a premium for well-governed companies. They defined a well-governed company as one that had mostly outside directors, who had no management ties, undertook formal evaluation of its directors, and was responsive to investors' requests for information on governance issues. The size of the premium varied by market, from 11% for Canadian companies to around 40% for companies where the regulatory backdrop was least certain (those in Morocco, Egypt and Russia).

Other studies have linked broad perceptions of the quality of companies to superior share price performance. In a study of five year cumulative returns of Fortune Magazine's survey of 'most admired firms', Antunovich et al. found that those "most admired" had an average return of 125%, whilst the 'least admired' firms returned 80%. In a separate study Business Week enlisted institutional investors and 'experts' to assist in differentiating between boards with good and bad governance and found that companies with the highest rankings had the highest financial returns. On the other hand, research into the relationship between specific corporate governance controls and some definitions of firm performance has been mixed and often weak. The following examples are illustrative.
[edit] Board composition

Some researchers have found support for the relationship between frequency of meetings and profitability. Others have found a negative relationship between the proportion of external directors and profitability, while others found no relationship between external board membership and profitability. In a recent paper Bhagat and Black found that companies with more independent boards are not more profitable than other companies. It is unlikely that board composition has a direct impact on profitability, one measure of firm performance.
[edit] Remuneration/Compensation

The results of previous research on the relationship between firm performance and executive compensation have failed to find consistent and significant relationships between executives' remuneration and firm performance. Low average levels of pay-performance alignment do not necessarily imply that this form of governance control is inefficient. Not all firms experience the same levels of agency conflict, and external and internal monitoring devices may be more effective for some than for others. Some researchers have found that the largest CEO performance incentives came from ownership of the firm's shares, while other researchers found that the relationship between share ownership and firm performance was dependent on the level of ownership. The results suggest that increases in ownership above 20% cause management to become more entrenched, and less interested in the welfare of their shareholders. Some argue that firm performance is positively associated with share option plans and that these plans direct managers' energies and extend their decision horizons toward the long-term, rather than the short-term, performance of the company. However, that point of view came under substantial criticism circa in the wake of various security scandals including mutual fund timing episodes and, in particular, the backdating of option grants as documented by University of Iowa academic Erik Lie and reported by James Blander and Charles Forelle of the Wall Street Journal. Even before the negative influence on public opinion caused by the 2006 backdating scandal, use of options faced various criticisms. A particularly forceful and long running argument concerned the interaction of executive options with corporate stock repurchase programs. Numerous authorities (including U.S. Federal Reserve Board economist Weisbenner) determined options may be employed in concert with stock buybacks in a manner contrary to shareholder interests. These authors argued that, in part, corporate stock buybacks for U.S. Standard & Poors 500 companies surged to a $500 billion annual rate in late 2006 because of the impact of options. A compendium of academic works on the option/buyback issue is included in the study Scandal by author M. Gumport issued in 2006.

A combination of accounting changes and governance issues led options to become a less popular means of remuneration as 2006 progressed, and various alternative implementations of buybacks surfaced to challenge the dominance of "open market" cash buybacks as the preferred means of implementing a share repurchase plan.

Agenda 21
Agenda 21 is a programme run by the United Nations (UN) related to sustainable development and was the planet's first summit to discuss global warming related issues. It is a comprehensive blueprint of action to be taken globally, nationally and locally by organizations of the UN, governments, and major groups in every area in which humans directly affect the environment.

Development of Agenda 21
The full text of Agenda 21 was revealed at the United Nations Conference on Environment and Development (Earth Summit), held in Rio de Janeiro on June 14, 1992, where 178 governments voted to adopt the program. The final text was the result of drafting, consultation and negotiation, beginning in 1989 and culminating at the two-week conference. The number 21 refers to an agenda for the 21st century. It may also refer to the number on the UN's agenda at this particular summit.

[edit] Rio5
In 1997, the General Assembly of the UN held a special session to appraise five years of progress on the implementation of Agenda 21 (Rio +5). The Assembly recognized progress as 'uneven' and identified key trends including increasing globalization, widening inequalities in income and a continued deterioration of the global environment. A new General Assembly Resolution (S-19/2) promised further action.

[edit] The Johannesburg Summit
The Johannesburg Plan of Implementation, agreed at the World Summit on Sustainable Development (Earth Summit 2002) affirmed UN commitment to 'full implementation' of Agenda 21, alongside achievement of the Millennium Development Goals and other international agreements.

[edit] Implementation
The Commission on Sustainable Development acts as a high level forum on sustainable development and has acted as preparatory committee for summits and sessions on the implementation of Agenda 21. The United Nations Division for Sustainable Development acts as the secretariat to the Commission and works 'within the context of' Agenda 21. Implementation by member states remains essentially voluntary.

[edit] Structure and contents
There are 40 chapters in the Agenda 21, divided into four main sections.

technology transfer. regional and local levels. [edit] Section III: Strengthening the Role of Major Groups Includes the roles of children and youth. international institutions and mechanisms and financial mechanisms. Such programmes are often known as 'Local Agenda 21' or 'LA21'. combating deforestation. national. search . women. education.[1] Decision support system From Wikipedia. [edit] Section IV: Means of Implementation includes science.[edit] Section I: Social and Economic Dimensions Includes combating poverty. conservation of biological diversity (biodiversity). the free encyclopedia Jump to:navigation. business and workers. population and demographic dynamics. promoting sustainable settlement patterns and integrating environment and development into decision-making. [edit] Section II: Conservation and Management of Resources for Development Includes atmospheric protection. Some national and state governments have legislated or advised that local authorities take steps to implement the plan locally. protecting fragile environments. promoting health. local authorities. NGOs. Implementation [edit] Local Agenda 21 The implementation of Agenda 21 was intended to involve action at international. changing consumption patterns. as recommended in Chapter 28 of the document. and control of pollution.

and the technical work on interactive computer systems. data warehouses. [edit] History According to Keen (1978)[1]. and data marts). mainly carried out at the Massachusetts Institute of Technology in the 1960s.[1] It . Typical information that a decision support application might gather and present are: • • • inventories of all of your current information assets (including legacy and relational data sources. projected revenue figures based on new product sales assumptions.1 Development Frameworks 5 Classifying DSS 6 Applications 7 Benefits of DSS 8 See also 9 References 10 Further reading [edit] Overview A Decision Support System (DSS) is a class of information systems (including but not limited to computerized systems) that support business and organizational decision-making activities. Decision support systems constitute a class of computer-based information systems including knowledge-based systems that support decision-making activities. cubes. which may be rapidly changing and not easily specified in advance. DSSs serve the management level of the organization and help to take decisions. documents. the concept of decision support has evolved from two main areas of research: The theoretical studies of organizational decision making done at the Carnegie Institute of Technology during the late 1950s and early 1960s. A properly designed DSS is an interactive software-based system intended to help decision makers compile useful information from a combination of raw data. comparative sales figures between one week and the next.Example of a Decision Support System for John Day Reservoir. Contents [hide] • • • • • • • • • • 1 Overview 2 History 3 Taxonomies 4 Architecture ○ 4. personal knowledge. or business models to identify and solve problems and make decisions.

and end 1980s DSS faced a new challenge towards the design of intelligent workstations. and organizational decision support systems (ODSS) evolved from the single user and model-oriented DSS. examples include integrated tools like Microsoft's NetMeeting or Groove[7] . The system again improves. have been focused on decision makers in considered that the concept of DSS became an area of research of its own in the middle of the 1970s. group decision support systems (GDSS). Furthermore. documentdriven DSS. [edit] Taxonomies As with the definition. or refine the decision suggestions provided by the system. and refines the suggestions of the decision maker and sends them back to her for validation. According to Sol (1987)[2] the definition and scope of DSS has been migrating over the years. Late 1970s the DSS movement started focusing on "interactive computer-based systems which help decision-makers utilize data bases and models to solve ill-structured problems". completes. and model-driven DSS. A passive DSS is a system that aids the process of decision making. there is no universally-accepted taxonomy of DSS either. although hypertext researchers have generally been concerned with information overload. An active DSS can bring out such decision suggestions or solutions. before gaining in intensity during the 1980s. Different authors propose different classifications. knowledge-driven DSS. Haettenschwiler[5] differentiates passive. This decision support system is credited with significantly reducing travel delays by aiding the management of ground operations at various airports. Using the relationship with the user as the criterion. Using the mode of assistance as the criterion. new Web-based analytical applications were introduced. The whole process then starts again. until a consolidated solution is generated. beginning with O'Hare International Airport in Chicago and Stapleton Airport in Denver Colorado.[3][4] Beginning in about 1990. certain researchers. DSS also have a weak connection to the user interface paradigm of hypertext. A cooperative DSS allows the decision maker (or its advisor) to modify. before sending them back to the system for validation. The advent of better and better reporting technologies has seen DSS start to emerge as a critical component of management design. notably Douglas Engelbart. Examples of this can be seen in the intense amount of discussion of DSS in the education environment. Another taxonomy for DSS has been created by Daniel Power. data-driven DSS. executive information systems (EIS). and cooperative DSS. data warehousing and on-line analytical processing (OLAP) began broadening the realm of DSS. As the turn of the millennium approached.[2] In 1987 Texas Instruments completed development of the Gate Assignment Display System (GADS) for United Airlines. but that cannot bring out explicit decision suggestions or solutions. active. complete. Power differentiates communication-driven DSS. Both the University of Vermont PROMIS system (for medical decision making) and the Carnegie Mellon ZOG/KMS system (for military and business decision making) were decision support systems which also were major breakthroughs in user interface research. In the 1980s DSS should provide systems "using suitable and available technology to improve effectiveness of managerial and professional activities". In the middle and late 1980s.[6] • A communication-driven DSS supports more than one person working on a shared task. In the 1970s DSS was described as "a computer based system to aid decision making".

and 3. An enterprise-wide DSS is linked to large data warehouses and serves many managers in the company. • • • Using scope as the criterion. optimization. rules. the decision context and user criteria).[6] A model-driven DSS emphasizes access to and manipulation of a statistical. and manipulates unstructured information in a variety of electronic formats.[10] . Power[9] differentiates enterprise-wide DSS and desktop DSS. and the development approach.• A data-driven DSS or data-oriented DSS emphasizes access to and manipulation of a time series of internal company data and.. retrieves. external data. [edit] Architecture Design of a Drought Mitigation Decision Support System.e. Three fundamental components of a DSS architecture are:[5][6][10][11][12] 1. sometimes. Such a framework includes people. single-user DSS is a small system that runs on an individual manager's PC. A knowledge-driven DSS provides specialized problem-solving expertise stored as facts. financial. the user interface. the model (i. procedures. A desktop.[5][12] [edit] Development Frameworks DSS systems are not entirely different from other systems and require a structured approach. the database (or knowledge base). technology. or simulation model. A document-driven DSS manages. or in similar structures. Model-driven DSS use data and parameters provided by users to assist decision makers in analyzing a situation. The users themselves are also important components of the architecture. they are not necessarily data-intensive. 2. Dicodess is an example of an open source model-driven DSS generator[8].

Holsapple and Whinston[13] classify DSS into the following six frameworks: Text-oriented DSS. The actual application that will be used by the user. Other examples include a bank loan officer verifying the credit of a loan applicant or an engineering firm that has bids on several projects and wants to know if they can be competitive with their costs. The nascent field of Decision engineering treats the decision itself as an engineered object. DSS components may be classified as: 1. but a mix of two or more architecture in one. [edit] Classifying DSS There are several ways to classify DSS applications. interrelated categories[14]: Personal Support. and characteristics to analyze 2. This level makes use of case tools or systems such as Crystal. The user can act upon that particular problem. It is a hybrid system that includes two or more of the five basic structures described by Holsapple and Whinston[13]. The support given by DSS can be separated into three distinct. and iThink. This is the part of the application that allows the decision maker to make decisions in a particular problem area. DSS generators including special languages. Inputs: Factors. A compound DSS is the most popular classification for a DSS. Once the system is designed. . 2. Spreadsheet-oriented DSS. Solver-oriented DSS.DSS technology levels (of hardware and software) may include: 1. Decisions: Results generated by the DSS based on user criteria DSSs which perform selected cognitive decision-making functions and are based on artificial intelligence or intelligent agents technologies are called Intelligent Decision Support Systems (IDSS) [15] . Tools include lower level hardware/software. function libraries and linking modules An iterative developmental approach allows for the DSS to be changed and redesigned at various intervals. [edit] Applications As mentioned above. User Knowledge and Expertise: Inputs requiring manual analysis by the user 3. Rule-oriented DSS. and applies engineering principles such as Design and Quality assurance to an explicit representation of the elements that make up a decision. and Organizational Support. there are theoretical possibilities of building such systems in any knowledge domain. numbers. Group Support. Outputs: Transformed data from which DSS "decisions" are generated 4. Database-oriented DSS. AIMMS. Generator contains Hardware/software environment that allows people to easily develop specific DSS applications. 3. One example is the Clinical decision support system for medical diagnosis. it will need to be tested and revised for the desired outcome. and Compound DSS. Not every DSS fits neatly into one category.

These often require a simulation expert to implement modifications. and predictive analytics. All process information is stored in the database. harvest scheduling to sustainability and ecosystem protection have been addressed by modern DSSs.g. For example. the DSSAT4 package[16][17]. including activity. A growing area of DSS application. and modify their own unique process flows and then use simulation to study their performance in an iterative manner. “Level 1” models are traditional desktop simulation models that are executed within the native software package. The database becomes a template library that users can access to build. process metrics). and analyze results. Executive dashboard and other business performance software allow faster decision making. developed through financial support of USAID during the 80's and 90's. which can result in hundreds of derailments per year. CACI . A problem faced by any railroad is worn-out or defective rails. A comprehensive list and discussion of all available systems in forest management is being compiled under the COST action Forsys A specific example concerns the Canadian National Railway system. CACI defines three levels of simulation model maturity. identification of negative trends. “Level 3” models are also embedded in a web-based application but are tied to real-time operational data. a DSS can be designed to help make decisions on the stock market. which tests its equipment on a regular basis using a decision support system. This approach involves developing and maintaining reusable models that allow decision makers to easily define and extract business level information (e. many constraints to the successful adoption on DSS in agriculture[18]. DSS are also prevalent in forest management where the long planning time frame demands specific requirements. from log transportation. Under a DSS. it can be used in any field where organization is necessary. concepts. has begun integrating simulation and decision support systems. “Level 2” models embed the modeling engine in a web application that allows the decision maker to make process and parameter changes without the assistance of an analyst. and better allocation of business resources. run scenarios..DSS is extensively used in business and management. has allowed rapid assessment of several agricultural production systems around the world to facilitate decisionmaking at the farm and policy levels. There are. process/work flow management. CN managed to decrease the incidence of derailments at the same time other companies were experiencing an increase. Additionally. DSS has many applications that have already been spoken about. The execution of “level 3” models can be triggered automatically based on this real-time data and the corresponding results can be displayed on the manager’s desktop showing the prevailing trends and predictive analytics given the current processes and state of the system. or deciding which area or segment to market a product toward. “Level 1” models are decomposed into their business objects and stored in a database. principles. and techniques is in agricultural production. However. All aspects of Forest management. however. and costing data. change. marketing for sustainable development. The advantage of this approach is that “level 1” models developed for the FDA projects can migrate to “level 2 and 3” models in support of decision support. resource. production/operations management.

g. and concern for public image. 3. 2. 2. focused discussions. Developing the vision can be the most enjoyable part of planning. Therefore. i. participants may use methods ranging from highly analytical and rational to highly creative and divergent. the mission statement describes the overall purpose of the organization. Developing a mission statement can be quick culture-specific. etc..Developing a Mission Statement 1. 4. 8. divergent experiences around daydreams.g.. Recently. focused discussions. too often including highly idealistic phrasing and activities which the organization cannot realistically aspire. markets. sharing stories. etc. Consider any changes that may be needed in wording of the mission statement because of any new suggested strategies during a recent strategic planning process. Basically.. Developing a Values Statement 1. including what drives members’ priorities and how they truly act in the organization. i. e. sharing stories. i. 5. the vision was a compelling description of the state and function of the organization once it had implemented the strategic plan..e. Therefore. If the organization elects to develop a vision statement before developing the mission statement. etc. ask “Why does the image. the vision has become more of a motivational tool.what is it’s purpose?” This purpose is often the same as the mission.e. Values .. divergent experiences around daydreams. and maybe priorities of activities for survival. When wording the mission statement. 4. visit with the participants how they might like to arrive at description of their organizational mission. consider the organization's products. e. but the part where time easily gets away from you. values. the vision exist -. When refining the mission. Does the mission statement include sufficient description that the statement clearly separates the mission of the organization from other organizations? Developing a Vision Statement 1. Note that originally. 3. a useful exercise is to add or delete a word from the mission to realize the change in scope of the mission statement and assess how concise is its wording. 7. The vision statement includes vivid description of the organization as it effectively carries out its operations. visit with the participants how they might like to arrive at description of their organizational vision. Developing a vision statement can be quick culture-specific.e. a very attractive image toward which the organization was attracted and guided by the strategic plan. Ensure that wording of the mission is to the extent that management and employees can infer some order of priorities in how products and services are delivered. participants may use methods ranging from highly analytical and rational to highly creative and divergent. services. Values represent the core priorities in the organization’s culture. 6.

e. divergent experiences around daydreams. i. succinctly describing why it exists and what it does to achieve its Vision. 3. [edit] Mission statements and vision statements Organizations sometimes summarize goals and objectives into a mission statement and/or a vision statement. sharing stories. vision and values Mission: Defines the fundamental purpose of an organization or an enterprise. Vision: Defines the desired or intended future state of an organization or enterprise in terms of its fundamental objective and/or strategic direction. They often drive the intent and direction for “organic” planners. 4. shareholders. Record each preferred value on a flash card. Values drive an organization's culture and priorities. For example a charity working with the poor might have a vision statement which read "A world without poverty" It is sometimes used to set out a 'picture' of the organization in the future. sometimes describing how the organization would like the world in which it operates to be. Therefore.g. .are increasingly important in strategic planning. 2. Establish four to six core values from which the organization would like to operate.. visit with the participants how they might like to arrive at description of their organizational values. Consider values of customers. the basis for all the organization's planning. 2.e. Vision is a long term view. Incorporate into the strategic plan. or 3 in terms of the priority needed by the organization with 3 indicating the value is very important to the organization and 1 is least important. [edit] Mission. Then address discrepancies where a value is highly preferred (ranked with a 3). actions to align actual behavior with preferred behaviors. A vision statement provides inspiration. Strategy: Strategy narrowly defined. Others begin with a vision and mission and use them to formulate goals and objectives. It could answer the question: "Where do we want to go?" Values: Beliefs that are shared among the stakeholders of an organization. 5. Notice any differences between the organization’s preferred values and its true values (the values actually reflected by members’ behaviors in the organization). employees and the community. means "the art of the general" (from Greek stratigos).. etc. participants may use methods ranging from highly analytical and rational to highly creative and divergent. Then go through the cards again to rank how people think the values are actually being enacted in the organization with 3 indicating the values are fully enacted and 1 indicating the value is hardly reflected at all. but hardly enacted (ranked with a 1). Developing a values statement can be quick culture-specific. then have each member “rank” the values with 1. A combination of the ends (goals) for which the firm is striving and the means (policies)by which it is seeking to get there. focused discussions.

If you have a new start up business. Which comes first? The mission statement or the vision statement? That depends. but that can be a grave mistake.While the existence of a shared mission is extremely useful. A mission statement can resemble a vision statement in a few companies. A Mission statement is more specific to what the enterprise can achieve itself. It provides clear decision-making criteria. Measurable. and where you want to go . It can confuse people. the mission guides the vision statement and the rest of the strategic plan. your current situation in terms of internal resources and capabilities (strengths and/or weaknesses) and external conditions (opportunities and/or threats). so it is useful to examine them here. If you have an established business where the mission is established. However. and sometimes one is simply used as a longer term version of the other. Achievable. many strategy specialists question the requirement for a written mission statement. and those prospects are managers. Either way. They both are an essential part of the strategy-making process. Many people mistake vision statement for mission statement. These statements have a direct bearing on the bottom line and success of the organization. Vision should describe what will be achieved in the wider sphere if the organization and others are successful in achieving their individual missions. The Vision should describe why it is important to achieve the Mission. then the vision will guide the mission statement and the rest of the strategic plan. Statements create a sense of direction and opportunity. It concentrates on the future.the vision for the future. The mission statement can galvanize the people to achieve defined objectives.[citation needed] . employees and sometimes even customers. or how it wants the world in which it operates to be. It's important that you keep the end or desired result in sight from the start. you need to know your fundamental purpose . even if they are stretch objectives. It is a source of inspiration. A Vision statement outlines what the organization wants to be. then many times. • An advantage of having a statement is that it creates value for those who get exposed to the statement.the mission. Features of an effective vision statement include: • • • • • • Clarity and lack of ambiguity Vivid and clear picture Description of a bright future Memorable and engaging wording Realistic aspirations Alignment with organizational values and culture . Relevant and Time-bound) terms. A Vision statement defines the purpose or broader goal for being in existence or in the business and can remain the same for decades if crafted well. new program or plan to re engineer your current services. It informs you of the desired level of performance. provided it can be elucidated in SMART (Specific. • A Mission statement tells you the fundamental purpose of the organization. It defines the customer and the critical processes. there are many models of strategic planning that start with mission statements. A mission statement provides a path to realize the vision in line with its values.

mission statements need to be subjected to an internal assessment and an external assessment. Firstly.what resources are required to execute the activities? See . These discrepancies between these two assessments can give insight on the organization's mission statement effectiveness. and encouraging others to craft their own personal vision compatible with the organization's overall vision.what specific actions must be taken to close the gap between today's situation and the ideal state? Plan . and following on from this.define goals/objectives Draw .Define the vision and set a mission statement with hierarchy of goals and objectives SWOT .Monitor and get feedback from implemented processes to fully control the operation [edit] Situational analysis .Implementation of the agreed upon processes Control .define goals and/or objectives (sometimes called ideal state) Path . "What can (and /or does) the organization do or contribute to fulfill those aspirations?".what is today's situation? Think . an organizational vision statement must (the theory states) become assimilated into the organization's culture. [edit] Methodologies There are many approaches to strategic planning but typically a three-step process may be used: • • • • • • • • • • • • • • • Situation . acting as role-models by embodying the vision. creating narratives that illustrate the vision.To become really effective. The internal assessment should focus on how members inside the organization interpret their mission a route to achieving the goals/objectives Vision . Another approach to defining Vision and Mission is to pose two questions.evaluate the current situation and how it came about. The external assessment — which includes all of the businesses stakeholders — is valuable since it offers a different perspective. In addition.Formulate actions and processes to be taken to attain these goals Implement . "What aspirations does the organization have for the world in which it operates and has some influence over?". The succinct answer to the first question provides the basis of the Vision Statement. The answer to the second question determines the Mission Statement.what is today's situation? What is the gap from ideal and why? Think .what is the ideal image or the desired end state? See . creating short-term objectives compatible with the a possible route to the goals/objectives Draw . Leaders have the responsibility of communicating the vision regularly. Target .Analysis conducted according to the desired goals One alternative approach is called Draw-See-Think An alternative to the Draw-See-Think approach is called See-Think-Draw In other terms strategic planning can be as follows: Formulate .

[edit] Goals. but don’t get articulated (translated) into day-to-day projects and tasks that will be required to achieve the plan. The analysis has to be executed at an internal level as well as an external level to identify all opportunities and threats of the external environment as well as the strengths and weaknesses of the organizations. It is practiced widely informally and formally. Terminology or word choice. It is also uncommon to find that the first two . the objective in a lower rank answers to the question "How?" and the objective in a higher rank answers to the question "Why?" The . tactics and and competition . overlap and fail to achieve clarity. The regulatory environment It is rare to find all seven of these factors having critical importance. time bound statements of intended future results and general and continuing statements of intended future results. analysis of the organization and its environment as it is at the moment and how it may develop in the future. is important. Supplier markets 5. Third Rank Objective. Markets (customers) 2. objectives. The following terms have been used in strategic planning: desired end states. The economy 7. policies. One of the core goals when drafting a strategic plan is to develop it in a way that is easily translatable into action plans. etc. plans. It is also important in the public sector areas such as education. are both examples of easy ways to fail at translating your strategic plan in a way that makes sense and is executable to others. Competition 3. The items listed above may be organized in a hierarchy of means and ends and numbered as follows: Top Rank Objective (TRO). objectives and targets Strategic planning is a very important business activity. strategies. Most strategic plans address high level initiatives and over-arching goals. Often. One model of organizing objectives uses hierarchies. Definitions vary. goals. plans are filled with conceptual terms which don’t tie into day-to-day realities for the staff expected to carry out the plan. which most models refer to as either goals or objectives (sometimes interchangeably).are not of critical importance.What to Consider") Analysis of the external environment normally focuses on the customer. Labor markets 6. and whether those customer sets are the ones the company wishes to serve. many times based on the framework suggested by Michael Porter. There are several factors to assess in the external situation analysis: 1. Analysis of the competitive environment is also performed. how these could impact customer sets. (Bradford "External Situation . as well as the level a plan is written. Management should be visionary in formulating customer strategy. From any rank. Strategic planning and decision processes should end with objectives and a roadmap of ways to achieve those objectives. Technology 4. and should do so by thinking about market environment shifts.When developing strategies. Second Rank Objective. The most common of these concepts are specific.

That is how the TRO is defined. and long-term goals. Goals without objectives can never be accomplished while objectives without goals will never get you to where you want to be. Using one goal as a stepping-stone to the next involves goal sequencing. In an organizational setting. you will realize that how important it is that you have both of them. Here is an easy way to remember how they differ: Goals – has the word “go” in it. The two concepts are separate but related and will help you to be who you want to be. Objectives are concrete attainments that can be achieved by following a certain number of steps. then to the long-term goals. it is important to set both goals and objectives. but the main difference comes in their level of concreteness. almost impossible to attain. Difference Between Goals and Objectives Goals vs Objectives When you have something you want to accomplish. long-term goals appear very difficult. Your goals should go forward in a specific direction. At the other extreme. the organization may co-ordinate goals so that they do not conflict with each other. Goal sequencing can create a "goal stairway". Goals and objectives are often used interchangeably. Definition of Goals and Objectives Goals are long-term aims that you want to accomplish. One approach recommends having short-term goals. "Goal congruency" refers to how well the goals combine with each other. one can expect to attain short-term goals fairly easily: they stand just slightly above one's reach.exception is the Top Rank Objective (TRO): there is no answer to the "Why?" question. In this model. Strategic management jargon sometimes refers to "Big Hairy Audacious Goals" (BHAGs) in this context. The goals of one part of the organization should mesh compatibly with those of other parts of the organization. whereas goals are less structured. Once you learn the difference between goals and objectives. People typically have several goals at the same time. knowing the difference between goals and objectives can be crucial to the acceptance of your proposal. goals are more about everything you accomplish on your journey. Objectives are very concrete. Does goal A appear compatible with goal B? Do they fit together to form a unified strategy? "Goal hierarchy" consists of the nesting of one or more goals within other goal(s). A person or group starts by attaining the easy short-term goals. Remembering the Differences between Goals and Objectives When you are giving a presentation to a potential or current employer. then steps up to the medium-term. medium-term goals. However. rather than getting to that .

Goals are long term and objectives are usually accomplished in the short or medium term. EVA can be measured as Net Operating Profit After Taxes (or NOPAT) less the money cost of capital. I want to increase my sales by 10% this month. In all three cases. which can be determined. Objectives – has the word “object” in it. among other ways. budgets. Goals are nebulous and you can’t definitively say you have accomplished one whereas the success of an objective can easily be measured. Measuring Goals and Objectives Goals – unfortunately. The amortization of goodwill or capitalization of brand advertising and other similar adjustments are the translations that can be made to Economic Profit to make it EVA. Summary: 1. Goals are hard to quantify or put in a timeline. Simply phrase your objective in the form of a question. Every area of each objective should be firm. Examples of Goals and Objectives Goals – I want to be a better ball player. Objects are concrete. but since goals are de facto nebulous. Stern Stewart & Co. the utility of having a separate and more precisely defined term such as EVA or Residual Cash Flow is that it makes a clear separation from dubious accounting adjustments that have enabled businesses such as Enron to report profits while in fact being in the final approach to becoming insolvent. 3. you can never say for sure that you have definitively achieved them. The EVA is a registered trademark by its developer. They are something that you can hold in your hand. and personnel needs. I want learn to play “Freebird” on the guitar. but objectives should be given a timeline to be more effective. I want to maximize my professional performance. Calculating EVA . 2. You may feel that you are closer. Goals will often go into undiscovered territory and you therefore can’t even know where the end will be. For example. including deducting the opportunity cost of equity capital. Another. Economic Value Added or EVA is an estimate of economic profit.distant point. I want to learn more about Chinese history. Economic value added In corporate finance. by making corrective adjustments to GAAP accounting." however. Objectives – can be measured. Because of this. although under some definitions there may be minor technical differences between EVA and RI (for example. The concept of EVA is in a sense nothing more than the traditional. adjustments that might be made to NOPAT before it is suitable for the formula below). Objectives – I want to memorize the periodic table before my next quiz. there is no set way in which to measure the accomplishment of your goals. money cost of capital refers to the amount of money rather than the proportional cost (% cost of capital). EVA is similar to Residual Income (RI). your objectives can be clearly outlined with timelines. much older term for economic value added is Residual Cash Flow. Goals and objectives are both tools for accomplishing what you want to achieve. 4. “I want to accomplish x in y amount of time” becomes “Did I accomplish x in y amount of time?” This can easily be answered in a yes or no form. commonsense idea of "profit.

To put it simply. c is the Weighted Average Cost of Capital (WACC) and K is capital employed. called the Return on Invested Capital (ROIC). or MVA. Shareholders of the company will receive a positive value added when the return from the capital employed in the business operations is greater than the cost of that capital. [edit] Relationship to Market Value Added The firm's market value added. search . for the shareholders of a company. see Working capital management. The basic formula is: where . NOPAT is the Net Operating Profit After Tax. is the discounted sum of all future expected economic value added: Note that MVA = NPV of company. EVA is the profit earned by the firm less the cost of financing the firm's capital. above the required return. Any value obtained by employees of the company or by product users is not included in the calculations. the free encyclopedia Jump to:navigation.In the field of corporate finance. Economic Value Added is a way to determine the value created. r is the firm's return on capital. Culture of India From Wikipedia.

unique geography and diverse demography. dance. invasions from Central Asia.500 years old and its theme is heavily influenced by the Puranas. music. [edit] Religion . which were formed during the Indus Valley Civilization and evolved further during the Vedic age.[1] The culture of India has been shaped not only by its long history. but also by its ancient heritages. European colonization and the rise of Indian nationalism. the Golden age.A Kathakali performer as Krishna. The culture of India is an amalgamation of diverse sub-cultures spread all over the country and traditions that are several millennia old. but nevertheless possess a commonality. The languages. architecture and its customs differ from place to place within the country. religions. One the eight major Indian classical dances. rise and decline of Buddhism. Kathakali is more than 1.

traditional Indian culture is defined by relatively strict social hierarchy. with some of the most deeply religious societies and cultures. Hinduism and Buddhism are the world's third. He also mentions that from an early age. Buddhism. Zoroastrianism.[5] Strict social taboos have governed these groups for thousands .[5] This is reinforced by the fact that many believe gods and spirits have an integral and functional role in determining their life.4 billion followers altogether. India. Religion still plays a central and definitive role in the life of most of its people. are a major form of world religions next to the Abrahamic ones. Makar. a far more powerful division is the traditional Hindu bifurcation into nonpolluting and polluting occupations. Jainism and especially Buddhism are influential not only in India but across the world.[3] Dharmic religions. Islam is practiced by around 13% of all Indians.[5] Several differences such as religion divide the culture. with around 1.Close-up of a statue depicting Maitreya at the Thikse Monastery in Ladakh. atheism and agnostics also have visible influence along with a self-ascribed tolerance to other people.[5] However.[4] Sikhism. [edit] Society [edit] Overview According to Eugene M. Today. Dharmic religions such as Hinduism and Buddhism are indigenous to India.[2] Main articles: Religion in India and Indian religions is the birth place of Dharmic religions such as Hinduism. Despite the strong role of religion in Indian life. Christianity. Jainism and Sikhism. also known as Indian religions. children are reminded of their roles and places in society. India The religion of 80% of the people is Hinduism. Judaism and the Bahá'í Faith are also influential but their numbers are smaller. India is one of the most religiously diverse nations in the world.and fourth-largest religions respectively.

of years.[5] In recent years, particularly in cities, some of these lines have blurred and sometimes even disappeared.[5] The Nuclear family is becoming central to Indian culture. Important family relations extend as far as gotra, the mainly patrilinear lineage or clan assigned to a Hindu at birth. [5] In rural areas & sometimes in urban areas as well, it is common that three or four generations of the family live under the same roof.[5] The patriarch often resolves family issues.[5] Among developing countries, India has low levels of occupational and geographic mobility. People choose same occupations as their parents and rarely move geographically in the country. [6] During the nationalist movement, pretentious behaviour was something to be avoided. Egalitarian behaviour and social service were promoted while nonessential spending was disliked and spending money for ‘showing off’ was deemed a vice. This image continues in politics with many politicians wearing simple looking / traditionally rural clothes, such as the traditional 'kurta -pyjama' and the 'Gandhi topi'.
[edit] Family Main articles: Hindu joint family, Arranged marriage in India, and Women in India

A bride during a traditional Punjabi Hindu wedding ceremony.

Family plays a significant role in the Indian culture. For generations, India has had a prevailing tradition of the joint family system. It is a system under which extended members of a family parents, children, the children’s spouses and their offspring, etc. - live together. Usually, the eldest male member is the head in the joint Indian family system. He makes all important decisions and rules, and other family members abide by them.
[edit] Marriage

For centuries, arranged marriages have been the tradition in Indian society. Even today, the vast majority of Indians have their marriages planned by their parents and other respected familymembers, with the consent of the bride and groom.[7] Arranged matches are made after taking into account factors such as age, height, personal values and tastes, the backgrounds of their families (wealth, social standing) and their castes and the astrological compatibility of the couples' horoscopes. In India, the marriage is thought to be for life,[8] and the divorce rate is extremely low — 1.1% compared with about 50% in the United States.[9] The arranged marriages generally have a much lower divorce rate. The divorce rates have risen significantly in recent years:

"Opinion is divided over what the phenomenon means: for traditionalists the rising numbers portend the breakdown of society while, for some modernists, they speak of a healthy new empowerment for women."[10]

Although child marriage was outlawed in 1860, its practiced continues in some rural parts of India.[11] According to UNICEF’s “State of the World’s Children-2009” report, 47% of India's women aged 20–24 were married before the legal age of 18, with 56% in rural areas.[12] The report also showed that 40% of the world's child marriages occur in India.[13]
[edit] Names and language
Indian names are

based on a variety of systems and naming conventions, which vary from region to region. Names are also influenced by religion and caste and may come from the Indian epics. India's population speaks a wide variety of languages.
[edit] Gender equality

Although women and men are equal before the law and the trend toward gender equality has been noticeable, women and men still occupy distinct functions in Indian society. Woman's role in the society is often to perform household works and pro bono community work.[5] This low rate of participation has ideological and historical reasons. Women and women's issues appear only 7-14% of the time in news programs.[5] In most Indian families, women do not own any property in their own names, and do not get a share of parental property.[14] Due to weak enforcement of laws protecting women, they continue to have little access to land and property. [15] In many families, especially rural ones, the girls and women face nutritional discrimination within the family, and are anaemic and malnourished.[14] They still lag behind men in terms of income and job status. Traditional Hindu art, such as Rangoli (or Kolam), is very popular among Indian women. Popular and influential woman's magazines include Femina, Grihshobha and Woman's Era', 'Savvy.

[edit] Animals

Cows depicted in the decorated goppuram of the Kapaleeshwarar temple in Chennai See also: Wildlife of India, Animal husbandry in India, and Cattle in religion

The varied and rich wildlife of India has had a profound impact on the region's popular culture. Common name for wilderness in India is Jungle which was adopted by the British colonialists to the English language. The word has been also made famous in The Jungle Book by Rudyard Kipling. India's wildlife has been the subject of numerous other tales and fables such as the Panchatantra and the Jataka tales.[16] In Hinduism, the cow is regarded as a symbol of ahimsa (non-violence), mother goddess and bringer of good fortune and wealth.[17] For this reason, cows are revered in Hindu culture and feeding a cow is seen as an act of worship.[18]
[edit] Namaste
Namaste, Namaskar or Namaskaram or Vannakam is a common spoken greeting or salutation in the Indian subcontinent. Namaskar is considered a slightly more formal version than namaste but both express deep respect. It is commonly used in India and Nepal by Hindus, Jains and Buddhists,

and many continue to use this outside the Indian subcontinent. In Indian and Nepali culture, the word is spoken at the beginning of written or verbal communication. However, the same hands folded gesture is made usually wordlessly upon departure. In yoga, namaste is said to mean "The light in me honors the light in you", as spoken by both the yoga instructor and yoga students. Taken literally, it means "I bow to you". The word is derived from Sanskrit (namas): to bow, obeisance, reverential salutation, and respect, and (te): "to you".

When spoken to another person, it is commonly accompanied by a slight bow made with hands pressed together, palms touching and fingers pointed upwards, in front of the chest. The gesture can also be performed wordlessly or calling on another god E.g.: "Jai shri Krishna" and carry the same meaning.

Dipawali, a festival of lights, is celebrated by Hindus across India by lighting diyas and making rangolis. [edit] Festivals Main article: Festivals in India

India, being a multi-cultural and multi-religious society, celebrates holidays and festivals of various religions. The three national holidays in India, the Independence Day, the Republic Day and the Gandhi Jayanti, are celebrated with zeal and enthusiasm across India. In addition, many states and regions have local festivals depending on prevalent religious and linguistic demographics. Popular religious festivals include the Hindu festivals of Navratri Diwali, Ganesh Chaturthi, Durga puja, Holi, Rakshabandhan and Dussehra. Several harvest festivals, such as Sankranthi, Pongal and Onam,"Nuakhai" are also fairly popular. Certain festivals in India are celebrated by multiple religions. Notable examples include Diwali, which is celebrated by Hindus, Sikhs and Jains, and Buddh Purnima, celebrated by Buddhists and Hindus. Islamic festivals, such Eid ul-Fitr, Eid al-Adha and Ramadan, are celebrated by Muslims across India. Adding colors to the culture of India, the Dree Festival is one of the tribal festivals of India celebrated by the Apatanis of the Ziro valley of Arunachal Pradesh, which is the easternmost state of India.

[edit] Cuisine
Main article: Cuisine of India

A variety of Indian curries and vegetable dishes.

The multiple varieties of Indian cuisine are characterized by their sophisticated and subtle use of many spices and herbs. Each family of this cuisine is characterized by a wide assortment of dishes and cooking techniques. Though a significant portion of Indian food is vegetarian, many traditional Indian dishes also include chicken, goat, lamb, fish, and other meats. Food is an important part of Indian culture, playing a role in everyday life as well as in festivals. Indian cuisine varies from region to region, reflecting the varied demographics of the ethnically diverse subcontinent. Generally, Indian cuisine can be split into five categories: North, South, East,West Indian and North-eastern India. Despite this diversity, some unifying threads emerge. Varied uses of spices are an integral part of food preparation, and are used to enhance the flavor of a dish and create unique flavors and aromas. Cuisine across India has also been influenced by various cultural groups that entered India throughout history, such as the Persians, Mughals, and European colonists. Though the tandoor originated in Central Asia, Indian tandoori dishes, such as chicken tikka made with Indian ingredients, enjoy widespread popularity.[19] Indian cuisine is one of the most popular cuisines across the globe.[20] Historically, Indian spices and herbs were one of the most sought after trade commodities. The spice trade between India and Europe led to the rise and dominance of Arab traders to such an extent that European explorers, such as Vasco da Gama and Christopher Columbus, set out to find new trade routes with India leading to the Age of Discovery.[21] The popularity of curry, which originated in India, across Asia has often led to the dish being labeled as the "pan-Asian" dish.[22]

[edit] Clothing

It sees what the others eyes cannot and is reputed to protect the brain from the outside and the sun. In southern India the men wear long. a long skirt worn under a blouse.A girl from Tripura sports a bindi while preparing to take part in a traditional dance festival. a long sheet of colourful cloth with patterns. is part of the women's make-up. In some village parts of India. Little girls wear a pavada. but now it has become a part of women's fashion. [edit] Literature [edit] History Main article: Indian literature . Traditionally. white sheets of cloth called dhoti in English and in Tamil. traditional clothes are the Dhoti/pancha/veshti or Kurta. or anything else. This is worn by young ladies and woman. t-shirts. Traditional Indian clothing for women are the saris and also Ghaghra Cholis (Lehengas). For men. men wear shirts. This is draped over a simple or fancy blouse. Over the dhoti. traditional clothing mostly will be worn. Bindi Delhi is considered to be India's fashion capital. Women wear a sari. A bindi is also worn by some as their third eye.[23] Indo-western clothing is the fusion of Western and Subcontinental fashion. housing the annual Fashion weeks. the red bindi (or sindhur) was worn only by the married Hindu women.

[26] . literature in the Tamil. and Urdu began to appear as well. Maasti Venkatesh Ayengar. Some of the most important authors from India are Rabindranath Tagore.[citation needed] Sanskrit literature begins with the Rig Veda. Urdu and Oriya. three each in Marathi. there are two major literary awards. Devaki Nandan Khatri. Amrita Pritam. During this time. Nirmal Verma.[citation needed] In the medieval period.[24] The earliest works of Indian literature were orally transmitted. Agyeya.[citation needed] The Tamil epics tolkappiyam and thirukural appeared towards the end of the first millennium BCE. Indira Goswami.[25] followed by the first Malayalam works in the 12th century. a collection of sacred hymns dating to the period 1500–1200 BCE. a collection of sacred hymns dating to the period 10000BC–1200 BCE. these are the Sahitya Akademi Fellowship and the Jnanpith Award. [ [Tamil literature]] begins with the sangam literature. Vaikom Muhammad Basheer. five in Bengali. Kamleshwar. and various dialects of Hindi. Classical Sanskrit literature flourished in the first few centuries of the first millennium CE. In contemporary Indian literature. The Sanskrit epics Ramayana and Mahabharata appeared towards the end of the first millennium BCE. Bengali. six in Hindi.Rabindranath Tagore. Ramdhari Singh 'Dinkar'. among the writers who have received critical acclaim are: Girish Karnad. literature in Kannada and Telugu appears in the 9th and 10th and 11th centuries respectively. Munshi Premchand. four in Malayalam. Subramania Barathi Kuvempu. Bankim Chandra Chattopadhyay. Gujarati.[citation needed] Classical Tamil literature succeeded well in the first few centuries of the first millennium CE. Muhammad Iqbal. Qurratulain Hyder and Thakazhi Sivasankara Pillai. Michael Madhusudan Dutt. In contemporary India. Seven Jnanpith awards each have been awarded in Kannada. Marathi. Asia's first Nobel laureate. Mahasweta Devi.

[edit] Performing arts . A famous modern example of this tradition can be found in such figures as Rabindranath Tagore. and about 1. long prose passages. Civaka Cintamani. [edit] Epics The Ramayana and Mahabharata are the oldest preserved and well-known epics of India. there are five epics in the classical Tamil language: Silappadhikaram. as well as unrelated epics include the Tamil Kamba Ramayanam.000 verses. Hindi Ramacharitamanasa. in Kannada. Versions have been adopted as the epics of Southeast Asian countries like Thailand. as well as the epics of ancient times. the Pampa Bharata by Adikavi Pampa. Manimegalai. poetry has served as an important non-violent tool of nationalism during the Indian freedom movement. and much of poetry can be attributed to religious movements. S. In addition. and poets such as Basava (vachanas) . as well as prose compositions. Kabir and Purandaradasa (padas and devaranamas) in medieval times. Malaysia and Indonesia. Other regional variations of these. Narasimhaswamy in modern times. India has strong traditions of poetry ever since the Rigveda. Two examples of poetry from Tagore's Gitanjali serve as the national anthems of both India and Bangladesh.[edit] Poetry Main article: Indian poetry Illustration of the Battle of Kurukshetra. Torave Ramayana by Kumara Valmiki and Karnata Bharata Katha Manjari by Kumaravyasa. Writers and philosophers were often also skilled poets. Valaiyapathi and Kundalakesi. Kuvempu and K. In modern times. and Malayalam Adhyathmaramayanam. the Mahābhārata is one of the longest epic poems in the world. Poetry is often closely related to musical traditions. With more than 74.8 million words in total.

It remains instrumental to religious inspiration. and classical music.[27][31] Purandaradasa [29] [edit] Dance Main article: Indian dance . Main article: Music of India The music of India includes multiple varieties of religious.000 songs in the Kannada language. It has a history spanning millennia and it was developed over several eras. cultural expression and pure entertainment.[27][28] He concluded his songs with a salutation to Lord Purandara Vittala and is believed to have composed as many as 475. It includes two distinct styles: Carnatic and Hindustani music. only about 1000 are known today. It is noted for the use of several Raga. popular. folk. India's classical music tradition is heavily influenced by Hindu texts. The oldest preserved examples of Indian music are the melodies of the Samaveda that are still sung in certain Vedic Śrauta sacrifices.[edit] Music Panchavadyam temple music in Kerala. melodic modes.[30] However. is considered the "father of carnatic music" (Karnataka sangeeta pitamaha). pop.

These are: bharatanatyam of the state of Tamil Nadu. the dandiya and garba of Gujarat. It is preserved in texts such as the Mallapurana. the ghoomar of Rajasthan. Dance. have been accorded classical dance status by India's National Academy of Music. Pehlwani and Malla-yuddha. Among the well-known folk dances are the bhangra of the Punjab. odissi of the state of Orissa and the sattriya of Assam. like Buddhism. and eventually developing into Kung-fu. Eight dance forms. the bihu of Assam. the chhau of Jharkhand and Orissa.[citation needed] Other later martial arts are Gatka. Indian dance too has diverse folk and classical forms. or Kalari for short. kathak of Uttar Pradesh.[32][33] Kalarippayattu. [edit] Drama and theater .Odissi dancer in front of the Konark Sun Temple. manipuri of Manipur. and Drama. Kalari and other later formed martial arts have been assumed by some[who?] to have traveled to China. kathakali and mohiniattam of Kerala. the Yakshagana of Karnataka and lavani of Maharashtra and Dekhnni of Goa. is considered one of the world's oldest martial arts. kuchipudi of Andhra Pradesh. many with narrative forms and mythological elements.

going back to at least the second century BCE.[34] The natak of Bhasa are very popular in this art form. Vikramorvaśīya and Mālavikāgnimitra. the petroglyphs as found in places like Bhimbetka. following those of Bhasa. It strictly follows the Natya Shastra. Bhasa's Swapnavāsavadatta and Pancharātra. He was known for mastery of Rasa Abhinaya. Main article: Theatre in India Indian drama and theater has a long history alongside its music and dance.[35][36] The tradition of folk theater is popular in most linguistic regions of India. Subbanna and still maintained by groups like Nandikar. One of the oldest surviving theatre traditions of the world is the 2. and K. [edit] Visual arts Main article: Indian art [edit] Painting Main article: Indian painting The Jataka tales from Ajanta Caves.000 year old Kutiyattam of Kerala. V. Ancient texts outline theories of darragh and anecdotal accounts suggesting that it was common for households to paint their doorways or indoor rooms where guests resided. Harsha's Nagananda in Kutiyattam form. some of which go back to the Stone Age. Group Theater is also thriving in the cities. Nātyāchārya (late) Padma Shri Māni Mādhava Chākyār .[37] Utpal Dutt. He started to perform the Kalidasa plays like Abhijñānaśākuntala. initiated by the likes of Gubbi Veeranna. Kalidasa's plays like Shakuntala and Meghadoota are some of the older plays. In addition.the unrivaled maestro of this art form and Abhinaya.Natyacarya Mani Madhava Chakyar as Ravana in Bhasa's Abhiṣeka Nataka Kutiyattam one of the oldest surviving drama tradition of the world. Ninasam and Prithvi Theatre. The earliest Indian paintings were the rock paintings of pre-historic times. there is a rich tradition of puppet theater in rural India. . Khwaja Ahmad Abbas. (It is mentioned in Patanjali's commentary on Panini).[citation needed] revived the age old drama tradition from extinction.

such as the one at Ellora were not constructed by using blocks but carved out of solid rock. Jehangir Art Gallery. Raja Ravi Varma is one the classical painters from medieval India. Buddhism. as Hinduism. These recent artists have acquired international recognition. Mughal painting are some notable Genres of Indian Art. Some huge shrines. Mumbai. Mysore Palace has on display a few good Indian paintings. [edit] Sculpture Main article: Sculpture in India Hindu sculptures at the famous Khajuraho temple in Madhya Pradesh. Ellora and Sittanavasal and temple paintings testify to a love of naturalism. Jamini Roy and B. Raza.Cave paintings from Ajanta. During the Gupta period (4th to 6th century) sculpture reached a very high standard in execution and delicacy in modeling. Sculptures produced in the northwest. Atul Dodiya. Tanjore painting. Buddhist or Jain. Most early and medieval art in India is Hindu. and Jainism developed further. schist. display a very strong blend of Indian and Classical Hellenistic or possibly even Greco-Roman influence. Later. F. Rajput painting. in stucco. Bose Krishnamacnahri. [edit] Architecture Main article: Indian architecture .Venkatappa[38] are some modern painters. M. or clay. where stone and bronze figures have been discovered. Bagh. These styles and others elsewhere in India evolved leading to classical Indian art that contributed to Buddhist and Hindu sculpture throughout Southeast Central and East Asia. Geeta Vadhera. Husain. The first sculptures in India date back to the Indus Valley civilization. H. The pink sandstone sculptures of Mathura evolved almost simultaneously. S. Among the present day artists. Madhubani painting. India produced some extremely intricate bronzes as well as temple carvings. A freshly made coloured flour design (Rangoli) is still a common sight outside the doorstep of many (mostly South Indian) Indian homes. Mysore painting. while Nandalal Bose. Devajyoti Ray and Shibu Natesan represent a new era of Indian art where global art shows direct amalgamation with Indian classical styles.

The traditional system of Vaastu Shastra serves as India's version of Feng Shui. architecture. Konark. Feng Shui is more commonly used throughout the world.[39] Indian architecture encompasses a multitude of expressions over space and time. During the period of the Mauryan and Gupta empires and their successors. Angkor Wat. the Hoysaleswara Temple at Halebidu. Akshardham in Delhi the largest Hindu temple in the world.The Umaid Bhawan Palace in Rajasthan. The result is an evolving range of architectural production that nonetheless retains a certain amount of continuity across history. Though Vastu is . one of the largest private residences in the world. Thanjavur. Brihadeeswara Temple. influencing town planning. South India produced several Hindu temples like Chennakesava Temple at Belur. Later on. but they contain certain similarities. Some of its earliest production are found in the Indus Valley Civilization (2600-1900 BCE) which is characterised by well planned cities and houses. as they are built in styles almost identical to traditional Indian religious buildings. such as the caves of Ajanta and Ellora and the monumental Sanchi Stupa were built. Religion and kingship do not seem to have played an important role in the planning and layout of these towns. Sri Ranganathaswamy Temple at Srirangam. It is unclear which system is older. the Sun Temple. and the Buddha stupa (Chinna Lanja dibba and Vikramarka kota dibba) at Bhattiprolu. and the Kesava Temple at Somanathapura. Borobudur and other Buddhist and Hindu temples indicate strong Indian influence on South East Asian architecture. and ergonomics. several Buddhist architectural complexes. constantly absorbing new ideas.

and mixing of several other styles. Gol Gumbaz. The modern eastern martial arts originated as ancient games and martial arts in India. The Victoria Memorial or the Chhatrapati Shivaji Terminus are notable examples. etc. such as the exact directions in which various objects. Mumbai's Nariman Point is famous for its Art Deco buildings. (also called life-force or Prana in Sanskrit and Chi/Ki in Chinese/Japanese). The central spire is also sometimes called a vimanam. temple tower or pagoda and temple gate or torana. Cities are extremely compact and densely populated. The colonial rule of the British Empire saw the development of Indo-Saracenic style. materials. Indian architecture was adapted to allow the traditions of the new religion.conceptually similar to Feng Shui in that it also tries to harmonize the flow of energy. Red Fort of Delhi are creations of this era. temple spire or sikhara. Traditional indigenous sports include kabaddi and gilli-danda. A few games introduced during the British Raj have grown quite popular in India: field hockey. In the area of recreation and sports India had evolved a number of games. Indian architecture has influenced eastern and southeastern Asia. used extensively in East Asia and South East Asia. which are played in most parts of the country. are notable. such as European Gothic. Qutub Minar. A number of Indian architectural features such as the temple mound or stupa. have become famous symbols of Asian culture. Contemporary Indian architecture is more cosmopolitan. football (soccer) and especially cricket. The southern temple gate. but the entire subcontinent. Fatehpur Sikri. and are often used as the stereotypical symbols of India. With the advent of Islamic influence from the west. cricket is by far the most popular sport not only in India. or gopuram is noted for its intricacy and majesty. and it is believed by some that these games were transmitted to foreign countries. and the various modern urban developments of India like Chandigarh. due to the spread of Buddhism. through the house. where they were further adapted and modernized. Recent creations such as the Lotus Temple. rooms. are to be placed. it differs in the details. thriving . Taj Mahal. Although field hockey is India's official national sport. [edit] Recreation and sports Main article: Sports in India See also: kabaddi and Indian chess The annual snake boat race is performed during Onam Celebrations on the Pamba River at Aranmula near Pathanamthitta.

The small screen has produced numerous celebrities of their own kind some even attaining national fame for themselves.recreationally and professionally. Today. 1982 saw revolution in TV programming in India. and dice. This channel was known as DD 2 later DD Metro. Snakes and Ladders. that year. television programming had reached saturation.[40] Indian small screen programming started off in the mid 1970s. Games of strength and speed flourished in India. Carrom. and has thousands of programmes in all the states of India. In 1991. including stations such as Cartoon Network. and even men of all kinds. Both channels were broadcasted terrestrially. Cricket has even been used recently as a forum for diplomatic relations between India and Pakistan. Since then. India saw the colour version of TV. archery. Badminton are popular. Chess was invented in India. opening them up to cable television. The Ramayana and Mahabharat were some among the popular television series produced. Indian silver screen is a huge industry by itself. weight lifting. The two nations' cricket teams face off annually and such contests are quite impassioned on both sides. In ancient India stones were used for weights. Some lesser known actors have found success in Bollywood. Indoor and outdoor games like Chess. Ancient Indians competed in chariot racing. Polo is also popular. Playing cards. horsemanship. Hence the government opened up another channel which had part national programming and part regional. the government liberated its markets. wrestling. military tactics. Nickelodeon. [edit] Popular media [edit] Television Main article: Television in India See also: List of Indian television stations Indian television started off in 1959 in New Delhi with tests for educational telecasts. [edit] Cinema Main article: Cinema of India . hunting. TV soaps are extremely popular with housewives as well as working women. Though there was a single channel. At that time there was only one national channel Doordarshan. Indian TV now has many of the same channels as Western TV. there has been a spurt in the number of channels available. and MTV India. swimming and running races. which was government owned. with the New Delhi Asian games. By the late 1980s more and more people started to own television sets. marbles.

Malayalam. Satyajit Ray. Hrishikesh Mukherjee. K. Adoor Gopalakrishnan. Marathi. Tamil. V. (See Indian film directors). Guru Dutt.Shooting of a Bollywood dance number.Vishwanath.etc. Bollywood and the other major cinematic hubs (in Bengali. changing the revenue patterns. Shankar Nag. Iyer. Kannada. whose output is considered to be the largest in the world in terms of number of films produced and number of tickets sold. Vishwanath. . With the opening up of the economy in the recent years and consequent exposure to world cinema. Girish Karnad. In addition. Ritwik Ghatak. Punjabi and Telugu) constitute the broader Indian film industry. Shekhar Kapoor. G. multiplexes have mushroomed in most cities.Jagdaman Grewal. audience tastes have been changing. Bapu . Girish Kasaravalli. is the informal name given to the popular Mumbai-based film industry in India. Bollywood India has produced many critically acclaimed cinema-makers like K.

ha coupon rate. vo It ris be lu s tifi is a hybrid security with debt. od od sc es st various training and production centers and specialized institutes spread over uc uc al vo different parts of the country. It functions es Pr pr of sal to through a network of the field offices namely 30 SISIs. at an agreed-upon price. in or e pe ) cr st in Providing economic information services. if it has a maturity of greater than 10 years. However. a convertible note (or. 28 Br. a ns ofi m id convertible debenture) is a type of bond that the holder can convert into shares of es to t er en common stock in the issuing company or cash of equal value. Planning on 1 iliz ea g Commission. modernization quality cli lu co (P es improvement & infrastructure. It is rendering the services in the following areas :. m qu s pri Evolving and coordinating policies for development of ancillaries. Financial Institutions. common facilities and e e es or cy lu extension services. the value of shareholder's equity is reduced due to the stock an M 2. the key benefit of raising money by selling convertible Le an o a en on 3. & similar other developmental Re de e se an organizations/agencies related to the promotion and development of SSI Sector. in exchange for the benefit of ss d m on ch es m reduced interest payments. di ta e te 2 mi bil eff d M nis ity ec Convertible bond cu ar h be ts st ke gi pr sal o t In finance. ab cr sin Maintaining close liaison and vital linkage with the Central Ministries. in bonds is a reduced cash interest payment. and thereby participate in further growth in the company's equity value. litt lif n m sal le vo Providing techno-economic and managerial consultancy. 7 FTSs. titi ea 1. the instrument carries additional value through the option to convert the ca m pu e ve tio Sa M bond to stock. Although it typically has a low e co m 4. State Govts. ne m m LC Human resources development through training and skill up-gradation. de vo no cle m Providing facilities for technology up-gradation. in policy matters concerning small scale sector. es bli pe to tu ar The investor receives the potential upside of conversion into equity while protecting n m c ak be downside with cash flow from the coupon payments. of t tio e lu Advising the Govt.and equity-like features. ed d at Gr od Ch of en in ke to de ur o uc ar The convertible bond markets in the United States and Japan are of primary global th ge cr t try cli it wt ti ac e of ea sa th pr ne y h on te pr se tur e od od s st ris St ati pr uc uc ag tic on co od t tio is e e s m uc C o nt e nt s . 1. tr pt s all s ar dilution expected when bondholders convert their bonds into new shares. 2 ra ke or aw s pr ti t e ar From the issuer's perspective. lu m t mi m SIDO is playing a very constructive role for strengthening this vital sector which has 1 al of es proved to be one of the strong pillars of the economy of the sts be re ar co du e m lo ce hi e we d gh SMALL INDUSTRIES DEVELOPMENT ORGANISATION (SIDO) co re du slo un d e ORGANISATIONAL STRUCTURE OF SIDO w ter as to Small Industries Development Organisation (SIDO) an apex body at Central level for sal a formulating policy for the development of Small Scale Industries in the country. d an es sig ce ex d t nif Monitoring of PMRY Scheme s. is ec es [hi op re on headed by the Additional Secretary & Development Commissioner (Small Scale vo de] ti sul o Industries) under Ministry of Small Scale Industries Govt. 4 RTCs. pe ha for ica pr rie Monitoring the working of different Tool Rooms & PPDC's s de ntl ofi nc to vi y ta e be ati bil pr cu cr on ity ofi rv ea 1. SISIs.

161 : Occupational Health Services Convention. 1957 ILO Convention No. 122 : Employment Policy Convention. 29 : Forced Labour Convention. 2006 ILO Declaration of Philadelphia ILO Declaration on Fundamental Principles and Rights at Work. 1952 ILO Convention No. 1975 ILO Convention No. 1964 ILO Convention No. 1949 ILO Convention No. 1973 ILO Convention No.• • • • • • • • • • • • • • • • • • • • • • • • ILO Constitution ILO Convention No. 138 : Minimum Age Convention. 1960 ILO Convention No. 1948 ILO Convention No. 182 : Worst Forms of Child Labour Convention. 1949 ILO Convention No. 1951 ILO Convention No. 98 : Right to Organise and Collective Bargaining Convention. 144 : Tripartite Consultation (International Labour Standards) Convention. 129 : Labour Inspection (Agriculture) Convention. 115 : Radiation Protection Convention. 1958 ILO Convention No. 81 : Labour Inspection Convention. 1969 ILO Convention No. 1999 ILO Convention No. 105 : Abolition of Forced Labour Convention. 1985 ILO Convention No. 187 : Promotional Framework for Occupational Safety and Health Convention. 155 : Occupational Safety and Health Convention. 100 : Equal Remuneration Convention. 97 : Migration for Employment Convention. 1998 ILO Declaration on Social Justice for a Fair Globalization e dis ac titi m cy tri he on ak cle bu d be es (P tio gi in no LC n ns cr m ) eff to ea on ici 3 in se ey en Li cr in at cy mi ea co thi th tat se m s an io wi pe st in ns th tit ag cr a 4 or e ea fe Se s se w e en d ne als ter sal w o in es pl g 5 ay th Re er e fer s m en in ar ce es ke s ta t 6 bli pri Ex shi ce ter ng s na m te l ar nd lin ke to ks t dr in op cr du ea e se to d th co e m pr pe oli titi fer on ati le on ad of s co to m pri pe ce tin de g cr pr ea od se uc s ts br an d dif fer en tia tio n . 1947 ILO Convention No. 102 : Social Security (Minimum Standards) Convention. 1976 ILO Convention No. 1930 ILO Convention No. 1981 ILO Convention No. 87 : Freedom of Association and Protection of the Right to Organise. 111 : Discrimination (Employment and Occupation) Convention. 1982 ILO Convention No. 158 : Termination of Employment Convention. 143 : Migrant Workers (Supplementary Provisions).

and was officially launched at UN n or Headquarters in New York on July 26. the International Labour ea Organization. ts Labour Standards go Businesses should uphold: do • Principle 3: the freedom of association and the effective recognition of the right to wn collective bargaining. 2004. . 1999.d fe at ur e di ve rsi fic ati United Nations Global Compact on The United Nations Global Compact. also known as Compact or UNGC. and pr ofi • Principle 2: Make sure that they are not complicit in human rights abuses. stating ten principles in the areas of human rights. and Principle 6: the elimination of discrimination in employment and occupation. the United Nations Industrial Development se Organization. the United Nations Environment Programme. the environment and anti."[1] nt The Global Compact was first announced by the then UN Secretary-General Kofi Annan in an ai address to The World Economic Forum on January 31. e and to report on their implementation. labour ze groups and civil society. is a United Nationsis initiative to encourage businesses worldwide to adopt sustainable and socially responsible policies. such as the Millennium Development ai Goals (MDGs). in The Global Compact Office is supported by six UN agencies: the United Nations High cr Commissioner for Human Rights. Kofi Annan announced the addition of a tenth principle sh ar against corruption. 2000. d The Global Compact is the world's largest corporate citizenship initiative and as voluntary to initiative has two objectives: "Mainstream the ten principles in business activities around the m world" and "Catalyse actions in support of broader UN goals. This step followed an extensive consultation process with all Global Compact e participants. companies are brought together with UN agencies. and the United Nations Office on Drugs and Crime. during the first Global Compact Leaders Summit. Principle 5: the effective abolition of child labour. June 24. the United Nations Development Programme. Under the Global Compact. m ar ke t The Global Compact was initially launched with nine Principles. Human Rights Businesses should: • • • Principle 4: the elimination of all forms of forced and compulsory labour. asi corruption. The Global Compact is a principle-based framework for m businesses. The Ten Principles In du str • Principle 1: Support and respect the protection of internationally proclaimed ial human rights. Environment Businesses should: • Principle 7: support a precautionary approach to environmental challenges.

was held on 5–6 July 2007 at the Palais des Nations in Geneva. Australia. but it distinguishes the following channels through which it provides facilitation and encourages dialogue: policy dialogues. and civil society organizations. chaired by Secretary-General Ban Ki-moon. For example. Anti-Corruption • [edit] Facilitation The Global Compact is not a regulatory instrument. It provided an opportunity for the ten Principles of the Global Compact to be translated into meaningful outcomes within a cities (rather than just organizations). business and civil society into a cross-sector partnership in order to develop a practical project that addresses a seemingly intractable urban issue. delegates were invited to attend the first Prix Ars Electronica Digital Communities award ceremony. The formation of the Programme goes back to early 2001 when the City of Melbourne proposed that cities as well as corporations should be allowed and encouraged to engage the UN Global Compact. was held in UN Headquarters in New York on June 24.• • Principle 8: undertake initiatives to promote environmental responsibility. 2004. but rather a forum for discussion and a network for communication including governments. a simple framework called the Melbourne Model was developed that entailed more than just signing onto the Ten Principles. It aimed to bring "intensified international focus and increased momentum" to the Global Compact. Melbourne argued that this would engender a clear statement of a city's civic. The Global Compact office in New York accepted the proposal and Melbourne became the first city to engage the Global Compact in June 2001.Cities Programme was launched in 2002 by the then UN SecretaryGeneral Kofi Annan. which was co-hosted by a representative from the UN. . The Compact itself says that once companies declared their support for the Global Compact principles "This does not mean that the Global Compact recognizes or certifies that these companies have fulfilled the Compact’s principles. representing its stakeholders. The aim of the Cities Programme is to improve urban life in cities throughout the world. whose actions it seeks to influence. and Principle 9: encourage the development and diffusion of environmentally friendly technologies. [edit] The UN Global Compact . The first Global Compact Leaders Summit. On the eve of the conference. chaired by the then Secretary-General Kofi Annan. It begins by drawing the resources of government. as well as motivating participation in international dialogue." The Compact's goals are intentionally flexible and vague. In April 2003 under the directorship of David Teller. It was formed as an urban-focused component of the Global Compact with its International Secretariat located in Melbourne.Cities Programme The UN Global Compact . cultural and corporate commitment to positive change. The second Global Compact Leaders Summit. Switzerland. Principle 10: Businesses should work against corruption in all its forms. local networks and projects. It adopted the Geneva Declaration on corporate responsibility. companies and labour organisations. Porto Alegre is tackling the problem of developing infrastructure and utilities for slum dwellers. including extortion and bribery. learning.

and 5 federations of commerce and industry.[2] [edit] UN Global Compact In Syria The Syria initiative aims at enhancing civic engagement and corporate social responsibility of private sector by promoting the ten principles of the UN Global Compact as well as forging partnerships between private sector organizations. Tshwane and Ulan Bator. local and international civil society organizations. This initiative is a partnership between the Syrian Government represented by the State Planning Commission and the UNDP Country Office in Syria. and as an entry door to increase corporate influence on the policy discourse and the development strategies of the United Nations. It was displayed among 10 selected ones from around the world in the Global Compact Sixth Annual Local Networks Forum. The Syria story was called a “leadership case” and the Syria Network growth ratio was ranked first among the global top ten in 2008. these organizations argue that companies can misuse the Global Compact as a public relations instrument for "bluewash"[5]. The Global Compact has admitted companies with dubious humanitarian and environmental records in contrast with the principles demanded by the Compact. with a sustainability indicators program developed as a way of assessing and monitoring progress.Member cities include Al Salt. San Francisco. levels a variety of criticisms at the Global Compact: • • • The compact contains no mechanisms to sanction member companies for non-compliance with the Compact's principles. international corporate representatives. 5 NGO’s. the Global Compact fails to hold corporations accountable. available at [3] The UNGC National Advisory Council has been formulated and held its founders’ meeting in October 15. There. the Syrian Government. Melbourne. Porto Alegre. as an excuse and argument to oppose any binding international regulation on corporate accountability. Jinan. Plock. projects associated with city-based responses to global climate change and globalization have become increasingly important.[4] Moreover. in July 2008. media and education sectors. Le Havre. the International Secretariat moved from the Committee for Melbourne to the Global Cities Institute at RMIT University.[6] [edit] Global Compact Critics An informal network of organizations and people with concerns about the UN Global Compact. called Global Compact Critics. itself affiliated with UN-HABITAT. 2008. In 2007. public sector institutions and civil society. [edit] Criticism Many civil society organizations believe that without any effective monitoring and enforcement provisions. . The Melbourne Model has been further elaborated. The Syria Local Network has 26 businesses. with the participation of leaders from the Syrian private sector. It was launched under the patronage of the Head of State Planning Commission and in the presence of the Deputy Chairperson of the UN Global Compact. Berlin. A corporation’s continued participation is not dependent on demonstrated progress. UNDP.

Planet. which no longer exists. Corporate Social Responsibility has been redefined throughout the years. communities. Consequently. pressure is applied on industry to improve business ethics through new public initiatives and laws (e. and voluntarily eliminating practices that harm the public sphere. higher UK road tax for higher-emission vehicles). Proponents argue that there is a strong business case for CSR. Ideally.[1] is a form of corporate self-regulation integrated into a business model. The practice of CSR is subject to much debate and criticism. deputy director of UNRISD[9]. consumers. short-term profits. employees. CSR-focused businesses would proactively promote the public interest by encouraging community growth and development. Corporate social responsibility Corporate social responsibility (CSR). sustainable responsible business (SRB). also known as corporate responsibility. However. responsible business. As a corporate practice and a career specialization. was a campaigning organization of several international NGOs. the field is primarily normative.[edit] Alliance for a Corporate-Free UN The Alliance for a Corporate-Free UN. Maude Barlow. and Peter Utting. or corporate social performance. [edit] Criticism from within the United Nations The Global Compact has been criticized by several senior UN officials and advisers. it essentially is titled to aid to an organization's mission as well as a guide to what the company stands for and will uphold to its consumers. in that corporations benefit in multiple ways by operating with a perspective broader and longer than their own immediate. Furthermore. business would embrace responsibility for the impact of its activities on the environment. which highlighted weaknesses in the principles underlying the Global Compact. CSR is the deliberate inclusion of public interest into corporate decision-making. In academia.g.[7] Other vocal critics have been David Andrews. Development Business ethics is one of the forms of applied ethics that examines ethical principles and moral or ethical problems that can arise in a business environment. regardless of legality. In the increasingly conscience-focused marketplaces of the 21st century. ethical standards. led by Corpwatch. self-regulating mechanism whereby business would monitor and ensure its support to law. The range and quantity of business ethical issues reflects the degree to which business is perceived to be at odds with non-economic social values. others argue that it is nothing more than superficial window-dressing. stakeholders and all other members of the public sphere. Essentially. Historically. and international norms. senior adviser on water issues to the President of the United Nations General Assembly. the demand for more ethical business processes and actions (known as ethicism) is increasing. Business ethics can be both a normative and a descriptive discipline. and the honoring of a triple bottom line: People. In December 2008. Simultaneously. senior adviser on Food Policy and Sustainable Development[8]. others yet argue that it is an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations. CSR policy would function as a built-in. Critics argue that CSR distracts from the fundamental economic role of businesses. descriptive approaches are also taken. interest in business . called the Global Compact "bluewashing". Profit. corporate citizenship.

BP's "beyond petroleum" environmental tilt). as discussed above.g. both within major corporations and within academia. only people can have social responsibilities. social responsibility charters). and McDonald's (see below) to distract the public from ethical questions posed by their core operations. The term stakeholder.[18] the petroleum giant BP (well-known for its high-profile advertising campaigns on environmental aspects of its operations). They argue that some corporations start CSR programs for the commercial benefit they enjoy through raising their reputation with the . so all economic entities have an obligation to society (e. [edit] CSR and questionable motives Some critics believe that CSR programs are undertaken by companies such as British American Tobacco (BAT). In some cases.. corporations are only responsible to their shareholders and not to society as a whole. The UN has developed the Principles for Responsible Investment as guidelines for investing entities. today most major corporate websites lay emphasis on commitment to promoting non-economic social values under a variety of headings (e.[15] Milton Friedman Critics of this argument perceive neoliberalism as opposed to the well-being of society and a hindrance to human freedom. they assert that corporations have no other obligation to society. longevity and/or infant mortality have been created by economic growth attributed to free enterprise.[2] ISO 26000 is the recognized international standard for CSR (currently a Draft International Standard). Some people perceive CSR as incongruent with the very nature and purpose of business. meaning those on whom an organization's activities have an impact. although it was seldom abbreviated. and indeed a hindrance to free trade.[16] A wide variety of individuals and organizations operate in between these poles. ethics codes. and thus their citizens are at a higher risk of exploitation by multinational corporations. was used to describe corporate owners beyond shareholders as a result of an influential book by R Freeman in 1984. the REALeadership Alliance asserts that the business of leadership (be it corporate or otherwise) is to change the world for the better. CSR and the nature of business and others have argued that a corporation's purpose is to maximize returns to its shareholders. Public sector organizations (the United Nations for example) adhere to the Triple Bottom Line (TBL). cf. Economic Justice for All).ethics accelerated dramatically during the 1980s and 1990s. It is widely accepted that CSR adheres to similar principles but with no formal act of legislation. Those who assert that CSR is contrasting with capitalism and are in favor of neoliberalism argue that improvements in health. and that since (in their view).[17] Many religious and cultural traditions hold that the economy exists to serve human beings. For example. noting that these countries usually have fewer labor protections.g. many CSR proponents point out that CSR can significantly improve long-term corporate profitability because it reduces risks and inefficiencies while offering a host of potential benefits such as enhanced brand reputation and employee engagement. For example.g. The term CSR came in to common use in the early 1970s. corporations have re-branded their core values in the light of business ethical considerations (e. after many multinational corporations formed. Moreover. Although they accept that corporations should obey the laws of the countries within which they work. They claim that the type of capitalism practiced in many developing countries is a form of economic and cultural imperialism.

the company has beefed up its CSR programs related to its labor.public or with government. they have encountered new challenges that impose limits to their growth and potential profits. but this did not prevent the 2004 scandal concerning its misreporting of oil reserves. one's diet may well become high in fat etc. . [edit] Globalization and market forces As corporations pursue growth through globalization. Since then. with the very real risk of heart disease. 105) Global competition places a particular pressure on multinational corporations to examine not only their own labor practices. tariffs. helping them sustain a competitive advantage by using their social contributions to provide a subconscious level of advertising. They suggest that corporations which exist solely to maximize profits are unable to advance the interests of society as a whole. such as Patricia Werhane argue that CSR should be looked more upon as a Corporate Moral Responsibility. May and Keane ruled that it was fair comment to say that McDonald's employees worldwide 'do badly in terms of pay and conditions'[21] and true that 'if one eats enough McDonald's food. More recently. which seriously damaged its reputation and led to charges of hypocrisy. Some view ethical issues as simply a costly hindrance.'[22] has a much-publicized CSR policy and was a pioneer in triple bottom line reporting. For example. Consumers are becoming more aware of the environmental and social implications of their day-to-day consumer decisions and are therefore beginning to make purchasing decisions related to their environmental and ethical concerns. as CSR has become mainstream.. including a partnership with Marks and Spencer (UK) in three flower and fruit growing communities across Africa. so does the pressure on limited natural resources required to meet rising consumer demand (Grace and Cohen 2005. Shell Critics concerned with corporate hypocrisy and insincerity generally suggest that better governmental and international regulation and enforcement. Meiners 1986. Government regulations. and limit the reach of CSR by focusing more on direct impacts of the organization as viewed through a systems perspective to identify stakeholders. is booming as a result of both technology and globalization. but those of their entire supply chain. the Shell Foundation has become involved in many projects across the world. the McDonald's Corporation's association with Ronald McDonald House has been viewed as CSR and relationship marketing. Lord Justices Pill. [edit] Ethical consumerism The rise in popularity of ethical consumerism over the last two decades can be linked to the rise of CSR. from a CSR perspective. However. As global population increases. in McDonald's Restaurants v Morris & Steel. environmental and other practices[20] All the same. are necessary to ensure that companies behave in a socially responsible manner. 147). environmental restrictions and varying standards of what constitutes "labor exploitation" are problems that can cost organizations millions of dollars. (Fry. rather than voluntary measures. in many developing countries.[19] Another concern is when companies claim to promote CSR and be committed to Sustainable Development whilst simultaneously engaging in harmful business practices. while some companies use CSR methodologies as a strategic tactic to gain public support for their presence in global markets. Industrialization. Keim. this practice is far from consistent or universal. since the 1970s. Others.

in ensuring that corporations are prevented from harming the broader social good. leveraging the power of the media and the Internet to increase their scrutiny and collective activism around corporate behavior. Non-governmental organizations are also taking an increasing role. One method that is gaining increasing popularity is the use of wellgrounded training programs. [edit] Laws and regulation Another driver of CSR is the role of independent mediators. the development of community in holding businesses responsible for their actions is growing (Roux 2007). The aim of such training is to help employees make ethical decisions when the answers are unclear. what a company should morally do. takes a CMR perspective in order to do what is moral and he begins to shift his company's focus towards the biosphere by utilizing carpets in sections so that they will sustain for longer periods. the history of organizations and their growth in power is discussed. CSR critics such as Robert Reich argue that governments should set the agenda for social responsibility by the way of laws and regulation that will allow a business to conduct themselves responsibly. some of it required by government regulation. hence the need for learning normative values and rules in human behavior (Tullberg 1996). For example. Ray Anderson. The issues surrounding government regulation pose several problems. This leads to burdensome legal processes bogged down in interpretations of the law and debatable grey areas (Sacconi 2004).[edit] Social awareness and education The role among corporate stakeholders is to work collectively to pressure corporations that are changing. The most direct benefit is reducing the likelihood of "dirty hands" (Grace and Cohen 2005). where CSR is a major issue. and business simulations can play a part in this. in The Corporation." where if people do not pay attention to the private ways in which we use public resources. Caterpillar and Best Buy are examples of organizations that have taken such steps (Thilmany 2007). including people and the environment. particularly the government. people will eventually lose those public resources. Organizations also see secondary benefit in increasing employee loyalty and pride in the organization. Corporate social responsibility. This is Anderson thinking in terms of Garret Hardin's "The Tragedy of the Commons. Tullberg believes that humans are built with the capacity to cheat and manipulate. [edit] Ethics training The rise of ethics training inside corporations. companies are becoming interested in processes that can add visibility to their CSR policies and activities. Shareholders and investors themselves. through socially responsible investing are exerting pressure on corporations to behave responsibly. is another driver credited with changing the behavior and culture of corporations.[citation needed] One relevant documentary is The Corporation. are both important topics to consider when looking at ethics in CSR. versus corporate moral responsibility (CMR). Increasingly. 1985). Through education and dialogue. a view taken from (Trivers 1971. Regulation in itself is unable to cover every aspect in detail of a corporation's operations. General Electric is an example of a corporation that has failed to clean up the Hudson River after contaminating it with organic pollutants. The company continues to argue via the legal . fines and damaged reputations for breaching laws or moral norms. what a company does to in trying to benefit society.

process on assignment of [edit] Crises and their consequences Often it takes a crisis to precipitate attention to CSR. on the concerns of economic loss and national interest. The company ordered a recall of all apple or carrot juice products and introduced a new process called "flash pasteurization" as well as maintaining lines of communication constantly open with customers. The second issue is the financial burden that regulation can place on a nation's economy. just before the meeting of the UN Framework Convention on Climate Change. corporations are motivated to become more socially responsible because their most important stakeholders expect them to understand and address the social and community issues that are relevant to them. Prime Minister Kevin Rudd signed the ratification immediately after assuming office on 3 December 2007. 16 December 2008. Odwalla also experienced a crisis with sales dropping 90 percent. CSR/SRI is still voluntary in Denmark. Critics of CSR also point out that organisations pay taxes to government to ensure that society and the environment are not adversely affected by business activities. and the company's stock price dropping 34 percent due to several cases of E. Understanding what causes are important to employees is usually the . One of the most active stands against environmental management is the CERES Principles that resulted after the Exxon Valdez incident in Alaska in 1989 (Grace and Cohen 2006). (Sullivan & Schiafo 2005).On the change of government following the election in November 2007. The reporting requirements became effective on 1 January 2009[23]. Denmark made a law on CSR. The company had to cease business immediately and work with independent regulatory bodies to execute a cleanup. The Australian government took the position that signing the Kyoto Pact would have caused more significant economic losses for Australia than for any other OECD nation (Bulkeley 2001. which required a recall of millions of toys globally and caused the company to initiate new risk management and quality control processes. In another example. investors and state owned companies to include information on corporate social responsibility (CSR) in their annual financial reports.Coli spread through Odwalla apple juice. while the cleanup remains stagnant. the Danish parliament adopted a bill making it mandatory for the 1100 largest Danish companies. Other examples include the lead poisoning paint used by toy giant Mattel. Magellan Metals in the West Australian town of Esperance was responsible for lead contamination killing thousands of birds in the area. [edit] Stakeholder priorities Increasingly. More on the Danish law on CSRgov. pg 436). This view shared by Bulkeley. The information shall include: • • • information on the companies’ policies for CSR or socially responsible investments (SRI) information on how such policies are implemented in practice and information on what results have been obtained so far and managements expectations for the future with regard to CSR/SRI. but if a company has no policy on this they must state their positioning on CSR in their annual financial report. who cites the Australian federal government's actions to avoid compliance with the Kyoto Protocol in 1997.

The process of claims adjudication. and so on).[1] [edit] In healthcare Claims adjudication in health insurance refers to the determination of the insurer's payment or financial responsibility. The relevant legislation in the UK is the Housing Grants. [edit] In construction Adjudication is a legal process provided for by statute for the resolution of disputes in the construction industry. Disputes between public officials or public bodies. From the United States Department of the Navy Central Adjudication Facility: "Adjudication is the review and consideration of all available information to ensure an individual's loyalty.e. more loyalty.first priority because of the many interrelated business benefits that can be derived from increased employee engagement (i. is also referred to as [medical bill advocacy]. 2. The process is by the presentation of case supported by evidence. Disputes between private parties. [edit] Other meanings Adjudication can also be the process (at dance competitions. in this context. (1996 Chapter 53). The "Decision" if not complied with is enforceable by the winning Party in the Courts. 3. such as individuals or corporations. Construction and Regeneration Act 1996. consumers. Disputes between private parties and public officials. increased retention. and the media). enforceable decision on the Parties to the dispute. reliability. higher productivity. regulators. Key external stakeholders include customers. Adjudication Adjudication is the legal process by which an arbiter or judge reviews evidence and argumentation including legal reasoning set forth by opposing parties or litigants to come to a decision which determines rights and obligations between the parties involved. and trustworthiness are such that entrusting an individual with national security information or assigning an individual to sensitive duties is clearly in the best interest of national security. together with counter argument to an Adjudicator who performs an inquisitorial role in reaching a binding. in television game shows and at other competitive forums) by which competitors are evaluated and ranked and a winner is found. after the member's insurance benefits are applied to a medical claim. improved recruitment. academics. Three types of disputes are resolved through adjudication: 1. [edit] Pertaining to security clearances Adjudication is the process directly following a background investigation where the investigation results are reviewed to determine if a candidate should be awarded a security clearance. investors (particularly institutional investors)." .

a branch of the Queensland Building Services Authority[8]. sub-contractors and suppliers need to carefully choose a nominating authority to which they make an adjudication application. to allow for the rapid determination of progress claims under building contracts or sub-contracts and contracts for the supply of goods or services in the building industry. 2004. The act covers construction. Different states have different processes for declaring a child as adjudicated. [edit] In Victoria Adjudication[4] is a relatively new process introduced by the Government of Victoria[5] in Australia. • The Arizona State Legislature' has this definition: "'Dually adjudicated child' means a child who is found to be dependent or temporarily subject to court jurisdiction pending an adjudication of a dependency petition and who is alleged or found to have committed a delinquent or incorrigible act. a delinquent minor or an addicted minor. whether written or verbal. dependent. "[3] [edit] In Australia Robert Gaussen is said to have played pioneered the introduction of Adjudication process in Australia through his role in drafting of Adjudication legislations in most states and territories in the country.[6] Builders. It is regulated by the Building and Construction Industry Security of Payment Act 2002. . abused. the term adjudicated refers to children that are under a court's jurisdiction usually as a result of having engaged in delinquent behavior and not having a legal guardian that could be entrusted with being responsible for him or her. without parties getting tied up in lengthy and expensive litigation or arbitration. contracts. BCIPA is regulated by the Building and Construction Industry Payments Agency." [2]* The 'Illinois General Assembly' has this definition: "'Adjudicated' means that the Juvenile Court has entered an order declaring that a child is neglected. a minor requiring authoritative intervention. and related supply of goods and services. Through a statuatory-based process known as adjudication a claimant can seek to resolve payment on account disputes.[edit] Referring to a minor Referring to a minor. This process was designed to ensure cash flow to businesses in the building industry.[7] [edit] In Queensland The Building and Construction Industry Payments Act 2004 (BCIPA) came into effect in Queensland in October.

and provides a simpler and cheaper alternative to litigation. takes feelings into account and reframes representations.Conciliation Conciliation is an alternative dispute resolution (ADR) process whereby the parties to a dispute (including future interest disputes) agree to utilize the services of a conciliator. Depending on the nature of the case. and usually have some objectives that are not listed by the other party. Conciliation differs from mediation in that the main goal is to conciliate. and the conciliator usually has no authority to seek evidence or call witnesses. who then meets with the parties separately in an attempt to resolve their differences. interpreting issues. most of the time by seeking concessions. appraisers. Parties in such cases are required to undergo conciliation proceedings and may only bring their case to court once conciliation has failed. actuaries. In conciliation the parties seldom. improving communications. non-judge experts (doctors. . The conciliator then has each of the parties separately prioritize their own list from most to least important. He does this by lowering tensions. exploring potential solutions and bringing about a negotiated settlement. usually writes no decision. providing technical assistance. The most common forms are civil conciliation and domestic conciliation. [edit] Effectiveness Recent studies in the processes of negotiation have indicated the effectiveness of a technique that deserves mention here. Domestic conciliation is most commonly used to handle contentious divorces. and makes no award. Thus the conciliator can quickly build a string of successes and help the parties create an atmosphere of trust which the conciliator can continue to develop. etc.) may be called by the court as conciliators to help decide the case. The parties rarely place the same priorities on all objectives. Conciliation differs from arbitration in that the conciliation process. but may apply to other domestic disputes such as the annulment of a marriage or acknowledgment of paternity. and for governmental agencies such as the Federal Mediation and Conciliation Service in the United States. starting with the least important and working toward the most important for each party in turn. He/She then goes back and forth between the parties and encourages them to "give" on the objectives one at a time. has no legal standing. both of which are managed under the auspices of the court system by one judge and two non-judge "conciliators. in and of itself. [edit] Conciliation in Japan law makes extensive use of conciliation (調停. if ever. A conciliator assists each of the parties to independently develop a list of all of their objectives (the outcomes which they desire to obtain from the conciliation)." Japanese Civil conciliation is a form of dispute resolution for small lawsuits. chōtei?) in civil disputes. Some conciliators operate under the auspices of any one of several non-governmental entities. actually face each other across the table in the presence of the conciliator. the mediator tries to guide the discussion in a way that optimizes parties needs. In mediation. Most successful conciliators are highly skilled negotiators.

Average cost will vary in relation to the quantity produced unless fixed costs are zero and variable costs constant. marginal costs are the first derivative of total or variable costs. average cost is higher due to under-utilised equipment. with marginal cost representing the cost of the last unit produced at each point. When average cost is neither rising nor falling (at a minimum or maximum). marginal cost is less than average cost. It is also equal to the sum of average variable costs (total variable costs divided by Q) plus average fixed costs (total fixed costs divided by Q). so average costs are decreasing as quantity increases. marginal cost equals average cost. production bottlenecks increase the average cost. A cost curve can be plotted. Marginal costs are often shown on these graphs. so average costs are increasing as quantity increases. for low levels of production there are economies of scale: marginal costs are below average costs. price may be lower than average cost due to marginal cost pricing.Average cost From Wikipedia. An increasing marginal cost curve will intersect a U-shaped average cost curve at its minimum. A typical average cost curve will have a U-shape. When average cost is rising. because fixed costs are all incurred before any production takes place and marginal costs are typically increasing. marginal cost is above average costs. [edit] Overview Average cost is distinct from the price. approaching marginal cost. because of diminishing marginal productivity. An example may be . and depends on the interaction with demand through elasticity of demand and elasticity of supply. Q). marginal cost is greater than average cost. the free encyclopedia Jump to:navigation. This is indicative of diseconomies of scale. Other special cases for average cost and marginal cost appear frequently: • Constant marginal cost/high fixed costs: each additional unit of production is produced at constant additional expense per unit. after which point the average cost curve begins to slope upward. In this "typical" case. for example). Average costs may be dependent on the time period considered (increasing production may be expensive or impossible in the short term. Average costs affect the supply curve and are a fundamental component of supply and demand. An example of this typical case would be a factory designed to produce a specific quantity of widgets per period: below a certain production level. average cost is equal to total cost divided by the number of goods produced (the output quantity. with cost on the y-axis and quantity on the xaxis. For further increases in production beyond this minimum. In cases of perfect competition. search In economics. [edit] Relationship to marginal cost When average cost is declining as output increases. The average cost curve slopes down continuously. while above that level.

limited maintenance expenses and a high up-front fixed cost (ignoring irregular maintenance costs or useful lifespan). The movement in the Marginal Cost curve determines the movement and direction of the other curves. That is. 6. dangerous or extremely costly. though the Average Variable Cost curve attains the minimum point prior to that of the Average Cost curve. average cost will be close to or equal to marginal cost. Industries where fixed marginal costs obtain. For example. which has no fuel expense. The Average Variable Cost Curve is never parallel or intersects the Average Cost curve due to the existence of the Average Fixed Cost in all units of production. similarly. The long run elasticity of supply will be higher. or have discontinuities. • Minimum efficient scale / maximum efficient scale: marginal or average costs may be non-linear. • [edit] Relationship between AC. Average Cost curve and the Marginal Cost curve start from a height.[1] Mathematically. reach the minimum points. Low or zero fixed costs / constant marginal cost: since there is no economy of scale. the marginal cost (MC) function is expressed as the first derivative of the total . it is the cost of producing one more unit of a good. The high fixed capital costs are a barrier to entry.hydroelectric generation. 5. as new plants could be built and brought on-line. may meet the conditions for a natural monopoly.. 3. its maximum output for any given time period may essentially be fixed. and production above that level may be technically impossible. search In economics and finance. The Average Fixed Cost curve nears the Average Cost curve initially and then moves away from it. such as electrical transmission networks. the marginal cost to the incumbent of serving an additional customer is always lower than the average cost for a potential competitor. 4. The Average Fixed Cost curve starts from a height and goes on declining continuously as production increases. marginal cost is the change in total cost that arises when the quantity produced changes by one unit. AVC and MC 1. Examples may include buying and selling of commodities (trading) etc. then rise sharply and continuously. Average cost curves may therefore only be shown over a limited scale of production for a given technology. the free encyclopedia Jump to:navigation.. because once capacity is built. Marginal cost From Wikipedia. The Marginal Cost curve always passes through the minimum points of the Average Variable Cost and Average Cost curves. AFC. The Average Variable Cost curve. while the rest are determined curves. 2. Marginal Cost curve is the determining curve. a nuclear plant would be extremely inefficient (very high average cost) for production in small quantities.

VC represents variable costs. and over the longest run. building a new factory. Some of these may be considered market failures. In practice. all costs are marginal. marginal cost at each level of production includes any additional costs required to produce the next unit. FC represents fixed costs and TC represents total costs. price discrimination and others. where Q represents the production quantity. At each level of production and time period being considered. the marginal cost is the cost of the next unit produced. the marginal cost of those extra vehicles includes the cost of the new factory.(TC) function with respect to quantity (Q). for example. transaction costs. the presence of negative or positive externalities. the total cost function and its derivative are expressed as follows. and other costs are considered fixed costs. [edit] Cost functions and relationship to average cost In the simplest case. A number of other factors can affect marginal cost and its applicability to real world problems. . These may include information asymmetries. marginal costs include all costs which vary with the level of production. If producing additional vehicles requires. cost A typical Marginal Cost Curve In general terms. Note that the marginal cost may change with volume. the analysis is segregated into short and long-run cases. and so at each level of production.

it drops out of the equation when it is differentiated. In view of the durability of many capital items this textbook concept is less useful than one which allows for some scrapping of existing capital items or the acquisition of new capital items to be used with the existing stock of capital items acquired in the past. [edit] Short and long run costs and economies of scale A textbook distinction is made between short-run and long-run marginal cost. which is the total cost divided by the number of units produced and does include fixed costs. Conversely. A long-run cost function describes the cost of production as a function of output assuming that all inputs are obtained at current prices. The marginal cost of producing the second shoe is $40 . For discrete calculation without calculus. labor or organization) becomes more expensive. This type of production function is generally known as diminishing marginal productivity: at low levels of production. any change in its production involves only changes in the inputs of labour.Since (by definition) fixed costs do not vary with production quantity. average cost is falling. Note that marginal cost upwards and marginal cost downwards may differ. The important conclusion is that marginal cost is not related to fixed costs. including the expenditure on additional capital goods or any saving from disposing of existing capital goods. Increasing returns to scale are said to exist if additional units can be produced for less than the previous unit. This can be compared with average total cost or ATC.$30 = $10. materials and energy. [edit] Economies of scale Production may be subject to economies of scale (or diseconomies of scale). marginal costs rise because increasing output (with existing capital. Long-run marginal cost then means the additional cost or the cost saving per unit of additional or reduced production. For this generic case. this point will not be at the minimum for marginal cost if fixed costs are greater than zero. . minimum average cost occurs at the point where average cost and marginal cost are equal (when plotted. the capital equipment and overhead of the producer. suppose the total cost of making 1 shoe is $30 and the total cost of making 2 shoes is $40. This can only occur if average cost at any given level of production is higher than the marginal cost. and everything is being built new from scratch. productivity gains are easy and marginal costs falling. The latter allows all inputs. including capital items (plant. there may be levels of production where marginal cost is higher than average cost. the two curves intersect). for example. marginal cost equals the change in total (or variable) cost that comes with each additional unit produced. equipment. and average cost will rise for each unit of production after that point. but productivity gains become smaller as production increases. eventually. The former takes fixed costs as unchanged. that is. For instance. buildings) to vary. in contrast with marginal cost according to the less useful textbook concept. that current technology is employed.

In this case. [edit] Negative externalities of production Negative Externalities of Production Much of the time. we see that an increased cost of production on society creates a social cost curve that depicts a greater cost than the private cost curve. Such externalities are a result of firms externalising their costs onto a third party in order to reduce their own total cost. The concept of economies of scale then does not apply. with an existing capital stock. Alternatively. In an equilibrium state we see that markets creating negative externalities of production will overproduce that good. In these cases. because the individual does not receive all of the benefits. it is necessary to distinguish those costs which vary with output from accounting costs which will also include the interest and depreciation on that existing capital stock. When marginal social costs of production are greater than that of the private cost function. which may be of a different type from what can currently be acquired in past years at past prices.Economies of scale are said to exist when marginal cost according to the textbook concept falls as a function of output and is less than the average cost per unit. and others may bear those costs. private and social costs do not diverge from one another. such as education. Under the more useful concept. for example. production or consumption of the good in question may differ from the optimum level. . As a result. an individual may be a smoker or alcoholic and impose costs on others. A consumer may consume a good which produces benefits for society. [edit] Externalities Externalities are costs (or benefits) that are not borne by the parties to the economic transaction. A producer may. pollute the environment. the socially optimal production level would be lower than that observed. As a result of externalising such costs we see that members of society will be negatively affected by such behavior of the firm. This means that the average cost of production from a larger new built-from-scratch installation falls below that from a smaller new built-from-scratch installation. we see the occurrence of a negative externality of production. but at times social costs may be either greater or less than private costs. he may consume less than efficiency would suggest. Productive processes that result in pollution are a textbook example of production that creates negative externalities.

It is the marginal private cost that is used by business decision makers in their profit maximization goals. of both production and consumption. The equality of price with social marginal cost. [edit] Social costs Main article: Social cost Of great importance in the theory of marginal cost is the distinction between the marginal private and social costs. rent. for example. which creates a divergence in social and private costs. It incorporates all negative and positive externalities. when deciding whether or how much to buy. In an equilibrium state we see that markets creating positive externalities of production will under produce that good. In the long run all costs can be considered variable. includes the production of education. An example of such a public good. as well as a positive for those directly involved in the market. including parties that have no direct association with the private costs of production.[edit] Positive externalities of production Positive Externalities of Production When marginal social costs of production are less than that of the private cost function. Marginal social cost is similar to private cost in that it includes the cost functions of private enterprise but also that of society as a whole. we see the occurrence of a positive externality of production. by aligning the interest of the buyer with the interest of the community as a whole is a necessary condition for economically efficient resource allocation. It is often seen that education is a positive for any whole society. The marginal private cost shows the cost associated to the firm in question. Production of public goods are a textbook example of production that create positive externalities. the socially optimal production level would be greater than that observed. buyers take account of the cost to society of their actions if private and social marginal cost coincide. Hence. [edit] Other cost definitions • Fixed costs are costs which do not vary with output. . and by individuals in their purchasing and consumption choices. Examining the relevant diagram we see that such production creates a social cost curve that is less than that of the private curve. As a result.

are costs which vary directly with the level of output.• Variable cost also known as. the free encyclopedia Jump to:navigation. labor. power and cost of raw material. resulting • • • • from private production. fuel. search Living wage is a term used to describe the minimum hourly wage necessary for shelter (housing and incidentals such as clothing and other basic needs) and nutrition for a person for an extended period of time (lifetime). operating costs. [edit] Cost Functions Total Cost (TC) = Fixed Costs (FC) + Variable Costs (VC) FC = 420 VC = 60Q + Q2 TC = 420 + 60Q + Q2 Marginal Costs (MC) = dTC/dQ MC = 60 +2Q Average Total Cost (ATC) = Total Cost/Q ATC = (420 + 60Q + Q2)/Q ATC = 420/Q + 60 + Q Average Fixed Cost (AFC) = FC/Q AFC = 420/Q Average Variable Costs = VC/Q AVC = (60Q + Q2)/Q AVC = 60 + Q Living wage From Wikipedia. In developed countries such as the United Kingdom or Switzerland. prime costs. this standard generally means that a person working forty hours a week. Average variable cost are variable costs divided by the quantity of output. with no additional income. on costs and direct costs. Social costs of production are costs incurred by society. Average total cost is the total cost divided by the quantity of output. Average fixed cost is the fixed cost divided by the quantity of output. as a whole. . for example.

food. • "If a worker receives a wage sufficiently large to enable him to provide comfortably for himself. not to lengthen the working day beyond a man’s capacity. health care. and establishing minimum wages. see that the largest possible number among the masses of the population prefer to own property. the circumstances of time and place and. in fact. This concept differs from the minimum wage in that the latter is set by law and may fail to meet the requirements of a living wage.should be able to afford a specified quality or quantity of housing. the law ought to favor this right and." (#43) • • • . It differs somewhat from basic needs in that the basic needs model usually measures a minimum level of consumption. Rerum Novarum." (#43) "Care must be taken. that the right of private property must be regarded as sacred. In this letter. if prudent. issued in 1891 to combat the excesses of both laissez-faire capitalism on the one hand and communism on the other. Wherefore. How much time there must be for rest depends upon the type of work." (#17) "As regards protection of this world’s good. the health of the workers. [edit] Catholic social teaching The living wage is a concept central to the Catholic social teaching tradition beginning with the foundational document. and recreation. utilities. reducing the work week. particularly. as nature itself seems to counsel. transport. though these notions may be conflated. Pope Leo first described a living wage in such terms as could be generalized for application in nations throughout the world. Rerum Novarum touched off legislative reform movements throughout the world eliminating child labor. The means of production were considered by the pope to be both private property requiring state protection and a dimension of the common good requiring state regulation. that the whole question under consideration cannot be settled effectually unless it is assumed and established as a principle. gladly strive to practice thrift. therefore. so far as it can. a papal encyclical by Pope Leo XIII. Pope Leo affirms the right to private property while insisting on the role of the state to require a living wage. that after expenditures are deducted there will remain something over and above through which he can come into the possession of a little wealth. but also to raise a family. A related concept is that of a family wage – one sufficient to not only live on oneself. without regard for the source of the income. he will. the first task is to save the wretched workers from the brutality of those who make use of human beings as mere instruments for the unrestrained acquisition of wealth. his wife and his children. We have seen. and the result will be." (#65) "Wealthy owners of the means of production and employers must never forget that both divine and human law forbid them to squeeze the poor and wretched for the sake of gain or to profit from the helplessness of others.

[edit] Australia In Australia. Justice Higgins established a wage of 7/.(T)he wealthy class violates (the common good) no less. the basic wage was increased to 8/. than does the. The judgment was later overturned but remains influential. to compensate for the rising cost of living. New Mexico have notably passed very wide-reaching living wage ordinances.(7 shillings) per day or 42/. when. The basic wage system remained in place in Australia until 1967. San Francisco. and Washington D. and for no other reason save that they are of such a nature. San Francisco. The first Retail Price Index in Australia was published late in 1912. California and Santa Fe.S. . In 1913. there were at least 140 living wage ordinances in cities throughout the United States and more than 100 living wage campaigns underway in cities. in seeking to protect the worker from exploitation. the 1907 Harvester Judgment ruled that an employer was obliged to pay his employees a wage that guaranteed them a standard of living which was reasonable for "a human being in a civilised community. California. but it was vetoed by the mayor. In 2007. community advocates have won similar ordinances in cities such as Boston. society must not exploit the employer. angered deeply at outraged justice and too ready to assert wrongly the one right it is conscious of..[3] (The city of Chicago. and attacks and seeks to abolish. [edit] United States In the United States. However. it demands for itself everything as if produced by its own hands. of whatever kind they are or whatever the function they perform in human society. San Francisco. it thinks it the right order of things for it to get everything and the worker nothing.) Living wage laws typically cover only businesses that receive state assistance or have contracts with the government. • ".. Los Angeles. the first increase since the minimum was set.[citation needed] U. and college campuses[6].Rerum Novarum. Pope Pius XI. 1931 [2] [edit] Implementations The national and international living wage movements are supported by many labor unions and community action groups such as ACORN. the state of Maryland and several municipalities and local governments have enacted ordinances which set a minimum wage higher than the federal minimum for the purpose of requiring all jobs to meet the living wage for that region. Louis. Subsequent to this effort.per week as a 'fair and reasonable' minimum wage for unskilled workers. It was also adopted by some state tribunals and was in use in some states in the 1980s. all property and returns or incomes.. cities with living wage laws include Santa Fe and Albuquerque in New Mexico.per day. and St. Pope Pius XI clarifies Rerum Novarum by warning that. as if free from care on account of its wealth. 1891 [1] In Quadragesimo Anno." regardless of his capacity to pay. counties. that have not been obtained by labor.C.working class when. states. Pope Leo XIII.." (#57) Quadragesimo Anno. Illinois also passed a living wage ordinance in 2006. therefore.[4] This effort began in 1994 when an alliance between a labor union and religious leaders in Baltimore launched a successful campaign requiring city service contractors to pay a living wage[5].

Other organisations with an interest in living wage issues include the Living Wage Campaign[7]. [edit] Alternative policies Some critics[who?] argue that there are alternative ways to deliver income to the poor. the UK Working Tax Credit or a negative income tax. Although minimum wage laws are in effect in a great many jurisdictions.[2] [edit] Background . The Guardian newspaper columnist Polly Toynbee is also a major supporter of the campaign for a living wage. it increases unemployment. that don't have the unemployment and deadweight loss effects that critics claim are the result of living wage law. and the Church Action on Poverty [8] and the Scottish Low Pay Unit. many campaigning organisations have responded to the low level of the National Minimum Wage by asserting the need for it to be increased to a level more comparable to a living wage. The charity London Citizens is campaigning for a living wage to be implemented across London.[1] Opponents say that if it is high enough to be effective. there are differences of opinion about the benefits and drawbacks of a minimum wage. thereby harming lesser skilled workers to the benefit of better skilled workers. search A minimum wage is the lowest hourly. Minimum wage From Wikipedia. the Mayor of London's office hosts a Living Wage Unit which monitors the level needed for a living wage in London (which has considerably higher living costs than the rest of the UK). it is the lowest wage at which workers may sell their labor. Equivalently. Supporters of the minimum wage say that it increases the standard of living of workers and reduces poverty. such as the US Earned Income Tax Credit. For instance.[edit] United Kingdom In the United Kingdom. where jobs are provided to all comers at a living wage. setting a de facto (but not de jure) living wage. the free encyclopedia Jump to:navigation. particularly among workers with very low productivity due to inexperience or handicap. daily or monthly wage that employers may legally pay to employees or workers. A further alternative is a job guarantee.

From the time of their introduction.[3] The classic exposition of the minimum wage's shortcomings in reducing poverty was provided by George Stigler in 1946: • • Employment may fall more than in proportion to the wage increase. rooted in concern about the ability of markets to provide income equity for the least able members of the work force. especially families." Over time. and have received much less support from economists than from the general public. As uncovered sectors of the economy absorb workers released from the covered sectors. there is great disagreement as to whether the minimum wage is effective in attaining its goals. Today. minimum wage laws have usually been judged against the criterion of reducing poverty. the focus changed to helping people. teenagers from families not in poverty. An obvious solution to this concern is to redefine the wage structure politically to achieve a socially preferable distribution of income. thereby reducing overall earnings. minimum wage laws have been highly controversial politically. and a minimum wage was proposed as a means to make them pay "fairly. minimum wage laws cover workers in most low-paid fields of employment.[3] The minimum wage has a strong social appeal.A sweatshop in Chicago. Illinois in 1903 Minimum wages were first proposed as a way to control the proliferation of sweat shops in manufacturing industries. Despite decades of experience and economic research.[4] Although the goals of the minimum wage are widely accepted as proper. debates about the costs and benefits of minimum wages continue today. The sweatshop owners were thought to have unfair bargaining power over their workers. Thus. for example. The impact of the minimum wage on family income distribution may be negative unless the fewer but better jobs are allocated to members of needy families rather than to. The legal restriction that employers cannot pay less than a legislated wage is equivalent to the legal restriction that workers cannot work at all in the • • . become more self sufficient. The sweat shops employed large numbers of women and young workers. paying them what were considered to be substandard wages. the decrease in wages in the uncovered sectors may exceed the increase in wages in the covered ones.

So can international public opinion. by pressuring multinational companies to pay Third World workers wages usually found in more industrialized countries.[9] and £5.25 per hour under U.[5] [edit] Economics of the minimum wage [edit] Simple supply and demand Main article: Supply and demand An analysis of supply and demand of the type shown in introductory mainstream economics textbooks implies that by mandating a price floor above the equilibrium wage. and zero is what some people would receive if they fail to find jobs when they try to enter the workforce.[13] One such textbook says: . minimum wage laws should cause unemployment. and any wage rate effects on their income is strictly proportional to the hours of work they are offered. not only in setting a particular amount of money (e. Employment opportunities and the factors that limit labor market participation must be considered as well. Very few low-wage workers come from families in poverty. if market outcomes for low-skilled families are to be supplemented in a socially satisfactory way. Those primarily affected by minimum wage laws are teenagers and low-skilled adult females who work part time.[5] [edit] Minimum wage law Main article: Minimum wage law First enacted in New Zealand in 1894.g.55 in the U. the real minimum wage is always zero.[4] Economist Thomas Sowell has also argued that regardless of custom or law.S.80 (for those aged 22+) in the United Kingdom[10]).S.[8] Minimum wage rates vary greatly across many different jurisdictions. According to the model shown in nearly all introductory textbooks on economics. but also in terms of which pay period (e. increasing the minimum wage decreases the employment of minimum-wage workers.[4] Direct empirical studies indicate that anti-poverty effects in the U. The latter situation in Southeast Asia and Latin America has been publicized in recent years.g. Federal law. even if there were no unemployment effects. Some jurisdictions allow employers to count tips given to their workers as credit towards the minimum wage level.[6][7] there is now legislation or binding collective bargaining regarding minimum wage in more than 90% of all countries. (See also: List of minimum wages by country) [edit] Informal minimum wages Sometimes a minimum wage exists without a law. but it existed with companies in West Africa in the middle of the twentieth century. So. or they lose the jobs they already have. would be quite modest.S. factors other than wage rates must also be considered. state of Washington. US$7. Companies can be more selective in those whom they employ thus the least skilled and least experienced will typically be excluded. $8.[11][12] This is because a greater number of workers are willing to work at the higher wage while a smaller numbers of jobs will be available at the higher wage. Russia and China set monthly minimums) or the scope of coverage.protected sector unless they can find employers willing to hire them at that wage. Custom and extra-legal pressures from governments or labor unions can produce a de facto minimum wage.

"[14] It illustrates the point with a supply and demand diagram similar to the one below. We will start by assuming that the supply and demand curves for labor will not change as a result of raising the minimum wage. will be unable to find work. Minimum wage behaves as a classical price floor on labor. This is because. and is shown as a line moving up and to the right. The minimum wage will price the services of the least productive (and therefore lowest-wage) workers out of the market. the fewer hours an employer will demand of an employee...[15] . particularly those with the lowest prelegislation wage rates. If no minimum wage is in place. It is assumed that the higher the wage. as the wage rate rises. The direct results of minimum wage legislation are clearly mixed.[15] A firm's cost is a function of the wage rate. if set above the equilibrium price. Others. will enjoy higher wages.e."If a higher minimum wage increases the wage rates of unskilled workers above the level that would be established by market forces. unemployment. more labor will be willing to be provided by workers than will be demanded by employers. The demand of labor curve is therefore shown as a line moving down and to the right. the quantity of unskilled workers employed will fall. It is assumed that workers are willing to labor for more hours if paid a higher wage. workers and employers will continue to adjust the quantity of labor supplied according to price until the quantity of labor demanded is equal to the quantity of labor supplied. They will be pushed into the ranks of the unemployed or out of the labor force. the supply of labor curve is upward sloping. Standard theory says that.[15] Combining the demand and supply curves for labor allows us to examine the effect of the minimum wage. Economists graph this relationship with the wage on the vertical axis and the quantity (hours) of labor supplied on the horizontal axis. where the supply and demand curves intersect. reaching equilibrium price. creating a surplus of labor i. Some workers. most likely those whose previous wages were closest to the minimum. This assumption has been questioned. Since higher wages increase the quantity supplied. . it becomes more expensive for firms to hire workers and so firms hire fewer workers (or hire them for fewer hours).

[16] [edit] Criticism of the "textbook model" The argument that minimum wages decrease employment is based on a simple supply and demand model of the labor market. or naturalistic factors such as segmented markets. But proponents of the minimum wage hold that the situation is much more complicated than the basic theory can account for. and the 'personal' element of the labor transaction give some degree of wage-setting power to most firms. that little of the empirical work done with the textbook model constitutes a potentially falsifying test. instead of using the downward labor demand curve shown in the diagram above. based on simulation results. building on the work of Piero Sraffa. argue that that model. Gary Fields. monopsonistic employers would use a steeper downward sloping ."[22] An alternate view of the labor market has low-wage labor markets characterized as monopsonistic competition wherein buyers (employers) have significantly more market power than do sellers (workers). In such a case the diagram above would not yield the quantity of labor clearing and the wage rate. consequently. Vienneau[18]. and that the standard theoretical arguments incorrectly measure only a one-sector market. Graham White [21] argues. where "the self-employed. imperfect mobility. is logically incoherent. argues that the standard "textbook model" for the minimum wage is "ambiguous". A number of economists (for example Pierangelo Garegnani[17].In other words.' asymmetric information. that the policy of increased labor market flexibility. including the reduction of minimum wages. empirical evidence hardly exists for that model." is the basis for better analysis. which tends to be higher with minimum wage laws than without them. the government buys it. Robert L. This is because while the upward sloping aggregate labor supply would remain unchanged. Fields says a two-sector market. Fields shows the typical theoretical argument to be ambiguous and says "the predictions derived from the textbook model definitely do not carry over to the two-sector case. imperfect mobility and the 'personal' element of labor markets. even given all its assumptions. the labor surplus takes the form of unemployment. and hurts people who are not hired (or lose their jobs) because companies cut back on employment. Michael Anyadike-Danes and Wyne Godley [20] argue. Through this model. When there is a wheat surplus. The result is a surplus of the commodity. Since the government doesn't hire surplus labor. for example): Artificially raising the price of the commodity tends to cause the supply of it to increase and the demand for it to lessen. the simplest and most basic economics says this about commodities like labor (and wheat. since a non-covered sector exists nearly everywhere. does not have an "intellectually coherent" argument in economic theory. whereby the individual employer has some market power in determining wages paid. partially on the basis of Sraffianism. One complicating factor is possible monopsony in the labor market. and Arrigo Opocher & Ian Steedman[19]). and. Therefore. Professor of Labor Economics and Economics at Cornell University. Thus it is at least theoretically possible that the minimum wage may boost employment. and farm workers are typically excluded from minimum-wage coverage… [and with] one sector with minimum-wage coverage and the other without it [and possible mobility between the two]. This monopsony could be a result of intentional collusion between employers. Though single employer market power is unlikely to exist in most labor markets in the sense of the traditional 'company town. information costs. the predictions of the textbook model simply cannot be relied on.[5] So the basic theory says that raising the minimum wage helps workers whose wages are raised. service workers.

it is extraordinarily difficult to separate the effects of minimum wage from all the other variables that affect employment. political. whose members' jobs are protected by minimum wage laws. hampers firms in reducing wage costs during trade downturns. and hence training costs.[5] The following table summarizes the arguments made by those for and against minimum wage laws: Arguments in favor of Minimum Arguments against Minimum Wage Laws Wage Laws Opponents of the minimum wage claim it has these effects: Supporters of the minimum wage claim it has these effects: • Increases the standard of living for the poorest and most vulnerable class in society and raises average. financial.[28] Hurts small business more than large • .curve corresponding to marginal expenditures to yield the intersection with the supply curve resulting in a wage rate lower than would be the case under competition. an appropriately set minimum wage could increase both wages and employment. if management is forced to increase wages. and generally dysfunctions. as do labor unions. as opposed to an illusory "free lunch" for low-wage workers. with the optimal level being equal to the marginal productivity of labor. On the other side of the issue.[26] The presence of these powerful groups and factors means that the debate on the issue is not always based on dispassionate analysis. low-wage employers such as restaurants finance the Employment Policies Institute. agencies that administer the laws have a vested interest in showing that "their" laws do not create unemployment.[24] For example. and emotional investments in issues surrounding minimum wage laws. Another reason minimum wage may not affect employment in certain industries is that the demand for the product the employees produce is highly inelastic. Additionally. Three other possible reasons minimum wages do not affect employment were suggested by Alan Blinder: higher wages may reduce turnover. and price rises. and minimum wage workers might represent such a small proportion of a business's cost that the increase is too small to matter. it excludes low cost competitors from labor markets.[1] Motivates and encourages employees • • As a labor market analogue of politicaleconomic protectionism. Also. which has released numerous studies opposing the minimum wage. the amount of labor sold would also be lower than the competitive optimal allocation. generates various industrialeconomic inefficiencies as well as unemployment.[23] This view emphasizes the role of minimum wages as a market regulation policy akin to antitrust policies. Since demand for the product is highly inelastic. poverty. Such a case is a type of market failure and results in workers being paid less than their marginal value. management can pass on the increase in wage to consumers in the form of higher prices. but argues that "the list demonstrates that one can accept the new empirical findings and still be a card-carrying economist. Under the monopsonistic assumption."[25] [edit] Debate over consequences Various groups have great ideological. raising the minimum wage may "render moot" the potential problem of recruiting workers at a higher wage than current workers. He admits that he does not know if these are correct. consumers continue to buy the product at the higher price and so the manager is not forced to lay off workers. For example.

[1] Increases the work ethic of those who earn very little. most notably in the four years following the implementation of the minimum wage. [edit] Empirical studies . and have found ways to cause current workers to be more productive (especially service companies). the Earned Income Tax Credit) at reducing poverty.S. A study of U. increased prices.[27] • Stimulates consumption. reduced staff hours. states showed that businesses' annual and average payrolls grow faster and employment grew at a faster rate in states with a minimum work harder (unlike welfare programs and other transfer payments). and is more damaging to businesses than those other methods.g. The Low Pay Commission found that.[42] Neither trade unions nor employer organizations contest the minimum wage.[1] business.[1] Decreases the cost of government social welfare programs by increasing incomes for the lowest-paid. rather than make employees redundant. the International Labour Organization (ILO)[8] argued that the minimum wage could not be directly linked to unemployment in countries that have suffered job losses.[36] Is less effective than other methods (e. employers have reduced their rate of hiring. the Organisation for Economic Co-operation and Development (OECD)[37] released a report arguing that countries could alleviate teen unemployment by “lowering the cost of employing low-skilled youth” through a sub-minimum training wage.[30][31] May cause inflation as businesses try to compensate by raising the prices of the goods being sold.[36] • • • • • • • • In 2006.[39] A review of its effects found no discernible impact on employment levels. but did not claim to prove causation. prices in the minimum wage sector were found to have risen significantly faster than prices in non-minimum wage sectors.[41] Since the introduction of a national minimum wage in the UK in 1999. as employers demand more return from the higher cost of hiring these employees.[36] Discourages further education among the poor by enticing people to enter the job market. although the latter had especially done so heavily until 1999.[40] However. either through a reduction in the number of hours worked by individuals.[32][33] Benefits some workers at the expense of the poorest and least productive.[38] The study showed a correlation. or through a reduction in the number of jobs. the minimum wage introduced in the UK is no longer controversial and the Conservatives reversed their opposition in 2000. its effects on employment were subject to extensive research and observation by the Low Pay Commission. In April 2010.[29] • Reduces quantity demanded of workers.[35] Businesses may spend less on training their employees. Although strongly opposed by both the business community and the Conservative Party when introduced in 1999.[34] Can result in the exclusion of certain groups from the labour force. by putting more money in the hands of lowincome people who spend their entire paychecks.

e. For example. with no effect on either the teen or young adult unemployment rates.[43] Brown et al. as a whole. for the effect on the teenage unemployment rate.Economists disagree as to the measurable impact of minimum wages in the 'real world'. [5] In Florida. and in particular that teenagers were made worse off by the unemployment associated with the minimum wage. it was commonly found that teenagers withdrew from the labor force in response to the minimum wage. there were a number of empirical studies that supported this view. logarithmic specifications).6 percentage points. that the minimum wage reduced employment. Using a variety of specifications of the employment and unemployment equations (using ordinary least squares vs. generalized least squares regression procedures. inflation-adjusted) value of the minimum wage was declining. and no change in the teenage unemployment rate. especially among younger and low-skill workers.[6] .S. (1983) note that time series studies to that point had found that for a 10 percent increase in the minimum wage. from zero to over 3 percent. In contrast to the simple supply/demand figure above. Economists have done empirical studies on numerous aspects of the minimum wage. Gramlich (1976) found that many of the benefits went to higher income families. and linear vs. a strong consensus existed among economists. [44] Wellington (1991) updated Brown et al. She found that a 10% increase in the minimum wage decreased teenage employment by 0. The study also found a small. the most frequently studied aspect Effects on the distribution of wages and earnings among low-paid and higherpaid workers Effects on the distribution of incomes among low-income and higher-income families Effects on the skills of workers through job training and the deferring of work to acquire education Effects on prices and profits Until the mid-1990s. but statistically significant. they found that a 10 percent increase in the minimum wage caused a 1 percent decrease in teenage employment. a followup comprehensive study confirms a strong economy with increased employment above previous years in Florida and better than in the U. This disagreement usually takes the form of competing empirical tests of the elasticities of demand and supply in labor markets and the degree to which markets differ from the efficiency that models of perfect competition predict. due to the fact that it had not increased since 1981.'s research with data through 1986 to provide new estimates encompassing a period when the real (i. which produced the possibility of equal reductions in the supply as well as the demand for labor at a higher minimum wage and hence no impact on the unemployment rate.[45] Some research suggests that the unemployment effects of small minimum wage increases are dominated by other factors. the studies exhibited wider variation in their estimates. where voters approved an increase in 2004. prominently including:[3] • • • • • Employment effects.. there was a decrease in teenage employment of 1-3 percent.[13] In addition to the basic supply-demand intuition. However. increase in unemployment for adults aged 20–24. both conservative and liberal.

25 to $5.05 per hour (an 18. they look at the 1992 increase in New Jersey's minimum wage. argue that their research was flawed. Critics. They argued that the negative employment effects of minimum wage laws are minimal if not non-existent.[47] Card and Krueger expanded on this initial article in their 1995 book Myth and Measurement: The New Economics of the Minimum Wage (ISBN 0-691-04823-1). employment. David Card and Alan Krueger gathered information on fast food restaurants in New Jersey and eastern Pennsylvania in an attempt to see what effect this increase had on employment within New Jersey.[54][55] According to economists Donald Deere (Texas A&M). and the 1990-91 increases in the federal minimum wage. Basic economic theory would have implied that relative employment should have decreased in New Jersey. an increase above this equilibrium point could likely bring about increased unemployment for the low and unskilled workers.[49] but in a later edited version they found that the same general sample set did increase unemployment.[edit] Card and Krueger In 1992. From these isolated findings Card and Krueger paint a big picture wherein increased minimum wages do not decrease. Kevin Murphy (University of Chicago). Thus in the absence of the minimum wage law unskilled workers would be paid approximately the same amount. Card and Krueger's conclusions are contradicted by "common sense and past research". like Nobel laureates Paul Krugman[53] and Joseph Stiglitz do accept them as correct. Three of them consider a single state.8% increase) while the adjacent state of Pennsylvania remained at $4. On the other hand. and two of them look at only a handful of firms in one industry. Our view is that there is something wrong with this picture.[51][52] while some others. For example. the minimum wage in New Jersey increased from $4. Kevin M.[46] Based on data from the employers' responses. In addition to their own findings. and Finis Weltch (Texas A&M). the authors concluded that the increase in the minimum wage increased employment in the New Jersey restaurants. However. Artificial increases in the price of unskilled laborers . They conclude that:[56] Each of the four studies examines a different piece of the minimum wage/employment relationship.[50] Another possible explanation for why the current minimum wage laws may not affect unemployment in the United States is that the minimum wage is set close to the equilibrium point for low and unskilled workers.[48] Subsequent attempts to verify the claims requested payroll cards from employers to verify employment. Murphy and Nobel laureate Gary Becker do not accept the Card/Krueger results.8% wage hike resulted in "[statistically] insignificant—although almost always negative" employment effects. however. asking managers for data on the full-time equivalent staff level of their restaurants both times. The 18. generally finding that the older results of a negative employment effect did not hold up in the larger datasets. and may increase. and again in November-December 1992.25. and found that the minimum wage increases were followed by decreases in employment. an assessment of data collected and analyzed by David Neumark and William Wascher did not initially contradict the Card/Krueger results. Card and Krueger surveyed employers before the April 1992 New Jersey increase.[15] [edit] Reaction to Card and Krueger Some leading economists such as Greg Mankiw. the 1988 rise in California's minimum wage. they reanalyzed earlier studies with updated data.

if seriously advanced. Nobel laureate James M. According to the Neumark and Wascher. becomes equivalent to a denial that there is even minimum scientific content in economics. Card and Krueger analyzed 14 earlier time-series studies and concluded that . Alan Krueger responded in The Washington Post:[58] More was at stake here than the minimum wage – the methodology of public policy analysis was also at issue. have simply rejected the notion that their view of economic theory possibly could be proved wrong by data. They emphasize three especially salient conclusions: First. they found some evidence that the minimum wage is harmful to poverty-stricken families. [edit] Neumark and Wascher In a 2008 book.[3] The studies were from several countries covering a period of over 50 years. those showing positive effects are few. has argued in favour of the Card and Krueger result. arguing:[57] . Some economists. and new cases confirming its results keep coming in. we have not yet become a bevy of camp-following whores. Wascher described their analysis of over 300 studies on the minimum wage. Buchanan responded to the Card and Krueger study in the Wall Street Journal.. Based on the published studies they considered. in consequence. Such a claim. by reducing their ultimate level of education. primarily from the 1990s onward. questionable." Second. such as James Buchanan. stating that Card and Krueger. Their work has been attacked because it seems to contradict Econ 101 and because it was ideologically disturbing to many. only a handful of economists are willing to throw over the teaching of two centuries. [edit] Statistical Meta-analyses Several researchers have conducted statistical meta-analyses of the employment effects of the minimum wage.. economists can do nothing but write as advocates for ideological interests. Third. they found that studies since the early 1990s have strongly pointed to a "reduction in employment opportunities for low-skilled and directly affected workers. and disproportionately discussed. Yet it has stood up very well to repeated challenges. Nobel laureate Paul Krugman. David Neumark and William L. the conventional wisdom remains intact.[59] . found no evidence that minimum wage increases in the range that the United States has experiences led to job losses.. a large majority of the studies show negative effects for the minimum self-respecting economist would claim that increases in the minimum wage increase employment. while acknowledging Card and Kreuger. Fortunately. Neumark and Wascher conclude that the minimum wage is not good social policy.. and that. they found that the minimum wage lowers adult wages of young workers who encounter it.inevitably lead to their reduced employment. and "virtually no evidence" that it helps them.

They argued that the different policy views were not related to views on whether raising the minimum wage would reduce teen employment (the median economist said there would be a reduction of 1%). suggesting that their results could signify either publication bias or the absence of an effect. opponents of the minimum wage virtually ignored this issue.5% disagreed. studies on disemployment effects and concluded that Card and Krueger's initial claim of publication bias is still correct. which had more data and lower standard errors.D. They found that a majority signed on the grounds that it transferred income from employers to workers. This consensus was weakened when some well-publicized empirical studies showed the opposite. although others confirmed the original view. Whaples found that 37. Klein and Stewart Dompe conclude. T.D. "Once this publication selection is corrected. Using a different methodology.[65] A 2000 survey by Dan Fuller and Doris Geide-Stevenson reports that of a sample of 308 American Economic Association economists. "The silence is fairly deafening. Hristos Doucouliagos and T. They state that the reduction on consensus on this question is "likely" due to the Card and Krueger research and subsequent debate. at worst."[69] In 2007. Fuchs et al. just above the level of statistical significance at the .[68] Daniel B. Stanley conducted a similar meta-analysis of 64 U. they concluded.3% wanted it decreased.6% fully agreed with the statement. (1998) polled labor economists at the top 40 research universities in the United States on a variety of questions in the summer of 1996.9% agreed with provisos. minor negative effects. however. 45."[61] More recently.7% of respondents supported an increase in the minimum wage.5% disagreed. Klein and Dompe conducted a non-anonymous survey of supporters of the minimum wage who had signed the "Raise the Minimum Wage" statement published by the Economic Policy Institute.8% wanted it completely eliminated.[67] Surveys of labor economists have found a sharp split on the minimum wage.there was clear evidence of publication bias because the later studies."[63] [edit] Surveys of economists Until the 1990s. In . or equalized bargaining power between them in the labor market. 1. "a minimum wage increases unemployment among young and unskilled workers". 27.3% wanted it kept at the current level. Leonard noted.[62] In 2008.[60] Though a serious methodological indictment. and 46. did not show the expected increase in t-statistic (almost all the studies had a t of about two. 90 percent of the economists surveyed agreed that the minimum wage increases unemployment among low-skilled workers. economists generally agreed that raising the minimum wage reduced employment.[64] According to a 1978 article in the American Economic Review. Today's consensus. little or no evidence of a negative association between minimum wages and employment remains. and 26. "the average level of support for the minimum wage is somewhat higher among labor economists than among AEA members. 14. if one exists.S. The authors of this study also reweighted data from a 1990 sample to show that at that time 62. but on value differences such as income redistribution. he concludes that there is statistically significant evidence of publication bias and that correction of this bias shows no relationship between the minimum wage and unemployment.[66] A similar survey in 2006 by Robert Whaples polled PhD members of the American Economic Association. while 19.05 level). Stanley has criticized Card and Krueger's methodology. is that increasing the minimum wage has. as Thomas C. Moreover.4% of academic economists agreed with the statement above.5% agreed with provisos and 17. Their 65 respondents split exactly 50-50 when asked if the minimum wage should be increased. on the basis of previous surveys.

[70] [edit] Alternatives Economists and other political commentators have proposed alternatives to the minimum wage. Paul Samuelson. minimum wage standards in different sectors are set by collective bargaining.[citation needed] . In 1968 James Tobin. Examples of refundable tax credits include the earned income tax credit and the additional child tax credit in the U. in that the refundable tax credit is usually only paid to households that have earned at least some income. [citation needed] [edit] Guaranteed minimum income A guaranteed minimum income is another proposed system of social welfare provision.[77] Sweden and Denmark are examples of developed nations where there is no minimum wage that is required by legislation.[76] [edit] Collective bargaining Germany. as it would benefit a broader population of low wage earners. and working tax credits and child tax credits in the UK. [edit] Basic income A basic income (or negative income tax) is a system of social security..[71] Both Tobin and Samuelson have also come out against the minimum wage. not cause any unemployment. Milton Friedman. would be more economically efficient. except that it is normally conditional and subject to a means test. or a willingness to perform community services.S. There is no means test. causing losses in efficiency. Some proposals also stipulate a willingness to participate in the labor market. Friedrich Hayek.[74] James Meade. A basic income is often proposed in the form of a citizen's dividend (a transfer payment from the government). Such a system is slightly different from a negative income tax. and distribute the costs widely rather than concentrating it on employers of low wage workers. that periodically provides each citizen with a sum of money that is sufficient to live on. Senator George McGovern called for a 'demogrant' that was very similar to a basic income. as the minimum wage effectively imposes a high marginal tax on employers. and result in a net payment to the taxpayer beyond their own payments into the tax system. They argue that these alternatives may address the issue of poverty better than a minimum wage. It is similar to a basic income or negative income tax system.200 economists signed a document calling for the US Congress to introduce in that year a system of income guarantees and supplements. Proponents argue that a basic income that is based on a broad tax base. [72] In the 1972 presidential campaign. Robert Solow. Instead.addition. a majority considered disemployment to be a moderate potential drawback to the increase they supported. a basic income is entirely unconditional. and the richest as well as the poorest citizens would receive it.[citation needed] [edit] Refundable tax credit A refundable tax credit is a mechanism whereby the tax system can reduce the tax owed by a household to below zero. The ability of the earned income tax credit to deliver a larger monetary benefit to poor workers at a lower cost to society was recently documented in a report by the Congressional Budget Office. Except for citizenship.[73] Winners of the Nobel Prize in Economics that fully support a basic income include Herbert Simon.[75] Jan Tinbergen and James Tobin. John Kenneth Galbraith and another 1.

One word more and I — I withdraw my overdraft!" Cartoon from Punch Magazine Vol. 1917 An overdraft occurs when withdrawals from a bank account exceed the available balance. the free encyclopedia Jump to:navigation. Contents [hide] • 1 History of the overdraft . June 27. If the balance exceeds the agreed terms. In this situation a person is said to be "overdrawn". then interest is normally charged at the agreed rate.Overdraft From Wikipedia. and the amount overdrawn is within this authorised overdraft limit. search "I warn you. 152. If there is a prior agreement with the account provider for an overdraft protection plan. Sir! The discourtesy of this bank is beyond all limits. then fees may be charged and higher interest rate might apply.

1 Amount of fees 3.2 Industry statistics 4. The funds may not be immediately available and lead to overdraft fees.4 Proposed legislation • • 5 See also 6 References [edit] History of the overdraft The first known overdraft was awarded in 1728 when merchant William Hog was allowed to take out £1000 (almost £65000 today.1 Overdraft protection in the US     ○ ○ ○ 4.Banks or ATMs may allow cash withdrawals despite insufficient availability of funds.1.• • 2 Reasons for overdrafts 3 United Kingdom ○ 3.1. ATM overdraft . it may automatically authorize a withdrawal based on limits preset by the authorizing network.1. The account holder may or may not be aware of this fact at the time of the withdrawal. Failure to maintain an accurate account register .1 Overdraft protection in the UK   3.1. If the ATM is unable to communicate with the cardholder's bank.The account holder doesn't accurately account for activity on their account and overspends through negligence.1.3 Linked accounts 4.1 Ad-hoc coverage of overdrafts 4. These may include: • Intentional short-term loan .The account holder finds themselves short of money and knowingly makes an insufficient-funds debit.A deposit made to the account can be placed on hold by the bank.[1] The overdraft was awarded by The Royal Bank of Scotland which had opened in Edinburgh the previous year.4 Bounce protection plans 4. [edit] Reasons for overdrafts Overdrafts occur for a variety of reasons.2 Legal status and controversy • 4 United States ○ 4.2 Overdraft lines of credit 4. They accept the associated fees and cover the overdraft with their next deposit.3 Transaction processing order 4. Temporary Deposit Hold . • • • .1. US $93000) more than he had in his account. This may be due to Regulation CC (which governs the placement of holds on deposited checks) or due to individual bank policies.

or a direct-deposit chargeback in order to recover an overpayment. and so the bank may release the hold before the merchant collects the funds thus making these funds available again.00. Banks do not hold these funds indefinitely. However the merchant doesn't receive the funds until they process the transaction batch for the period during which the customer's purchase was made. The debit could also have been made as a result of a wage garnishment.A merchant account could receive a chargeback because of making an improper credit or debit card charge to a customer or a customer making an unauthorized credit or debit card charge to someone else's account in order to "pay" for goods or services from the merchant. Playing the Float . For example. or the customer could be a victim of a bad check or a counterfeit check scam. It is possible for the chargeback and associated fee to cause an overdraft or leave insufficient funds to cover a subsequent withdrawal or debit from the merchant's account that received the chargeback.The bank charges a fee unexpected to the account holder. such as the initiation of a recurring service following a free trial period. the bank could sue or even press criminal charges.When a customer makes a purchase using their debit card • • • without using their PIN. Authorization holds .The account holder makes a debit while insufficient funds are present in the account believing they will be able to deposit sufficient funds before the debit clears. Chargeback to merchant . • • • . or forged. then barring an interim deposit the account will overdraw when the merchant collects for the original purchase. If the customer spends these funds.• Unexpected electronic withdrawals . stolen. a customer may authorize a $5. The customer has the option to recover these funds through chargeback to the merchant. This could be due to a deposited item that is known to be bad. If the resulting overdraft is too large or cannot be covered in a short period of time.The account holder deposits a check or money order and the deposited item is returned due to non-sufficient funds. The funds are placed on hold in the customer's account reducing the customer's available balance.A merchant may improperly debit a customer's account due to human error. an overdraft results or a subsequent debit which was reliant on such funds causes one. Bank fees . the transaction is treated as a credit transaction. While many cases of playing the float are done with honest intentions. or being discovered to be counterfeit.00 purchase which may post to the account for $500. the time involved in checks clearing and the difference in the processing of debits and credits are exploited by those committing check kiting. This could occur in good faith of both parties if the electronic withdrawal in question is made legally possible by terms of the contract.At some point in the past the account holder may have authorized electronic withdrawals by a business. Returned check deposit . a closed account. Merchant error . an offset claim for a taxing agency or a credit account or overdraft with another account with the same bank. As a result of the check chargeback and associated fee. altered. leaving insufficient funds for a subsequent debit from the same account.

" or phishing.A check debit may post for an improper amount due to human or computer error.• Intentional Fraud . Bank Error .A debit occurs in the customer’s account resulting in an overdraft which is then covered by a credit that posts to the account during the same business day. Whether this actually results in overdraft fees depends on the deposit-account holder agreement of the particular bank. Other banks tend to charge fees regardless of the amount of the level of the overdraft. When a customer exceeds their authorized overdraft limit. offer a "buffer zone". whether this is offered free of interest. they now charge per day. which often results in the customer being charged one or more fees. the bank sends out a letter informing the customer of the charge and requesting that the account be operated within its limits from that point onwards. The money or checks from an ATM deposit could also have been stolen or the envelope lost or stolen. The criminal act could cause an overdraft or cause a subsequent debit to cause one. ATM-card. The fees charged by banks can vary. which is seen by some as unfair. another person's account. but others could work to their benefit. In a BBC Whistleblower programme on the practice.Fri) before any items are returned or any bank charges incurred (with exception from Standing . so an amount much larger than the maker intended may be removed from the account.An ATM deposit with misrepresented funds is made or a check or money order known to be bad is deposited (see above) by the account holder. This could occur as the result of demand-draft. The fraud could be perpetrated against one's own account. or debit-card fraud. together with a higher rate of lending on the amount by which they have exceeded their authorized overdraft limit. the level and nature of such fees varies widely between banks. that is.30pm (Mon . [4] [edit] Amount of fees No major UK bank has completely dropped unauthorized overdraft fees. skimming. rather than a single monthly fee for an unauthorized overdraft. where customers will not be charged fees if they are over their limit by less than a certain amount. Intraday overdraft . Lloyds TSB changed its fee structure. or an account set up in another person's name by an identity thief. However. Victimization . Usually. the bank elects not to permit the customer to go into unauthorized overdraft. they become overdrawn without authorization. Same bank errors can work to the account holder's detriment. subject to a pre-arranged limit (known as an authorized overdraft limit). They also allow a 'grace period' where you can pay money in before 3. Again. and enough money is debited before the fraud is discovered to result in an overdraft once the chargeback is made. in which case the victim is often denied a remedy.The account may have been a target of identity theft. Some. check forgery. A customer may also incur a fee if they present an item which their issuing bank declines for reason of insufficient funds. In response to criticism. it was noted that the actual cost of an unauthorised overdraft to the bank was less than two pounds. however. an "account takeover. • • • [edit] United Kingdom [edit] Overdraft protection in the UK Banks in the UK often offer a basic overdraft facility. subject to an average monthly balance figure or at the bank's overdraft lending rate varies from bank to bank and may differ according to the account product held.

the OFT recommended that credit card issuers set such fees at a maximum of 12 UK pounds. there have been cases where the courts have ruled in favor of the banks and alternatively struck out claims against customers who have not adequately made a case against their bank.[6] [edit] United States [edit] Overdraft protection in the US Overdraft protection is a financial service offered by banking institutions primarily in the United States. to pay money in before 10am on Monday morning and the daily fees for the weekend (Saturday and Sunday) to be waivered. It is currently thought that the England and Wales county courts are flooded with such claims. electronic transfers. the manager of a bank would look at the bank's list of overdrafts each day.[4] To date. [edit] Legal status and controversy See also: UK default charges controversy In 2006 the Office of Fair Trading issued a statement which concluded that credit card issuers were levying penalty charges when customers exceeded their maximum spend limit and / or made late payments to their accounts. Overdraft or courtesy pay program protection pays items presented to a customer's account when sufficient funds are not present to cover the amount of the withdrawal. The charges for cheques and Direct Debits which are refused (or "bounced") due to insufficient funds are usually the same as or slightly less than the general overdraft fees. even if this causes an overdraft. have a "no fees on fees" policy whereby an account that goes overdrawn solely because of an unpaid item fee will not be charged an additional fee. the fee charged is between twenty-five and thirty pounds. like Halifax. In the statement. the OFT opined that the fees charged by credit card issuers were analogous to unauthorized overdraft fees charged by banks. overdraft protection allows for these items to be paid as opposed to being returned unpaid.[2] In the statement. Overdraft protection can cover ATM withdrawals. Alliance & Leicester formerly had a buffer zone facility (marketed as a "last few pounds" feature of their account). or bouncing. If the manager saw that a favored customer had incurred an overdraft. along with an increased rate of debit interest. they had the discretion to pay . A situation which has provoked much controversy is the bank declining a cheque/Direct Debit. In general. if they have gone into an unplanned Overdraft on a Friday for example. Many customers who have incurred unauthorized overdraft fees have used this statement as a springboard to sue their banks in order to recover the fees. This. However.[3] Claimants tend frequently to be assisted by web sites such as The Consumer Action Group.Orders which debit at beginning of working day). does need to be cleared funds.[5] However. and checks. and can be charged on top of them. but this has been withdrawn. In the case of non-preauthorized items such as checks. purchases made with a debit card. However. however. some banks. Lloyds TSB allowes their customers. many banks do not appear in court to justify their unauthorized overdraft charging structures and many customers have recovered such charges in full. ATM withdrawals and purchases made with a debit or check card are considered preauthorized and must be paid by the bank when presented. levying a fee which takes the customer overdrawn and then charging them for going overdrawn. or ACH withdrawals. [edit] Ad-hoc coverage of overdrafts Traditionally.

Overdraft lines of credit are loans and must comply with the Truth in Lending Act. Generally. funds are transferred from the linked account to cover the overdraft. [edit] Bounce protection plans A more recent product being offered by some banks is called "bounce protection. Banks have a cut-off time when this action must take place by. and the length of time those accounts have . Once the link is established. the overdraft history of the account. As opposed to traditional adhoc coverage. credit card. This form of overdraft protection is available to consumers who meet the creditworthiness criteria established by the bank for such accounts. [edit] Overdraft lines of credit This form of overdraft protection is a contractual relationship in which the bank promises to pay overdrafts up to a certain dollar limit. if there are extenuating circumstances or the item in question is from an account held by a regular customer." Smaller banks offer plans administered by third party companies which help the banks gain additional fee income. the amount of which may or may not be disclosed. this decision to pay or not pay overdrawn items is automated and based on objective criteria such as the customer's average balance.[7] Larger banks tend not to offer bounce protection plans. the number of accounts the customer holds with the bank. only for accounts held in their specific branch. The one exception to this is so-called "force pay" lists. when an item is presented to the checking account that would result in an overdraft. With the advent of largescale interstate branch banking. after which the bank checks the consumer's credit and approves or denies the application. Banks traditionally did not charge for this ad-hoc coverage. and also charge interest on the outstanding balance. a checking account can be linked to another account. In addition. city or state. the manager may take a risk by paying the item. and so could not be depended on. As with linked accounts. as after that time. the item automatically switches from "pending rejection" to "rejected. In either case. or line of credit. However. but instead process overdrafts as disclosed in their account terms and conditions. if a customer is able to come into the branch with cash or make a transfer to cover the amount of the item pending rejection. banks typically charge a nominal fee per overdraft. Some banks charge a small monthly fee regardless of whether the line of credit is used. [edit] Linked accounts Also referred to as "Overdraft Transfer Protection". it was fully discretionary." and no further action may be taken. Once the line of credit is established. such as a savings account. At the beginning of each business day. branch managers often still get a computerized list of items that are pending rejection. the manager can "force pay" the item. and if the linked account is a credit card or other line of credit. but this is increasingly uncommon. the available credit may be visible as part of the customer's available balance.the overdraft for the customer. the bank may choose to cover overdrawn items at their discretion and charge an overdraft fee. The main difference between linked accounts and an overdraft line of credit is that an overdraft line of credit is typically only usable for overdraft protection. A consumer who wants an overdraft line of credit must complete and sign an application. the consumer may be required to pay interest under the terms of that account. traditional ad-hoc coverage has practically disappeared. Separate accounts that are linked for overdraft protection are independent accounts in their own right. A nominal fee is usually charged for each overdraft transfer.

and the bank processes the largest transaction first. multiple overdrafts can result.[13] . the practice has recently been challenged. Historically. These disclosures are already provided by larger banks which process overdrafts according to their terms and conditions. and restrictions on the marketing of bounce protection programs to deter misleading advertisements.been open. the bank does not promise to pay the overdraft even if the automated criteria are met. Banks typically charge a one-time fee for each overdraft paid. The "biggest check first" policy is common among large U. yet the bank reserves the right to refuse payment of an overdrawn item. separate statement categories to enumerate the number of fees charged. [12] Bank deposit agreements usually provide that the bank may clear transactions in any order.[8] However.[9] Because banks are not contractually obligated to cover the overdrafts. a Federal agency. banks are projected to collect over $38.5 billion in overdraft fees for 2009. Critics argue that because funds are advanced to a consumer and repayment is expected. Banks in the United States are mostly regulated by the Office of the Comptroller of Currency. arguing that banks use "biggest check first" to manipulate the order of transactions to artificially trigger more overdraft fees to collect. which prohibits certain deceptive advertisements and requires disclosure of the terms of loans. that bounce protection is a type of loan. Later. These amendments include requirements to disclose the types of transaction that may cause bounce protection to be triggered. under numerous individual state deceptive practice laws.[10] [edit] Transaction processing order An area of controversy with regards to overdraft fees is the order in which a bank posts transactions to a customer's account. Bounce protection plans have some superficial similarities to overdraft lines of credit and ad-hoc coverage of overdrafts. Regulation DD of the Truth in Savings Act was amended to require that banks offering "bounce protection" plans provide certain disclosures to their customers. as with traditional ad-hoc coverage. the fees associated with bounce protection. If all of the items present for payment to the account on the same day.S. In May 2005. Like an overdraft line of credit. Consumers have attempted to litigate to prevent this practice. nearly double compared to 2000. banks. which has formally approved of the practice. A bank may also charge a recurring daily fee for each day during which the account has a negative balance. the balance of the bounce protection plan may be viewable as part of the customer's available balance. [edit] Industry statistics U. despite some such transactions being guaranteed. This situation can arise when the account holder makes a number of small debits for which there are sufficient funds in the account at the time of purchase. however.[11] Banks argue that this is done to prevent a customer's most important transactions (such as a rent or mortgage check. at the bank's discretion. This is controversial because largest to smallest processing tends to maximize overdraft occurrences on a customer's account. bounce protection could be added to a consumer's account without his or her permission or knowledge. or utility payment) from being returned unpaid.S. the account holder makes a large debit that overdraws the account (either accidentally or intentionally). but tend to operate under different rules. "bounce protection" is not regulated by the Truth in Lending Act.

There are two types of FDI: inward foreign direct investment and outward foreign direct investment.Global Depository Receipt From Wikipedia. Please help improve this article by adding citations to reliable sources. such as factories. Foreign direct investment From Wikipedia. the free encyclopedia Jump to:navigation. Western Europe and Japan). Figure below shows net inflows of foreign direct investment as a percentage of gross domestic product (GDP). where they are traded on the International Order Book (IOB). such as JPMorgan Chase. Deutsche Bank. Prices of GLOBAL DEPOSITARY RECEIPT are often close to values of related shares. Increasing foreign investment can be used as one measure of growing economic globalization. It usually involves participation in management. Global Depository Receipts facilitate trade of shares. Bank of New York. Normally 1 GDR = 10 Shares. The largest flows of foreign investment occur between the industrialized countries (North America. Several international banks issue GDRs. GDRs represent ownership of an underlying number of shares. Luxembourg Stock Exchange and in the London Stock Exchange. transfer of technology and expertise. GDRs are often listed in the Frankfurt Stock Exchange. but not always. mines and land. search Foreign direct investment (FDI) refers to long term participation by country A into country B. and are commonly used to invest in companies from developing or emerging markets. [edit] History Foreign direct investment (FDI) is a measure of foreign ownership of productive assets. US International Direct Investment Flows:[1] Perio FDI FDI Net . the free encyclopedia Jump to:navigation. Citigroup. joint-venture. (November 2009) A Global Depository Receipt or Global Depositary Receipt (GDR) is a certificate issued by a depository bank. resulting in a net FDI inflow (positive or negative). Unsourced material may be challenged and removed. But flows to nonindustrialized countries are increasing sharply. which purchases shares of foreign companies and deposits it on the account. search This article does not cite any references or sources. but they are traded and settled independently of the underlying share.

13 bn 69 1970. or any combination of the above.703.$ 122.d Outflow Inflows + $ 37.13 bn 1960$ 42.18 bn $ 5.27 89 bn 1990.81 + $ 246.93 bn .629. a group of related individuals.$ 122.$ 1. a government body. a group of related enterprises.34 bn 2000. an estate (law). trust or other societal organisation.04 bn + $ 81.69 $ 2.421.96 bn + $ 43.31 + $ 207.47 99 bn $ 40. a public company or private company.74 07 bn bn bn Total $ 2. [edit] Methods The foreign direct investor may acquire 10% or more of the voting power of an enterprise in an economy through any of the following methods: • • • • • • by incorporating a wholly owned subsidiary or company by acquiring shares in an associated enterprise through a merger or an acquisition of an unrelated enterprise participating in an equity joint venture with another investor or enterprise low corporate tax and income tax rates tax holidays Foreign direct investment incentives may take the following forms:[citation needed] .$ 950.950.05 $ 1.$ 206.88 bn bn bn [edit] Types A foreign direct investor may be classified in any sector of the economy and could be any one of the following:[citation needed] • • • • • • • • an individual.72 79 bn 1980.23 bn $ 907.79 bn $ 329. an incorporated or unincorporated entity.

• • • • • • • • • • • • • • other types of tax concessions preferential tariffs special economic zones EPZ . Address concerns related to the business environment by helping as an ombudsman in Washington Dc for the international venture community. the “walmartization” of the country could have significant negative effects on the overall economy by reducing the number of people employed in the retail sector (currently the second largest employment sector nationally) and depressing the income of people involved in the agriculture sector (currently the largest employment sector nationally).[2] In a country like India. The $2. which is a 37 percent increase from 2007.1 trillion stock of FDI in the United States at the end of 2008 is the equivalent of approximately 16 percent of U. More than $325. with its restriction on FDI in the retail sector is an example. gross domestic product (GDP).3 billion in FDI flowed into the United States in 2008.[4] The “Invest in America” policy is focused on: • • • • • Facilitating investor queries. over 4000 new projects and 630. Provide support both at local and state levels.[citation .55 Benefits of FDI in America: In the last 6 years.000 new jobs have been created by foreign companies. Carrying out maneuvers to aid foreign investors. resulting in close to $314 billion in investment.[3] [edit] Foreign direct investment in the United States "Invest in America" is an initiative of the Commerce department and aimed to promote the arrival of foreigners investors to the country. The United States is the world’s largest recipient of FDI. India.S. Offering policy guidelines and helping getting access to the legal system.Export Processing Zones Bonded Warehouses Maquiladoras investment financial subsidies soft loan or loan guarantees free land or land subsidies relocation & expatriation subsidies job training & employment subsidies infrastructure subsidies R&D support derogation from regulations (usually for very large projects) [edit] Debates about the benefits of FDI for low-income countries Some countries have put restrictions on FDI in certain sectors.

They always keep looking for more and better advanced technologies or methods to help foreign industries and companies to develop well in China at all times. science and commerce in the southwest of China.[citation needed] Even though there was a slight dip in FDI in 2009 as a result of the global slowdown. Microsoft.7 billion RMB. Foreign institutional investment is a common term in the financial sector of India. Sichuan province. Ericsson. 2010 has again seen investments increase.[5] Affiliates of foreign corporations spent more than $34 billions on research and development in 2006 and continue to support many national projects. etc.[7] Chengdu is the centre of technology. But once the globalization took the whole world in its grip. Chengdu Hi-Tech Industrial Development Zone (CDHT) is ranked no. which are growing very rapidly. CDHT has achieved an added value of 78. The term foreign institutional investment denotes all those investors or investment companies that are not located within the territory of the country in which they are investing.000 per employee. Especially. Inward FDI has led to higher productivity through increased capital. FDI in China has grown to over $300 billion in the first 10 years. are becoming hot favorite investment destinations for the foreign institutional investors. Sony.[6] [edit] Foreign direct investment in China FDI in China has been one of the major successes of the past 3 decades. While. The type of institutions that are involved in the foreign institutional investment are as follows:  Mutual Funds  Hedge Funds  Pension Funds InsuranceCompanies The economies like India.[citation needed] The Chinese continue to steam roll with expectations of an economic growth of a 10% this year. which is coming through the foreign institutional investment is referred as 'hot money' because the money can be taken out from the market at anytime by these investors.needed] Unarguably. Nokia. UPS. The money. The promise of rapid growth of the investable fund is tempting the investors and so they are coming in huge numbers to these countries. the diversified . Carrefour. when China has become one of the hot spots for foreign direct investment. In 2008.762 billion RMB and an income from trade and technology of 220. The foreign investment market was not so developed in the past. US affiliates of foreign companies have a history of paying higher wages than US corporations. Motorola. inside the park. This is the prime reason behind the growing interests of the foreign investors. CDHT has the faith to support more foreign companies to succeed their ambition in China.[citation needed] Starting from a baseline of less than $19 billion just 20 years ago. It is also the hub of communication and transportation between mainland China and foreign investors. These markets have the potential to grow in the near future . With over 20 years of experience helping and supporting foreign companies. Chengdu Hi-Tech has created its prestige and credibility. Its outsourcing services have won the trust of their clients. at this time.[citation needed] Increased US exports through the use of multinational distribution networks.4 of state-owned development zones in China. They have many very large international or global companies as their clients. Toyota.[citation needed] Foreign companies have in the past supported an annual US payroll of $364 billion with an average annual compensation of $68. which accounts for 12% of all manufacturing jobs in the US. NEC. All those conditions have made Chengdu the natural choice for a lot of overseas investors or companies to develop their international business in China. Siemens. China has continued its massive growth and is the leader among all developing nations in terms of FDI. These are actually the outsiders in the financial markets of the particular company. FDI has resulted in 30% of jobs for Americans in the manufacturing sector. which in turn has led to high living standards. Corning. such as Intel.

banking sector and the IT companies for the investments Most active foreign institutional investors in India are HSBC. The Securities and Exchange Board of India looks after the foriegn institutional investments in market became united.06 billion The foreign institutional investors are preferring the construction sector. the free encyclopedia Jump to:navigation. SEBI has imposed several rules and regulations on these investments. Because of this the investment sector became very strong and at the same time allowed the foreigners to enter the national financial market. At the same time the developing countries understood the value of foreign investment and allowed the foreign direct investment and foreign institutional investment in their financial markets. search . Some important facts about the foreign institutional investment: • • • • • The number of registered foreign institutional investors on June 2007 has reached 1042 from 813 in 2006 US $6 billion has been invested in equities by these investors The total amount of these investments in the Indian financial market till June 2007 has been estimated at US $53. Merrill Lynch. Although the foreign direct investments are long term investments but the foreign institutional investments are unpredictable. CLSA Price skimming From Wikipedia. Citigroup.


then theoretically no customer will pay less for the product than the maximum they are willing to pay. Some early purchasers will feel they have been ripped-off. If competitors do this. Price discrimination uses market characteristics (such as price elasticity) to adjust prices. This results in a high level of untapped demand. This negative sentiment will be transferred to the brand and the company as a whole. Price discrimination is illegal in many jurisdictions. A price skimmer must be careful with the law. It may be necessary to give retailers higher margins to convince them to handle enthusiastically the product. Skimming results in a slow rate of stuff diffusion and adaptation. It is a temporal version of price discrimination/yield management. Dominant market share will typically be obtained by a low cost producer that pursues a penetration strategy. • It is effective only when the firm is facing an inelastic demand curve. it is almost impossible for a firm to capture all of this surplus. The manufacturer could develop negative publicity if they lower the price too fast and without significant product changes. the window of opportunity will have been lost. The inventory turn rate can be very low for skimmed products. Penetration pricing is a more suitable strategy in this case. Price skimming is sometimes referred to as riding down the demand curve. a marketer must speak and think in terms of product characteristics in order to stay on the right side of the law. then lowers the price over time. This gives competitors time to either imitate the product or leap frog it with a new innovation. It allows the firm to recover its sunk costs quickly before competition steps in and lowers the market price. In practice. Price changes by any one firm will be matched by other firms resulting in a rapid growth in industry volume. they will quickly enter. whereas yield management uses product characteristics. They will feel it would have been better to wait and purchase the product at a much lower price. This could cause problems for the manufacturer's distribution chain. Skimming encourages the entry of competitors. The objective of a price skimming strategy is to capture the consumer surplus. Price skimming can be considered either a form of price discrimination or a form of yield management. If the long run demand schedule is elastic (as in the diagram to the right).Price Skimming Price skimming is a pricing strategy in which a marketer sets a relatively high price for a product or service at first. When other firms see the high margins available in the industry. market equilibrium will be achieved by quantity changes rather than price changes. If using a skimming strategy. but yield management is not. Marketers see this legal distinction as quaint since in almost all cases market characteristics correlate highly with product characteristics. • • • • • . [edit] Limitations of Price Skimming There are several potential problems with this strategy. If this is done successfully.

" wrote Ronald W. but do not stand out as vastly better than competing products. the Playstation 3 was originally sold at $599. "These temporary price cuts should not be confused with low penetration prices. A low penetration price may be called a 'stay out' price. It discourages competitors from entering the market." wrote McCarthy and Perreault Jr. however. but it has been gradually reduced to $299. price skimming was used. A penetration policy is even more attractive if selling larger quantities results in lower costs because of economies of scale. in which marketers attach temporary low prices to new products when they first hit the market. With this policy. take a decidedly different tack when introducing their goods to the marketplace. its producers can then review business conditions and decide whether to gradually increase the price." Once the product has secured a desired market share. This is the case when the whole demand curve [for the product] is fairly elastic. Jerome McCarthy and William Perreault Jr. "The plan [with introductory price dealing] is to raise prices as soon as the introductory offer is over. E." Writing in Basic Marketing. Inefficient practices will become established making it difficult to compete on value or price. For instance. Penetration pricing. is not the same as introductory price dealing. "This pricing approach. the initial price of the good or service is set relatively low in hopes of "penetrating" into the marketplace quickly and securing significant market share. however.• High margins may make the firm inefficient. There will be less incentive to keep costs under control. Such an approach might be wise when the 'elite' market—those willing to pay a high price—is small. "often is used for products that are of good quality. Penetration pricing may be wise if the firm expects strong competition very soon after introduction. observed that "a penetration pricing policy tries to sell the whole market at one low price. . Some choose to engage in skimming pricing. Hilton in Managerial Accounting. such as the Apple iPhone and Sony PlayStation 3." SKIMMING VERSUS PENETRATION Some manufacturers of new products. [edit] Examples of price skimming • With certain high-end electronics. Penetration pricing is a strategy employed by businesses introducing new goods or services into the marketplace.

especially in some developing countries. Even though sales will likely be modest with skimming. a lockout occurs when union membership rejects the company's final offer at negotiations and offers to return to work under the same conditions of employment as existed under the now-expired contract. Skimming pricing results in much slower acceptance of a new product. When only part of a trade union votes to strike. "depends on the type of product and involves trade-offs of price versus volume. In most jurisdictions this is illegal but is occasionally reported. [edit] Causes A lockout may happen for several reasons. the free encyclopedia A lockout is a work stoppage in which an employer prevents employees from working. if the anticipated strike severely hampers work of non-striking workers. but lower unit profits. the lockout is designed to pressure the workers into accepting the terms of the company's last offer. In such a case. Another case in which an employer may impose a lockout is to avoid slowdowns or intermittent work-stoppages. the price is then reduced to appeal to a greater range of consumers. in which employees refuse to work. This is different from a strike. the profit margin is great. For example. Other times.a strategy wherein the initial price for the product is set quite high for a relatively short time after introduction. The value of the stock equals next year's dividends divided by the difference between the required rate of return and the assumed constant growth rate in dividends. but higher unit profits. [edit] Lock-in The term lock-in refers to the practice of physically preventing workers from leaving a workplace. the purpose of a lockout is to put pressure on a union by reducing the number of members who are able to work. Once the product's appeal broadens.[citation needed] ." Dividend growth model An approach that assumes dividends grow at a constant rate in perpetuity. the employer may declare a lockout until the workers end the strike." said Hilton. particularly in the United States. This pricing approach is most often used for high-prestige or otherwise unique products with significant cache. "The decision between skimming and penetration pricing. Penetration pricing results in greater initial sales volume. Lockout (industry) From Wikipedia.

[edit] United States In the United States. many American employers have historically been reluctant to impose lockouts. but are not eligible for such benefits during a strike. 3M's national manager was locked in his office for 24 hours by employees in a dispute over redundancies. as American unions have increasingly begun to resort to slowdowns rather than strikes. which have been labelled 'bossnapping' by the mainstream media. The dispute lasted from 26 August 1913 to 18 January 1914.[4] Such practices bear mild resemblance to the gherao in India. However.[1][2][3] The following month. and is often viewed as the most severe and significant industrial dispute in Irish history. lock-ins have been carried out by employees against management. an employer may legally hire permanent replacements. [edit] Ireland Cartoon showing the depth of ill feeling caused by the Dublin Lockout. [citation needed] For the above reasons. in response to management locking them out. under Federal labor law. unless it is an unfair labor practice (ULP) strike. instead attempting to provoke a strike.More recently. and even as incident of strikes are on the decline.S. incidents of lockouts are on the rise in the U. lockouts have come "back in fashion" for many employers.[citation needed] Recent notable lockout incidents have been reported in professional sports. notably involving the National Basketball Association in the 1998–99 season and the National Hockey League in the 1994– 95 and 2004–05 seasons. In France during March 2009. In a strike. Central to the dispute was the workers' right to unionize.S. employees of a call centre managed by Synovate in Auckland locked the front doors of the office. employees who are locked-out are eligible to receive unemployment benefits. states. . in many U. Also. The Dublin Lockout (Irish: Frithdhúnadh Mór Bhaile-Átha-Cliath) was a major industrial dispute between approximately 20.000 workers and 300 employers which took place in Ireland's capital city of Dublin. an employer may hire only temporary replacements during a lockout.

unless the employer has strong objections. rather than laying off specific people. Rogers 2002). cutting cost and improving organisational performance (Mellahi and Wilkinson 2004) most often as a cost-cutting measure. "workforce optimization". in which case the person isn't entitled to unemployment benefits and leaving the company voluntarily in the frame of a RIF. workers who are laid off can file an unemployment claim and receive compensation. Chorely 2002. "smartsize". An RIF reduced the number of positions. Originally the term "layoff" referred exclusively to a temporary interruption in work. workers who leave voluntarily are generally ineligible to collect unemployment benefits. In many U. 2003. "redeployment". Mason 2002.Layoff From Wikipedia. France and Germany). Downsizing is the ‘conscious use of permanent personnel reductions in an attempt to improve efficiency and/or effectiveness’ (Budros 1999. "delayering". the free encyclopedia Jump to:navigation. Depending on local or state laws. see also the American Management Association annual surveys since 1990). "workforce reduction". "force shaping". 70). Ahmakjian and Robinson 2001) suggests that downsizing is being regarded by management as one of the preferred routes to turning around declining organisations. especially in the government employment sector). "excess". "rightsize". Certain countries (e. [edit] Etymology are often used to "soften the blow" in the process of firing and being fired. in recent times the term can also refer to the permanent elimination of a position. 1999. Since the 1980s. Indeed. search Layoff is the temporary suspension or permanent termination of employment of an employee or (more commonly) a group of employees for business reasons. and is usually accompanied by internal redeployment. in which case the person is entitled to them. such as the decision that certain positions are no longer necessary or a business slow-down or interruption in work. "simplification". it may be perceived as obfuscation. and Japan (Mroczkowski and Hanaoka 1997. p. states.S. 2006) including "downsize". and "reduction in force" (also called a "RIF". "Mass layoff" implies laying off a large number of workers. Also. UK (Sahdev et al. lay-offs due to a firm's moving production overseas may entitle one to increased re-training benefits. However. Firings imply misconduct or failure while lay-offs imply economic forces beyond one's control. (Wilkinson 2005. distinguish between leaving the company of one's free will. "Early retirement" means workers may quit now yet still remain eligible for their retirement benefits later. Redman and Wilkinson. as are those who are fired for gross misconduct. "Attrition" implies that positions will be eliminated as workers quit or retire. In this situation. it's more beneficial for the state to . as when factory work cyclically falls off. downsizing has gained strategic legitimacy. A person might leave even if their job isn't reduced.g. Euphemisms [edit] Unemployment compensation The method of separation may have an effect on a former employee's ability to collect whatever form of unemployment compensation might be available in their jurisdiction. "recussion". While "redundancy" is a specific legal term in UK labour law. recent research on downsizing in the US (Baumol et al.

for some reason. in the absence of some change making operations impossible or unnecessary. which means to grow. in the case of a non-profit. or a non-profit organization. as. p. If the organization has no outstanding debts or pending operations to finish. However. This has also spawned the opposite term upsize. reduced product development time. costing nothing to the social security system in the end. The most common form of voluntary closure would be when a group of people decide to start some organization such as a social club. which organisations claim to be seeking from downsizing. it may be necessary to perform liquidation of its assets. up to and including an entire country if. The benefits. a band. from a single church to a whole religion. or because it is the non-surviving entity in a corporate merger. as a result of the proprietor of the business dying. Closure may be the result of a bankruptcy. since they are less likely to remain jobless. speedier decision making. organ failure and an extreme pathological fear of becoming inefficient. Often they find new jobs while still being paid by their old companies. Closure (business) Closure is the term used to refer to the actions necessary when it is no longer necessary or possible for a business or other organization to continue to operate. Hence ‘trimming’ and ‘tightening belts’ are the order of the day (Tyler and Wilkinson 2007) [edit] Derivative terms Downsizing has come to mean much more than job losses.facilitate the departure of the more professionally active people. 1997. as a result of a business being purchased by another organization (or a competitor) and shut down as superfluous. . as the word downsize may now be applied to almost everything. where the organization lacks sufficient funds to continue operations. some writers draw attention to the ‘obsessive’ pursuit of downsizing to the point of self-starvation marked by excessive cost cutting. by law any remaining assets must be distributed to another non-profit. voluntary or involuntary. the remainder is distributed to the stockholders. expand or purchase something larger. If an organization has debts that cannot be paid. then at some point those involved decide to quit. Closures are of two types. This is referred to as the organizers walking away from the organization. centre on savings in labour costs. 168). People describe downsizing their cars. most operations will continue until something happens that causes a change requiring this situation. A closure may occur because the purpose for which the organization was created is no longer necessary. Voluntary closures of organizations are much rarer than involuntary ones. better communication. houses and nearly anything else that can be measured or valued. in the case of a for-profit organization. enhanced involvement of employees and greater responsiveness to customers (De Meuse et al. any entity which is created by human beings can be subject to a closure. While a closure is typically of a business or a non-profit organization. There have also been increasing concerns about the organisational effectiveness of the postdownsized ‘anorexic organisation’. If there is anything left after the assets are converted to cash. closure may consist of nothing more than the informal organization ceasing to exist. it ceases to exist.

It has been suggested that Hygiene factors be merged into this article or section. who theorized that job satisfaction and job dissatisfaction act independently of each other. Retrieved from "http://en. then a closure occurs through a bankruptcy liquidation: its assets are liquidated. and MCI Worldcom's bankruptcy and eventual merger into Verizon. the end of East Germany can be considered a merger rather than a closure as West Germany assumed all of the assets and liabilities of East Germany. while a separate set of factors cause dissatisfaction. it may have to declare bankruptcy. as Russia claims it is not responsible for them.wikipedia. (Discuss) The two-factor theory (also known as Herzberg's motivation-hygiene theory) states that there are certain factors in the workplace that cause job satisfaction. Several major business closures include the bankruptcy of the Penn Central railroad. If it is not viable for the business to continue operating. see Two factor theory of emotion. a psychologist. There have been issues over who is responsible for unpaid parking tickets accumulated by motor vehicles operated on behalf of diplomatic missions operated by the former Soviet Union in other countries.If an organization has more debts than assets. and the business ceases operations. If the organization has viability. it did not assume all of them. it reorganizes itself as a result of the bankruptcy and continues operations. Possibly the largest "closure" in history was the destruction of the Soviet Union into the composite countries that represented it. the free encyclopedia Jump to: navigation. the creditors are paid from whatever assets could be liquidated. because while Russia assumed most of the assets and responsibilities of the former Soviet" Two-factor theory From Wikipedia. It was developed by Frederick Herzberg.[1] Contents [hide] • • • • • • 1 Two-factor theory fundamentals 2 Validity and criticisms 3 Implications for management 4 References 5 Further reading 6 External links . In comparison. The end of the Soviet Union was the equivalent of a closure through a bankruptcy liquidation. search For Schachter's two factor theory of emotion. the Enron scandals.

and contained some substantive description other than feelings and interpretations… The proposed hypothesis appears verified. Instead.[edit] Two-factor theory fundamentals Attitudes and their connection with industrial mental health are related to Maslow's theory of motivation. So far. responsibility. This theory suggests that to improve job attitudes and productivity. but are independent phenomena. dissatisfaction results from unfavorable assessments of such job-related factors as company policies. on the other hand. Herzberg added a new dimension to this theory by proposing a twofactor model of motivation. If. and to provide reasons. From analyzing these interviews. Rather. Thus. According to Herzberg. His findings have had a considerable theoretical. Each respondent gave as many "sequences of events" as he could that met certain criteria—including a marked change in feeling. technical problems. individuals are not content with the satisfaction of lower-order needs at work. and for achieving selfrealization. Thus. we asked our respondents to describe periods in their lives when they were exceedingly happy and unhappy with their jobs. recognition. assuming responsibility. as well as a practical. individuals look for the gratification of higher-level psychological needs having to do with achievement. Conversely. that is. the absence of such gratifying job characteristics does not appear to lead to unhappiness and dissatisfaction. personal worth. he found that job characteristics related to what an individual does — that is. satisfaction and dissatisfaction are not on a continuum with one increasing as the other diminishes. supervision. The subjects were asked to relate times when they felt exceptionally good or bad about their present job or any previous job. The two-factor. chosen because of their professions' growing importance in the business world. it should be concerned with the nature of the work itself — the opportunities it presents for gaining status. The theory was based around interviews with 203 American accountants & engineers in Pittsburgh. responsibility. management wishes to reduce dissatisfaction. this appears to parallel Maslow's theory of a need hierarchy. and advancement) are mostly unipolar. administrators must recognize and attend to both sets of characteristics and not assume that an increase in satisfaction leads to decrease in unpleasurable dissatisfaction. or motivation-hygiene theory. based on the notion that the presence of one set of job characteristics or incentives lead to worker satisfaction at work. competency. and self-realization. Here is the description of this interview analysis: Briefly. and working conditions. developed from data collected by Herzberg from interviews with a large number of engineers and accountants in the Pittsburgh area. the dis-satisfiers . thus making him happy and satisfied. and working conditions[1]. influence on attitudes toward administration[2]. they contribute very little to job dissatisfaction. then managers must give attention to both sets of job factors. while another and separate set of job characteristics lead to dissatisfaction at work. advancement. interpersonal relations on the job. a beginning and an end. salary. procedures. intrinsic interest in the work. to the nature of the work he performs — apparently have the capacity to gratify such needs as achievement. However. and a description of the sequence of events giving rise to that positive or negative feeling. those associated with minimum salary levels or safe and pleasant working conditions. status. The factors on the right that led to satisfaction (achievement. supervision. However. for example. then it must focus on the job environment — policies. if management wishes to increase satisfaction on the job. If management is equally concerned with both (as is usually the case). and the nature of the work itself.

In effect. While the Motivator-Hygiene concept is still well regarded. on the other hand. it has been noted the theory does not allow for individual differences. hygiene factors are needed to ensure an employee is not dissatisfied. Essentially. In other words.. supervisory practices. and Hygiene factors (e. status.g. such as a particular personality traits. or wages/salary[4]. and corroborated with studies using different procedures that agreed with his original findings regarding intrinsic employee motivation making it one of the most widely replicated studies on job attitudes. salary and fringe benefits) that do not • give positive satisfaction. "How much payoff is there for me toward attaining a personal goal while expending so much effort toward the achievement of an assigned organizational . arising from intrinsic conditions of the job itself. if you perform a work related action because you have to then that is classed as movement. Herzberg and others have presented considerable empirical evidence to confirm the motivation-hygiene theory. such as recognition. who offered little data to support his ideas. and include aspects such as company policies. and salary) contribute very little to job satisfaction[3]. The most basic is the criticism that both of these theories contain the relatively explicit assumption that happy and satisfied workers produce more. then he will find ways to play and think about golf more often. this diagram of expectancy depicts an employee asking himself the question posed by one investigator. Finally. working conditions. Furthermore.(company policy and administrative practices. These are extrinsic to the work itself. achievement. perhaps resulting in an accompanying lower output on the job. which would affect individuals' unique responses to motivating or hygiene factors [4]. though dissatisfaction results from their absence. satisfaction and dissatisfaction are generally no longer considered to exist on separate scales. Motivation factors are needed to motivate an employee to higher performance. but if you perform a work related action because you want to then that is classed as motivation.g. responsibility) that give positive satisfaction. this individual's expectation or estimated probability that a given behavior will bring a valued outcome determines his choice of means and the effort he will devote to these means. recognition. job security. in his pursuit of status he might take a balanced view and strive to pursue several behavioral paths in an effort to achieve a combination of personal status objectives. Two-factor theory distinguishes between: • Motivators (e. The separation of satisfaction and dissatisfaction has been shown to be an artifact of the Critical Incident Technique (CIT) used by Herzberg to record events [5]. although their work has been criticized on methodological grounds. [edit] Validity and criticisms In 1968 Herzberg stated that his two-factor theory study had already been replicated 16 times in a wide variety of populations including some in Communist countries. or personal growth[4]. for example. if playing a better game of golf is the means he chooses to satisfy his need for recognition. interpersonal relationships. Herzberg also further classified our actions and how and why we do them. supervision. A number of behavioral scientists have pointed to inadequacies in the need hierarchy and motivation-hygiene theories. Another problem is that these and other statistical theories are concerned with explaining "average" behavior and. challenging work. Unlike Maslow.

objective?" [6] The Expectancy theory by Victor Vroom also provides a framework for motivation based on expectations. the opposite of dissatisfaction is no dissatisfaction. The following table presents the top six factors causing dissatisfaction and the top six factors causing satisfaction. it relates motivation to ability: Performance = Motivation*Ability. it is capable of handling individual differences. Herzberg found that the factors causing job satisfaction (and presumably motivation) were different from those causing job dissatisfaction. a study by the Gallup Organization. That said. To better understand employee attitudes and motivation. Frederick Herzberg performed studies to determine which factors in an employee's work environment caused satisfaction or dissatisfaction. Fourth. Third. The opposite of satisfaction is not dissatisfaction. appears to provide strong support for Herzberg's division of satisfaction and dissatisfaction onto two separate scales. First. Second. He developed the motivationhygiene theory to explain these results. While at first glance this distinction between the two opposites may sound like a play on words. which emphasizes past learning. there are physiological . Similarly. He called the satisfiers motivators and the dissatisfiers hygiene factors. unlike Maslow's and Herzberg's theories. using the term "hygiene" in the sense that they are considered maintenance factors that are necessary to avoid dissatisfaction but that by themselves do not provide satisfaction. as detailed in the book "First. This approach to the study and understanding of motivation would appear to have certain conceptual advantages over other theories: First. its focus is toward the present and the future. Herzberg argued that there are two distinct human needs portrayed. Break All the Rules: What the World's Greatest Managers Do" by Marcus Buckingham and Curt Coffman. listed in the order of higher to lower importance. Leading to satisfaction • • • • • • Achievement Recognition Work itself Responsibility Advancement Growth Leading to dissatisfaction • • • • • • • Company policy Supervision Relationship with boss Work conditions Salary Relationship with peers Security Herzberg reasoned that because the factors causing satisfaction are different from those causing dissatisfaction. while hygiene factors were determined to have little effect on motivating high performance. but rather. no satisfaction. The studies included interviews in which employees where asked what pleased and displeased them about their work. the authors discuss how the study identified twelve questions that provide a framework for determining high-performing individuals and organizations. He published his findings in the 1959 book The Motivation to Work. in contrast to drive theory. In this book. it specifically correlates with behavior to a goal and thus eliminates the problem of assumed relationships. These twelve questions align squarely with Herzberg's motivation factors. such as between motivation and performance. the two feelings cannot simply be treated as opposites of one another.

to purchase food and shelter. Mohamed Hossam El-Din Khalifa and Quang Truong (2009). The findings of this study provide a kind of an indirect support to Herzberg's findings that improving Hygiene Factors would not lead to improvement in an employee's job satisfaction. job satisfaction does not necessarily imply a high level of motivation or productivity. [edit] Implications for management If the motivation-hygiene theory holds. the free encyclopedia Jump to: navigation.(French. the process of providing incentives or a threat of punishment to cause someone to do something. On the contrary. perception of equity and job satisfaction were not related when the outcome in the equity comparison was one of Herzberg's Hygiene Factors. Critics of Herzberg's theory argue that the two-factor result is observed because it is natural for people to take credit for satisfaction and to blame dissatisfaction on external factors. for example. 2008) 360-degree feedback From Wikipedia. From the above table of results. Second. Herzberg argues that these provide only short-run success because the motivator factors that determine whether there is satisfaction or no satisfaction are intrinsic to the job itself. If a person cannot be fully utilized. management not only must provide hygiene factors to avoid employee dissatisfaction. then the firm should consider automating the task or replacing the employee with one who has a lower level of skill. search . and that it is a continuous management process. then there will be a motivation problem. According to Herzberg: • • • The job should have sufficient challenge to utilize the full ability of the employee. but rather. where KITA is an acronym for Kick In The Ass. Herzberg often referred to these hygiene factors as "KITA" factors. are external factors. and do not result from carrot and stick incentives. but also must factors intrinsic to the work itself for employees to be satisfied with their jobs. there is the psychological need to achieve and grow. If a job cannot be designed to use an employee's full abilities. Herzberg argued that job enrichment is required for intrinsic motivation.needs that can be fulfilled by money. and this need is fulfilled by activities that cause one to grow. Furthermore. has found out that Perception of Equity was directly related to job satisfaction when the outcome in the equity comparison was one of Herzberg's Motivators. In a survey of 80 teaching staff at Egyptian private universities. one observes that the factors that determine whether there is dissatisfaction or no dissatisfaction are not part of the work itself. Herzberg's theory has been broadly read and despite its weaknesses its enduring value is that it recognizes that true motivation comes from within a person and not from KITA factors. Employees who demonstrate increasing levels of ability should be given increasing levels of responsibility.

companies use some type of multi-source feedback (Bracken. & Church." where the employees are most often reviewed only by their managers. Also during this time period. peers. "360" refers to the 360 degrees in a circle. Jako. The problem was that collecting and collating the feedback demanded a paper-based effort including either complex manual calculations or lengthy delays. also known as multi-rater feedback. McCauley. From there." where managers are given feedback by their direct reports. & Pollman. or should be used for appraisal purposes as well (Waldman et al.. the 360 assessment is for evaluation purposes. 1996)." However. 360-degree feedback. and by the 1990s most human resources and organization development professionals understood the concept. 2002). In recent years. others explored the use of multi-rater feedback via the concept of T-groups. due largely to the use of the Internet in conducting web-based surveys (Atkins & Wood. and aggregate reporting) (Bracken. and it has even been suggested that it may decrease shareholder value (Pfau & Kay. Multi-rater feedback use steadily increased in popularity. 1998). with an individual figuratively in the center of the circle. or a "traditional performance appraisal. 1998). with a growing menu of useful features (e. Internet-based services have become the norm. Others claim that this estimate is closer to 90% of all Fortune 500 firms (Edwards & Ewen. multi languages. Timmereck. such as pay or promotion. Today. there is a great deal of controversy as to whether 360-degree feedback should be used exclusively for development purposes. When this is the case. .. Summers. One of the earliest recorded uses of surveys to gather information about employees occurred in the 1950s at Esso Research and Engineering Company (Bracken.S. Dalton. studies suggest that over onethird of U.g. Contents [hide] • • • • 1 History 2 Accuracy 3 Results 4 References [edit] History The German Military first began gathering feedback from multiple sources in order to evaluate performance during World War II (Fleenor & Prince. comparative reporting. The results from 360-degree feedback are often used by the person receiving the feedback to plan training and development.In human resources or industrial/organizational psychology. the second to a gradual erosion of commitment by recipients. 2002). or multisource assessment. Results are also used by some organizations in making administrative decisions. Feedback is provided by subordinates. 1997). feedback from external sources such as customers and suppliers or other interested stakeholders. the idea of 360-degree feedback gained momentum. 2001a). is feedback that comes from all around an employee. multisource feedback. The first led to despair on the part of practitioners. and is sometimes called a "360-degree review. It also includes a self-assessment and. in some cases. and supervisors. 1997). It may be contrasted with "upward feedback. There is also controversy regarding whether 360-degree feedback improves employee performance. & Fleenor.

” The study concludes that the most accurate ratings come from knowing the person long enough to get past first impressions. 1994. rater training and orientation. Some authors maintain that 360 processes are much too complex to make blanket generalizations about their effectiveness (Bracken. Multiple pieces of research (Bracken & Paul. "We therefore think that it is time for researchers and practitioners to ask. Goldsmith and Underhill (2001) report the powerful influence of the participant behavior of following up with raters to discuss their results. integration with HR systems. & Reilly. 2009. & McClellan. positive reactions to feedback. Studies have also indicated that self-ratings are generally significantly higher than the ratings of others (Lublin. manager) affects the reliability of the feedback. 2001b. 1993.. (1996) found that performance increased between the 1st and 2nd administrations. Additional studies show that 360 feedback may be predictive of future performance (Maylett & Riboldi. Other potentially powerful moderators of behavior change include how raters are selected. 2006. 1991. 2007). 2005). Nowack. The study shows that subjects in the group “known for one to three years” are the most accurate.[edit] Accuracy A study on the patterns of rater accuracy shows that length of time that a rater has known the person being rated has the most significant effect on the accuracy of a 360-degree review.. coaching. peer. English. 1996). It has been suggested that multi-rater assessments often generate conflicting opinions." Their metaanalysis of 24 longitudinal studies looks at individual and organizational moderators that point to many potential determinants of behavior change. A study by Reilly et al.6 percent decrease in market value. participant training. [edit] Results Several studies (Hazucha et al. 1992). while another study concludes that "there is no data showing that [360- . 60). Walker & Smither. goal setting. London & Wohlers. 2004). but higher scores were noted between 2nd and 3rd and 3rd and 4th years. but not so long as to begin to generalize favorably (Eichinger. manager (supervisor) training. 1993. manager approval. and accountability (Bracken et al. followed by “known for less than one year. Caputo & Roch. 2001b). Smither et al. 1993. In a 5-year Walker and Smither (1999) study. One 2001 study found that 360-degree feedback was associated with a 10. Smither. Timmreck. no improvement in overall ratings was found between the 1st and 2nd year. Kaiser & Kaplan. Bracken et al. 'Under what conditions and for whom is multisource feedback likely to be beneficial?' (rather than asking 'Does multisource feedback work?') (p. with direct reports being the least reliable and therefore requiring more participation. London. (2005) suggest. Yammarino & Atwater. and taking action. instrument quality (reliability and validity). Rose.” followed by “known for three to five years” and the least accurate being “known for more than five years. & Summers. Fleenor. 2009) have demonstrated that the response scale can have a major effect on the results. Others authors state that the use of multi-rater assessment does not improve company performance. Greguras and Robie (1998) document how the number of raters used in each rater category (direct report. including positive feedback orientation. and that there may be no way to determine whose feedback is accurate (Vinson. and some response scales are indeed better than others. Some of these factors have been researched and been shown to have significant impact. (2001b) and Bracken and Timmreck (2001) focus on process features that are likely to also have major effects in creating behavior change and offer best practices in those areas. and sustained this improvement 2 years later. 1999) indicate that the use of 360-degree feedback helps people improve performance.

degree feedback] actually improves productivity, increases retention, decreases grievances, or is superior to forced ranking and standard performance appraisal systems. It sounds good, but there is no proof it works." (Pfau & Kay, 2002) Similarly, Seifert, Yukl, and McDonald (2003) state that there is little evidence that the multi-rater process results in change. Additional studies (Maylett, 2005) found no correlation between an employee's multi-rater assessment scores and his or her top-down performance appraisal scores (provided by the person's supervisor), and advised that although multi-rater feedback can be effectively used for appraisal, care should be taken in its implementation (Maylett, 2009). This research suggests that 360-degree feedback and performance appraisals get at different outcomes, and that both 360degree feedback and traditional performance appraisals should be used in evaluating overall performance.[1] Collecting data is the second step in the Workforce Planning process. Data collection includes conducting an Environmental Scan andSWOT Analysis (PDF file) and a Supply/Demand Analysis (PDF file). An Environmental Scan can be commonly defined as: an analysis and evaluation of internal conditions and external data and factors that affect the organization. In workforce planning, environmental scanning helps an agency develop the understanding of the internal and external environment needed to determine whether the business needs of the agency are in sync with the availability and competency of the workforce. An Environmental Scan requires identifying the internal and external Strengths, Weaknesses, Opportunities and Threats (SWOT) that will affect the short- and long-term goals of the agency. A comprehensive Environmental Scan includes:
• • • • • Forecasting business trends. Conductng internal and external scans. Describing the current workforce. Projecting workforce supply and demand. Identifying current and needed competencies (knowledge, skills, abilities and behaviors).

While the Environmental Scan is about collecting information and data to gain understanding, the SWOT Analysis is about categorizing this information into action buckets. Information and trends discovered during the Environmental Scan process can provide the foundation for a SWOT Analysis finding. For example, if the Environmental Scan predicts that

there will be a shortage of trained child welfare workers, this shortage would likely be identified as a Threat in the SWOT Analysis. A Supply Analysis is the process of creating a profile of an agency's existing workforce. A Demand Analysis identifies the workforce and competencies needed to carry out the agency's mission.
SIDBI has set up Technology Development and Modernisation Fund Scheme for direct assistance of small scale industries to encourage existing industrial units in the small scale sector to modernise their production facilities and adopt improved and updated technology so as to strengthen their export capabilities. Assistance under the scheme is available for meeting the expenditure on purchase of capital equipment, acquisition of technical know how, upgradation of process technology and products with thrust on quality improvement, improvement in packaging and cost of TOM & acquisition of ISO-9000 series certification. Units which are already exporting their products or have the potential to export at least 25% of the output by adopting modernisation scheme would be eligible for assistance from the fund provided they have been in operation of atleast 3 years and are not in default to bank/financial institutions. Assistance under the scheme will be need-based subject to a minimum of Rs. 10 lakh per unit. Technical upgradation and quality improvement (including TSC - 9000) Technical Development Trust Funds for Technology upgradation / acquisition / transfer in the small scale sector. Towards facilitating Industry Associations and NGOs in the programme of technology upgradation and transfer in small scale sector, a Plan Scheme has been approved for providing grants including assistance to Technology Development Funds to be created in various states with the involvement of State Governments and Industry Associations. Total Outlay for this scheme is Rs. 150 lakhs during Eighth Plan period. The ratio of contribution to the fund could be 60% from Government of India, 40% from State Government, Industry Associations and other developmental agencies including banks put together. The initiative could be with the state Govts./Industry Associations, to rise their contribution of 40% by mobilising resources at the State level. Assistance to such a fund is restricted to Rs. 30 lakhs per fund. The scope and activities to be generated out of the Fund are as follows : This technology fund, inter-alia, is to bring about technological upgradation in selected areas of the SSI Sector with the involvement of CEIR Labs, Tool rooms, Testing Centres, PPDC etc. It will also help in development of prototypes, designs, drawing and dissemination of the information through seminars, workshops, Consultancy etc. Arranging of technology transfer between SMEs within the country and also by way of arranging tie-ups for technology transfer between large and small industries, particularly for ancillarisation and vendor development. Arranging of technology transfer from Indian small enterprises to small enterprises in other

developing countries. Arranging of technology transfer to the Indian SMEs in other developed countries. Sponsoring/sponsoring studies related to upgradation of technology in specified SSI sector, clusters. It is also proposed that following activities could be included for making a portion of the fund, more useful for getting faster results : i. The fund at the disposal of the Government/DCSSI could also be utilised for sponsoring technology related training programmes in India & abroad. - Organising Seminars/Workshops: Participation of experts/SSI industry/concerned institutions in seminars/workshops, symposiums etc, held abroad by various international and national level agencies. With regard to SSI industries, the fund could support upto 50% of the cost not exceeding Rs. 50,000 covering travel, per diem etc. per unit. - Provide partial funding support upto 50% of the cost acquisition of technologies, negotiating transfer for technology agreement, and such related activities. - Meeting expenditure for experts participation from other developed countries in various seminars/workshops related to technology transfer/acquisition. ii. Conducting of technology related studies including cluster studies etc. MODERNISATION OF SELECTED SMALL SCALE INDUSTRIES During the Eighth Five Year Plan, a sum of Rs. 70 lakhs was earmarked for the programme of modernisation of selected small scale industries. Under this scheme it is proposed to prepare modernisation guides, status reports, technology upgradation reports, cluster study reports, units specific study reports and organise contact programme in the form of seminars/workshops for dissemination of information. LOCK-OUT means the temporary closing of a place of employment or the .... compel the workmen to accept the terms and conditions of the employer .

QL - Acceptance Quality Level
The AQL (Acceptance Quality Level), the maximum % defective that can be considered satisfactory as a process average for sampling inspection, here is 1%. Its corresponding Pa is about 89%. It should normally be at least that high.

RQL - Rejectable Quality Level
The RQL (Rejectable Quality Level) is the % defective, here at 5%, that is associated with the established β risk (which is usually standardized at 10%). It is also known as the Lot Tolerance Percent Defective (LTPD).

LTPD - Lot Tolerance Percent Defective
The LTPD of a sampling plan is a level of quality routinely rejected by the sampling plan. It is generally defined as that level of quality (percent defective, defects per hundred units, etc.) which the sampling plan will accept 10% of the time.

* The hyper geometric and binomial distance are also used. The alpha risk is the probability of rejecting relatively good lots (at AQL). The beta risk is the probability of accepting relatively bad lots (at LTPD/RQL). It is the probability of accepting product of some stated undesirable quality; it is the value of Pa at that stated quality level. The OC curves are a means of quantifying alpha and beta risks for a given attribute sampling plan. The Pa value obtained assumes that the distribution of defectives among a lot is random – either the underlying process is in control, or the product was well mixed before being divided into lots. The samples must be selected randomly from the entire lot. The alpha risk is 1 − P a. The shape of the OC curves is affected by the sample size (n) and accept number (c) parameters. Increasing both the accept number and sample size will bring the curve closer to the ideal shape, with better discrimination.

We say that there is a positive linear correlation if y increases as x increases and we say there is a negative linear correlation if y decreases as x increases. but I could have used any letters. Of course. Explanatory and Response Variables In many experiments. The fixed/controlled variable is known as the explanatory or independent variable and the other variable is known as the response or dependent variable. .g. A good way of doing this is by drawing a scatter diagram. There is no correlation if x and y do not appear to be related. one of the variables is fixed or controlled and the point of the experiment is to determine how the other variable varies with the first. "Regression" is the process of finding the function satisfied by the points on the scatter diagram. "Linear" means that the function we are looking for is a straight line (so our function f will be of the form f(x) = mx + c for constants m and c).Linear Regression Scatter Diagrams We often wish to look at the relationship between two things (e. the points might not fit the function exactly but the aim is to get as close as possible. Here is a scatter diagram with a regression line drawn in: Correlation Correlation is a term used to describe how strong the relationship between the two variables appears to be. between a person"s height and weight) by comparing data for each of these things. I shall use "x" for my explanatory variable and "y" for my response variable.

the "normal equations" are the same but with x and y swapped. You should make sure that your line passes through the mean point (the point (x. Normal Equations The "normal equations" for the line of regression of y on x are: Σ y = aΣ x + nb and Σ xy = aΣ x2 + bΣ x The values of a and b are found by solving these equations simultaneously. The other is a line of regression of x on y.y) where x is mean of the data collected for the explanatory variable and y is the mean of the data collected for the response variable). The first is a line of regression of y on x. This is a problem as people hide what they earn and firms hide their output. we can draw two different regression lines depending upon which variable we consider to be the most accurate. if all the points lie on a straight line). For the line of regression of x on y. Least Squares Regression Lines This is a method of finding a regression line without estimating where the line should go by eye. which can be used to estimate y given x. a regression line can be drawn "by eye". If there is a perfect correlation between the data (in other words. to avoid paying tax.this is a problem in collecting and calculating statistics. we need to find what a and b are. then the two regression lines will be the same. If the equation of the regression line is y = ax + b.Regression Lines By Eye If there is very little scatter (we say there is a strong correlation between the variables). this is the black economy also known as . used to estimate x given y. What are the problems involved in measuring national income? There are 3 main problems involves in measuring National Income These are: Errors and Omissions . Two Regression Lines When there is a reasonable amount of scatter. We find these by solving the "normal equations".

Competencies enable individuals to identify and articulate what they offer -regardless of the job.the "ray gun" Over recording of figures (Double Counting) . and used to pay such things as benefits and pensions. Competency mapping is a process of identifying key competencies for a particular position in an organisation. performance management. In a written reply to a question in Lok Sabha. This also affects firms as their output/produce is taken account for more than once. Over Recording of incomes (Double Counting) . recruitment. Introduction of competency mapping has also involved introducing skill appraisals in performance appraisals. it drives them to develop the competencies for the same. once the organisation gives an employee the perspective of what is required from him/her to reach a particular position. training and development. etc. The need for competency mapping Finding the right fit for the right job is a matter of concern for most organisations especially in today’s economic crisis. As meeting an individual's career aspirations are concerned. Measures Undertaken For Rehabilitation Of ‘Sick' Msmes In a bid to accelerate the revival of ‘sick' MSMEs. Dinsha Patel. and then using it for jobevaluation. "Financial support in the form of debt restructuring as well as extending fresh loans has been offered by primary lending institutions (PLIs) in order to rehabilitate sick MSMEs that are potentially viable. minister of state (independent charge) for MSMEs. if these are also counted sleight of hand is in progress. the Reserve Bank of India (RBI) has issued comprehensive guidelines to banks. stated.As people pay taxes their incomes are taking into account. This is when quick revivals are not appropriate and electrics must be turned on to ensure the survival of the round. the apex bank had issued guidelines on identification of sickness in MSMEs at an early stage as well as on debt restructuring mechanism for small firms based on the ‘Policy Package for Stepping up credit to Small and Medium Enterprises'." Earlier. "The RBI and the government have in the past undertaken several remedial measures required to help ailing small industrial units function smoothly by laying down guidelines to . as it is used by other Juggernoob production firms. asking them to undertake measures that would enable non-performing units to access adequate credit. succession planning.This is losing all perks as you are not revived and incomes are being counted multiple times.

implementing a CSR strategy adapted specifically to your business or organizational context. Increasingly.banks and PLIs to provide adequate and affordable finance to the sector. producers and foreign trade. So these earnings and expenditures represent the NI. NI equation will be Y= C+I+G and Y= C+S+T An economy may consist of three sectors the economy is consisting of consumers." said A Somani. NI equation will be as Y= C+I+G+M and Y= C+S+T+X The circular flow of NI is based upon two principles. According to the latest available data compiled by the apex bank. then whatsoever is producer by the producers is sold out to the consumers. Against such services. The goods produced represent NI while the consumers spend all of their earning on the consumption of goods produced by the producers such expenditures also represent NI. If goods and services have a flow towards a particular direction. and instruments for.330 ailing micro small enterprises out of 8. provides an overview of the basic steps to. Corporate Social Responsibility: An Implementation Guide for Business The critical role of companies in implementing sustainable development internationally is widely recognized. designed for businesses operating in the international context. NI equations will be as Y= C+I and Y= C+S An economy may consist of three sectors. The consumers or household provide the services of four factors to the producers. This guide.168 viable sick units had been put under rehabilitation by the end of March 2009. Anonymous Balanced Scorecard Basics The balanced scorecard is a strategic planning and . 2. the economy is consisting of consumers. Explain The Circular Flow Of National Income? Accordingly. Accordingly. Accordingly. corporate social responsibility (CSR) is being acknowledged not only as a key to risk mitigation but also as a core element for building corporate value. As we are constructing the circular flow of NI in two sector economy. As a result of each economic transaction the seller gets how much is spent by the buyer. the money has also a flow towards the other direction. producers and government. an equity broking firm in New Delhi. senior analyst at Balaji Securities. the factors of production get the remunerations such earnings also represent NI.

government. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. The balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into system that is used extensively in business and industry. While the phrase balanced scorecard was coined in the early 1990s. and monitor organization performance against strategic goals. Kaplan and Norton. This new approach to strategic management was first detailed in a series of articles and books by Drs. When fully deployed. The balanced scorecard has evolved from its early use as a simple performance measurement framework to a full strategic planning and management system. It enables executives to truly execute their strategies. It provides a framework that not only provides performance measurements. but helps planners identify what should be done and measured. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance. the roots of the this type of approach are deep. the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise. and include the pioneering work of General Electric on performance measurement reporting in the 1950’s and the work of French process engineers (who created the Tableau de Bord – literally. and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization. a "dashboard" of performance measures) in the early part of the 20th century. Kaplan and Norton describe the innovation of the balanced scorecard as follows: . Recognizing some of the weaknesses and vagueness of previous management approaches. improve internal and external communications. It was originated by Drs. The “new” balanced scorecard transforms an organization’s strategic plan from an attractive but passive document into the "marching orders" for the organization on a daily basis. the balanced scorecard approach provides a clear prescription as to what companies should measure in order to 'balance' the financial perspective.

But financial measures tell the story of past events. Kaplan and David P. suppliers. and innovation. technology. In . however. processes. and to develop metrics. employees. people -the only repository of knowledge -. These financial measures are inadequate."The balanced scorecard retains traditional financial measures.are the main resource." Adapted from Robert S. an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. Perspectives The balanced scorecard suggests that we view the organization from four perspectives.” Harvard Business Review (January-February 1996): 76. Norton. “Using the Balanced Scorecard as a Strategic Management System. In a knowledge-worker organization. for guiding and evaluating the journey that information age companies must make to create future value through investment in customers. collect data and analyze it relative to each of these perspectives: The Learning & Growth Perspective This perspective includes employee training and corporate cultural attitudes related to both individual and corporate selfimprovement.

what the Baldrige criteria call "high performance work systems. The Financial Perspective Kaplan and Norton do not disregard the traditional need for financial data. It also includes technological tools. it is hoped that more of the processing can be centralized and automated. In developing metrics for satisfaction. Kaplan and Norton emphasize that 'learning' is more than 'training'. These are leading indicators: ifcustomers are not satisfied. But the point is that the current emphasis on financials leads to the "unbalanced" situation with regard to other perspectives. such as risk assessment and cost-benefit data. it also includes things like mentors and tutors within the organization. and whether its products and services conform to customer requirements (the mission). These metrics have to be carefully designed by those who know these processes most intimately. and managers will do whatever necessary to provide it." The Business Process Perspective This perspective refers to internal business processes. Timely and accurate funding data will always be a priority. With the implementation of a corporate database. In fact. as well as that ease of communication among workers that allows them to readily get help on a problem when it is needed. Poor performance from this perspective is thus a leading indicator of future decline. Metrics can be put into place to guide managers in focusing training funds where they can help the most. in this category. with our unique missions these are not something that can be developed by outside consultants. it is becoming necessary for knowledge workers to be in a continuous learning mode. learning and growth constitute the essential foundation for success of any knowledge-worker organization. Metrics based on this perspective allow the managers to know how well their business is running. In any case. customers should be analyzed in terms of kinds of customers and the kinds of processes for which we are providing a product or service to those customer groups.the current climate of rapid technological change. There is perhaps a need to include additional financial-related data. The Customer Perspective Recent management philosophy has shown an increasing realization of the importance of customer focus and customer satisfaction in any business. they will eventually find other suppliers that will meet their needs. often there is more than enough handling and processing of financial data. even though the current financial picture may look good. Strategy Mapping .

helps transform disparate corporate data into information and knowledge. step-by-step connection between strategic objectives (shown as ovals on the map) in the form of a cause-andeffect chain. Unfortunately. What are the Primary Implementation Success Factors?  Obtaining executive sponsorship and commitment  Involving a broad base of leaders. the logical link between action and payoff that the organization must create to be effective. Generally speaking. Three aspects of the proposition include Product/Service Attributes (Performance/ Functionality considerations such as . and strategy mapping first to avoid rushing to judgement on measures or software Viewing the scorecard as a long-term journey rather than a short-term project  Planning for and managing change  Applying a disciplined implementation framework  Getting outside help if needed Definitions of Balanced Scorecard Strategic Planning & Management Terms Customer Value Proposition The Customer Value Proposition is the unique added value an organization offers customers through its operations. They show a logical. Once a scorecard has been developed and implemented. Balanced Scorecard Software The balanced scorecard is not a piece of software. which in turn enables the organization to create desirable results in the Customer and Financial perspectives (the top two rows). performance management software can be used to get the right performance information to the right people at the right time. however. Automation adds structure and discipline to implementing the Balanced Scorecard system. improving performance in the objectives found in the Learning & Growth perspective (the bottom row) enables the organization to improve its Internal Process perspective Objectives (the next row up).Strategy maps are communication tools used to tell a story of how value is created for the organization. vision. managers and employees in scorecard development  Agreeing on terminology  Choosing the right BSC Program Champion  Beginning interactive (two-way) communication first  Working through mission. and helps communicate performance information. strategic results. many people believe that implementing software amounts to implementing a balanced scorecard.

Strategic Result Strategic results are the desired outcome for the main focus areas of the business. A good Strategy Map tells a . ‘What strategic projects must the organization implement to meet its Strategic Objectives?’ Strategic Objectives Objectives are strategy components. and deliver value to customers. Performance Measures answer the question." Strategy Map A Strategy Map displays the cause-effect relationships among the objectives that make up a strategy. provide an analytical underpinning for decisions. Strategic Initiatives Strategic Initiatives are programs or projects that turn strategy into operational terms and actionable items. Image and Relationship. Perspectives A Perspective is a view of an organization from a specific vantage point. vision. continuous improvement activities that must be done to be successful. 'How is the organization doing at the job of meeting its Strategic Objectives?' Lagging indicators are those that show how successful the organization was in achieving desired outcomes in the past. Good objectives are action-oriented statements.quality. performance drivers. The organization's business model. Each Strategic Theme has a corresponding Strategic Result Strategic Theme Strategic Themes are key areas in which an organization must excel in order to achieve its mission and vision. Objectives are the building blocks of strategy and define the organization's strategic intent. Four basic perspectives are traditionally used to encompass an organization's activities. determine the appropriate perspectives. Strategic Initiatives answer the question. timeliness or price). Strategic Themes are the organization's "Pillars of Excellence. and provide a structured way to prioritize projects according to strategic impact. are easy to understand. represent continuous improvement potential and are usually not 'on-off' projects or activities. the organization's purpose Performance Measures Performance Measures are metrics used to provide an analytical basis for decision making and to focus attention on what matters most. and strategy. Mission A mission statement defines why an organization exists. which encompasses mission. Leading indicators are those that are a precursor of future success.

real capital receives a rate of return. common with larger enterprises Factor incomes Factors of production earn an income which contributes to national income. including: Sole traders. and to households and firms abroad. human capital by labour. Firms The function of firms is to supply private goods and services to domestic households and firms. Private limited companies (‘Ltd). and bear the risks associated with production. Public limited companies (Plcs). an approach. common in small to medium sized enterprises 4. 1. as they engage in mutually beneficial exchange. Targets Desired levels of performance for performance measures Vision A vision statement is an organization's picture of future success. Members of households pay for goods and services they consume with the income they receive from selling their factor in the relevant market. common in legal and financial services 3. Land receives rent. and expenditure are generated by the activities of the two most vital parts of an economy. output. human capital receives a wage. There are several types of firm. human capital. and enterprise receives a profit. Partnerships. Entrepreneurs combine the other three factors. Strategy How an organization intends to accomplish its vision. real capital and enterprise. real capital by capital owners (capitalists) and enterprise is provided by entrepreneurs. Land is supplied by landowners. its households and firms. Households The primary economic function of households is to supply domestic firms with needed factors of production ‐ land. The factors are supplied by factor owners in return for a reward. To do this they use factors and pay for their services. or “game plan”. Production function . where it wants to be in the future The circular flow of income National income. which are common in retailing and services 2.story of how value is created for the business.

Injections and withdrawals The circular flow will adjust following new injections into it or new withdrawals from it. labour (La). from other firms.e. An injection of new spending will increase the flow. and understanding the circular flow process is key to explaining how national income. New spending (C) generates new income (Y). A net injection relates to the overall effect of injections in relation to withdrawals following a change in an economic variable. and this spending is . output and expenditure is created over time. Households may choose to save (S) some of their income (Y) rather than spend it (C). firms also purchase capital goods. and this reduces the circular flow of income. K) The Circular flow of income Income (Y) in an economy flows from one part to another whenever a transaction takes place. such as machinery. and further new income (Y). Spending and income continue to circulate around the macro economy in what is referred to as the circular flow of income. and so on. La. Q = f (L. land (L). which generates further new spending (C). However. Savings and investment The simple circular flow is. i.The simple production function states that output (Q) is a function (f) of: (is determined by) the factor inputs. adjusted to take into account withdrawals and injections. therefore. and capital (K). The circular flow of income forms the basis for all models of the macro‐economy. Marginal decisions to save reduce the flow of income in the economy because saving is a withdrawal out of the circular flow.

Countries that trade are . and also on support for the poor and those unable to work. Government injects income back into the economy by spending (G) on public and merit goods like defence and policing. the simple model must be adjusted to include the public sector. Including international trade Finally. This injection into the circular flow. and further income is withdrawn out of the circular flow of income. as well as save. the model must be adjusted to include international trade. The public sector In a mixed economy with a government. occurs because existing machinery wears out and because firms may wish to increase their capacity to produce. and healthcare. called investment (I). education. Therefore. households are also likely to pay taxes (T) to the government (G).

the households of an open economy will spend some of their income on goods from abroad. Foreign consumers and firms will. and this is an injection into the circular flow. called imports (M). called exports (X). and this is withdrawn from the circular flow. .called ‘open’ economies. also wish to buy domestic products. however.

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