Research Korner: Organizational Strategic Plan

Why Enron Run Out of Gas

Why Enron Run Out of Gas       Abstract               Five years had already passed since Enron Corporation filed for bankruptcy protection on December 2, 2001, but the business world is still reeling from the unlikely event that shook the very foundations where great organizations are made. Enron’s application for bankruptcy protection was one of the most highly publicized business fiascos in history. The legal battle of settlements, criminal and civil charges and workouts will continue for years. But outside of the courts and the overly sensational press, what really happened? What caused the collapse of what at one time was the sixth largest company in the United States? The case explores the many stories of Enron in an attempt to find not only the answer to what happened, but what maybe learned from this failure.   The Enron Corporation and the Man behind             Enron was created in 1985 when InterNorth of Omaha acquired Houston Natural Gas. The merger/combination created the single largest operator of gas pipeline in the whole of the United States.  was named the CEO of the merger/combination in February 1986. The combined company was then christened Enron. Kenneth  instantly became the fifth highest paid CEO in the United States. Working closely with his Chief Operating Officer (COO),  took in charge a rapid growth strategy for his newly created and named company. The Houston, Texas-based company, formed in 1985, grew into the nation's seventh-biggest company in revenue by buying electricity from generators and selling it to consumers. It was admired on Wall Street as a technological innovator. In 1996, energy markets were changed so that the price of energy could now be decided by competition among energy companies instead of being regulated or fixed by the Government. With this change, Enron began to function more as a middleman than a traditional energy supplier, trading in energy contracts instead of buying and selling natural gas. Enron's rapid growth created excitement among investors and drove the stock price up.               Although a cast of characters were involved in the Enron’s rise and fall, one person stands out as the thread which binds all others together throughout the brief yet intriguing history of Enron’s, .  earned his BA and Ma in economics at the University of . He found job with the Humble Oil in Houston after earning his degree. Oil industry, was the equivalent of the gold rush of the later century. It was a brief stint with the said company for he joined the US Navy and found his way to the pentagon corners and earned considerable connections.  returned to Houston where he earned his PhD in economics at the University of Houston. he then returned to government service, first at the Federal Energy Regulatory Commission (FERC), then the Department of Interior. Throughout his time in Washington,  focused on what he believed to be the inevitable movement towards deregulation of the U.S. energy sector. He believed boldly in its correctness. The U.S. energy sector was deregulated on 1996,  was already the CEO of Enron Corporation.             After only eighteen months in Washington,  joined Florida Gas in 1973 as Vice President for Corporate Planning, rising to President of the pipeline division in 1976, and finally to the Presidency itself in 1979. His career path was already clearly established with the energy sector.  He moved along this career path from Florida Gas to Transco Energy in Houston, and from there to Houston Natural Gas. On June 1984, at the age of 42 he became the Chief Executive Officer of Houston Natural Gas and he started executing which he would pursue above all others for the next 17 years, get big fast.             Enron Corporation, before meeting its final end in 2002 was a conglomerate of big business ventures ranging from coal energy to internet broadband. By the end of 2000, Enron break the 100 billion dollar revenue mark after only 15 years in operation. The highest revenue growth was reported from 1996 to 2000, from $13.3 billion of 1996 to $100.8 billion in 2000, a 57% increase in revenue unparalleled in any business ventures in history. Also by the end of 2000, Enron have more than 19, 000 employees which generates $5.9 million revenue per employee, peerless even with the monopolists people from Microsoft ( 2002).       Think Big, Look Big (the rise of Enron)             Grow big, fast. With  corporate philosophy, he was headstrong of making Enron one the largest company in the US, not only in the energy sector but in the whole business sector. He engaged McKinsey Consulting immediately following Enron’s formation to evaluate the company’s strategy. The head of the McKinsey team was , a graduate of the  University’s School of Engineering and  Business School, where he finished his MBA on 1979. McKinsey consulting was widely considered the best and brightest of the time, and among many talents,  stood out. Like ,  also boldly voiced out what he considered the backwardness of the natural gas industry. One of his earliest proposals to Enron had been to apply the principles of market making, commonly applied in the financial sector to the natural gas industry. Although the Enron Board thought of the idea idiotic at that time,  finally implemented this strategy in 1989 when he joined Enron.  saw the company’s pipeline, which connected producers and buyers, as potential market maker. He created a gas bank, a natural gas trading business and envisioned Enron by being between the suppliers and demanders, the firm then was uniquely positioned to understand what gas was available from what sources at which points in time. Enron could then use that information for trading purposes in understanding the needs of buyers of natural gas. In a natural gas market suffering from a painful transition following deregulation as Ken  had foreseen, Enron quickly expanded sales and profits by offering both buyers and sellers longer-term fixed prices with little new investment in assets. This asset-light strategy became a centerpiece of ’s approach to expanding the business. “To be a per in this business, you just need to understand the price of natural gas and the concept of risk. In the coming years, Wall Street firms piled into the business, but even Enron always had a huge advantage. Its immense network of physical assets, its ability to tie up all the moving pieces together and provide physical delivery of the gas itself, and its long history in the gas business gave it insights its Wall Street competitors could never match “(2003). On Jeff ’s insistence of to use an accounting system common to financial services, but unheard of in the energy industry, Enron applied the market-to-market accounting (MTM). MTM accounting allowed Enron to recognize its sales and earnings on deals today, although most of the actual sales and profits and cash flows would not actually occur until way into the future.  successfully convinced both Ken  and Rich Kinder, then COO of Enron to use of MTM if they were to engage in trading business which  envisioned by creating his gas bank.                and  began building a conglomerate little by little. Enron Finance was the brain child of , the unit was combined a year later with Enron Gas Marketing. It was a major development as it provided and established the much needed financing base to buoy Enron Finance, still a struggling unit. After another year, the business unit base was extended again, this time with the addition of the intrastate Houston pipeline business. The new combined unit was named Enron Capital and Trade Resources (ECT).             ECT occupied a whole floor of the Enron building and immediately became a subculture of its own. The majority of Enron’s traditional employees were from various engineering and science field related to natural gas and pipeline operation, ECT however recruited primarily MBA’s, who were selected on the basis of their intellect and ambition.  encouraged out of the box thinking and behavior. With the culture of Enron before ECT as being rigid and strict to the rules as engineering and hard sciences fellows always seems to carry, the subculture of ECT was dubbed as “anti-Enron Enron”.              supported the development of a very loose culture in his own ECT. It was one which encouraged risk-taking and deal-making, but simultaneously did not expect loyalty, only performance.  and , both become known as pushovers to prima donna traders or deal makers who demanded promotions, bonuses and perks.             From the very beginning, however, Enron only recruited the best and the brightest. Enron quickly gained a reputation of supporting and rewarding entrepreneurial thinking. In the words of a former employee, “If you could show that something new and different could make money, you could do it”. The company’s loose culture translated into a distaste for bureaucracy and a corporate belief in free markets.             Enron was growing rapidly, that it feels like the company needs a bigger space to market its business, and so in 1993 Enron International was created. Enron is now a multi-national company.             Although  is typically associated with Enron International, it was John Wing who was largely responsible for its early growth. Enron international originated from the Teeside gas-fired cogeneration power plant in United Kingdom which Wing developed. The Teesside project was the source of considerable profit in its early years, but eventually became one of the big sources for significant looses. Enron had entered into along term take-or-pay contract for NorthSea Gas from a newly developed “J-Block” in order to provide adequate feedstock’s for its cogen plant. Enron entered into the long term contract unfortunately when the prices of feedstock’s were at historical high. In the end they were able to negotiate a $450 million settlement payment to end its long term commitment to take or pay at astronomical rates the gas originating from J-Block.             Both and  were pursuing booked earnings (accounting earnings) because that was the criteria for success at Enron. With their criteria for success, both were pursuing a short term recognition of financial results on business lines which often required years of delivery and execution to actually create value. However, Enron kept its fast paced sprint to being bigger by making deals and investments as far as India, most of them turned failures.             The ascension of  to the COO  position, ’s ECT subculture moved to the driver’s seat within Enron’s complex web of business units and corporate culture. There had always been a number of obvious differences in the subcultures across business units. And although both trading and international had increasingly shared accounting practices, there were still fundamental differences in how business was done and the personality characteristics of those doing it. In fact the battle with in the traders and the deal makers were so much aggravated by cultural differences. The deal makers cultivated personal relationships with customers and hammered out deals over many months. The traders on the other hand do business by phone and computer in a matter of seconds. The dealers viewed the traders in the company as bloodless mercenaries who would do everything to get the business done. The traders viewed the dealers in same not too flattering manner for they were associated with dinosaurs, destined for extinction. By  words, he characterized Enron’s culture as loose-tight. The loose was the no holds barred approached to creativity in business development. The tight, as  described it, was the organizational processes within Enron to manage the risk they often take. ’s moved to put Enron into power trading in a bigger way resulted in a significant repositioning of much of the company’s core returns. The energy trading business, primarily in the North America boomed in 1996 to 2000 period. By  vision, Enron had indeed gotten big fast. In 2000, it broke the $100 billion in revenues mark for the first time. Its market capitalization, the value of the total outstanding shares of the company, was now worth roughly $70 billion. By this time Enron’s perception of its own core competence was changing. It was not any more confined to building and operating natural gas pipelines and power plants, or even to the trading of natural gas and electrical power. Trading is now its own self defined competence. The evolving strategy was to create markets where markets had never existed, exploit them for all they were worth, and when profits decline by competitor entry, move on to the next cutting edge market creation. Between 1996 and 2001, Enron tried, sometimes failed and sometimes succeeded, in trading water, weather derivatives, bandwidth and coal to name but a few…   Feeding the Giant             Enron grew so big and so fast, that feeding itself was becoming increasingly a problem. A particularly troublesome feature of Enron’s emerging business model was that revenues were growing much faster than earnings. The cost of undertaking all new trading ventures at panic face was catching up with the firm. The salaries, bonuses, start-up costs and general lack of control over all operating costs drowned whatever profits gained from the ventures. Even the more successful trading lines, its natural gas operation did not generate margins the business world had come to expect from Enron and all its older portfolio of business. Enron needed additional external capital, perhaps a new debt and new equity. Both  and s however are reluctant to issue large amounts of new equity because it would dilute earnings and holdings of existing shareholders. The debt option was also limited given the already high debt levels Enron was carrying and left it in precarious position of being rated BBB, just barely investment grade by credit agency standards. After this, the downward dizzying spiral fall of one of the coolest and biggest company of the world began.                         What happened at Enron? This question was been troubling many business analyst for some time now. The financial analyst thinks they have the answer, the organizational behavior theorists also thinks they have the answer. The business community needs the answer to these to avoid another company from going the same route of pitfall like Enron took. The fall of Enron could be viewed in many different perspectives, each leading to different complex questions. Was it the ethical and business judgment failures of select people at the top, or did it go deeper to the thousands of employees Enron have. Was Enron’s leadership responsible for the creation and growth of a corporate culture which was inherently flawed? Or was it a good business burdened with bad leadership, or a bad business with a bad leadership? Or was Enron a company, a victim itself of the market that has grown cynical as a result of the dotcom bubble collapse of the 1990s. Or did this culture just grow from specific instances of individual flaws and leadership malfeasance?   Organizational Analysis: ENRON The explanations as to why the nation’s seventh largest corporation succumbed to dead end are as diverse as the baffling questions of how could such a thing happen. Enron as an organization was big and complex yet without a powerful HR department that would manage the company’s most important asset, the people. But before we talk about the flaws in the organization (Enron) we must remember that Enron did enjoyed success as a company. It was so successful that it was the seventh largest corporation in the United States with businesses in Asia, Europe and South America. It reached that status primarily because Enron’s primary concern, as to the words of Ken , is to grow big and fast.  must have installed it in the heart of every employee through either his charisma, motivation factors (salary, incentives, bonuses...etc) or just finding the right people for Enron (brightest and smartest). Enron was lucky to have both intelligence and charisma that is in  , that must have lead his people to rally behind his “grow big, fast slogan”. Leadership as defined by  (1950) may be considered as the process of influencing the activities of an organized group in its efforts toward goal setting and goal achievement. Enron’s employees could have been one of the most motivated workforce in the entire business industry. Enron selected only the brightest and smartest individuals, their only criteria, to work with in the company. As long as they deliver what the company expects them to be then they are rewarded with bonuses, perks and promotions. According to Maslow’s hierarchy of needs, we also need to fulfill our “need to boost our self esteem”. The esteem category lists some of the desires that should be fulfilled, the desire for the feeling of strength, adequacy, achievement, confidence, independence and freedom (1954).  The Enron organization seemed so perfect that every people within the organization deliver, and job satisfaction and efficiency was evident in the 2000 report that the 19,000 workers in Enron generates $5.9 million revenue per employee. Job satisfaction is viewed as an outgrowth of achievement, recognition (verbal), the work itself (challenging), responsibility, and advancement (promotion) (Greenberg, 1994). All of these requirements were to be found in Enron, where employees are given the responsibility and challenged to think out of the box, to create new ideas where they can make money out of it. Management will make full use of the potential capacities of its human resources only when each person in an organization is a member of one or more effectively functioning work groups that have a high degree of group loyalty, effective skills of interaction, and high performance goals. … An organization will function best when its personnel function not as individuals but as members of highly effective work groups with high performance goals. Consequently, management should deliberately endeavor to build these effective groups, linking them into an overall organization by means of people who hold overlapping group membership. The superior in one group is a subordinate- in the next group and so on through the organization. (1961)  X and Y theory also explains why the Enron’s employees was motivated to work best, because the only criteria in Enron to get promoted was to perform at best, central principle of theory Y states that individuals “achieve their own goals best by directing their efforts toward the success of the enterprise”. Ultimately  came to associate theory Y directly with participative management: “The principle of integration requires active and responsible participation of the individual in decisions affecting his own career” (1960).             Theorists such as  (1978) advocated an open-system perspective. That perspective recognized that organizations are interdependent with other organizations and groups in their environment. It also recognized that these other systems influence both what goals organizations choose and the extent to which they can meet those goals.  (1978), for example, defined success in meeting internal goals as efficiency. They defined effectiveness as ". . . an external standard of how well an organization is meeting the demands of various groups and organizations that are concerned with its activities"   What has also been lacking with Enron was it compromised the importance of planning before taking a leap forward. An organization doesn’t just have to grow bigger, but better. The importance of planning and consultation must never be downped. Both strategy and planning are vital for innovation, but neither lessens uncertainty. Enron basically disdained planning. Its strategic intent pushed it into a number of different markets where it thought it could be successful, not by being better than other competitors, but by reinventing the market place. This was certainly innovative, but even if you can redefine the terms of competition, you still have to have a business plan, highly reliable core processes, and a sustainable ability to execute. The business media makes much of Enron’s strategic intent overreaching its capabilities of its efforts to innovate overwhelming its ability to deliver. Innovation is about the people, not the organization ( 1996). While most of the people stories about Enron have been about employees losing their life savings, their jobs, and having their professional reputations tainted, what's missing is the quality of ideas. As growth was essential to the company's business model and survival: to ensure new investments and global reach, the availability of the right personnel was crucial. Yet resource planning was somehow the most difficult part of the entire HR process (1995). Planning semantically refers to organization and structure. The traditional approach to resource planning: factoring in business and environmental needs, performing a gap analysis and job (re)design, and moving on to recruitment, proved impossible, as business plans could change, literally overnight. So recruitment had to be highly proactive and, paradoxically, well-planned. All the more so because qualified and experienced staff were almost unavailable: the Internet market's rapid evolvement and yet immaturity had not created a large enough pool of competencies and experience. Those with even the most rudimentary know-how were being chased by a legion of job offers. Recruitment process of Enron was very loose and less standardized. The preceding factors combined called for the recruitment of potential, of versatility and flexibility. The main profile for recruitment was a young, bright graduate with international exposure, highly result-driven, a go-getter, willing to shift positions as soon as business models required adjustment in skills, and hence requiring minimum supervision (self-motivated) and the ability to be autodidactic. Ideally they would also be adventurous, risk takers, and "dreamers." Though Enron offered a very good environmental workplace and a fast career growth, it also did not require employee loyalty, which is a very important factor in organizational stability. It is in loyalty that trust is built with in the organization. The last lesson of Enron is simply that the ideas people have, the changes they put into action, and the lessons learned in terms of success or failure are what innovation is all about. The tragedy of Enron is that the worth of those ideas and the workforce that produced them has been swallowed whole by management self-deception at best, or corporate corruption at worst. It should always have been about the individuals and the power of their ideas.

Why Enron Run Out of Gas

Why Enron Run Out of Gas Abstract Five years had already passed since Enron Corporation filed for bankru...

The Food and Agricultural Organization

1) How does Australia finance its current account deficit? What long-term problems will arise for Australia if it uses its capital account surplus to fund current consumption instead of increasing its productive capacity? Explain carefully. What evidence exists that this is a problem?               Current account deficit encompasses a situation where there are greater amounts of goods and services imported into the country compared to the amount of the goods and services exported outside of the country so that debits exceed credits. This means that the country’s expenditure for imports exceeds the amount that enters the country from exports. Theoretically, macroeconomic policy in this situation centres on achieving balance between aggregate demand and supply. On one hand, the government can implement demand-side policy by influencing the extent of spending of the economy. By doing so, cutbacks on import purchases will have a positive effect on production and prices of domestic products and on local employment. On the other hand, the government can implement supply-side policy by providing incentives for business people and workers to enhance the level of productivity in the economy. (Jackson and McIver, 2001)             In application, Australia focused on demand-side policy to address its persisting current account deficit cycling to and from one and a half to seven and one fourth percent or an average of four and a half percent of the gross domestic product. The federal government’s response included compulsory private-saving schemes together with sustained fiscal restraint (Gruen, 2005). These had the effect of increasing the national savings to a level that the country could not have achieved without a tight fiscal policy. In the national budget for 2005-2006 the government affirmed its commitment towards gradual but continuing tightening of fiscal policy in the medium term. Through this strategy, budget balance persists on the average above the cycle with the effect of current account deficit decreasing to one fourth to one half of GDP despite the exclusion of the Future Fund asset earnings from the budget.               Capital account comprises the record of the flow of funds coming out and getting into a country or debit and credit respectively. A capital account surplus means that funds getting into the country are higher than the amount exiting the country on capital account (Jackson and McIver, 2001). The flow of funds covers activities such as the disposal and acquisition of fixed assets such as land, fund transfer of funds by migrants, government grant payments for overseas projects, and government receipt of money for capital projects. Capital account surplus relative to the current account means that the country has sold its assets or incurred debt in order to meet the current account deficit. Current account and capital account comprise equivalent or comparable variables in the balance of payments.             With a capital account surplus, the government’s decision to use the surplus for consumption instead of investing in the enhancement of the economy’s productive capacity involves several implications. Ideally, spending on consumption instead of investment into production will not cause a significant multiplier effect over the money spent for consumption. While it is true that consumption would accrues revenue to businesses, giving them the financial capability to expand production, which in turn creates employment and provides income to people, the process does not necessarily lead to further production because of the many uncontrollable intervening factors such as the decision of the business firm not to expand or spend profit for other things. Moreover, this only has a short-term, minimal effect relative to the fiscal tightening policy of the government. This is because even with spending providing revenue to businesses, the encouragement of savings by the government would lead to the decrease in demand, which would not support the expansion of production. To motivate businesses to expand their production capacities, the expected increase in demand should be sufficient enough to equal the increase in production. If businesses perceive that people are more inclined to save instead of save, they would not invest the money derived from the spending of the surplus for consumption.             Without expansions in production to make domestic products competitive to imports, the entry of cheaper import products into the Australian market would further increase the current account deficit. Despite the tight fiscal policy of the government, this may not be enough to arrest or minimize the persisting deficit. The insufficiency of the tightening fiscal policy as a solution to current fiscal deficit is justified by the inability of the government to achieve its goal to minimize deficit to a level less than one percent of the gross domestic product. The current account deficit may stretch towards its fourth decade of unacceptable value. 2) What effects might each of the following have on aggregate demand or short-run and long-run aggregate supply curves?   a) A widespread fear of depression among consumers               Fear of depression would dampen consumption since the anticipation of the economic downturn would cause people to save whatever money they have at present in preparation for the depression. As a result, business firms would cut-back on investment expenditures. These two components of aggregate demand would shift the curve to the left. On the supply side, in the short-run the decrease in consumption would cause a movement along the aggregate supply curve as business firms try to match the price of consumers. However, with a decline in potential output, the aggregate supply curve would shift to the right.    b) The sale of wheat to the Russian federation             The Food and Agricultural Organization (FAO) issued the forecast that in 2006, the world wheat output would decrease by 6 million tonnes compared to production in 2005. If Australia sells wheat to the Russian federation, the price of wheat would increase due to the expected increases in wheat consumption per year coupled with the decrease in supply due to the export of wheat to the Russian federation. In the short and long run, there would be movements along the aggregate supply curve due to price changes. In the long run, the demand curve would shift to the right due to the change in consumption and exports.    c) A tax leading to 5 cents per litre increase in petrol prices             An increase in the price of petrol would result to corresponding increases in consumer products. Price increases would affect the demand and supply of consumer products causing movements along the aggregate supply and demand curves as consumers and suppliers seek to find a level of equilibrium levels at a price level acceptable to both parties. d) An increase in the money supply              An increase in money supply could translate to more money circulating the economy for the purchase of goods and services. The circulation of money affects consumption and investment expenditures shifting the aggregate demand curve to the right. In the short run, there would be movements along the aggregate supply curve as prices react to increased consumption. In the long-run the increased expectation of potential output would shift the aggregate supply curve to the right. e) A cut in commonwealth spending for higher education             A decrease in government expenditure, assuming that all other components of aggregate demand are in ceteris paribus, would shift the aggregate demand curve to the left. In the short run, there would be movements along the aggregate supply curve as price reacts to decreased spending or demand. In the long run, aggregate supply curve would shift to the left if there is an expectation of decreased potential output due to the decreased government spending. f) An increase in interest rates             An increase in real interest rates not influenced by price negatively affects planned investment spending. This would shift the entire aggregate demand curve to the left. In the short-run there would be negligible movements along the aggregate supply curve. In the long-run, the aggregate supply curve would shift to the left due to the expected decline in potential output. g) The discovery of cheaper energy sources             The discovery of cheaper sources of energy would decrease the price of consumer goods and services previously dependent on oil products. In the short-run, the decrease in price would result to movements in the demand curve due to increased consumption. In the long-run, changes in consumption would shift the demand curve to the right. In the short-run, movements along the aggregate supply curve would happen due to reactions to increased demand. In the long-run, the aggregate supply curve would shift to the right when influenced by expected increases in potential output brought about by other factors apart from price/ h) Tax reductions             Tax reductions would normally increase the income of households available for consumption and the money of business firms for investments. The changes in consumption and investments shift the aggregate demand curve to the right. In the short run, there would be movements along the aggregate supply curve due to the reactions to price changes and increased demand. In the long-run, investments would increase potential output shifting the aggregate supply curve to the right. 3) a) Using the aggregate demand-aggregate supply model, explain how discretionary fiscal policy can be used to reduce the effects of demand-pull inflation.               Demand-pull inflation refers to the increase in prices due to the continuing increases in aggregate demand represented by the aggregate demand curve persistently shifting towards the right (Sloman and Sutcliffe, 2001). Fiscal policy may be adopted to address this characteristic of the business cycle. However, the fiscal policy may be either discretionary or non-discretionary. Discretionary fiscal policy refers to the government action designed to decrease or increase taxes, expenditures or both to achieve domestic output with full employment together with minimal inflation.             In addressing demand-pull inflation resulting to increased prices, contractionary fiscal policy is advisable. The government can increase taxes, decrease public spending, or do both to lower the level of inflation. Increasing taxes would lower the disposable income of families and business firms. The change in consumption would cause the aggregate demand curve to shift towards the left. The shift in turn addresses the inflationary gap. Decreasing government spending reduces expenditures resulting to a shift in the aggregate demand curve towards the left. This would in turn reduce the inflationary gap. The graph below shows the changes in aggregate demand caused by contractionary discretionary fiscal policy.       b) How may fiscal policy be used to increase the equilibrium level of real GDP while minimising the impact of inflation? Use the aggregate demand-aggregate supply model as the framework for your answer.               Real GDP refers to the real value of aggregate final commodities produced in an economy after being adjusted for inflation. Equilibrium level of real GDP is the value where aggregate demand and aggregate supply meet at a certain price level. In considering the AD-AS model, a decrease in price would increase the value of real commodities demanded while an increase in price would result to increases in real supply of commodities. Equilibrium for an aggregate economy is similar to the demand supply relationship in a single product. The intersection of AD and AS determines the equilibrium, overall price level, and the equilibrium real GDP. Concurrently, prices above the equilibrium create aggregate surpluses while prices below the equilibrium create aggregate shortages. The graph below shows real GDP equilibrium.                     Increasing the equilibrium level of real GDP without increasing price means shifting the aggregate supply and aggregate demand to the right without utilizing or affecting price such as through fiscal policy. To shift aggregate demand to the right, the government has the option to cut-back on taxes to change consumption or increase government spending in order to shift the demand curve towards the right. Simultaneously, the government may also create a business environment conducive to investments such as tax holidays or relaxed regulations to influence increase in expected or potential output shifting the aggregate supply curve to the right. These policies should be simultaneously implemented so as aggregate demand increases so will aggregate supply resulting to an increase in equilibrium level without affecting price.    4) Show the implications of the supply-siders' arguments in the aggregate demand-aggregate supply framework. Do you think that tax-transfer disincentives have a short-run or long-run impact, or both? Explain.               Tax transfer system in Australia creates the situation where the government spend in providing benefits and assistance to unemployed Australians. As much as this system secures the welfare of the population, it also creates the disincentive for people to work or to gain employment offering them income at levels that would disqualify them from the transfer payments. This is due to the burdens of working considered with the expected compensation from employment relative to the amount received for transfer payment eligibility. Overall, tax transfer disincentives influence the motivation for people to work depending upon the comparison of expected benefits. Transfer disincentives also influence the motivation to work since receiving benefits usually outweigh the burdens involved in employment, especially if the income received is not enough to offset these burdens. The security of receiving an amount of welfare money every month also works against the motivation to save and invest because of the security.             Tax transfer disincentives have short-run and long-run impact. Short-run impact of the transfer payments comprises the sustained expenditures of households because of the secured amount they receive every month. However, the impact is not that radical because of spending is not expected to increase. In the long-run, transfer payments will have an impact on economic growth in the area of productivity. Transfer payments negatively affect production because the money transferred from those with income able to pay tax to the people without income involves government expenditure without a resultant production. In the circular flow of income, this means that there is a withdrawal without necessarily being compensation with an injection. The bulk of transfer payments withdrawn from the government do not necessarily coincide with an inflow of tax revenue especially with the dragging of tax reforms, which would increase the tax burden upon the people belonging to the highest income percentile. Relative to the AD-AS dynamics, expenditure without direct impact on production will not have a significant multiplier impact towards aggregate demand or supply indicating economic growth.             Moreover, production depends upon resource factors such as labour and savings. With the tax transfer disincentives, there would be no motivation for employment, when employment is a key ingredient in production. The impact of the decision to remain unemployed due to transfer payments depends upon the supply and demand of labour. In situations where there is labour surplus, the unemployment of certain segments of the population would not influence the price of labour because of the voluntary decision not to work instead of competing for limited employment opportunities. In situations where there is labour shortage, the voluntary decision of people not to work due to the security of transfer payments would increase the price of labour. This would in turn increase the price of commodities produced. Depending upon the characteristic of the product, the general trend would a decrease in consumption of the product. Decreased consumption would translate to decreased revenue and lesser amount for allocation to further production. Concurrently, scarcity of labour has a shrinking effect to production. On a larger scale, a shrinking production causes movements along the aggregate demand and supply curves resulting to an equilibrium point representing lower output at higher prices.             With tax transfer disincentives, there would be no motivation for people to save or invest. Production suffers from lack of savings and investments. The increase in the    level of production of goods and services depends upon the availability of funds and the conduciveness of fund access to business ventures. Lack of savings and investments resulting to limited funds hamper production even with a conducive environment for borrowing. On the bigger scale, lack of savings and investments would result to an AD-AS equilibrium point involving lesser output at higher price levels.

The Food and Agricultural Organization

1) How does Australia finance its current account deficit? What long-term problems will arise for Australia if it uses its capital account...

PACT (People, Activities, Contexts, Technologies) ANALYSIS OF THE LOST (Lecture Organiser for Students) SYSTEM

Computer-based interactive systems provide support to an ever widening range of educational activities like enrollment, report card acquisition, and even lecture-taking. Basically, the function of analysis in an interactive design process is to perform a systematic exploration of the way things are and the way they should be. The PACT Analysis of the LOSt system, which is a software package that is used for organising, creating and editing lecture notes and other academic information that would help students capture all of the information that they gather from inside a class, consists of the scrutiny of:       People who will use or be affected by the system       Activities that the system will support (functionality)       Context that the system will be used in (and whether this will affect what you can design)       Technologies that can be designed or brought together to support the Activities (Technologies provide many opportunities for doing things differently).   PACT FORM People. The LOSt system will be used mainly by students after they have installed the software package in each of their individual laptops. They will also be used by the school’s administration, as they would have to maintain a server which would deliver audio notes, OHP lectures and other information to the students’ laptops. Also, university lecturers will become users of this system, as they are the source of information where the server will get the information that they will transfer to the students’ system from. The use of the system will affect both the students and the school administration. For the students’ part, they will have easier time getting hold of important class lectures and organising them into something suitable to their studying needs. As for the administration and the lecturers, they can be assured that what wealth of knowledge they are trying to impart to their students will now have higher chances of getting through to the intended recipients. The students would not have special requirements, as their usage will basically be the same for every one of them, in that they will have their written notes, scanned paper-based information and internet links fed directly to their computers and the audio notes and OHP lecture notes transferred to them from the school server. The administration, of course, will need to install the LOSt server to their system for them to be able to transfer their lecturers’ notes from their system to the system of the students. Their major tasks are to program changes in inputs or control routines and to serve as backup in case of failure, monitoring computers, which, in turn, integrate information flow from various lecturers. The lecturers would have no special requirements from the system. Each of the users could extend what can be designed for the system, as the educational environment is one open to innovation and progress. Another people aspect of the analysis involves such considerations as the users’ knowledge of computers, the nature of their role in the use of the LOSt system, their underlying abilities, and their semantic and syntactic knowledge about computers would largely affect the design of the interactive system. There is now the need to design it so that it would be user-friendly.   Activities. The temporal aspects, co-operation, complexity, safety and the nature of the content of an activity affect the effective and efficient implementation of a system design. LOSt would support such activities that would promote better lecture organisation for the students, activities as downloading notes from the university website, recording lecturers’ speech, linking slides to speech, support for summarising revision information, uploading assignments to the lecturers’ website, importing scanned paper-based info, taking notes live during lectures, acquiring audio recordings and OHP lectures and downloading content from the University LOSt server. The host of possibilities that the system can do would help in the process of the formulation of a design. The activities that the students do now are the traditional methods of taking down lecture notes, not interactive as they would have liked. Linear notes and patterned notes are what they mostly use. In the linear form of taking down notes, students use a numerical system for paragraphing or an alphabetical system which helps with cross-referencing and organising their notes for revision later. Patterned notes are also used by the students, or those which make use of nuclear, spider-grams, diagrammatic, mind-maps and other note-taking tools which are produced from standard lecture notes so that a student could clarify the key points of the lecture. These notes were produced in the first review after the lecture and were added to throughout the semester. Consequently, students then used the notes for exam preparation.  Lecturers almost always make their slides available online, which the students go to the trouble of downloading instead of being sent to their laptops. Students, lecturers and administrators alike would have liked more interactivity when it comes to the lectures issue, thus the LOSt system.   Context of use. The educational realm is an ever-developing arena for interactive systems design. Thus, a sensing mechanism can be designed and embedded in the system to detect and capture indexes of changes, so that the system effectively changes its operational modes and characteristics to optimize its interfaces to users. There is a need for interpretive filters to detect signs of contextual changes that need to be used as triggers for appropriate transformations of the system or interface configuration. In order to support particular student lecture-absorbing activities, the appropriate setting of contexts is necessary for the enhancement of user interactions with artefacts. The context in which the LOSt system exists paves the way for faster dissemination of text and graphic information as well as motion video materials and image data to the students. By incorporating high quality video and digital sound in lecture notes and making it available to the students for their use, it makes the learning process more interesting and stimulating, while at the same time greatly increases the rate of learning and knowledge retention. The environment in which the system will be mostly used will specifically be inside a classroom, the environment would not require any special design for the system, just the assurance that even though the students are outside the particular class, they can still get hold of the information that they need from their class lectures. The environment would be that the lecturer provides all learning materials, demonstration, tutoring, testing, administrative and advisory guidance, interpersonal motivation, discipline and counselling to individual. Each student would have his/her own laptop, feeding the laptop with notes as the lecturer delivers his/her presentation and later downloading additional lecture materials from what was presented in class during the lecture from the University server.   Technology. Input, output, communication, and content is important in making the last part of the PACT analysis. The hardware, in this case the students’ laptops, should have the capacity to download and upload lecture and assignments and should have audio recording hardware (microphone, sound card) which would record the lecturers’ speech delivered in class and all other audio materials necessary for learning the lessons, and a high-speed wireless internet connection to download and upload lecture files from the University’s server to the students’ system in their individual laptops. Alternative input devices such as light pens and touch panels, which will be particularly useful to students with disabilities. A hardware issue concern is the potential complaints of University students who would have to work in front of their laptops for considerably longer periods of time. It is important to know what effects are attributable to the laptops or to other studying factors. The software would basically have to make sure that it could support what the hardware could offer. The core functions of the software will consist of editing, publishing, exchanging documents and messages, data management. Other applications such as those specially tailored for particular types of analyses, or for checking through text for spelling errors, or for doing the text-graphic document typography in a special area of technical portrayal, and so on may also exist. Connections of laptops to the shared LOSt system will be via high-speed wireless internet. The software should allow for students to download any portion of the lecture that they find relevant, enabling students to go back at any time to previous screens of the presentation. Students can then concentrate on the material being presented, rather than focus on taking notes. Through these technologies, activities outlined above would be realised entirely to the benefit of all the target users. The existence of laptops for every student in the University would provide the opportunity for the LOSt system to be fully utilised. The ease of typing lecture notes and the organisational benefit of knowing notes are archived in files in the internal memory of their laptops and for easy retrieval from the University server. Using the LOSt system for note taking is an example of technology rightly applied. Beyond a mere productivity tool, a computer used in this way becomes technology that facilitates understanding.

PACT (People, Activities, Contexts, Technologies) ANALYSIS OF THE LOST (Lecture Organiser for Students) SYSTEM

Computer-based interactive systems provide support to an ever widening range of educational activities like enrollment, report card acqui...

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EXECUTIVE SUMMARY             Human resource development (HRD) plays a vital function by maximizing employee expertise to achieve the main objectives of an organization. This is done by methods that enable organizations to compete with the emergent changes in business strategies. The key function of HRD evolves from the onset of information technology which is deemed useless without the intervention of skilled manpower. It is in this light that HRD determines the implementation of the needed techniques for business success. Two factors have influenced the evolution of HRD toward a more active role in the formulation of business strategy: (a) the centrality of information technology to business success, and (b) the sustainable competitive advantage offered by workforce expertise. These two factors work together in such a way that the competitive advantages they offer are nearly impossible to achieve without developing and maintaining a highly competent workforce. 7-Eleven is convenience store in Hong Kong that seeks appropriate strategy to maintain it leadership in the industry. This paper has analyzes its organization and its competitors as well as the industry as a whole. Having analyzed the internal and external environment of the organization, a performance-based development strategy is the identified appropriate strategy for the organization. In addition, an improvement plan is formulated to give the organization a guide for the execution of the plan. There are already 600 superstores and convenience stores in Hong Kong today not including their outlets. Competition is more dynamic today and organization must possess flexibility in order to cope up with the dynamic changes in the industry. However, with the increase of working women, convenience stores sales have increased in the year 2006. Convenience stores have increasing become popular giving 7-Eleven more opportunities to expand. However, in order to attain sustainable competitive advantage human resource development plays a vital role in the success of any organizations objectives through development of its employees.   INTRODUCTION AND BACKGROUND OF THE STUDY   Convenience Retailing in Hong Kong                (2006) has reported that “in 2005, food and drinks total retail sales has reached to $6.4 billion which represents a 6 percent growth comparing to 2004. In January to August 2006 retail sales has increase 6.2 percent for traditional markets and 6.3 percent for superstores compared to the same period in 2005. Retail establishments in 2006 amounts to approximately 15,083, which includes 85 supermarkets and convenience store establishments in which would total to 1,634 stores if branch outlets are included and 14,998 wet market stalls and “mom and pop” shop operators. Retail shops in Hong Kong generally are very small in size, about 98 percent of which hire less than 10 employees. Traditionally, Hong Kong consumers shop for food daily because of a preference for fresh food. Much of the shopping is still done in traditional markets including wet markets and mom-and-pop shops. However, sales in supermarkets are increasing. The supermarket’s share in terms of retail sales has risen from 44 percent of total sales in 1995 to 54 percent in 2005. Many supermarkets in Hong Kong now have successfully tapped the fresh food market by offering fresh foods at very competitive prices and providing a comfortable shopping environment, which is very different from traditional wet markets. In 2000, only $524 million worth fresh/chilled meat, fish, fruit and vegetables and frozen food were sold in supermarkets. The sales values of the same category in supermarkets greatly expanded to $684 million in 2005, increasing 31% over 2000.”   Source:  (2006)   Source:  (2006)     In short, as according to  (2006), “wet markets are strong in fresh foods, while supermarkets are strong in processed, chilled and frozen, high added value, and canned food products. The competition between wet markets and supermarkets has intensified in recent years. Some wet markets have turned air-conditioned and provide free shuttle to nearby residential areas. In the next few years, the Hong Kong Government has earmarked over $77 million to improve the environment of wet markets. Meanwhile, more and more supermarkets have been renovated to make sales of fresh meats possible and to enhance the overall experience of the convenience shopping at a supermarket.” According to the latest figures available, in 2004 there were 85 supermarkets in Hong Kong but only 9 of them had 5 or over branch outlets. About 63 supermarkets had only one store without any branch outlets (, 2006). In the past decade, there has been a substantial decline of small supermarket operators. Between 1997 and 2004, the number of supermarket operators decreased by 31 percent whereas the sales and the number of persons engaged in the supermarket industry rose by 11 percent and 29 percent respectively (, 2006). These figures reflected that the supermarket industry has been growing but in a way not favorable to small operators. Many small operators left the market due to severe competition. Source:  (2006)   There are two dominant supermarket chains in Hong Kong: The Wellcome Co. Ltd. (247 outlets with 20 superstores) and ParknShop (over 226 with 46 superstores). ParknShop and Wellcome account for about 80 percent of the supermarket turnover. Both supermarkets are able to work closely with real estate developers to open stores in strategic locations, thus maintaining their significant market share (, 2006). In the past decade, a “superstore” concept has emerged in the operation of supermarkets, blending the Western supermarket style with a traditional Hong Kong wet market. Superstores offer traditional Chinese fresh food like live fish, meats, ready-to-eat foods and market-style fruit and vegetables as well as the most extensive range of international products. Almost all Hong Kong supermarkets require listing fees, that is, a fee charged to allow a new product to be put on their shelves. This is a one-off fee for a trial period. The listing fees are extremely negotiable and vary greatly among different supermarket chains. Major supermarket chains, such as Wellcome and ParknShop which have many branch stores, have expensive listing fees. Industry sources revealed that key supermarket chains may charge HK$1,000 (US$130) per SKU for each of its store (, 2006). A 30 percent discount may be offered to certain suppliers. The discount offered varies tremendously depending on the popularity of the products and the bargaining power of the supplying companies. Agents/importers will not bear this cost, which is transferred to their principals. In short, all supermarkets require listing fees except those belonging to Japanese department stores. Hong Kong consumers usually demands for numerous trading term from Hong Kong food retailers, such as promotional discounts; back-end income (flat rebate per year that a U.S. exporter has to pay to the retail chain based on the annual turnover); D.G.A. (Distribution allowance - the fee that the supermarkets charge for distributing the products from its warehouse to its many branch stores); and incentive rebate (a percentage of turnover rebated to the supermarkets in case sales exceed the agreed amount). It can be expected that the bigger the supermarket, the harsher the trading terms. For general reference, about 15 percent of the annual turnover has to rebate to the major supermarkets and 8 percent to small ones (, 2006). Agents representing very popular items with large turnover usually have a stronger bargaining power and will be able to negotiate for a lower rebate rate. Different products have different mark-ups. A dried fruit importer revealed that an importer usually operates on a mark up of 5% to retailers who would then mark up another 30% to 35% to consumers (, 2006). There is excellent potential growth in Hong Kong’s retail food market for U.S. grocery store items, particularly new and different items, as food retail outlets continue to increase and diversify. Because of established ties and traditional relationships, most of Hong Kong’s supermarket chains traditionally looked to Britain, Australia, New Zealand, and Canada for supplies. In recent years, however, buying habits are shifting and many more American items are now available on local grocery store shelves. Supermarkets tend to use consolidators to help them source new products which are popular in the United States. There are around 950 convenience stores in Hong Kong. Two major chains dominate the market: 7-Eleven (711 outlets) and Circle K (238 outlets). They are targeting the customer age group of 15-35. Convenience stores are characterized by round-the clock operation. Since only a limited choice of brand names is available and prices are generally less competitive, most purchases are “convenience” in nature, i.e. goods are normally bought in small quantities for immediate consumption. Good sales items include packaged drinks, beer and snack food. The average store size of a convenience store is 1,000 sq. ft. Listing fees are also required for convenience stores. According to a study, Hong Kong can accommodate 1,200 convenience stores (, 2006). The primary strategy of convenience stores is to increase services providing "convenience" to consumers and to increase the number of stores so as to reach economies of scale. Despite faring below expectations, Hong Kong retail sales witnessed a strong growth in October 2006 as the Asian nation saw its retail sales jumping to US$ 2.3 Billion, up by 6.9% year-on-year, reports  on December 1 2006 (, 2006). Retail sales volume also increased by 5.2 % compared to last year (, 2006). Current consumer boom boosted by increasing wages, lower lending rates & recent boom in stock market has been the mainstay of Hong Kong retail industry & the current scenario suggests that the consumption is likely to remain stable in near future.   7 Eleven Background Information 7-Eleven is an international franchisor, licensor, and operator of the largest chain of convenience store in eighteen countries including: Canada, United States, Mexico and Puerto Rico in the Americas; Norway, Sweden and Denmark in Europe; Taiwan (Republic of China), People’s Republic of China (China), Hong Kong, South Korea and Japan in East Asia; the Philippines, Thailand, Malaysia and Singapore in Southeast Asia; and also Turkey and Australia. The company was founded in Oak Cliff, Texas, USA, which is now part of Dallas, USA, in 1927, and started to use the 7-Eleven name in 1946; 7-Eleven purchased a chain of stores in 1964 called "Speedee-Mart", which initiated the company's entry into franchising. Supermarket chain Ito-Yokado, which operates 7-Eleven stores in Japan, purchased the majority interest of The Southland Corporation in 1991. In 1999, The Southland Corporation changed its name to 7-Eleven, Inc. Initially, these stores were open from 7 am to 11 pm, which was unprecedented at the time, hence the name; however, most 7-Eleven stores are now open twenty-four hours per day, seven days per week. 7-Eleven's most popular private label products include: Slurpee, a partially frozen carbonated and non-carbonated beverage, available in a number of flavors, and the Big Gulp super size sofdrink in 32, 44, 52(Xtreme Gulp), and 64 (American) fluid ounce sizes. In 2005, 7-Eleven introduced their largest soft drink product, the 128 fluid ounce (1gallon) Team Gulp. In November of 2005, Seven and I Holdings Co. completed the purchase of 7-Eleven, Inc., turning the American publicly traded conglomerate into a publicly traded Japanese conglomerate. Seven-Eleven Japan is itself a subsidiary of Seven & I Holdings, which also owns the Japanese Denny’s chain of restaurants and Ito-Yokado. In Hong Kong, 7-Eleven is operated by Dairy Farm since 1981. There are over 600 stores in the city in 2005. About half of them are franchised stores. In September 2004, Dairy Farm acquired Daily Stop, a convenience store chain located mainly in the territory's MTR and KCR stations, and converted the Daily Stop stores to 7-Elevens in the spring of 2005. 7-Eleven in Hong Kong offers items such as food and drink, magazines, medicines, CDs, and MP3 songs. Extra services include the sale of postage stamps, recharging Octopus Cards, and ATM machines found within the store premises. The company opened its 711th Hong Kong store July 11 (7-Eleven Day), 2006 in the Causeway Bay district of the city (). With most locations being in urbanized areas, approximately 40 percent are franchised stores. 7-Eleven in Hong Kong offers items such as food, beverages, newspapers, magazines, medicine and cigarettes. Sandwiches, pizza, microwaveable Dim Sum, meal boxes and other Chinese-style snacks are available for purchases. The Hong Kong 7-eleven 24-hour convenience store was launched in Hong Kong in 1981 and was acquired by Dairy Farm Group in 1989.  Having a long presence in the market and a well-known brand both internationally and locally, 7-eleven has customers from all walks of life and serving some 15 million customers per month. 7-Eleven, operated on a franchise basis, is able to expand the number of stores quickly. 7-Eleven is owned by Dairy Farm, which is also the parent company of the giant supermarket chain of Wellcome. Many of 7-Eleven stores are strategically located in MTR (subway) and KCR (train) stations, popular shopping malls and housing developments throughout Hong Kong.     Competitor Analysis             7-Eleven is currently have various competitions which includes superstores, hypermarkets, convenience stores and even traditional markets. However, the biggest competitor of 7-Eleven today are Circle K convenience stores, ParknShop and Wellcome. Currently, in Hong Kong there are already more than 600 supermarkets and convenience stores. ParknShop opened its first superstore in 1996 with a floor area of 45,000 sq. ft. Presently, its largest supermarket in Hong Kong has a floor area of 72,000 sq. ft. giving customers a modern one-stop shopping solution. The store sells over 20,000 product categories ranging from snacks to electrical household appliances. The ParknShop supermarket chain carries two own-label product lines, namely PARKnSHOP and Best Buy, first introduced in 1995. ParknShop is also associated with three other supermarkets by the name of Great, Taste, and Gourmet. These high-end supermarkets are after the more affluent clientele. They are ideal outlets for innovative, quality and priced international food products. These stores also carry a wide selection of organic products. Great adopts a stylish international food hall concept and its flagship store offers over 46,000 gourmet items. The first 35,000 square feet TASTE food galleria was opened in November 2004, and features more than 25,000 quality food items sourced from around the world. Gourmet, opened in 2005, occupied 15,000-square-foot store offering a selection of over 20,000 products carried across 30 merchandise categories of quality and premium foods. The average expenditure per customer for Gourmet and Taste is expected to be $18 and $13 respectively. In addition Wellcome also is a competitor of 7-Eleven which is also is owned of Dairy Farm. Wellcome, will also be opening an upscale supermarket in Hong Kong’s central commercial area catering to the more affluent clientele. The new store called Three Sixty will be opened in mid November. With a floor area of 23,000 square feet, it will be Hong Kong’s largest retail outlet for organic and natural products. About 6,000 items or 70 percent of the items in the store will be organic or natural products. The store will include an organic sector for baby products. “Health” and “natural” are the key concepts of this store.     Name of Retailer   Ownership   Food Sales US$   No. of Outlets   Location   Type of Purchasing agent   Wellcome   Hong Kong   over $1 billion   261, 27 of which are superstores   Hong Kong   Importers/Agents Exporters Consolidators   ParknShop   Hong Kong   over $1 billion   215, 45 of which are superstores*   Hong Kong   Importers/Agents Exporters Consolidators Source:  (2006)   ParknShop and Wellcome account for almost 80 percent of the supermarket turnover. Both supermarkets are able to work closely with real estate developers to open stores in strategic locations, thus maintaining their significant market share.  Because of their significant market share, they are able to make suppliers offer goods to them at very competitive prices, so that they are able to set retail prices lower than their competitors’.  Consequently, it is difficult for small competitors to survive and new players to enter into the market. Moreover, a new development in 2003 is that ParknShop expanded into 24-hour convenience store operations.  The supermarket giant has opened a number of stores under the name ParknShop Express on a trial scheme and may expand the network across Hong Kong if the experiment succeeds.  Currently, there are about ten Express stores.  ParknShop has intrinsic competitive advantages over its rivals because it can use the leverage of the group’s existing infrastructure to offer products at low prices.  The stores carry the products as other convenience stores such as cooked food, drinks, newspapers and magazines.  In a bid to lure customers, the 1,000 products offered by ParknShop Express are priced at the same level as those being sold at ParknShop.  This is in contrast to other convenience store operators charging at a premium of up to 15 per cent from those selling at supermarkets.  In the convenience store, Circle K is the a competitor of 7-Eleven. Circle K is continuing to expand. A Circle K representative revealed that average purchases per customer had dropped to HK$10.62 (U.S.$1.56) for the first three quarters of 2002, down 7% from a year ago (  , 2006). Retailer Name Ownership No. of Outlets Location Purchasing Agents Year Established Client’s Age Circle K Hong Kong 180 HK Importers Agents 1985 15-35 Source:  (2006)     SWOT Analysis Strengths             Majority of the goods that 7-Eleven Store are low prices sue to low cost of operations. Also, 7-Eleven is more convenient to customers. Consumers could avoid the long checkout lines, crowded parking lots, and traffic. There are many choices of shopping methods; browsing the aisles, using product search, and choosing from a shopping list customized from frequently bought products. They could shop 24/7 since the store is open for 24 hours in 7 days. The store also offers variety of selection from fresh to processed food and whatever shoppers would need.   Threats             However, despite the strengths, the store has also its weaknesses. One of which is inventory inefficiency in which they would experience stock outs. Moreover, with the presence of superstores, their current marketing strategies have been overshadowed. In addition, low performance of workers also has negative effect on the efficiency of the store.   Opportunities             7 Eleven has also some opportunities. With the problem of information dissemination, an opportunity to acquire new technology for more efficient operations can now be possible. Also, 7 Eleven has been already known by the people as a store open in 24 hours they have the advantage over it. In addition, the company also got the most strategic locations of their stores. Moreover, the company can still expand their business and open some more stores especially in China which got the opportunities of expansion with its large market.       Weaknesses             With the lax government regulations in trade, more international competitors are entering Hong Kong. Increase in competition is a great threat to 7 Eleven. Also, with the increasing high levels of educated people, consumers are now more skeptics and are more demanding. In addition, the traditional markets in which people can purchase fresh fruits and vegetables are still in its popularity in Hong Kong. Moreover, 7 Eleven has high employee turnover which is a sign of bad management.     IMPLEMENTATION             Since a convenience store is both a goods and service business, it is important that the workers have the ability to give the best service to customers and availability of goods is also important.             7 Eleven, despite market competition, is a market leader in Hong Kong today. However, with the continuous enter of international companies, it is important for 7 Eleven to maintain its leadership in the convenience store industry. Superstores are already emerging in the country which are mostly are also beginning to open 24 hours.             From the SWOT analysis, the company faces various problems that are needed to have a solution. It is recommended to concentrate on some areas. One of the areas that have a major impact on offering goods and service is the efficiency and effectiveness of the people doing the work.             One of the major objectives that the company should concentrate is the improvement of their workers. A strategic human resource development must be implemented within the company.             Human resource development (HRD) plays a vital function by maximizing employee expertise to achieve the main objectives of an organization. Human resource development (HRD) has served the needs of organizations to provide employees with up-to-date expertise. According to  and  (1994) Advances in HRD models and processes have kept pace with the increasingly sophisticated information and production technologies that continue to diffuse throughout our nation's most vital industries. During this period of rapid technological development, the HRD function could be relied upon to support a broad range of business initiatives that required a competent workforce. Critical business issues, from new marketing strategies to innovations in production technology, were based on, among other factors, the performance capabilities of those expected to use these new work systems. As a factor integral to business success, employee expertise itself has been expanded through effective programs of employee development. Expertise is defined as the optimal level at which a person is able and/or expected to perform within a specialized realm of human activity (, 1994). In short, the development of workplace expertise through HRD has been vital to optimal business performance. However, according to  and  (1994), today's business environment requires that HRD not only support the business strategies of organizations, but that it assumes a pivotal role in the shaping of business strategy. Business success increasingly hinges on an organization's ability to use employee expertise as a factor in the shaping of business strategy. As a primary means of sustaining an organization's competitive edge, HRD serves a strategic role by assuring the competence of employees to meet the organization's present performance demands. Along with meeting present organizational needs, HRD also serves a vital role in shaping strategy and enabling organizations to take full advantage of emergent business strategies. Both the strategy supporting and strategy shaping roles of HRD have distinctive features that are evident in the business practices of successful companies. The rationale for using HRD interventions to support business objectives is to enhance employee expertise through HRD increases the likelihood that business objectives will be achieved ( and , 1995; , 1994). For example, education and training used to support business objectives at Motorola is typical of the challenges and opportunities faced by many organizations in today's business environment. What Motorola discovered earlier than most organizations that began introducing new sophisticated technologies into the workplace was that their employees did not have the skills to make full use of the technologies (, 1994). Companies that compete in the fast-paced communications market where customers are particularly innovation-conscious must deliver high-quality, reliable products despite short product development cycles. Motorola sought production advantages through both the integration of new technology and the development of employee expertise. Motorola offers on- and off-site classroom education and training, laboratory training, and structured training in the workplace for employees at all levels of the organization. In addition to supporting Motorola's successful pursuit of its business objectives, many of its education and training initiatives serve as examples of best practices against which other organizations' HRD functions benchmark their performance. Thus, Motorola provides an early and influential example of HRD used to support business objectives. Training and other initiatives associated with total quality management have been critical in transforming marginal manufacturing plants into successful facilities (, 1994). HRD continues to be a primary vehicle for assuring mandated levels of employee competence and public safety in highly regulated sectors like the nuclear power industry (, 1994). In addition, HRD is moving beyond a role that is exclusively supportive of business strategy. Moreover, HRD is assuming a more influential role at the point of strategy formulation and is becoming one of the key determinants of business strategy.  and (1995) posit the argument that "Organizations in the new economy have come to realize that employee expertise is a vital and dynamic living treasure. The desire for employee expertise is meaningless unless an organization can develop it in ways that respond to the business needs." However, some Organizations have rushed to embrace information technology as a way to improve overall efficiency and reduce costs. Yet, it is not the information technology itself, but the way information technology is thoroughly integrated into major business processes, that represent the greatest opportunity for the successful transformation of outdated business processes (, 1993). However, those who have successfully used information technology to improve business performance will quickly point out that these advantages will not materialize without highly competent people to both implement and utilize these innovative work systems. The human capacity must exist to use information technology to maximize performance. Employee expertise is critical to an organization's ability to capitalize on the vast opportunities afforded by information technology. HRD is then in a strategic position to assure that the required expertise is available and effectively utilized. Organizations in market leadership positions realize sooner or later that human resources are ultimately the only business resource with the creativity and adaptive power to sustain and renew an organization's success despite changing market conditions (, 1993). The development of employee expertise provides a potentially inexhaustible source of ideas for further innovation and increased productivity because the most basic output of the highly competent employee knowledge is not used up in the process of producing it (, 1989). Investments in employee education and training increasingly fund the development of an infrastructure to support the sustainable competitive advantage that a highly-trained workforce provides. Developing employee expertise at all levels of the organization and using knowledge as a catalyst for growth and competitive advantage represents a major frontier in organizational performance that is only now beginning to be fully appreciated (, , , , and , 1994; , , and , 1995).             HRD serves a broad range of interests and outcomes in organizations. The primary purposes to be served by HRD can range from programs intended to meet the personal development needs of individuals such as identifying individual learning styles or personal financial planning to HRD programs necessary for everyone in the organization such as programs addressing a new performance appraisal method or role changes secondary to structural reorganization.             In addition, knowledge drives product innovation and employees are the carriers of that knowledge. As a vehicle for the continuous development of employee expertise, HRD is a crucial antecedent to successful business strategy. In these situations, HRD actively shapes strategy. In other business contexts, strategy may be based on providing reliable, high quality products in stable markets less affected by continuous innovation. Strategies for assuring reliable service and consistent quality, like those followed by food processors and electric companies, are supported by HRD after strategy has taken shape. Because their customers want quality and consistency, these companies rely on HRD to support the expertise needed to insure these outcomes.         PERFORMANCE IMPROVEMENT PLAN             In order for 7-Eleven convenience stores to maintain its leadership in the market of Hong Kong, an improvement plan should be conducted in the human resource development of the organization. The company should undergo a series of reorganizations. The company should work on downsizing. Performance-based development strategy is the appropriate strategy to use to increase the organization, the team and the individual to be more efficient and effective. It is a strategy that focuses obsessively on bridging the gap between anticipated and actual business results. The HRD should be the major driver in scoring their improvements. 7-Eleven should take an effort to fundamentally alter the way performance of the organization’s performance.             7-Eleven currently is the market leader in the convenience store over its close competitor which is the Circle K. To maintain this market rank, 7-Eleven should redefine the organization. In order to this, objectives are identified.   Objectives <li class="MsoNormal" style="text-align: justify; line-height: 200%"> To ensure that people across the organization understand its vision</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Create a work environment in which it is possible to pursue this vision</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Coach people on how to collaborate effectively within their own units and across business lines</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Improve the problem solving and decision making abilities of individuals and teams</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> To develop processes for streamlining operations, rebuilding teams and opening new lines of communication</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> To remove organizational barriers that hindered productivity and profitability</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> To increase trust between the people in the organization</li>   New Mission             7-Eleven convenience stores should decide on redefining the organization. To begin, middle- and upper-level managers should recruited for change teams responsible for designing and implementing a re-engineering process. Their objectives were formidable: to restructure the organization; to eliminate fragmented, inefficient and costly work processes through downsizing and other means; and to create an environment where managers could manage, not just perform transactions.             A comprehensive systematic analysis should be taken and accomplished to look not only at the mission of the organization but also the relationship of every individual in the organization. Evaluation on the goals and practices of the organization should also be undertaken. In addition, most importantly, evaluation efficiency, role clarity and value added of every individual in the organization should be undertaken.             With the emerging of more competitive environment in Hong Kong, 7-Eleven would require further development of the employees of the organization to attain the competencies necessary for the success of the business. The organization need to operate at the highest possible levels of effectiveness. HRD team plays a major role in managing the implementation of the re-engineering effort of the organization.             In order to attain these objectives and mission of the organization, a performance-based development strategy will be implemented.   The Performance-Based Development Strategy It is crucial for an organization to replace traditional, static developmental approach with a more flexible and dynamic responses (, 1991).  Some existing parts of the performance-based development model would be appropriated with some modules from other methodologies will be adapted (, 1991;  & , 1991; , 1991;  & , 1988). The strategy approach that will be develop will have an emphasis on improving individual, team and organizational effectiveness which would offer the most promising strategy for strengthening 7-Eleven short- and long-term competitive position. In addition, this approach will also yield a clear-cut measure of the impact of HRD performance on business results. Performance-based development begins by looking at a unit's business expectations and at its actual results. The job of the HRD business consultant will be to determine which factor or combination of factors (individual and organizational) is causing the gap between anticipated and actual business results. Through the development of a diagnostic process, the consultant will search and identify the root cause of a performance problem. Later in interactive consultation with the client, the HRD consultant will design customized developmental actions to eliminate the mutually acknowledged deficiencies and to improve results. HRD’s first task is to discover the source of a deficit or the root cause which is actually the most difficult and consequential task. Three computer-linked diagnostic tools that are designed and adapted are particularly useful to the HRD business consultant trying to ferret out the roots of a client's performance problem: <li class="MsoNormal" style="text-align: justify; line-height: 200%"> The "open organization profile" measures the current state of productivity. This tool takes the organization's mission, strategy, history, culture and goals into account. </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> The "team development assessment" uses questionnaires, surveys and interviews with individual contributors to assess team effectiveness. The evaluation focuses on the business's goals and purposes, its operations, how people interact and overall performance. </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> The behavior of individual employees is also studied in depth. This research provides a profile of what an employee should know in comparison to what the employee does know. </li> These tools and others support the performance-based development process will be used by HRD in every intervention. The process will normally take the following courses:   Research Numerous diagnostic tools which include personal interviews, surveys, questionnaires and on-site observation will be used to have a detailed and comprehensive picture of the organization. The main objective of the diagnostic tools is to specify business needs and understand the nature of the current difficulty. Having conversation with the people at every level and observing intra and interdepartmental transactions will also be conducted.   Analysis and Feedback Once the data is compiled, the information will be stored in computer-based systems where HRD will have immediate access to and can analyze abundant data quickly. This analysis will enable to determine the strengths and weaknesses of an individual, a team or an organization and to identify the factors inhibiting performance. The finding will be reviewed in group settings for organization development and in consultative sessions for individual development. Data will be shared to come to a conclusion of what the performance problem. In this way, the root cause of the performance gap would be fully understood by the organization and the individual.  Action After data are collected and performance gap has already been identified and understand by the organization and the individual, implementation of action program will commence which would be intended to counteract the problems hindering performance. With full commitment of the organization with the program, it would be easier for the improvement plan to be conducted and implemented.      Execution of the Plan             The execution of the plan is intended for the improvement of the performance of the organization, team and individual. Mainly, HRD’s responsibilities are to improve organizational effectiveness, to create agile, high-performing teams, and to increase the skill levels of individuals to meet business objectives.   The Organization The development of organizational effectiveness will relatively take a long range process for any organization and particularly with 7-Eleven. It intends to improve a business unit's ability to solve problems and to adjust to changing conditions. Such organizational development activities will be designed to contribute to 7-Eleven operations and management in several ways: Ø      To assist business leaders in defining a strategic direction that will result in improved business focus and increased profitability. Ø      To streamline workflow processes within and between functions to yield greater efficiencies. Ø      To create results-focused teams. Ø      To improve organizational problem solving processes. Ø      To increase the organization's ability to adapt to change.   One tool that will be used extensively in our organizational development is the Open Organization Profile (, , , , 1993). An automated instrument, it asks respondents to rank themselves, their team members and others in their unit in three categories: alignment with the business goals; their ability to respond to internal forces; and their ability to react to the marketplace and other external challenges. It provides an accurate measure of the degree of cooperation and effectiveness in a business unit.   The Team Increasingly, teams are handling key jobs in 7-Eleven dynamic business of convenience stores. Having numerous branches of the stores around Hong Kong, different teams handle its own store problems and decision making. The team’s effectiveness will be measure in the following conditions:   Ø      The business leader must show a strong commitment to the team's work. Ø      All team members must share a common understanding of and a commitment to the team's purpose and goals. Ø       Individual team members must bring the proper mix of skills to their work. Ø      The processes that enhance interaction and communications must be in place.   HRD will be creating a Team Development Process that systematically assesses a team's effectiveness against these criteria and produces training programs to address specific deficiencies. A number of assessment tools will be developed and adapted to evaluate teams and their characteristics depending on the objectives of the particular team.   The Individual The approach to individual development will concentrate on the core competencies that are integral to effective job performance in 7-Eleven.  Six categories of knowledge have been identified that constitute the basic core of learning required of people throughout the organization. Depending on the requirements of their specific jobs, employees must have varying levels of knowledge of these categories: Ø      The company's products Ø      Finance Ø      The convenience store system, from network operations to legislative issues Ø      The operations of sales and service Ø      The electronic database systems used throughout the company Ø       Leadership and management   HRD will used as assessment tool which is the Individual Contributor Competency Assessment Profile, which will evaluate an individual's command of these core competencies. Other professional capabilities are measured by this tool as well, including skills in planning, problem solving, communicating, influencing others and innovating. Furthermore, the Profile assesses job proficiency, the quality of work produced, the degree of customer focus, adaptability to change, willingness to assume accountability, and teamwork skills. The competency assessment will give a 360-degree profile of the job holder. It includes a self-assessment as well as evaluations by the individual's manager, co-workers and subordinates. The data is compared to a profile developed for the particular position which specifies the attributes and skills needed to perform optimally in the job. Most important, this assessment serves as the foundation for a customized action plan to deal with the employee's unique developmental needs. Performance-based development for individuals will integrate classroom training, self-study and computer-based instruction. It will be built around the core business interests of 7-Eleven which include product knowledge, sales, customer service and the service delivery system. To help ensure cost-effective delivery of core training, employees will have access to these programs through their desktop computers.     Future Performance Targets Like many other large organizations, 7-Eleven is facing a future with the prospects of periodic, if not continual, cost-cutting and downsizing. This sobering reality often translates into intense pressures to come up with fast answers and quick fixes. Consequently, HRD's toughest challenge in moving forward in re-engineering journey will be to sustain and leverage significant practice changes and gain that will be made. However, this will be done demonstrating the value of performance-based development strategy, showing how it supports the goals of the business and contributes to the bottom line. HRD will maximize awareness and build buy-in of performance-based development across the organization. Especially in a climate of caution and retrenchment, we must aggressively market the efficiencies, the rigor and the discipline that this powerful strategy can bring to the business However, the work of HRD does not end with the diagnosis, design and delivery of appropriate development activities. Crucial to HRD's performance-based approach are systems that track the impact of development activity on business results ( and , 1982).                   CONCLUSION To maintain the top-performing competitor of 7-Eleven in the industry, everyone on staff needed to understand the business goals and objectives. The organization need to create a work environment where everyone worked together to support the business and take ownership for its performance. The human resources development approach will give the organization the tools to address issues of non-performance, to isolate deficiencies and to identify the steps needed to improve results." Today, a systematic process is in place to identify and eliminate any performance problem. The foremost responsibility of HRD consultants is to pay close attention to the client's bottom line while analyzing why the business isn't achieving the results it wants. Clearly, the failure to achieve desired business results can stem from many causes: a key manager may be ineffective; a cross-functional team may not be operating productively; employees may not be well-versed in a new product or service; or an organizational obstacle may exist. It generally takes the HRD team a week or two to compile and interpret diagnostic data, which is used to pinpoint the source of the business' performance problem. Next, these findings are communicated to the client, along with a recommended course of action. HRD also prepares a cost-benefit analysis showing how the benefits of the solution outweigh the costs of the proposed action plan. If the business accepts HRD's recommendations, a consultant maps out appropriate training and organizational development activities. The tools, tactics, processes and strategy that will be adapted and adopted have been customized to fit the organization's needs. HRD in the organization plays a vital role in the success of its business. HRD needed to be obsessive about linking individual and organization development to the bottom-line, making sure that you deliver exactly what the business needs and what it wants. It is important to examine the successful models and practices that now exist then adapt them to fit your organization's particular conditions. Emphasizing the competencies of the development staff is also vital to build credibility for the business unit. In addition, it is important to use a development approach that is performance-based, not activity-oriented and focusing on effective management, not the volume of transactions.                         REFERNCES

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EXECUTIVE SUMMARY Human resource development (HRD) plays a vital function by maximizing employee expertise to achieve the m...