Research Korner

Cost and Management Accounting

Question 1  ABC drove costing very deeply into the organization by identifying the actual costs of labor, equipment, and premises associated with each activity performed by the firm rather than relying on arbitrary formulas to allocate overhead. Activity-based profitability analysis is a granular form of costing. It identifies the actual costs of labor, materials, equipment, and premises needed to deliver a product, serve the customer, and sustain the business. ABC practitioners believe that making costs known creates opportunities for savings even though ABC methodology alone does not identify savings targets. Two advantages are claimed for ABC compared to conventional costing methods. First, ABC makes all costs explicit, reducing distortions caused by arbitrary allocations of overhead to products and customers (2002).    Second, ABC traces costs back to the economic events that cause them, making it possible to judge the reasonableness of costs in light of these events. Activity-based costing is less useful when costing decisions are made without objective information about their consequences (2002). Activity based costing is good for WallDecor because it makes cost specific and more understandable to the company. ABC provided assistance in helping the company determine what composes its cost and whether such cost is acceptable to the company or not.  ABC is also good for the company because it can help in ascertaining whether the expenses and costs acquired by the company are acceptable or worth it. Question 2 A predetermined or estimated overhead rate is preferred over an actual overhead rate because timing the actual rate is not determinable in time to quote customer prices. Another reason is Inaccuracy wherein the wide fluctuations in the actual expenditures for overhead would cause commensurate fluctuations in the actual rate.  Even an annual period may have some shortcomings as a base for calculating overhead rates. Economic cycles have the effect of causing sales and production to be lower than normal for two or three years and then swing into a high cycle. Using one annual period may result in a predetermined rate that is either higher or lower than normal (1993).   Manufacturing companies may have numerous production plants the sites of that are determined by the location of raw materials, by the market destination or by other economic factors. Each plant has production costs that include factory overhead. In some small plants that perform only a few major operations, it may be expedient to develop an overhead rate based on one activity base, such as direct labor cost (1993).For the first activity the activity based overhead rate is $22,000. For the second activity the overhead rate is $51,000. For the third activity the overhead rate is 35,000. For the fourth activity the overhead rate is $59,000. The overhead rate was computed by adding the steel framed no matting with the items on wood framed with matting. The focus of the computation was on the different activities. For the different activities the same computation is done to arrive at the overhead cost. Question 3 The cost of a product influences channel structure directly. The unit cost of a forklift truck is high and may be considered investment spending. These types of products are used over and over again for many years. Financing the purchase may be a deciding factor in influencing when to buy and what brand to buy. Major equipment products, such as forklifts, are generally sold by exclusive retailers for specific brands or by company branch retailers. Because of the high purchase price, the direct incentives offered by the manufacturer to the user are of considerable importance (1992). In some instances, special options are offered and must be specified to the manufacturer in advance of product delivery. These market characteristics require a short line of communications, no storage or warehousing for wholesale distribution, and frequent involvement by the manufacturer with its retailers (1992).    There may also be periodic service or parts required to support the marketing channel structure. In this situation, the manufacturer is both the product source and the wholesaler. Products that cost only a few dollars, consumable supplies, and maintenance items may be purchased on impulse or with little thought concerning best-buy shopping, credit, or the service factor (1992). There are different costs for the various products pertaining to the company. The product cost of Lance Armstrong’s unframed print is $960.0000. The product cost for John Elway‘s print in steel frame is $240,000. The product cost for Lambau field print in wood frame is $140,000.  Question 4 The complexity of the overhead allocation problem can create difficulties for the analyst trying to decipher the mysteries of pricing structure from an arm's-length relationship with the supplier. Trying to emulate, decipher, and otherwise comprehend on the basis of limited information leads only to frustration. The approach to be taken is one of indifference about how many overhead accounts the supplier has or what they are (1992). That is the supplier's business. The analyst concerns himself only with the amount of money or percentage of price accounted for by overhead. Other methods can be used in overhead allocation such as allocation on the basis of machine hours of operation, allocation on the basis of labor and material, and allocation on floor space. The method is not the key element. The key is the magnitude of the overhead (1992).   ABC provided a clearer statement of what composes the product cost thus when it is computed the result was lower rates of overhead costs. The ABC system provided a better chance for the company to reanalyze its focus and financial goals. For the company this means that the use of ABC system can help it lessens the financial worries of the company thus the company can have more chance to try to analyze their goals and achieve the new perceived goal. Another implication for the company is it can make use of such information to create a better image for itself. This will help the company’s desire for a better standing in its competitive environment. Question 5 The cost of website allocation was divided into two categories so that easier analysis and anticipation can be done on what the website will compose. It also will make the task of determining what type of information from the two categories will prove vital for the company. By dividing the cost of the website into two categories the company can determine which category will create more cost and what category may prove inapplicable to the website. Allocating the website cost based from the number of prints will provide information on how the number of print information will be used in the website and what are the cost for putting this kind of information.   Question 6 By splitting the cost between two categories, it would be easier for the company to determine what aspects of the website would give them more cost. The company can know what will give them additional cost. By splitting the cost between two categories the company would easily determine what information is important and if such information is worth the cause. One the other hand splitting the cost between two categories would make the company have difficulty in determining what data would be appropriate for a certain category thus the company gains more cost. Another negative effect of having two categories instead of three is additional cost in segregating the different data into each category. The company can incur more costs on time constraints and other related information. Question 7 Cost drivers are the causal factors in cost. It is important to know what the cost drivers are because controlling the drivers allows a company to control cost. Traditional cost accounting systems, which evolved in the early part of the century, tended to assume that volume of production was the only cost driver. Volume of production in a one-product firm could be measured by units of production. If more than one product were produced, direct labor hours or direct labor dollars were used as proxies for the number of units ( 1993). When firms were highly labor-intensive, this simple assumption about cost drivers did not significantly distort product costs. The major costs involved in production were materials and labor, both of which could be traced directly to the units. If overhead expenses were applied to production by number of units or by a labor base, there was little to cause distortion (1993). The operating capacity used as a cost driver provides a better description of what will compose the cost category of the company. It can determine whether or not the company has achieved more cost or is having a negative operating capacity.   Question 8a Those included in the unframed prints are $80,000 for picking prints, $80,000 for inventory selection and management and 100,000 for website optimization. Those included in the steel framed prints are $15,000 for the picking prints, $ 30,000 for the inventory selection and management and $16,000 for website optimization. Those included in the wood framed prints are $7,000 for picking prints, $21,000 for inventory selection and management and 9,000 for website optimization.    Question 8b The total amount of overhead allocated was 13.44.      The total amount of overhead allocated was computed through adding the different overhead allocations of Lance Armstrong, John Elway and Lambeau Field. The total overhead of $375,200 was not included because the said amount did not support in providing information for sales estimate. For the company this means that it should double its allocation so that it can have better competitive chances.         Appendix Computations for questions 2 and 3 Question 2   Steel Framed Printing Wood Framed Printing Overhead Cost Activity 1 15,000 +7,000= 22,000 Activity 2 30,000 +21,000= 51,000 Activity 3 16,000 +19,000= 35,000 Activity 4 32,000 +27,000= 59,000   Question 3 Product cost of Lance Armstrong Unframed Print   Activity of Picking Prints (80,000) * base cost of print ($12) = $960,000   Product cost of John Elway print in steel frame   Activity of Picking Prints (15,000) * base cost of print ($16) = $240,000   Product Cost of Lambeau Field print in wood frame Activity of Picking Prints (7,000) * base cost of print ($20) = $140,000

Cost and Management Accounting

Question 1 ABC drove costing very deeply into the organization by identifying the actual costs of labor, equipment, and premises assoc...

Outsourcing as a Globalization Strategy

Outsourcing as a Globalization Strategy   Introduction A lot of factors have influenced the ever-increasing pressures that resulted to intense competition in the global manufacturing industry. New trends in the business operations strategies, more interactive business relations among different market players as well as the customers’ increased involvement in maintaining the quality of products and services continue to demand efficient and productive measures among contract manufacturers and service providers. The business, in order to effectively execute any business strategy or plan, should be able to determine first and identify the resources that are available in the company (, 2002). Studying and examining the opportunities of the available resources will help in constructing a business plan which will be profitable. The characteristics of the business should be clearly laid out and the ideas that will be made available should be thoroughly researched (2002). This will provide relevant information that the general management can utilise so as to be able to allocate the funds of the company in the most effective way. If the company knows the nature of the business, the further steps in formulating strategic business plan will be easier. Manufacturing companies were able to answer and meet the specifications of their customer base by utilising the current technological advancements in the past decades. Innovations in computer features, networking strategies, and telecommunication products facilitated business organisations to invest on market researches, company development, and effective re-engineering measures to create quality products and provide efficient services. As a result, outsourcing strategies have been widely accepted in order to reduce expenses, improve productivity, operations management, and delivery, and concentrate on upgrading the company’s technological expertise. The role of Contract Manufacturers (CM) in providing the needs of partner organizations have resulted to more sophisticated electronics parts that improved the quality of electronic products that are made available in the market. Their different designs and distributions services enable improvements among industries that practice outsourcing in delivering the demands of the consumer population. As such, maintaining the success of outsourcing entails continuous dedication in developing efficient and effective delivery options and business relations through proactive as well as improved information, operations, and supply chain management initiatives.     In this paper, it is interesting to know how big business organizations which depend highly on efficient delivery and distribution procedures gain their success in the competitive market environment by examining the strategic implications of outsourcing as well as the benefits and costs of such business strategy.   Strategic Implications In the traditional supply chain management used by business organisations, a lot of people, time and money are invested upon to ensure that the demands of the consumers will be handled in the specified date and time required (, 2002). Before being able to place an order of shipment of products and even services, several transactions are consulted between the product supplier or the service provider to meet the demands of the consumers and clients. The supply flow normally includes the intention of order, quotation, confirmation, delivery, payment and handling of receipts (, 2001). Normally, great amount of time is consumed in the mere planning of the purchase orders of a particular business company. And since most of the time the transactions involve not only a single client or customer, especially in the case of huge product and service providers, business establishments need to deal with sub-suppliers with several forwarders from which a number of consolidations are exchanged (, 2001). As such the workload and time that the inventory managers handle defines the proceeding business processes that follow and thus, predict and maintain the success and profit of the whole business organisation. In this regard, Supply Chain Management (SCM) has become a key strategic initiative for companies to improving service and reducing costs in order to remain competitive in today’s global economy (, 1998). SCM is business strategy focusing on the quick response to ever-changing market needs and shortened purchasing lead time, also adds value to increasingly demanding customers at the least cost and time (2002). Today, we cannot rely on a single party to fulfill the sophisticated needs of customers; we need a total commitment and full collaboration, integration and synchronisation among all business partners (1999). The Model of Continuous Improvement offers a lead on how to manage a business enterprise especially those operating in the international business environment. It highlights the relationship between the tools or resources of a particular business organisation with the people working in the company and the systems that that the company employ in processing their transactions. The concept of culture, communication and commitment is given importance in overall and continuous improvement of a business firm (, 2004). These concepts should be inculcated and learned by the members of the company so as to ensure that the business will run smoothly to improve the business organisation in the midst of industrial change. Almost all industries have been undergoing continuous explosion in products, technologies and dynamic customer requirements. This fierce global competition has resulted in the decision by many OEMs to outsource manufacturing in order to concentrate on R&D, marketing, and sales. Since the Industrial Revolution, companies have grappled with how they can exploit their competitive advantage to increase their markets and their profits (1996). In the 1950s and 1960s, the rallying cry was diversification to broaden corporate bases and take advantage of economies of scale. By diversifying, companies expected to protect profits, even though expansion required multiple layers of management. Subsequently, organisations attempting to compete globally in the 1970s and 1980s were handicapped by a lack of agility that resulted from bloated management structures (1996). However, most organisations were not totally self sufficient; they outsourced those functions for which they had no competency internally. Publishers, for example, have often purchased composition, printing, and fulfillment services. The use of external suppliers for these essential but ancillary services might be termed the baseline stage in the evolution of outsourcing. The main business purpose for outsourcing is to enhance the value of an organization’s offerings to its customers. (1996) calls this “smart” outsourcing, which indicates a careful selection of functions to be outsourced based on strategic decisions.  (2001) presented a study evaluating the implications of 50 supplier-manufacturer relationships in the area of product development. There were three new product development projects which were utilised for the analysis of the inter-organisational relationships. The contributions of both parties were analysed focusing on the products’ (a) design scope or the types of problem-solving activities used, as well as the (b) level of task interdependency or effects of the interaction between the manufacturer and the supplier to the product innovation practices. The results of the study indicated that the success of their relationship is highly dictated by the distribution of tasks and the type of problem-solving approaches as well as their continuous coordination during the entire project. It was emphasised that resolving the differences between the suppliers and the manufacturers likewise contributed to the positive performance outcomes of the relationships through the exchange of efficient short-term business strategies and long-term dedication to learning enhancement. Meanwhile, (1999) conducted a study on international procurement focusing on the significance of technological uncertainty in developing supplier assurances and structuring supply relationships in the Pacific Rim global organisations. The findings of their study indicated that mutual commitment to business relationship among suppliers and manufacturers/buyers can lead to increased level of mutual dependence of both partners. Moreover, since the relationship-specific investments among suppliers are reciprocated by buyers through shared information, learning and market adaptation are enhanced. As such, uncertainty contributes to the generated gains and advantages on the supplier side through cooperation so as to provide flexible, continuous and stable business relationship assurances. They learned that suppliers adapt demand-stabilising strategies to establish business relations as a result of technological uncertainty among manufacturers/buyers while dependence-balancing strategies are reinforced in high competitive market industry. In relation to this, , (2002) looked into the relationship of environmental volatility with opportunism in cross-cultural interfirm relations. They highlighted the importance of cultural sensitivity in cultivating commitment which is relevant in establishing cross-border business relationships. They identified and examined the driving forces of upholding commitment in the international business operations as well as its implications and influences to the business’ performance in a year’s time. In this regard, companies employ detailed business plans and strategies in order to gain several benefits from its competitors such as increased profits and enhanced customer relations as company objectives. The application of strategies directed towards the achievement of these objectives naturally requires the allocation of financial resources. However, while the company is capable of providing a budget, the outcomes should be able to recover these allocations in order to prevent capital losses. Thus, the company should employ strategies and create objectives that are compatible to the capacity of the company and what it intends to achieve. In the electronics industry, increased market competition identifies continuous adjustment and improvement in the production lines, outsourcing and supply chain management of companies. Interdependence and participation of suppliers and manufacturers in product design, innovation, as well as research and development characterise the current international business environment resulting to market volatility (, 2001;, 2002; 2003). In response to the increasing price pressure and competition due to market volatility, original equipment manufacturers (OEMs) turned to outsourcing practices to electronic manufacturing service (EMS) providers (2004) as contract manufacturing grew offering design, assembly, and test services (, 2001). The high cost of acquiring leading-edge, technology-based equipment and an accompanying highly skilled research and labor force makes contract manufacturing a highly attractive alternative for many companies (, 1998;, 2004). These organisations usually share proprietary corporate data with external suppliers and partners while ensuring maximum security to enhance efficiency across the product lifecycle by streamlining procurement, production, fulfillment, and distribution processes (, 2001;, 2002; 2003) which requires integration of applications and data across multiple geographically dispersed supply chain partners, as well as internal integration with legacy systems (2002; 2003). This trend is the result of OEMs focusing on their own core competencies such as research and development (R&D), or marketing (, 2002) while outsourcing manufacturing to EMS providers who can perform and deliver the service better, cheaper and faster (, 2000;, 2002). The commissioned research activity by (International) Ltd,   Hong Kong Ltd and Ltd (2004) regarding the initiatives of electronics companies in Hong Kong to shift from being OEM to ODM investigated the use of knowledge management tools that enhance electronics manufacturers’ product design capabilities and speed up ODM developments. The research activity found out that (1) pro-active selling and higher profit margins are major driving forces for developing ODM business; (2) marketing knowledge and intuition were critical success factors when shifting from OEM to ODM; (3) difficulty of identifying market need was the major barrier for company transform from OEM to ODM; (4) there is no absolute single roadmap that leads to ODM; (5) project-based product development team structure is most common; and (6) most innovations were generated from customers’ or suppliers’ ideas. According to (2002.) electronics manufacturing services (EMS) providers are facing the dual challenges of industry consolidation and the lingering effects of economic recession worsened by the impact of ecommerce regarding both supplier selection and supplier customer interface. As larger original equipment manufacturers (OEMs) expect top tier EMS providers to support manufacturing operation investments and ventures, mid-tier EMS companies who engaged in a follow-the-leaders strategy continuously struggle to find viable niches. As such, (2002) looked into the strengths, weaknesses, opportunities and threats (s) in current EMS-OEM relationship trends and made recommendations for effective strategies to maintain and grow customer relationships among these industries. The recommendations cover the (a) impact of e-commerce trends in supplier selection and supplier-customer linkage, (b) potential areas of conflict in OEM needs/practices vs. limitations of the EMS business model, (c) impact of consolidation on customer retention, and (d) impact of geographic migration trends for high volume manufacturing on business practices for mid-tier and lower-tier EMS providers. The recommendations of the study focus on the strategies to retain and grow existing business while identifying new business opportunities aligned with effective core business models (2002). According to (2004), possible outsourcing sites are found all over the world. In Asia for instance, the Philippines and India have flourishing offshore capacities. Poland and Russia of the Eastern Europe also have thriving offshore components. In the American sector, South and Central regions also have strong outsourcing potentials. Of course, Mexico and Canada, as United States neighbors, offer outsourcing options for American companies. Typically, these countries are commonly known as near shore options as opposed to the far shore alternatives. While these countries have already made their mark on the outsourcing business, other countries are also opening its doors for the current trend. One of which is China. Recently, China has transpired into the competitive business environment based on its extraordinary development rate. In software outsourcing for example, China is determined to enlarge its market in Southeast Asia, Japan, South Korea, Europe and America. While India is the present and undisputed leader in outsourcing, by 2006, China will become the next dominant business competitor. By that time, both India and China will be generating greater than US$27 billion each in revenue (, 2004). China is among the newest and biggest economies that had opened its doors towards the latest business trend when it comes to outsourcing capabilities. Based from gathered literature, China possesses several potentials that make it an attractive nation for outsourcing. Its huge population, enforcement of new legislations as well as enhancement of technical education had made China a potential outsourcing nation that even rivals India (2004). In fact several companies from the West like (, 2004), (2004), (, 2004) and (2004) have already outsourced its operations in China. However, like most business strategies, outsourcing tends to put clients at a disadvantage particularly due to the use of outside vendors (, 1998). In the Chinese setting, certain barriers in culture and language tend to make Western companies hesitant in partnering with Chinese businesses (, 2003;, 2004). In spite of these problems, benefits appear to outweigh the difficulties in outsourcing in China. Moreover, there are certain considerations to make Chinese outsourcing more rewarding. These include (a) rapid and sustained economic growth, (b) accession to WTO, (c) stable government and policy support, (d) investment in technical education, (d) growing manpower with skilled technologies, (e) improvement of basic facilities and infrastructure, (f) healthy internal environment, (g) remarkable reduction of development costs, (h) emerging middle class, (i) offshore manufacturing, (j) physical proximity to major markets and cultural similarities, and (k) international connections (, 2003;, 2004;, 2003)   Benefits and Costs Outsourcing manufacturing is one of vital business and supply chain strategies which are one way companies are revolutionising business operations to deliver better products faster at lowest cost possible (1998). It is a kind of supply chain collaboration model and strategic alliance approach, which allows the OEMs to concentrate on product development, sales and marketing (2003). It eventually helps business organisations to gain competitive advantage of increased product availability, reduced inventory; minimized total logistics cost and rapidly introduce their product to market without a significant investment in plans for capital equipment (, 2000). Normally, there are two types of outsourced services, technology and business process. Each can be inert partial to the subsequent areas. The first type of outsourcing is the technology services. This type covers the electronic commerce (e-commerce), infrastructure (networks), software (applications), telecommunications and website development and hosting. The second type of outsourcing is the business process outsourcing. Under this type of outsourcing are customer contacts (customer relations management), equipment, finance/accounting, human resources, logistics, procurement/supply chain management and security. There are many reasons for outsourcing in a company or an organisation. The most common reasons for outsourcing are the needs for expertise, that is due to lack of learning curve and re-creating; manpower, for having not enough staff; time requirements, because of the limited time available to accomplish the job; needed for economics, owing an overall cost savings; shifting of responsibility as for deniability; and removing of stumbling blocks in keeping the work for flowing. The Value Stream Mapping method (, 1985; 1991) used most significantly to reduce and decrease wastes in the production process among manufacturing companies is one of the many business processing outsourcing models that promise efficient and cost-effective production. This model is a visualisation tool which originated from the Toyota version of Manufacturing that aims to identify, demonstrate and decrease waste in the production process of manufacturing companies. Since waste does not add value to the final product produced, VSM provides measures to assist management, engineers, production associates, schedulers, suppliers, and customers in recognizing the root and causes of wastes. In effect, VSM serves as a communication tool as well as a strategic planning and change management tool among business organisations belonging to the manufacturing industry (, 1997). The VSM method maps the flow of materials and information from the raw material state of the product, all throughout the manufacturing process, until the shipment of the finished goods. Moreover, the VSM method visualises the current state of the manufacturing process activities by mapping out the cycle times, down times, in-process inventory, material moves, and information flow paths. The process include the physical mapping of the Current State (See Figure 1) as well as the Future State (see Figure 2) which serve as the foundation of further improvement strategies of the company. Among the commonly accepted wastes in the Toyota production system include (a) overproduction, (b) waiting, (c) transport, (d) inappropriate processing, (e) unnecessary inventory, (f) unnecessary motion, and (g) defects (1997).      According to (1996) in his review of the current literature, outsourcing is a trend that will continue. There are many benefits to outsourcing, including freeing up management resources, sharing costs, creating integrated networks, building new organisation structures, training staff, and interfacing with other information systems. Outsourcing offers a company functional specialisation and flexibility (1994). On the downside, some of the negatives include difficulties in maintaining confidentiality, retaining control, and confronting transition problems. The case studies pioneered by (2003) examined the codevelopments across a supply chain by highlighting the importance of researching good information as well as effective information management styles which directly affect the stipulation of chip production projects among semiconductor suppliers and manufacturers. The study discussed how they both were involved in setting the tradeoffs and boundaries in undertaking product development initiatives. The findings presented the profits and advantages to the manufacturers in deciding whether to “buy” or “make” the products particularly on the considerations made when they decide to “make” production modifications with the suppliers for codevelopment efforts. As such, manufacturers should opt for generally applicable modifications not just in their production line but also the extent of its application to the whole industry because it will lead to innovation due to increased supplier investment on follow-on knowledge creation for upgrades and field support, and will likewise decrease equipment costs (2003). Other considerations include intellectual property rights issues, prompt access and launch of the modified equipment, and increased production outputs. (2003) concluded the study by emphasising the importance of mutual knowledge accumulation between suppliers and manufacturers as well as its implications to long-term industry structure which contributed to the advent of contract manufacturing and outsourcing trends in the semiconductor industry. In this light, collaboration and synergy during codevelopment projects benefits the members of the supply chain and supports the short and long-term goals of the suppliers and the manufacturers (, 2003).     (2002) stated that there have three major outsourcing drivers: (a) economic - expense reductions, cost control and containment; (b) strategic - sharing risks, gaining access to new resources, achieving quicker time to market, as well as exploiting internet opportunities; and (c) technical - access to new technology; access to special expertise, coping with increasingly sophisticated risks and keeping up with the increasing complexity and speed of technology changes. (2000) reports that by using the outsourcing concept   has found that time to volume was cut by 25%, giving an additional $100 million US contribution to revenue, and on average, an iteration of the prototype phase is eliminated and the remaining four are shortened by more than a week. Moreover, electronic document packages, once manually assembled by engineers over one to two days can now be assembled automatically and directly by the EMS providers in a few minutes (, 2000). According to (2005), some OEMs are planning to take back portions of strategic sourcing responsibilities from EMS providers to regain control of sourcing strategic high-value components particularly the purchasing controls and functions and in effect, maximise the benefits of tighter supplier relationships. This is upon realisation that both OEMs and EMS providers are still handling strategic activities of sourcing decisions, as well as supplier relationship management., According to  , senior vice president of supply chain consultancy, “OEMs are losing their relationship with component suppliers” resulting to decreased levels of services and putting at risk necessary component allocations (, 2005).  (2003) investigated the role of relational norms in the governance of relationships between the US manufacturer and an independent distributor in the export market across four industry sectors in which the use of foreign distributors is the norm: (a) heavy equipment and machinery, (b) appliances, (c) medical equipment, and (d) electronics. The study claimed that the manufacturer’s use of relational norms to enhance its competitiveness in the export market examining both the direct and the indirect effects of relational norms. Moreover, the manufacturer’s use of relational norms is affected by (a) cultural distance, and (b) a manufacturer’s relative dependence on its foreign distributor. Finally, the study also provided information regarding the influence of hostility of the legal and institutional environment on the relative dependence of a manufacturer on its foreign distributor. The study particularly contributed to the understanding of governance structures in international distribution channels by considering relationships between organisations that operate in different cultural and legal/political environments and the uniqueness of relationship building in the international context in order to acquire competence in managing international channel partners (, 2003). However, in the past few years, the landscape of the EMS industry has been both competitive evolving from an assembly services industry to an end-to-end product service solutions industry (2004). The business relationship, and the overall supply chain networks between OEMs, EMS providers as well as the related business partners have become increasingly sophisticated and complex as characterised by complex supply chains which are integrated internally across different functions as well as externally with upstream suppliers and downstream customers (OEMs) (2000; 2001). Due to intense competitive pressures in the electronics industry, faster time-to-market, lower total manufacturing and logistic costs, effective communication, information sharing and better asset utilisation are requested so as to maintain the competitive power in the market (2000;, 2000;, 2000;, 2000). The decentralisation of manufacturing, fulfillment, and support operations creates a myriad of challenges in the OEM's newly outsourced supply chain network.     (, 1999) highlighted some of market challenges for EMS providers. These include (a) the demands on efficiency in product lifecycle information management () to strengthen their supply chain, critical during the product introduction as well as the end-of-life stages, (b) the consolidation and integration of the supply chain and reduction in the number of supply chain partners as a cost-cutting measure post-recession, and (c) ODM’s design capabilities, assembly, and manufacturing along with other services, blur demarcation between EMS and OEM (, 1999). As such EMS providers should have very wide view and exhaustive plans on setting up the supply chain strategies through the e-business models and IT support systems which are crucial to integrate diverse business partners and to guide the internal functions in the actualisation of the companies’ logistics goals and business strategies. Studies have been conducted in order to address the current challenges in the supplier-manufacturer relationship among OEMs and EMS providers.   Conclusion Indeed, making a business successful in a particular setting demands crucial and detailed studies and examination of the factors that will generate the best results that will serve the aims and objectives of the company. In this light, owners of big business organisations operating in a competitive business environment should be in constant look out with its competitors and the overall status and events in the industry. Taking advantage of the opportunities and intensifying the strengths while minimising the risks and weaknesses of a business firm greatly helps in predicting the success in business enterprise. Examination on the business strategies and plans in order to answer to the demands of clients and customers through efficient delivery of such needs will not only increase the profit of an organization but will likewise gain the trust and competence of the clients and business partners. Efficient management of delivery options in a particular company and looking into the problems encountered in operating the business may enhance the likelihood of a business corporation to attain its goals as enterprising organization. The need to improve manufacturing services entails high quality electronic products that can be delivered using efficient supply chain management principles applications. Implementation of efficient supply chain strategies is crucial in ensuring success in the industry by satisfying the needs of the customers to gain competitive advantage. In this regard, it is relevant that there should be an understanding of the specific roles of service providers, original manufacturers and distributors in the industry. Clarifications of how outsourcing strategies in the manufacturing industry can be designed to provide advantages to both business partners should be laid out objectively. Moreover the importance and significant functions of both the OEMs and the EMS providers are highlighted that enable them to meet the standards and demands of the consumer market. In order to provide better services contract manufacturers should be innovative in offering better product quality along with faster delivery system which could be availed cheaper compared to their competitors pricing. Adaptation of effective supply chain strategies and practices is one of the crucial factors for the successful implementation of outsourcing. They should be able to come up with plans and designs that will strategically position them in the highly competitive, diverse, and complex business environment that is experienced at present.   References:

Outsourcing as a Globalization Strategy

Outsourcing as a Globalization Strategy Introduction A lot of factors have influenced the ever-increasing pressures that resulted ...

Essay instructions on Individual Assignment 2 :It is often mentioned that learning at high school is more structured than learning in a university situation. Outline the similarities and differences between learning at high school and learning at universi

ESLA101 – 08B Individual Assignment 2 – Full Assignment 1   ASSIGNMENT TITLE It is often mentioned that learning at high school is more structured than learning in a university situation. Outline the similarities and differences between learning at high school and learning at university. ASSIGNMENT INSTRUCTIONS   On Wednesday, you will submit a full individual assignment to Moodle by 4pm as well as to the Faculty of Arts and Social Sciences Faculty Information Centre on the Ground Floor of J block by 4:30pm.    When finished, your assignment should be posted to Box 11 on Moodle, under your own name in the area entitled ‘INDIVIDUAL ASSIGNMENT 2 – COMPARISON/CONTRAST ASSIGNMENT’ BY 4pm.   You must submit to FIC an exact replica of the assignment that you submitted to Moodle and use as a cover sheet, the receipt that was emailed to you from Moodle when you submitted your assignment there.   There is a document that you need to be aware of, and download, that is important for you to use for this assignment.  You will find this on Moodle in, Individual Assignment 2 – Documents pack. It is the Check list for a full assignment, which is something that you can use to help you finally edit your assignment.     Please Note: There is no actual template for the assignment.  You should structure your assignment along the lines of the information contained on page 70 of your Course Notes.   EXTRA INFORMATION This assignment is not complex and you will have received your feedback on your Individual Report.  Make sure you read that feedback very carefully, as it is designed to help you with your final work.   There are no hard and fast rules for the number of body paragraphs in an assignment but for a comparison/contrast assignment, please make sure you either follow the mirror format or the free idea and that your paragraphs are in block format.  Do not mix the two.   Make sure that paragraphs are between 350-400 words long, and that each paragraph addresses one idea only.  Each idea or example within a body paragraph should be supported by quotations (on-line or paper) and appropriately referenced.  On this point, you need to be aware that assignments will be put through Turnitin to ensure that no plagiarism has taken place.   Ensure you pay attention to your in-text citations your list of references.  They should be in APA style.  I require a list of references for this assignment.   Pay attention to your grammatical constructions, punctuation and the style guidelines (See pages 71-78 of your notes).   The word limit for this assignment is 1, 500 words.   I will upload more files to you later. Please put the quotation of the references/sources that you used in the assignment. And you are required to finish this assignment of your own thinking and own ideas.       I had upload one example file of the format that u can look at it. And one is my individual assignment 1 as needed to be follow to complete this assignment 2. The paragraphs have to be compared and contrasted. For example: like the first paragraph is compared, the second is compared, and the third one should be contrast.   Also, you have to read all the files that I send you. To make sure you follow the right style.

Essay instructions on Individual Assignment 2 :It is often mentioned that learning at high school is more structured than learning in a university situation. Outline the similarities and differences between learning at high school and learning at universi

ESLA101 – 08B Individual Assignment 2 – Full Assignment 1 ASSIGNMENT TITLE It is often mentioned that learning at high school is ...

The factor affecting child labor on the academic performance of secondary school student in Nigeria

Child Labor Effecting Academic Performance in Nigeria   Poverty has truly taken its toll on the world society as a whole. It is the predominant trait of most developing countries in the contemporary world of today. Alongside the vast infrastructural advancements and financial booms in the world economy, many people live in poverty and starvation. Especially in developing countries, majority of its populations are composed the less fortunate without enough financial resources to fend for themselves, much less any resources to avail of common healthcare and general education. In the case of Nigeria, the society is so much riddled with the onslaught of poverty and hunger that people barely sufficiently pass by each day. Most families try to cope with the excess of poverty in their areas through the means of labor. Most of them are so much in poverty that even their children are forced to help their parents in providing for their daily needs. According to statistics, more than fifteen (15) million children in Nigeria who are below 14 fourteen years age are under employment. Most of them work to support their families and to be able to pay for their own schooling[1]. Studies have shown that over half of the 15 million working children are still under tutelage of the national public school system. Despite the cheapness and availability of the education, poverty has not allowed them to be able to attend their schooling effortlessly. They would still have to be able to provide for miscellaneous expenses such as school supplies, books and clothes to wear each day—uniform. On a different note, one would need to recognize the fact that almost half of these working children do not even attend school at all. Other findings show the veracity of the issue in the fact that almost about 7.8 million boys and 7.2 million girls who are working span the ages of 5 to 14. Most of the children fortunate enough were documented to have work in the part-time schedule in order to pay for their school expenses. Also, there are those children who end up not finishing their studies after all their efforts in order to fulfill the wish of their parents to quit school altogether so as to further expand the families’ financial resources. However, studies show that this may result to the students not being able to conform efficiently to the school’s schedule. The working students are mostly forced to skip classes because of the requirements to be fulfilled at work[2]. Moreover, some working students are also unable to participate in most of the activities of their school since when there is time that are seen by the students as not as important as everything else, they would choose to spend their days working instead of in school. Another facet of this issue is the fact that because of their work, not only their time is being sacrificed to produce financial resources at such a young age, but also their energies and effort. Most children who work already tend to lose their energy after a day’s work in wherever place they choose to work in. The fact that these children, through missing a lot of valuable holistic school time, are also missing the joys and innocence that life can afford at the singular time of childhood is truly depressing. One can even see the endless cycle with which these children are trapped into. These children often are pushed into labor because they want to be able to pay for matriculation fees and other miscellaneous expenses connected to studying. However, one may find it ironic that their efforts mostly prove to be more detrimental since they are, in their efforts, forced to sacrifice their valuable time and efforts because of their jobs. One hope that can be placed in their situation is the efforts made by concerned international organizations such as the International Labor Organization for arbitrating a change into the countries’ policies on child labor. The universal requirements for labor now include Nigeria in implementing a minimum age requirements for the eligibility of employment. One may only hope to save these children from labor at such young ages. For now, going to school may be their best of hope of actually rising from poverty.   References IRIN 2010, 15 million children work: mainly to pay for school, United Nations, Geneva Nigeria Country Programme 2005, Child labor: information sheet, UNICEF, Nigeria   [1] IRIN 2010, 15 million children work: mainly to pay for school, United Nations, Geneva [2] Nigeria Country Programme 2005, Child labor: information sheet, UNICEF, Nigeria

The factor affecting child labor on the academic performance of secondary school student in Nigeria

Child Labor Effecting Academic Performance in Nigeria Poverty has truly taken its toll on the world society as a whole. It is the pre...

KFC and McDonald’s in Shanghai

KFC and McDonald’s in Shanghai   Answer to Question # 1             From the case study, it can be observed that both KFC and McDonald’s serve to dominate the fast food business in Shanghai. Both fast food chains serve all their customers effectively, given the different categories and factors that determine the success of restaurants and fast food chains in Shanghai. However, based on the findings of the case study, it can be perceived that KFC is running a more successful business in Shanghai, compared to the business run by McDonald’s. This was given proof in the case study, based on the many and varied responses of customers to surveys, which involve their evaluation of both fast food restaurants, based on a number of factors, namely, food, service, environment, price, convenience, brand, and promotion.             In terms of food, although both fast food restaurants almost have the same varieties, certain differences can still be recognized. Both KFC and McDonald’s offer chicken and hamburger meals, including snacks, desserts, and drinks. However, only KFC offers a wide range of healthy side dishes, such as mashed potato, carrot muffin, and lotus fresh vegetable side dishes. In this sense, KFC aims to uphold healthy eating and nutrition of their customers. In addition, it has been emphasized in the case study that KFC appeared to have the upper hand over McDonald’s in terms of introducing new products in the market. Most of the new products of KFC, such as its breakfast items, suit the tastes of the Chinese. Such products are based on both Chinese and Western cuisines, including Mexican chicken rolls, spicy double-layer hamburgers, and New Orleans wings. KFC has also been introducing new products in the market in a regular rate, such as every two to three months, which is in contrast to the new production introduction rate of McDonald’s, which is often infrequent, and only mere variations in the sizes of hamburgers or the available components in set meals.             In terms of environment and service, although both fast food restaurants appeal to their market due to their convenient lighting, cleanliness, music, and decorations, still, KFC serves to have the upperhand over McDonald’s. Based on the survey made by the study, more customers are “Very Satisfied” with the services and environment of KFC over McDonald’s. This is because the waiting time in McDonald’s is too long, compared to KFC. In addition, it can also be perceived that KFC has more advantage than McDonald’s, as the employees in KFC have less time to interact with customers than its counterpart, as the volume of its business is larger.             The prices of food offered by both restaurants equally serve each other. However, the food offered by KFC is slightly higher, being able to offer some meals that are not offered by McDonald’s, such as the Family Bucket, Garden Chicken Burger Meal, and Hot & Spicy Wing Meal. Nevertheless, the volume of customers in all given times of day, in both weekdays and weekends is still higher in KFC than in McDonald’s. It has been indicated in the case study that the daily customer volume on weekdays for KFC is 3,549 and for McDonald’s is 2,191. On the other hand, the daily customer volume on weekends for KFC is 4,266 and 3,749 for McDonald’s. Given such figures, it can be perceived that more customers prefer KFC to McDonald’s, thus, indicative of the fact that KFC runs a more successful business than its counterpart does.             Moreover, the findings of the study indicate that more low income and high income customers prefer KFC to McDonald’s, while average income customers prefer McDonald’s more than KFC. In this sense, it can be observed that KFC has a wider range of customers compared to McDonald’s, thus, indicating that more customers patronizes KFC. Furthermore, for the finale, the proof that KFC is running a more successful business than McDonald’s is indicated in the survey ranking the performance of the Western Fast-Food Brands by Preference, and KFC ranked the first among the many brands listed. McDonald’s only ranked second. KFC Shanghai also ranked first in the Top Ten Catering Companies in China in 2002. In this regard, it can be distinguished that KFC outperforms McDonald’s in Shanghai.

KFC and McDonald’s in Shanghai

KFC and McDonald’s in Shanghai Answer to Question # 1 From the case study, it can be observed that both KFC and McDo...

Strategic Business Analysis of Proctor & Gamble

Strategic Business Analysis   Introduction             Procter and Gamble (P&G) is presently considered as one of the largest companies worldwide. Base on its 2003 company report, P&G markets nearly three hundred product brands. Whisper, Tide, Clairol, Downy, Pantene and Pampers are some of the world renowned brands marketed by the company. The success of P&G is not only evident by its wide product coverage but by the amount of its sales obtained from about a hundred and sixty nations. In addition, the company’s growth has also been made evident by its hundred and fifteen manufacturing plants scattered in eighty countries. The progress of the P&G is also attributable to its workforce, which is made up of more than ninety thousand employees. One of the keys to the company’s present success is the business strategies it has implemented over the years. One of the strategic changes which are remarkable in the industry is its launch of Organisation 2005. Primarily, the goal of this paper is to analyse the launch of Organisation 2005 within the industry. The paper will discuss the factors that trigger the initiation of Organisation 2005 using SWOT analysis. In addition, this case study analysis also aims to relate the Organisation 2005 with the eight managerial Tasks for strategy execution, a model which has been formulated by and his colleagues.   Task 1 SWOT ANALYSIS             It is a common fact that competition in the business world is very tough. Hence, the management of different organisation are trying to find the best way in order to be successful and achieve their organisational goal. For example, business, nowadays, have to cut cost to the bone by downsizing, outsourcing, offshore IT development and management.  The growth and success of an industry now depends on its ability to innovate to execute new business strategy effectively. Many organisations see that changing the business strategy must become a part of the core competency of every part of the organisation and its network of business partners (2003). It is noted that management adheres to different changes because of some factors. Like any other organisations or industries, Procter & Gamble has also been able to initiate change in their business strategy. In order to address the company’s problems due to the changes in the industry, P&G tried to develop a new strategy that will basically allow the company to have competitive advantage. The company also wanted a strategy that will improve its ordering and billing systems as well as quality of services for the consumers. This part of the paper provides insightful details regarding the organisational factors that drive or triggers them to initiate Organization 2005 strategy. The organisational factors will be analysed using SWOT (Strengths, weaknesses, market opportunities and threats. The strengths and weaknesses actually characterize the internal analysis of the company. Issues such as the reputation of the company, the type and quality of its product, manufacturing costs, the effectiveness of their sales team, profitability, innovativeness on research and development, market share and other issues of the company’s capabilities are recognized as strengths and weaknesses ( 1997).               Organisational Strengths             As mentioned, the main objective of P&G is to have a new business strategy that will enable them to sour growth in the mature market (2005). One of the organisational strengths that trigger the initiation of Organization 2005 is the ability of the management of P&G to develop a new strategy that will enable them to outgrow or compete with the emerging competitors and the ability of the management to identify the important aspects of the business to be changed.     In addition, strength of the company that triggers them to pursue Organization 2005 is the ability to anticipate stakeholders needs which can be done by restructuring the organisational structure. Furthermore, P&G is also known as a company with much ambition when it comes to outgrowing their rival companies, in this regard, their strengths that triggers or generates the initiation of Organization 2005 is the perseverance of its personnel and staff to enhance the marketing strategy of P&G in the global market. The company possesses a strong brand name in the industry that represents both value and quality. This strength emphasizes P&G capability to still attract customers even after the initiation Organization 2005.   Organisational Weakness             Although, P&G has their organisational strengths that trigger the initiation of Organization 2005, which involved changes in their business strategy, the company also encompasses some weaknesses. One of the weaknesses that can be attributed with P&G is the inability to sustain business strategy change because of some management issues and problems. Based on the case, Jager has not been able to sustain effectiveness in his initiation of Organization 2005, which affects the whole strategy execution. Furthermore, the inability of the management to anticipate cross-cultural conflicts and issues because of employee transfers can also be considered as a weakness for the company. While the internal side of the company represents its strings and weaknesses, the opportunities and threats on the other hand is external in nature. Opportunities may be recognized in rising markets, extending service networks, growing economies or capitalizing on the competitor’s flaws. Threats on the other hand, represents issues such as the introduction of new competitors, changing market trends, alliances formed by competitors as well as the transforming demographics. Both of these factors are interrelated with the company’s strengths and weaknesses. Opportunities may be used in the maximization of the company’s strengths. Though the company is already operating globally; however, the number of its international branches are only limited to a few countries. This then does not optimize the ability of the company to effectively operate internationally even with its Organization 2005 approach. In addition, as a diversified organisation, the strategy may affect the launch of Organization 2005, especially when the management have not been able to integrate the value of diversity with the new strategy.   Organisational Opportunities Because of the strategies that Procter & gamble has implemented throughout the years, the company has many opportunities ahead which can be considered as factors that triggers their initiation of Organization 2005.  One of the organizational opportunities that P&G possess is in terms of the growing interest of the management with technological facilities. The new business strategy (2005) requires the use of information technology, especially in acquiring and managing data. This interest on technology will enable P&G to meet its goal as it implements Organization 2005. The integration of the business units of P&G can also be considered as an opportunity for the implementation of the new strategy. Furthermore, the company has the resources to support the business strategy, which includes technological support for better marketing activities are which is included in the business strategy (2005). Forming strategic alliances, merging or taking over other local and global industries is also another possible opportunity for the company to strengthen its operations, overcome competitors and support its future success through its Organization 2005.   Threats             Even if Procter & gamble have various strengths to pursue Organization 2005, the company has also some threats which may affect its implementation. This includes the experience of P&G when it comes to having low sales throughout the 1990s. In addition, it has been mentioned in the case the Procter & gamble are experiencing product decline because of the existence of rival companies which have faster innovative abilities and effective management strategy.  As the company is starting to change the entire business strategy, other threats or conflicts may not be met even after its initiation of Organization 2005. The organisational strengths, weakness, opportunities and threats that has been mentioned above, can be considered as essential factors on determining the needs of initiating Organization 2005 within Procter & gamble. The strengths that have been mentioned in the above analysis can be said to be good factors that will help the company have a successful implementation for Organization 2005. On the other hand, the weaknesses that has emphasized can be noted to be a major obstacle for Procter & Gamble to pursue it their change management approach through the Organization 2005.             The opportunities serves as a guiding forces for Procter & Gamble to continuously believe on the benefits of pursuing Organization 2005 in spite of their weaknesses in some aspects, while the threats can also be considered as a guiding aspects to be given attention by the management of Procter & gamble to ensure that their initiation of Organization 2005 will guarantee success and will be able to meet their organizational objective of being the number one industry in household and healthcare and hygiene products.   Task 2: Eight Managerial Tasks             Perhaps, every organisation wants to initiate a management system and strategy that could maintain the organization’s capability, strength and competitiveness. Several trends such as globalisation and the advancement of information and communication technologies (ICT) have changed the way people run their lives and how businesses perform their services. These changes have made the competition tougher and business organisation should be able to find a way to cope to these changes in the market environment by enhancing or improving their organisational performance. The outstanding profitability performance of a growing number of firms is not accidental—these firms profit because they have built world-class management systems. This does not mean that there is anything mechanical or bureaucratic in the way they operate. Quite the opposite; these firms shape their processes and methods so that they work together for high performance. These firms perform well because they are designed to grow in profit, size and management capability. Their managers focus on the behaviors, strategies, processes and measures that must work together as a system to find and satisfy customers. Organizational change is an important aspect of business establishments and companies as this concept allows operational improvement. By means of organizational change, companies are able to adapt new technologies and implement more effective strategies. In turn, this results to increased profitability, higher market share, better internal and external customer relations, enhanced operations and other significant advantages. Generally, the beneficial outcomes brought about by organizational change direct businesses to growth and progress. Moreover, this helps companies overcome major challenges. In considering a strategic change, the management must also consider the aspect of strategy implementation. Strategy implementation has been heralded as the key to corporate strategic success. It has been said that in order to strategically implement an organisational change, it is essential that the management should consider the eight managerial tasks for strategy implementation (See Appendix 1) formulated by  (2005).  Using this model, the Procter & Gamble initiation of Organization 2005 will be assessed.             The eight managerial tasks include (1) allocating resources, (2) building a capable organization, (3) exercising strategic leadership, (4) shaping corporate culture to fit strategy, (5) tying rewards to achievement of key strategic targets, (6) installing support systems, (7) instituting best practices, and (8) establishing strategy supportive policies.   Allocating Resources             Resource allocation often confronts organizations whether public or private inn which decision-makers are challenged to choose the most appropriate means of obtaining success. The most common resource that organization managers attend includes the company’s assets in the form of money, workforce, and technological infrastructures. Of these resources, financial management is common since money serves as the lifeblood of firms particularly those in the profit-seeking ventures. Resource allocation decisions normally involve the presence and participation of the stakeholders of the organization in order to undertake proper assessment and evaluation of options and alternatives. Often times, key strategic resource allocation decisions confront the administrative people when it comes to financial investments of the organizations that are held accountable for whatever output the decisions result to. In Organization 2005 strategy of Procter & Gamble, it can be noted that the management has been able to allocate resources effectively. Although there are some obvious glitches in the management of Jager, the case has also shown that the management have allocated the resources appropriately. In terms of financial resource, the new strategy involved substantial costs. In this regard, of the estimated $1.9 bn in costs, only $400 mn were planned to be used in 1999 and $1 bn over the next two fiscal years (2002-2004).  In line with their human resource, the company has been able to allocate its manpower intensively, though part of the strategy is to cut cost by eliminating 10,000 positions in fiscal 2001 and another cost-cutting of 5, 000 employees after 2001.             On one hand, during the management of  the new CEO has also give attention to allocate IT infrastructure as part of the change strategy for implementing Organization 2005. P&G Information technology spending had reached $1 bn in 2002 and still increasing. As part of the strategy, Lafley had incorporated various information technology initiatives which include collaborative technology in order to facilitate planning and marketing, Web-enabling P&G’s supply chain, and data standards, business-to-consumer E-commerce and data warehouse project to be able to deliver timely data to desktops worldwide. In doing so, Procter & Gamble had decentralized its 3,600-person IT department to ensure that 97% of their employees now worked in the company’s individual product, market and business teams, or were part of global business services, which supported shared services that includes infrastructure to P&G units. The remaining 3% worked in corporate information technology.   Building a Capable Organisation             As noted in the case, it has been said that the main objective of implementing Organization 2005 is to accelerate the growth of the company. Organization 2005 includes comprehensive innovations in the structure of Procter & Gamble, work processes as well as culture to enable the employees to make themselves become more flexible and speed up the innovation.  In addition, the company also aims to leverage the global presence of the company and become competitive in the global market. In terms of the first managerial tasks, it can be said that, based on the case study, the management o Procter & Gamble has been able to build a capable organisation. First, the management of P&G has been able select the most appropriate individual who will handle or managed the said organisational change. In this regard, as a CEO and as the main person who initiate the Organization 2005, Jager has been able to choose the most appropriate individual that will implement the changes. However, since the Organization 2005 has some flaw during its execution, it can be attributed to the inability of the chosen individuals to meet the real objective of the strategy. In terms of human resources the imperative tasks that has been implemented during the change process include the designing of the work environment and organization structure to move from present departmental structure to the new team based structure, develop new Human resources policies and programs to help employees make the transition and upgrade current employee skill sets and/or hire new employees with relevant skills.             In order to build a capable organisation, it is also essential that the management must ensure that they are able to dientify the core competency of the business to initate the changes. For all practical purposes, “core competencies” seem to be the same concept as “critical capabilities,” “resources,” and the other possible fads since they all advocate the building of competitive advantage based on “something” internal to the firm. Typically, a core competence is defined in relation to the competitive impact of its output; that is, a core competence provides the firm with (sustainable) competitive advantage via the way it is executed (1991) or via its attributes; for example, a core competence is firm-specific and hence difficult to imitate (1991). However, even if these definitions are useful in terms of competition and strategy, they are not very operational (1992), which sometimes create some serious difficulties in identifying and developing the core competencies of a firm (2000). Hence, organization must be able to determine its core competencies in an operational manner. Once the company has identified its core competency, the next thing to do is to develop all other aspects which can be helpful for achieving the organizational goal, i.e. growth. Core competencies of the company also represent its competitive advantages; these include features of the company that enable it to overcome business competition and other relevant challenges that they may encounter during the implementation of Organization 2005. In Procter & gamble’s case, one of these core competencies is its workforce or people. Talent and skills are among the most important factors a P&G must look for in its employees.             Based on the case study, upon the implementation of Organization 2005, the company also considered to have a support-team to make sure that the strategic change will meet its goal. In building capable organisations, the company have been able to think all the important aspects of selecting employees suitable for implementing Organization 2005. Although Jager has experienced problems which led to his resignation, Lafley, on the other hand, have taken over the position and have continued what Jager has started but with some changes.   Exercising strategic leadership             In managing strategic implementation, one must also consider how the management exercise strategic leadership. Accordingly, leadership is an important aspect of management. As stated by a few authors (2005), managing strategic implementation requires full leader participation and involvement instead of designating individual groups who will shoulder all the responsibilities. The involvement of leaders serves a number of purposes. For instance, this helps in preventing the resistance of employees to changes brought about by the implementation of a new strategy. The enthusiasm and determination of the leaders to make the strategy work can positively influence other company staff. Furthermore, this also helps in creating a sense of commitment and loyalty (2005).             The presence of leadership in strategic change is also one effective factor in addressing technical and non-technical issues. It is important however that the appropriate leadership style is used. In the case of the implementation of Organization 2005, it can be said that there are two leaders who have been responsible for the initiation of the new business strategy: Jager and Lafley. Based from the case study, Jager has become a good leader at the start of the implementation. However, the inability of Jager and his team to anticipate possible dilemma upon Organization 2005 implementation has impacted the whole change process which makes the strategy fail and have forced Jager to resign from his position. As said in the case, there are certain problems that have been encountered in the leadership of Jager. First, Jager had tried to put too much pressure on the Procter & Gambles managers into bringing their products to market faster. The inability of Jager as a leader to decide strategically is also an issue. This can be seen in the dual acquisition of Warner-Lambert and American Home Products, which were useless during that time. In addition, Jager has also become a leader who became reckless in all his action hoping that he will regain what they have lost.             The next leader who handled or managed Organization 2005 is Lafley, a veteran in the company. As  saw the mistakes of the previous leader of Procter & gamble, he made it sure that he will lead P&G to achieve success. In addition, Lafley can also be noted to use a distinctive leadership style.        Leadership style is the pattern of behavior used by a leader in attempting to influence group members and make decision regarding the mission, strategy, and operations of group activities (2000). In this regard, it is said that Lafley has been able to apply the right leadership style in the right moment and situation to effectively implement Organization 2005. By acting as a responsible leader,  has been able to inspire employees to put the good of the whole organization above self interest. In addition, upon the implementation of the Organization 2005 Lafley also stimulate employees to be more innovative, and he also take personal risks and are not afraid to use different types of methods in order to achieve the objective of implementing Organization 2005.   Corporate Culture Many definitions have been used to characterize corporate culture. Probably, the most common was the one based on Schein’s point of view in which his fundamental assumptions comprise the core and most important aspect of corporate culture. He defined corporate culture as the pattern of creating shared common assumptions that the organization learned as it resolves problems of outer adaptation and inner integration that has been considered valid making it possible for others to pass it down to new members as the appropriate way to think, perceive and feel organizational concerns (1992). In this perspective, Schein appears to emphasize on having a common goal or unified direction among organizational members which is based on the past challenges and experiences the business had successfully overcame. These common goals are then achieved through past practices and strategies that are guaranteed to work. In line with the implementation of Organization 2005, it can be argued that Jager has been able to have unified corporate culture to implement the new strategy. Through the Procter’ & Gamble’s corporate culture, the company has been engaged in sharing of learning upon implementation of Organization 2005. Sharing of thoughts and experiences with others implies that corporate culture in Procter & Gamble promotes a certain level of stability among the members of the organization to achieve the goal of Organization 2005. This can be seen under the management of Lafley than in the management of Jager. Corporate culture is founded by certain elements. In this case, values within the Procter & Gamble are the main foundation of corporate culture. The value of the organization serves as its defining elements where symbols, practices, standards and other related matters are derived. Values can be defined as a consistent belief that a certain mode of personal or sociable conduct is preferable against a contradictory mode of conduct. Through this element of corporate culture, employees of Procter & Gamble are able to establish a social identity which in turn generates meaning and connectedness.   Tying Rewards to Achievement of Key Strategic targets             In strategy implementation, the management of the company must be able to ensure that they are able to have a reward system. The employee reward policy is intended to align employees with organizational strategy by providing incentives for employees to act in the firm's interest and perform well over time. Expectancy theory carries a clear message that employees must feel confident that their effort will affect the rewards they receive. Perceptions of equity are therefore crucial in an employee's decision to remain and produce valuable work. Equity is a multidimensional construct, embracing external equity (the degree to which a firm pays employees the rate they would find in the external labour market), internal equity (the degree to which a firm differentiates pay between employees on the basis of performance in similar jobs), and individual equity (the degree to which employees are rewarded proportionately to their individual performance) (1993).             In the case of Procter & gamble, it can be said that although the goal of the Organization 2005 is to reduce the units of the business structure by laying off some of its employees, other part of the strategy also have a reward and motivational approach, to motivate the performance of the remaining employees. Lafley, in particular, have used a reward approach to increase organizational performance and effectiveness. The company’s reward approach is known to be capable of reinforcing the behaviours crucial to the implementation of Organization 2005 strategy.             The company creates reward policy in order to motivate and encourage the workers and employees to render their performances to the very best they can and to make a difference individually or by group or teams to ensure that the objective of Organization 2005 strategy will be achieved.  The policy also gives recognition to those employees whose works is exemplary or that employee who has contributes to outstanding achievements and accomplishments of the mission and objectives the implemented strategy.  The incentives used by Procter & Gamble may be monetary or non-monetary. All in all, it can be said that rewards and recognition go a long way to keeping employees motivated, satisfied, and committed. Management should recognize employees for both their progress toward and achievement of desired performance goals. It should show appreciation for small accomplishment as well as big ones. The recognition must be ongoing to reinforce employees' need to feel that they're doing a good job.  Moreover, the best forms of recognition typically have little or no cost. Employees are one of the driving-forces that generally contributes for the success or failure of any organization. Therefore the company should be able to create an overall policy that will make the employees feel that they are being valued so that they will be encourage and motivated to provide quality services and help in achievement of Organization 2005 goal.   Installing Support systems             In order to ensure that the implementation of the strategy will be successful, the management must be able to install support systems. In line with the implementation of Organization 2005, it can be uttered that the management of Procter & Gamble has been able to install a support system to initiate the changes. Based on the case presented, part of the support system made by Lafley is its restructuring of the management team. Herein, Lafley restructure the positions of the company to streamline the operations and to be able to meet the objective of Organization 2005 strategy.             In addition, as part of the support system Lafley also invest on information technology. It is said that through the alignment of information technology and business strategy within Procter & Gamble, the business value of the company could be maximized, and the competitive threat can be minimized (1997;1996). Herein, strategic alignment used by Lafley by investing to IT as a support for Organization 2005 can be distinguished as the process that provides a long-term engagement of the business strategy and the Information Technology resources ( 1998).  Wognum & Lam, (2000) stated that strategic alignment addresses whether the program concept of a certain business is aligned with the relevant organisations' goals, strategies, problems, and developments.  Moreover, to ensure strategic alignment in business, an organisationally paying attention, formative evaluation model should include training stakeholders, such as trainees' managers and upper-level management, in early stages of design when training content is determined. Some studies suggest that no business or corporate strategy is complete if there is no information systems strategy. For most firms it is the business strategy that increasingly is dependent on, or made possible by, investment in appropriate information systems. For some, however, the corporate strategy may be linked closely to information systems, especially if information technology provides the infrastructure through which the firm positions itself in its sector or plans to diversify or integrate into another sector. Planning for strategic information systems should be an important and integral part of the firm's competitive strategy development process which has been done during the management of Lafley. This point has been emphasized as more and more cases have been documented of businesses exploiting IT for competitive advantage and building their competitive strategy upon information systems which limit or enhance the competitive forces operating in their market place. Planning for information systems can no longer be treated as either a budgetary exercise or a longer range resource allocation process.  Information systems planning becomes a strategic exercise concerned  with alignment of IT with business needs, identifying strategic opportunities from IT and ensuring appropriate levels of investment  in IT and information systems are made.   Instituting Best Practices for Continuous Improvement The conception of best practice conceives the subsistence of collection of highly commendable performance of work practice which enhances the overall performance of the organisation that implements its notion (1994; 1995). Best practices may include but not limited to different management approaches such as knowledge management, strategic management, supply chain management, performance management, information technology management and others. Having been able to realise the importance of having a new strategy within Procter & Gamble to increase sale, it can be said that before Jager and his team implemented Organization 2005, this strategy adheres to best practices. Best practice is the process of specifying an organisation’s objectives, developing policies and plans to achieve these objectives, and allocating resources so as to implement the plans. In this regard, it can be said that the implementation of Organization 2005 has been able to follow the aspects. Before implemented Organization 2005, he made it sure that the objectives has been set, and different policies has been made to support the objective. Accordingly, successful strategy requires the firm to choose the markets in which its distinctive capabilities yield competitive advantage. But the adaptive, incremental nature of strategy means that the starting-point is where the firm is now, specifically in terms of best practice management approach.  Strategy is the direction and scope of an organisation over the long term: which achieves advantage for the organisation through its organization of resources within a changing market environment, to meet and satisfy the needs of the markets and fulfil the expectation of stakeholder expectations. Best Practice helps Procter & Gamble and the management to answers both the questions "where do you want to go?" and "how do you want to get there?" but the first question is answered when Jager and the management team has set the objective of Organization 2005 and the second is answered when the management plan the strategies. While developing a corporate strategy that adheres to best practice for any profit organisation, the management have kept in mind the demand of the customers and the marketability of the products and services offered. However, base on the case, it can also be noted that some of the products and decisions made by Jager did not adhere to the objectives which leads to the failure of achieving the objective of Organization 2005.   Establishing Strategy-Supportive Policies             Part of strategy implementation is to establish strategy-supportive policies which will serve as a guidelines and control system for the initiation of the new strategy. Strategy-supportive policies adhere to the needs of the organisation on having a policy that will standardise the implementation of the strategy. In the case of Procter & gamble’s Organization 2005, it can be said that Jager has not been able to have a strategy-supportive policies. One of these policies is the risk management or risk prevention policy. In relation to Organization 2005, one of the main risk management efforts that Procter & Gamble can apply is the assurance that all project management requirements are available. Professional expertise, financial resources, feasible schedule and proper monitoring techniques should be used by the business so as to ensure smooth project planning and implementation. Efficient planning procedures should be followed by the members of P&G. Information about the strategy should be properly disseminated to other employees so as to obtain their opinions and useful insights about the new business strategy. It is also important that possible problems that could arise during the implementation of the Organization 2005 should be identified. In addition, the Organization 2005 fails because Jager did not use any strategy-supportive policies to address and resolve the problems that have been foreseen in the implementation of the new strategy. In this regard, it can be said that before implementing a strategy, business should always note and consider all possibilities or problems that can occur in relation to the changes or development and provide a policy to lessen the impact of the conflict. For strategy implementation, one applicable strategy-support policy that the company may use is the employment of a monitoring system. Through established monitoring systems, problems or possible causes of future problems can be detected easily. It is important that the members of the monitoring team actively participate in this risk management procedure. In a monitoring effort, regularity is important. A definite monitoring schedule should then be set and followed.             Another strategy-support policy is the implementation of a feedback system. In this strategy, quality team leaders will be assigned per company unit; it is the responsibility of these leaders to take note of the developments of the quality systems project of the company. Information from employees or management regarding defective processes may be immediately reported to the leaders. The feedback system then allows the immediate resolution of quality problems even when monitoring procedures are not scheduled.             Furthermore, the company may also use other strategy-support policy which is related to mentoring and coaching. In order for the employees of P&G to contribute for the success of the new strategy, it is important that they are given sufficient information and training. This then makes mentoring and coaching an important element of strategy implementation. These two concepts are particularly important before the new strategy is fully integrated in the operations. How to handle customer concerns, ensure product safety, deliver accurate and timely services and prevent product errors are some aspects of Organization 2005 that need proper mentoring and coaching. In order to apply these two concepts into the project, the company may conduct training sessions for every department unit. Knowledgeable speakers will be invited to discuss the important activities, changes and responsibilities involved in quality management systems. During these sessions, visual aids will be used to promote effective learning. It is important that during these teaching procedures, the specific duties of the staff are explained in detail. These sessions will also allow the department staff to voice out their queries about the project. Once the project has already been implemented, team leaders assigned for each department will provide assistance to their subordinates. New project updates will also be relayed through the team leaders.             Mentoring and coaching, though most people mistake them as synonymous, are two different terms. In mentoring, it is the responsibility of the mentors to teach basic skills and knowledge to their mentee. According to Watt (2004), the objective of the mentors is to enhance the present knowledge of the mentee. In addition, it is also the aim of the mentors to encourage the individual development of their mentees and provide learning guidance. By means of mentoring, open and effective communication is established, which is very useful not only in educating employees how to integrate quality into their daily duties but also to address the problem on the new strategy.   Task 3 Procter & Gamble Acquisition of Gillette             A unique business phenomenon that is slowly becoming commonplace is consolidation between firms wanting to attain strategic value for their respective organisations. Merger and acquisition (M&A) deals have become part of daily business according to  (2000), to the point where news reporters anticipate ‘merger Mondays’ (a phrase that refers to the usual flurry of such activity at the beginning of the week). Industry-wide consolidation has now grown so pervasive that it in fact has spawned its own lingo, with such terms as bolt-on, roll-up, tuck-under, and carve-out describing various types of transactions. In M&A announcements, it will be frequently claimed that the deal is a true 'merger of equals' that creates superior access to resources and provides a strong global platform to accelerate growth, and will, in all certainty, create significant value for shareholders and represents an outstanding opportunity for customers and employees alike. A number of companies have deemed that through M&A, they will be able to achieve this. Others observed that while examples of failed mergers far outnumber examples of successful ones, there are some companies that have learned how to integrate acquisitions well. Since the aim of the company is to create value for its shareholders, the company has to create a competitive advantage to exploit its inconsistencies in the markets in which it operates – both its trading environment and its financial environment. Question 1: Acquiring or merging of two companies are said to be a strategic option for diversified companies because of the strategic business benefits that it would bring to the company. According to  (2002) merger and acquisition will immediately impact the company with changes in ownership, in ideology, and eventually in practice.  In order to have a more successful expansion, the company should provide some marketing strategy for the company in which Citigroup has been able to consider. Hence, one of the strengths of this merger is the diversification strategy imposed by Procter & Gamble right after the merger has been done.  Furthermore, there are three criteria of core competencies which can also be considered as the strength of the merger or acquisition. These core competencies include superior customer value, business similar in way related to core competency and difficult to imitate or find substitutes for. It seems that the creation of a new diversified company through merger has achieved to a certain extend the above criteria in a way that it did provide something different. In particular, reported in Business Magazine that as a result of the merger, some company was able to centralize computer systems, finance, human resource, project management, and procurement.  In addition, one of the strengths of the merger is its ability to strengthen the competitiveness of the merged company.  Strategic alliances through mergers present an especially attractive avenue for the financial industry since the multinationals will be able to integrate different communications segments quickly, capture a developed customer base, consolidate smaller niches, remove a rival and prevent competition from doing so, and accelerate the implementation of new technologies with combined resources. Merger became the dominant methods of consolidation and the primary objective was to control assets (assets during those days were the newly invented machinery and equipment, and plants and productive capacity since the economic driver was scale and efficiency of production), and the best way to control assets was to own them (1998). In addition,  mergers enables the surviving entity to combine assets and activities, substantially lower costs, and become a strong competitor-banks merge and close branches, credit companies merge and move down the scale-economies curve; manufacturing companies merge to combine facilities, increase scale economies, and spread the cost of R&D over volume; companies merge to improve the economics of the supply chain-and in all cases, integration of physical assets is vital in achieving the economic objectives of the combination ( 1998). In the company given above, the advantages brought by its implementation of merging: 1) Establish a base. Obtain a going concern in a particular location.  2) Establish a niche because of the expansion of products offered in terms of financial and insurance services. 3) Increase productivity and profitability. Increase output with unchanged fixed costs, yielding higher profit and 4) Expand geographic coverage. Through merging the company has been able to establish a competitive position not only in the local market but also in the global environment. On the other hand, merging offers the above advantages and additional ones, such as: 1) Succession planning, which is a way to secure retirement through new ownership. 2) Reduced work level: a way to share responsibility among more people and 3) Security of a larger organization. Through this, the company can be able to cope with larger competitors. Merger can create or enhance strategic assets as well as distinctive capabilities. Furthermore, Kay (1993) stated that merging with other businesses can sustain exclusivity, or maintain the value of a competitive advantage, if they inhibit entry.             Question 2    The competition in the business arena has been very stiff and complex.  In this regard, the organization must be able to utilize a strategy and management system that will enhance the performance of the business so as to outgrow its rivals (2005). In today’s rapidly changing and improving companies and businesses, individuals at all levels are also increasingly called upon to demonstrate the ability think strategically.  As the business wants to expand abroad, there are certain tasks that need to perform.  Businesses grow in two distinct ways; by natural so called ‘organic’ means, or by acquisition and merger. The acquisition and merger route is appropriate when growth in traditional products and markets is restricted, due to market size or share, for instance, or when a higher level of growth in turnover is needed, for whatever reason. However, starting up or acquiring businesses outside of current markets and products diversification is an excellent way to strengthen a company. According to  (2003) there are reasons for acquisitions including different kinds of efficiency improvement such as replacement of inefficient management product, financial, and tax synergies.  Other possible reasons are the tendency to achieve monopoly power, valuation discrepancies which are caused by information asymmetry as well as a number of agency motives such as growth maximization, free cash flow, and employment risk reduction.  In addition, acquisition allows two previously unrelated companies to achieve economies of scale or synergies.  Under the economic theory, two entities, when combined or been merged may be worth more than if they had remained independent.  This is especially true where a merger allows the companies to either eliminate overlapping cost centres or may reduce transaction costs between two firms.  As a result, the unified firm may reduce costs, improve quality, and boost output.  Synergies also result where the combined enterprises is less risky than the constituent corporations. One of the recognized acquisitions was the acquisition of Procter & Gamble with Gillette, worth $57 bn. In January 25, 2005, P&G announced that they would acquire Gillette saying that the merger of the two would bring together competitive advantage in marketing and distribution strengths for P&G, whose products are marketed mostly for women together with Gillette’s highly recognised brands which are marketed for men. In the case of Procter & Gamble, it can be said that acquiring Gillette shows some strategic benefits. First, the acquisition recognises and strengthens the existing strategies of both entities by combining complementary businesses and strengths to create an international force in providing products for men and women while maintaining the Company’s commitment to the independent products through enhanced wholesale distribution and retail services. The company’s ultimate aim is to deliver products that make people look and feel their best not only for women but also for men. In order to do so, the company values performance and continuously strives to fulfil promises to shareholders through setting high standards of practice that are recognised by all internal and external stakeholders. It intends to lead the industry with its products while demonstrating expertise in conceptualising, marketing, selling and distributing its brands.             Expansion of the business is an important and interesting aspect that can also be considered as a strategic business benefit of the acquisition of Procter & Gamble with Gillette. Acquisition has been recognised to be one of the strategic ways in business operation growth and expansion.  In line with the strategy of Procter & Gamble, it can be said that the used of acquisition have been able to provide the company a more comprehensive, efficient and effective ways to have a sustainable company growth. Mergers and acquisitions allow the company to grow both internally and externally because through mergers the family of the company has increased, not only in its local operation but also in global environment. Further, through the effective used of merger, Procter & Gamble is able to gain competitive advantage among its rival companies. Competitive advantage only arises from establishing differentiation.  According to  (2002) the more competitors stake their strategic thinking upon being the lowest price producer or delivering the highest quality, the more they start to look alike in their marketplace, thus losing their competitive edge over one another.  In meaning, competitive advantage arises out of a meaningful differentiation from one other player in the market.  It is better to understand that developing a successful strategy in standard cycle market proves to be relatively simple for other companies. However, if looked at too simply, a company will choose a strategy that is too narrow or too broad based on the other factors of choosing a strategy. Determining which customer needs to satisfy is an area where choosing the incorrect strategy can result in a decreased competitive advantage. Hence, with the acquisition of Procter & Gamble with Gillette the company has been able to offer products for men that suit the needs and demands of their respective consumers.   Moreover, through acquisition, the company had been able to gain a competitive advantage by making their product readily available in different parts of the world and always unique compared to other rival companies. Since the company, had gain different ideas on different kinds of products or services demanded by their customers, especially men, the company had also been able to diversify it products and established better brands which are mentioned above. It can be said that effective acquisition is the key factors for the success of Procter & Gamble.  The company’s merger and acquisitions strategy allows the whole organisation to perform better in the marketplace. Yet the ultimate success of the deal may depend on how well the acquirers manage the difficult organizational and human resource integration issues at their newly purchased company.  For example, sometimes interpersonal issues can emerge from the top of an organization when key managers cannot agree on a general corporate direction.  More often, interpersonal conflict arises because company employees and division managers have different perspectives regarding the needs of the company wants (and needs) from a merger.  If these human resource issues are not resolved, they can result in the turnover of key people, people refusing assignments, post-merger performance drops, and morale problems. Profits and revenues are secondary ventures that could also generate business to compete in the market.  According to  (2000) companies that diversify too broadly into unfamiliar products or industries can lose their market focus.       Acquisition, as a corporate strategy of companies, can be examined in two aspects: the financial considerations and the profitability and gains of the company in acquiring, and the employment issues it generates, specifically, the existing employees of the company before the merger. The inevitability of mergers in the face of the increasing economic competition propelled a bulk of literature addressing the issues and considerations that companies must consider before doing so. In a fast-track economy, many companies are forced to enter mergers or involved in acquisitions in order to compete with the global market. Thus, several companies merge or acquire other companies with the purpose of bringing future financial gains for their companies. At the same time, a merger is also a refuge for company’s failures manoeuvring to keep themselves afloat in the market.                For a long time the trend of merging and acquiring has been happening in the international corporate arena.  In the case of Procter & Gamble, the company used merger to stay in the competitive market and perform better within the marketplace, by providing innovative and new products in terms of financial and insurance services through the ideas that the management gain because of merging with other companies. It shows that without such strategy, the company may not be able to expand its business portfolio and reach more and more customers from local to international market.                 It can be concluded that merging, along with the concept of strategic management and other efficient marketing approach, can make a company to succeed in achieving its goal of providing quality products with their target market.  However, decisions should be made strategic also. This means, that the company should have the ability to decide which among the companies can be helpful to the company itself.   Appendix 1

Strategic Business Analysis of Proctor & Gamble

Strategic Business Analysis Introduction Procter and Gamble (P&G) is presently considered as one of the larg...