Research Korner: Trade and Industry Examples

Development of the Hotel Industry in Taiwan

Chapter 2 Review of Related Literature 2.1 Development of the Hotel Industry in Taiwan             The service industry has greatly contributed to the economic growth of Taiwan. Basically, Clark, H. (2001) stated that the hospitality and tourism industry is expected to continue growing within the succeeding years. Actually, the success of the industry is partly attributed to the external factors providing an environment suitable for business such as the political and economic stability of the market and tourism efforts of the government to encourage and draw visitors from other countries and partly from the management and business practices developed and maintained by the individual businesses conducive to customer satisfaction and customer loyalty.             The vibrant hospitality industry developed after passing through an industry cycle due to both external and internal factors affecting the number of tourists whose needs the industry meets. The hotel industry in Taiwan is delineated into international and domestic hotels based on business ownership and domestic hotels are also subdivided into domestic company owned hotels and family owned hotels depending on the scale of operation and ownership of the hotel (Dennis et. al, 2003). These hotels differ in a variety of ways according to the manner that they utilize their available and created resources and business strategies to actualize their business goals.             Despite the differences in the scale of operation, organizational structure and business strategies of international and domestic hotels, the common objective is to utilize and maximize their resources to achieve a high brand equity founded upon efficient and excellent quality of service that results to customer satisfaction and eventually to customer loyalty.  According to Nguyen and Leblanc, (2001), international and domestic hotels build a strong industry through their ability to cater to the diverse needs of customers in terms of price, customer relationship, accommodation arrangements, and other diverse hospitality needs of customers. Although there is competition among international hotels, international and domestic hotels, and among domestic hotels it cannot be denied that these hotels provide distinct hospitality services giving customers options for their service preferences.             As discussed, the Taiwan hospitality industry developed after experiencing a business cycle with its initial high during the implementation of the Six-Year National Development Plan applicable for the years 1991 to 1996, but becomes low with the outbreak of severe acute respiratory syndrome in 2003, and a rise again in the performance of the hospitality industry at present (Global Hospitality News Archive, 2003).             During the initial high of the hospitality industry in the mid 90s, the Tourism Bureau of Taiwan reported that building the hospitality industry requires leadership on the part of the government and the leading hotels within the industry to provide both administration and guidance to direct the industry towards growth; comprehensive and holistic facilities planning for the industry; and sufficient goal-oriented training for the employees of the hospitality industry (Chen, 1996).  The result of the Six-Year National Development Plan is the increase in the gross domestic product of the country by 1.1 percent for the period 1990 to 1994 (Bailey, 1996) and .7 percent in 1997 (Hsieh, 1998). The economic growth spurred the development of the hospitality and tourism industry in Taiwan. The 1997 Annual Report on Tourism showed that the composition of the visitors to Taiwan were mostly from other Asian countries who were also experiencing growth. Close to 76 percent of the tourists in Taiwan were Asians with the remaining percentage from North America, Europe and other regions. Apart from international tourism, the economic growth that Taiwan experienced also proved helpful to the hospitality industry by encouraging domestic tourism (Wise, 1993). In 1996, the average number of trips within Taiwan was 2.99 increasing to 3.2 in 1997 as a result of economic growth and the policy of declaring public holidays (Hsieh, 1998). Economic growth translates to income for households and the empowerment to spend not only on their needs but also for leisure activities such as travel. The five-day workweek implemented in 1998 limited the time available for international travels resulting to the consumption of domestic hospitality and tourism industry services. The Tourism Bureau is strengthening international tourism through innovative leisure resorts and tourism packages. The visitor expenditure of foreign tourists amounted to 3.4 billion in 1997 with a US $193.56 average daily spending for every visitor. The cost of hotel accommodations amounted to around 50 percent of the daily spending. (Lu, 1999) The bureau also sought to create an environment conducive to the hospitality business by releasing a promotional brochure in different languages, using the internet as a marketing strategy, and participating in organizations for international tourism cooperation such as the East Asia Travel Association, American Society of Travel Agents and the Asia Pacific Economic Cooperation. The industry expects to gain external support through government efforts to help the industry grow. In 2003, the industry experienced a rapid decrease in the occupancy rates because of the outbreak of the severe acute respiratory syndrome or SARS in the region.  In the May 2003 new report of the China Post, around 84 percent of hotels in Taiwan had a lower than 30 percent occupancy rate and 96 percent of the hotels in Taiwan incurred losses. In the survey made by Pan Asia Human Resource Corporation, 79 percent of the 2,452 hotels questioned viewed the effect of the SARS outbreak as very severe. The quarantine measure implemented in the Ho Ping Hospital resulted to the deterioration of 79.01 percent of hotels represented by 50 to 60 percent drop in occupancy rates resulting to losses. In an effort to prevent further losses, many of the hotels requested some of their employees to take unpaid leaves or take their annual leave, implemented salary cuts, and suspended the payment of salaries until business performance improves. The owners of firms have asked the government for a bailout plan. (Global Hospitality News Archive, 2003)             In just a few months, the industry development that the government and business owners sought to achieve was brought down by the SARS epidemic. Between April and May, all hotels tried to alleviate their losses by offering large discounts up to 70 percent of the original price in an effort to maintain the operations of the industry. Inter-industry collaborations were also in place such as the offer of a package that includes hotel accommodations as well as air fare for a discounted price. (Dennis et. al, 2003)             The government held an emergency meeting to develop a plan to help the hospitality and tourism industry. A plan to rescue the ailing airline transportation sector was implemented through the reduction of the fees for local airlines at the expense of government revenue. Tax cuts and exemptions were also planned for the other sub-sectors of the tourism industry. The legislature also approved the proposal preventing the local banks from not approving loans needed by the businesses within the tourism industry for short-term financing. (Dennis et. al, 2003)             In 2004, the SARS outbreak has been controlled leaving behind bankruptcies for the hotels and other businesses unable to cope up with the economic cost of the epidemic. By the end of 2004, the hospitality industry in Taiwan is still in the verge of development but fairing well because of the growth in economy with the vibrancy in the different industries after the arrest of the SARS epidemic.             At the end of 2005, the November 12 issues of Asia Times reported that the tourism industry in mainland China, Taiwan and Hong Kong continue to grow as observed through the rampancy of hotel construction in the different business and tourism centers of the country. The rate of arrival of international visitors increased by 16 percent as a result of the increase in occupancy in the hotel industry. The growing hotel industry in Vietnam is expected to grow with China hosting several international events such as the 2005 Miss World and the upcoming 2008 Olympics. With a favorable business environment, the competition is expected to heat up requiring the management of the different hotels to develop and establish management and operations strategies to draw customers and achieve customer satisfaction and loyalty.               2.2 Building Brand Image             International and domestic hotels will be able to keep up with the demands of a growing market for the industry by making the industry service-based instead of price-based. International and domestic hotels set their respective prices based on service and not on price alone. The key component to brand management is the implementation of an integrated approach where companies are able to say what they can offer relative to their competition, do what they offer and promise to customers and confirm it through consistent practice. The value of saying, doing and confirming should be internalized in the company culture. (Cai and Hobson, 2004)             Building brand image to achieve competitive advantage in the hotel industry requires management to treat the service as experience goods (Nguyen and Leblanc, 2001).  In treating hospitality service as experience goods, establishments focus on providing a pleasant experience for customers to create the image that the hotel wants to portray to the market. However, the image is only established once the hotel is able to consistently do what it says to the satisfaction of the different needs of customers. Management will then direct all efforts of the company towards the creation of a company culture that provides a satisfactory service that meets the experience requirements of customers and eventually to achieve customer loyalty. It is after the achievement of a good brand image that the hotel can justify its price. The brand image justifies price and not the other way around.             Brand image is one of the factors that hotels should consider if they plan to achieve consumer-based brand equity. Brand image affects the development of a customer base of the hotel and the consequent improvement in financial performance (Kim, Kim & An, 2003). The development of a brand image should be based on the customer’s viewpoint. This means that a hotel should initially have updated information on the current trends in market demand before the company can formulate a plan to develop its brand image through customer satisfaction. The practice of providing total customer satisfaction was developed within the industry from knowing that customers require a hotel service that integrates accessibility and delivery of material needs with service.             Brand image is dependent upon the feelings that consumers and other establishments have about the organization in relation to the evaluation of other competing brands. Marketing activities, such as advertising and promotions, falls under the general image of the organization. Once the organization has built its brand image, it should maintain this image because a negative change in the way that the brand name is regarded reflects on a decrease in customers and consequently of revenue. It takes twice as hard to rebuild a good brand image rather than initially building it. There are different management areas that the business should focus on in developing a good brand image. The people tasked to build brand image should think of two things in planning a strategy. These things are first is to sell the service of the organization as a short-term goal and second is to build image in the long run. During the process of promoting the brand name, the company should apply integrated marketing communications to ensure the efficient introduction of the quality of service that the organization stands for. Image is related to the strengths and weaknesses of the organization. The company should integrate all available resources and recognize opportunities such as combining a strong image with an external opportunity to create a strategic advantage. A comprehensive analysis of the image of the organization and its strengths and weaknesses should be integrated to solidify the connection with customers. The brand image should consider the different consumer behavior to be able to introduce a consistent message with the target market. To be able to effectively communicate the brand image to the public, it is important that within the organization the message and the brand image are clearly defined. The image should identify the values or principles of the organization and the extent that the organization has established its position. The purpose of communicating brand image is to instill a consistent and stable impression among customers. The general impression that hotels should develop is quality of service in terms of amenities, personnel and meeting the particular needs of customers for the market to develop an impression of the organization. The significant perception is that of the consumers rather than the view of the managers about the organization. Brand image is consumer-based because their perception about the organization determines their propensity to make decisions in choosing a particular hotel and in enlisting again the services of the hotel in the future. Brand image in the hotel industry has different components, which are tangible and intangible. The tangible components include the services offered by the organization; the different hotel branches in terms of location and accessibility; the marketing communications strategy of the organization; the name and logo of the organization representing the brand image; and the employees of the organization who are the forerunners of brand image. The intangible components include the operational and human resource policies of the organization; the organizational culture determining the beliefs and practices of company personnel; the external environment and location of the company such as the accepted personal and business practices of the particular country where the organization operates; and the publicity that the organization gets especially from the media. Brand image plays an important role in the perspective of the consumer. The brand image gives an assurance to the customer that the decision to obtain the services of the chosen organization in unfamiliar settings is worth it. Brand image also assures the customer of quality service when the latter has no previous experience of the organization. The image perceived of the organization also lessens the time spent looking for accommodations when the image meets the experience needs of the customer. The brand image also determines the nature and extent of connection that the customer develops with the organization based on the perceived openness of the organization.                          Brand image also plays an important role from the point of view of the organization. A good brand image ushers the acceptability of change and developments within the organization such as the introduction of new services and the putting up of new branches in different locations. The brand image determines the ability of the organization to determine the price of its services. A consistent brand image and consistently meeting the needs of customers results to the return of customers and positive endorsements through word-of-mouth. The brand image not only attracts customers but also qualified employees willing to work to maintain the brand image. A good brand image attracts favorable reviews from industry experts. 2.3 Delivering Quality Service             Competitive advantage is achieved by many organizations through their offer of superior service quality (Schmenner, 1995), which is a harder thing to do than offering product quality because there are a lot of service factors that are intangible and cannot be completely controlled such as the decisions and actions of employees and the result of the interaction between employees and different customers. Moreover, the customer judgment on the quality of service is based on the perceptions of the service recipient’s perceptions and expectations causing a difficulty in identifying and correcting service failures. (Hays and Hill, 2000).             Achieving service quality requires the organization to focus on building and transmitting the importance of service quality to the members of the organization. The efforts and contributions of management and personnel should be directed towards a clear vision of delivery of superior service quality. Employees should be motivated to provide quality service in all aspects of the operations of a service organization such as hotels. Outstanding service organizations have strong vision, initially market their offered service internally, evaluate service and publish results. (Albrecht and Zemke, 1985) There are two factors that affect perceived service quality, which are employee motivation and vision and organizational learning (Hays and Hill, 2000).             Quality is a significant predictor not only of profitability but also of the respective market share of organizations in the market (Buzzell and Gale, 1987).  The primary actors involved in ensuring quality are the personnel of the organization. The attributes of the personnel of the organization directed towards the achievement of quality plays an important role in consequently achieving customer satisfaction. The attributes emphasized in the field of service are commitment (Farber and Wycoff, 1991), organizational culture (Collier, 1994), and service delivery environment (Schneider, 1980). Employee attributes in the achievement of quality service is significant because service quality starts with people (Hostage, 1975).             The qualities of empathy, courtesy and responsiveness of employees in service delivery when combined in the interaction of personnel and customer influence the perceptions of customers on quality. Service personnel plays a significant role in service delivery that they are perceived to be an integral part of the service. Service employees not only create service but they also form part of service delivery (Czepiel et. al, 1985). This highlights the importance of motivating employees to become conscious of improving their performance and maintaining a standard quality of service based on organizational goals.           Developing a standard quality of service of the organization requires the determination of the goals of the company and the process of learning and improvement until such that the organization is able to establish a service quality that substantiates its brand image. Learning can be done in two ways, which are learning from employees and learning from customers. The organization should implement both an internal and external approach to learning (Marquardt and Reynolds, 1994). The rate that organizations learn constitutes a competitive advantage for the organization (Senge, 1990).              The organization should consider feedback from the employees in evaluating the effectiveness of a service because it is the personnel who directly observe the reaction and hear the complaints and praises of customers. Organization should also consider the views of customers by integrating a feedback system in service delivery. On the part of employees, the regular meetings and evaluations may be considered as the venue for collating employee experiences and comments on the service delivered and the system of delivery. On the part of customers, quality control is a system of getting the feedback of customers (Argyris and Schon, 1978). The hotel can establish a customer service booth or provide a form or a telephone number where their complaints can be voiced and addressed. The organization should use the records of complaints to assess and investigate the validity of claims, determine areas requiring change and device the most effective manner of making the change within a reasonable span of time.             In the delivery of quality service requires both internal and external consideration.  Internal consideration involves the creation of an organizational vision, the motivation of employees towards the realization of the visions and the establishment of a system for evaluating performance to facilitate learning. External consideration refers to information on the service expectations of customers, the integration of these expectations in the goals of the organization, and the establishment of a feedback system to solicit the participation of customers in evaluating the quality of service of the organization and enhancing organizational learning. Offering quality service to substantiate the brand image of the organization is primarily used to achieve customer satisfaction and eventually customer loyalty. 2.4 Achieving Customer Satisfaction             Customer satisfaction is what sustains the operations of the organization because an unsatisfied customer will not do business with the organization again and dissatisfaction may also dampen potential referrals to the friends and business associates of the unsatisfied customer. Even if the organization implement the newest technology in building the hotel and designing individual  rooms, offer the most expensive items for the use of customers, and train their personnel but if these do not meet the particular needs of customers, then satisfaction is not attained. The measurement of customer satisfaction is through the perception of customers and their propensity to engage the service again.             There is a direct connection between service, satisfaction, sales and profit (Gerson, 1993). However, these cannot be achieved without the imposition of measurements for performance. Measuring the customer satisfaction is important because everything that the organization measures are completed, improved and mastered. Having a measure of customer satisfaction also provides a detailed learning of the factors considered by customers as crucial to their satisfaction that will form the basis for identifying areas for improvement and the efficient change management. Every aspect of customer satisfaction should be centered on the customer.             The definition of customer satisfaction is based on the service that the customer expects to receive to become satisfied. A customer is satisfied whenever an expectation, whether real or perceived, is met or superseded (Gerson, 1993).  It is important for the organization to know the expectations of the customer and to know this the organization should ask the customer. This is the reason why in all service organizations, the personnel always ask for the preference of the customer. Starting from the reservation of hotel accommodations, the customer is asked about his or her preferences from the type of rooms, the amenities that comes with the room and other special arrangements. During the receiving and stay of the customer, there may be particular requests that the service personnel have to meet. An organization is able to provide satisfactory service by knowing the preferences of customer and anticipating the possible requests that customers may make.             For the organization to measure the value of customer satisfaction, the company must first measure the cost of delivering a poor service. There are several measures for determining the cost to the organization of poor service. First is lost customer revenue, which refers to the money that the organization will loose because of the loss of customer to a competitor because of poor service. Second is lost opportunity revenue that is the loss of money because of the decrease in the revenue that could have been achieved when the customer engages the services of the organization again and when the satisfied customer refers the service organization to friends and business associates. Third is customer replacement cost, which refers to the expenses that the organization will incur in looking for new customers. If the organization full comprehends the implications of these losses, then the company will start to recognize the role of customer satisfaction and profit.  (Gerson, 1993)             In the hospitality industry, customer satisfaction is based on the expected ultimate hotel experience of the customer (Sigala and Leslie, 2005). People no longer engage the services of hotels for board and lodging but customers seek a hotel experience that includes the amenities of the hotel, the services offered, the attitude of personnel, the completeness of service, and the manner that the organization values its customers. Although price still remains to be the consideration of customers, there are customers who are willing to pay a higher price for hotels with an excellent brand image but they also expect top service in return.              A hotel experience becomes measurable in terms of revenue when it is deemed a memorable. The organization increases the value of its services by including memorable experiences to service delivery. This is because the decisions of customers to consume and choosing a particular hotel are determined by hedonistic and psychological aspects (Gretzel and Fesenmaier, 2003). The ultimate hotel experience is that which satisfies the hedonistic expectations of customers. The experience creates a connection between the organization and its brand image and the lifestyle of the customer in the context of the intentions of both parties. There are physical and psychological considerations in achieving the ultimate hotel experience, which are the physical components of the service such as amenities and comforts and the psychological components such as the ambiance of the hotel, attitude of personnel and the drive to fulfill the emotions that people want to feel in a hotel. 2.5 Achieving Customer Loyalty             A loyal customer is a client that engages the hospitality services of a hotel every time an opportunity arises. Customer loyalty refers to the fidelity that a customer has for a particular organization as a result of a consistent experience of satisfaction from the services of the particular hotel. (Bowen and Shoemaker, 1998). Mutual trust develops based on the expectation on the part of the customer that the hotel will consistently meet the needs of the customer and on the part of the organization that the customer will patronize its services.              Achieving customer loyalty and retention involves the implementation of plans that prevent customers from changing their hotel preference. There are three considerations in preventing customers from changing their preference. First is the context of the engagement of the services of the organization. The needs and requirements of customers change depending upon the change in their circumstances and it is important that a hotel can accommodate the expectations of customers despite the changes in the context of the service engagement. The quality of service should still be consistent despite the fact that the customer previously visited the hotel on business and returns for leisure. Second is the control that the organization has on the marketing mix to efficiently maximize resources to provide a pleasurable experience to the satisfaction of customers. Price, location, promotions and services are the different aspects of hotel operations that the organization can control. Management should ensure that the operation of the hotel is synchronized in the direction of achieving customer loyalty.  Third is the consideration of the customer in terms of the background and the demographics of the customer. The background of the customer determines the service expectations of the customer, the fulfillment of which determines the propensity of the customer to return to the hotel in the future. Hotels should customize their services to accommodate cultural differences. There are cultures that require separate accommodations for men and women or the particular preparation of food. These aspects should be known and considered by the organization in providing service to international customers. (Morgan and Dev, 1994)                Service considerations include the physical and psychological aspects. The physical aspects include the accessible lay out of the rooms, elevators and stairs, bathrooms, foyers, restaurants and bars, and other significant aspects that contribute to the achievement of loyalty. The technical aspects of functionality also includes cleanliness and orderly placement of furniture in the room, the size and comfort of the bed, wall paper and decorations, quality of bathroom, facilities of the room. The functional aspects of the service include the style of service delivery, the presence of a customer service area, cleaning service and food delivery service. The psychological aspects of service delivery are the friendliness of the service personnel, speed of service, the attitude of employees towards customers, the ambiance of the hotel and the overall service reputation of the establishment. (Lewis and Pizam, 1981)             Price is a factor that contributes to customer loyalty. Pricing a hotel service is difficult because of the intangibility of the thing being valued (Dearden, 1978) Price that the organizations impose for their services primarily depends upon their official rating. A five star hotel has a higher price than a two star hotel. Generally price setting is cost-based. However, there are instances where price can be used as a competitive advantage for some sectors of the market. Whether the pricing system is cost or competition based or both, the organization should consider their target customers and decide based on the pricing that would effectively draw customers and maintain their loyalty. Price is also based on a good brand image that contributes to the motivation for customer loyalty.                          The location of the hotel is another factor that contributes to customer loyalty. Hotel location is a significant consideration depending on whether the customer is traveling for business or leisure purposes. A customer engaging the services of a hotel because of a business engagement in the area looks for a hotel that provides all his or her services especially the proximity to the venue of the business engagement. Businessmen travel with considerations for time and they would not ordinarily engage then services of a hotel that is far from the business areas. Leisure customers on the other hand consider the proximity of the hotel to the tourist locations and leisure activities that they want to experience. Location also matters to customers who are passing by the place and merely looking for transient accommodations. The smaller, more homely hotels located near major routes are usually the choice of accommodation for travelers and the small budget groups. (Hall, 1999)              Promotion is the other factor that contributes to customer satisfaction. Promotions in the hotel industry are classified into loyalty strategies, branding and relationship marketing. The common loyalty strategy is the issuance of loyalty cards that represents perks for frequent customers. This may work for some and not for others but if it works then the company expects to gain profit. Retaining 5 percent of customers will increase profit by 100 percent (Reichheld and Sasser, 1990). This is an excellent incentive for organizations to find a promotional program that efficiently retains at least 5 percent of customers for it to gain profit.

Development of the Hotel Industry in Taiwan

Chapter 2 Review of Related Literature 2.1 Development of the Hotel Industry in Taiwan The service ind...

Rice and Potato Farming in Australia: A Case Study

INTRODUCTION As a person with experience and knowledge of rice and potato farming in Australia as well as organic farming practices and genetic engineering of food crops, the author has always brought up to his superiors the viability of strategy formation regarding its analysis and at times fail to understand the reasons or logic behind certain strategic implementations imposed on it. By delving into this project paper, the author intends to have better insights into how the consumption behaviour in Australia is thought up, formulated and then interpreted. The author hopes to have an in-depth understanding as to how the changes in customer eating behaviour and their impacts enable the country to compete effectively and profitably in this era of internationalization where competition is extremely intense. In order to reinforce the learning objectives, two key focal issues were focussed upon i.e. innovation and diversity. Innovation was discussed with regards to the consumption behaviour in Australia where it was renowned for its developmental capabilities to constantly innovate. Diversity came under strategic thinking and formation as the author considered the diverse culture, political climate, economic surroundings, social environment, technological settings, government policies and legal systems of Australia in order to better understand the consumption behaviour in Australia. Rice and Potato Farming Rice and potato farming in Australia has blossomed over the years because of the efficient and effective implementation of the farming strategies and tasks necessary to gain abundant rice harvests. Rice and potato farming in Australia focuses on the careful management of the farming processes involved in the production and distribution of rice (George et al. 2002). More often than not, small rice and potato farms in Australia don't really have the capabilities to implement efficient consumption behavior studies. Instead, these farms engage in activities that various schools of agriculture typically associate with consumption behavior. These activities include the monitoring of rice and potato, rice and potato development, production and distribution. However, consumption behavior deals with all operations done within rice and potato farms and plantations. Factors such as the alternative eating habits, the emerging trends, logistics and evaluations are often related with consumption behavior. A great deal of emphasis lies on the efficiency and effectiveness of processes. Therefore, consumption behavior includes the analysis and management of internal processes (Audebert et al. 1998). Consumption Behavior in the Hospitality Industry A. Alternative Eating Habits Gone are the days when Australians work on their desks for eight hours a day. Today’s employees want to become as productive as possible while in their offices and interact with different individuals and groups in different settings. The technological advancement in genetic engineering among a variety of foods including potato and rice has allowed workers and employees to access quality and healthy food products in an instant. Because of this rigorous and hectic schedule of employees, it became imperative for them to indulge in healthy meals with rice and potatoes as staple food to help them ease the pressure after every day’s work (Jones, 1999).   B. Customer Eating-out Behavior Normally, customers typically choose the best quality of food based on two (2) main factors: Convenience The Australian rice and potato farms’ dedication to quality for almost three generations now has led to the satisfaction of millions and millions of its customers worldwide. Australian rice of the medium grain Japonica variety was produced by a group of people who pursued the best quality and craftsmanship in terms of rice farming. The Australian rice and potatoes that its customers and citizens eat today is still being produced using nothing but the original and unparalleled farming strategies discovered three generations ago by the Australian farmers. Their mild sweet taste, fresh aroma, bright color and clarity are obtained by using only the purest planting materials without risks of insecticide and pest infestation (Sahrawat et al. 1997). Health The raw materials in the farms used in the production and harvesting of Australian rice and potatoes are able to meet the high quality standards and specifications. The packaging materials where Australian rice and potatoes are sold are also being subjected to strict quality standards. In line to the Australian farm’s policies in food safety, appropriate measures are taken in the milling process of Australian rice and potatoes and all of their brands to prevent the possible contamination. Australian farms implement the principles of the HACCP (Hazard Analysis and Critical Control Points) system as a testament to their dedication to quality (Asch et al. 1999).   Emerging Trends A. Organic Farming Practices The occurrence of various organic farming practices within Australia reflects the growing difficulty in the management of the procurement of food for consumption in commercial hospitality operations that require the effective use of valuable resources such as money, materials, equipments, and people. And Australia is no exception to these. This is the reason why organic farming practices are being done by Australian farmers in order to implement and endorse it as the most effective way to coordinate these resources through the application of organic farming methods derived from fields of studies such agriculture, crop science and agronomy (Lin, 1998). Through organic farming practices, food procurement problems are solved in different ways and alternative solutions are then relayed to the farm management. The farm management then selects the appropriate course of action in line with the food procurement goals. More often than not, organic farming practices are concerned with complicated issues such as naturally occurring biological processes, crop resource allocation, designing of crop production facilities and systems and crop diversity. Organic farming actually may vary according to the structures of farms and philosophy of the farm management. But in most cases in Australia, it centralizes in green manure and composting. Organic farming may also have the possibility of utilizing natural pest control methods and livestock raising in order to identify and solve a variety of food procurement problems. No matter what the type or structure of the farm is, organic farming operates under similar sets of methodologies in order to carry out the organic and natural way to support the food procurement process.   B. Genetic Engineering of Food Crops The genetic engineering of food crops determines the best ways to utilize the basic factors of food procurement. These resources include the people, materials, information, and energy needed in the production of genetically engineered foods. Genetic engineering of food crops is the bridge that links the goals of food procurement and farm performance although in an unconventional way. Genetic engineering is concerned with the increase in productivity in food procurement through the genetic modification of a particular food crop and choosing the appropriate methods to enhance its nutritive value without endangering the health of the people (Grove-White, 1997). Genetic engineering of food crops makes sure that it performs the careful analysis of the food crops and the target nutrient requirements that will be modified. In this process, they make use of various mathematical methods in its research to meet the requirements. They also develop systems of management control in order to aid in the planning of finances and cost analysis in the process of genetic engineering. These systems are eventually subjected to improvements for the effective distribution of genetically engineered food crops. This process of genetic engineering of food crops performs the tedious task of selecting which among the various food crops have the best combination of availability and costs. This time, genetic engineers make use of computers for simulations and controlling various activities and devices.   Implications for Pricing Rice and potato farms in Australia base their pricing strategies on several key trends that continuously shape the global marketplace of rice and potatoes. One particular trend is labeled as “premium-tization” (Pham et al. 1989). This phenomenon causes the polarization of different rice and potato markets. This would then trigger the consumers to demand and pay much higher prices for perceived rice and potato quality. However, discounting in prices of rice and potatoes are also simultaneously taking place, therefore squeezing out the middle range. More often than not, rice and potato farms undergo internationalization which leads to a tighter squeeze for shelf space. This will in turn leave them as winners. It is for this reason why Australian rice and potato farms value the “premise sector” so much because this would allow consumers to try their brands at low risk and price. In terms of market segments, premium and specialty brands of organic and genetically engineered foods in Australia have a disproportionate share of volume growth at an estimated 4-5% per year, as against the 2-3% overall growth rate. These rates come up as a result of both the rise in GDP among developing markets and consumer demands for higher value propositions, which is obviously dominated by international brands. Therefore, Australian farms have to increase its portfolio and operate globally to overcome the home market. Australian farms practically operate on a relatively fragmented market, with other farms accounting for 22% of global organic and genetically engineered food volume five years ago and only about 28% today (Dingkuhn, 1996). Improving the Production and Distribution of Food in Australia Rice and potato farms in Australia have been able to maintain their reputation as one of the world's leading rice producers for more than 130 years now. They are able to face the challenges in many of its markets directly. This is made possible by the effective production and distribution strategies aimed to deliver not only profit growth, but also on building down the foundation of rice in Australia (Jones et al. 1996). The production and distribution strategies of Australia are focused mainly on driving the growth of its rice and improving the farm’s financial performance. These may include both genetic engineering of food crops as well as organic farming practices. These strategies have also helped secure significant acquisitions and partnerships. And more importantly, these strategies have led to the release of the potentials of the Australian farm’s farmers, thus building a quality performance- based culture (Futakuchi et al. 1998). The production and distribution strategies of Australia’s farms are practically reinforced by the local employees themselves. These moves certainly allow the rice farms to improve even more without the costs of introducing new technologies. These efforts have resulted in increased financial gains for the farms in Australia and have allowed the establishment of distribution networks for Australia’s food products, whether natural or genetically engineered.   CONCLUSION The results of the analysis carried out on the rice and potato farming of Australia indicated very significant effects, even amidst the threats of unrest. Therefore, we could conclude that the rice and potato farming in Australia could still be expected to improve faster than average. The review of the food consumption behavior in Australia revealed very little inconsistencies regarding the farming strategies of Australian farms. This is coherent with their traditional inside-out approach. However, the need to reconcile both the inside-out and outside-in approaches becomes imperative now for the Australian farms. The analysis among the implications of pricing as well as the improvement in the distribution and production of food revealed certain gaps, most of which are biased towards the environment. However, these gaps paved the way towards determining a number of recommended strategic options to secure the competitiveness of Australian foods. Also, the Australian farms have to find a balance between adherence to internal forces within the management and to the changing forces of the environment in order to implement such strategic options.

Rice and Potato Farming in Australia: A Case Study

INTRODUCTION As a person with experience and knowledge of rice and potato farming in Australia as well as organic farming practices and...

Influence of an Individual’s Perceptions and Interpretation In Decision-Making and Judgments

Every single day, people are faced with decisions whether be it as simple as what to do or what to wear for the day. Every single minute is characterized by choices, choices that people make, rationally or irrationally.  decision making is as essential process in the human nature. Much has been learned about the psychology of human decision making as well as decision making within organizations. This paper will examine and assess the extent by which people’s judgments and decisions are influenced by one’s perception and interpretation of the world.             There are many factors affecting our choices in life. The field of judgment and decision making is concerned on how people combine desires and beliefs to choose a course of action. There are three components in the conceptual design for a decision. It includes courses of action or choice options and alternatives; beliefs about objective states, processes and events in the world including outcome states and means to achieve them; and desires, values or utilities that describe the consequences associated with the outcomes of each action-event combination. Decision making is central to every human activity; thus, everybody is a decision-maker. It must be noted though that good decision making begins with a consecutive, purposeful, strategic-thinking process. In addition, good decisions are those that efficiently choose or select means that are available in a given circumstance or situation to attain the goals of the decision maker.             Defines a decision as “the act or process of deciding; a conclusion or resolution reached especially as to future action, after consideration; the settlement of a question; a formal judgment; tendency to decide firmly; resoluteness”. Many theories of decision making exist in disciplines for both scientific and social science paradigms. In statistics, decisional theory is a strategy of measuring the decision-making process, or making it into mathematical form to make the most efficient and effective choice. In early economic theories, there is also a decision-making model of economic utility wherein people choose the best option that provides the maximum positive utility. The aforementioned early theories are also referred to as classical decision-making which basically shows how decisions are made in ideal situations. In psychology, the highlight of the process of decision-making has been a primary area of focus and study. In Janis and Mann’s Conflict Model of Decision-making, the process of decision=making is viewed as a stressful process which involves an assessment of risk and an assessment of success and time availability to make a decision. This model hypothesize that people make a decision through a decision balance sheet wherein individuals evaluate the gains and losses of a decision on the basis of tangible gains or losses for oneself and for significant others and approval or disapproval from the self and from significant others as well.             Usually though, our decisions and judgments are primarily affected and influenced by how we perceive and interpret the world. In psychology, perception is a “neurological process of observation and interpretation; any neurological process of acquiring and mentally interpreting information from the senses”. It is the process by which individuals organize and interpret their sensory impressions in order to give meaning to what happens in their environment perceptions are essential because individuals act upon their interpretation of events and at other times fail to act because of perceptions. People are sometimes faces with the same events; however, there are different perceptions and views on such same events. Comments that perception is like beauty. It is in the eye of the beholder.             It must be noted that an individual’s behavior is based upon their perception of what reality, not on reality itself actually. The world as it is perceived or viewed is the world that is behaviorally important. Each one of use the five senses to experience our surroundings. They are the senses of sight, touch, smell, hearing and taste. Organizing all these information that we receive from these senses is called perception states that perception is a cognitive process. Perception actually helps individuals select, organize, store and interpret stimuli into a meaningful and rational picture of the world. As each person gives one meaning to stimuli, different individuals “see” the same things in different ways.  Obstacles in Making Accurate Perceptions             Sims has outlined some obstacles that hinder individuals from making accurate perceptions. They are stereotyping, first impression error, halo effect, contrast effect, selective perception and implicit personality theories. Each of these obstacles will be examined and discussed in the proceeding part of this paper. Stereotyping. Stereotypes are considered to be a group concept, actually held by one social group about another. They are often used in a negative or prejudicial sense and are usually used to justify certain discriminatory behavior . The basis for commonly held stereotypes may be associated to one’s sex, race, ethnic group and age. An example of stereotyping may be: the belief or perception that older workers are not capable of being trained for new tasks or younger workers cannot handle responsibility. Even though stereotyping may seem inaccurate and worthless, in some cases, there be “kernel of truth” in the basis of stereotyping; Stereotypes are sometimes based on actual group characteristics. It must be noted though that as stereotypes are some typical beliefs based on the element of truth wherein the beliefs are derived from observations that hold true for the entire group but do not hold much truth and accuracy for given individuals in the group. First Impression Error. As the saying goes, “first impressions last”. First impression errors mean that a person may observe a very brief bit about another person’s behavior in their first encounter and conclude that this behavior mirrors what the person is really like. Such impressions may be dangerous in interviews for work as these first impressions become the lasting impressions in the basis for their long-term employment relationships.    The Halo Effect. The halo effect is described as when a person good at something is assumed to be good at something else. This positive assumption creates a halo.  Gives two instances for this type of obstacle in making accurate perceptions. Example one: Let us say that you are a supervisor in a machine shop. An employee, let us call him John, has been one of the best drill operators in your section for the last ten years. A lathe operator is in need in another section. So, you recommend John, assuming that he will do superb at the lathe as he does in drill pressing. However, John fails; he may be very good in the other task but it doesn’t mean that he will definitely be great with the other task as well. He lacked the necessary skill and the training for the other task. Figuratively speaking, you have somehow placed a halo over John’s head. Another example may be when two people have a violent fistfight on the job. One is rather a personal friend of yours with whom you socialize off the job. There may be a tendency for you to place a halo over your friend’s head by assuming that the other person must have been the cause of the fight and conflict . Projection. Projection happens when an individual credit our own feelings and attributes to others. People engaging in projection have the tendency to perceive others according to what they themselves are like instead of according to what the person observed is really like. It must be noted that the observations may be accurate as they make observations of people who are actually like them; however, accuracy don’t always happen as they might have observations on people who are not like them. So, when engaging in projection, one must respond to individual differences. Contrast Effects.  Contrast effect can distort perceptions. A very common example is when illustrated in an old saying among entertainers that states never to follow an act which has kids or animals in it. There is a common belief that majority of the audience just love and adore kids and animals that the entertainer will look bad in comparison. This specific example portrays how contrast effects can affect and distort perceptions. States that people don’t assess a person in isolation. A person’s reaction to one person is influenced by other people we have just encountered. Selective Perception. Selective perception happens when perceptions arise from influences by one’s own interests. When individuals can longer take in all stimuli received, one has the tendency to select out certain elements. For instance, as one purchase a car, for some unknown reason you just begin to notice the same type of car every now and then on the streets compared to before purchasing the car . Implicit Personality Theories. As people have individual mini-theories on how people look and behave, this will result to inaccurate perceptions. These theories, helps each one of us to organize our perceptions and take shortcuts rather than incorporating new information all the time. Adds that people are cognitive misers. As the world becomes more complex and confusing and as people have only a limited mental capacity, people try to make sense of the world by grouping traits and appearances into clusters that may seem to go together. The discussion on what hinders making accurate perceptions have enlightened us on the issue of how much one’s perceptions and interpretation of the world can affect and influence decision-making as well as making judgments. We have seen how perceptions are distorted by stereotyping, first impression error, halo effect, contrast effect, selective perception and implicit personality theories. Researches on judgment and decision making have recognized important limitations in cognitive and emotional processing. It must be noted that errors in decisions occurring due to biases have widespread effects. Many scientists, economists and psychologists are driven to make behavioral assumptions in the market place as a result of real-world violations of the rational choice theory. In psychology, many examinations are made in the concept of rationality. Psychologists are further examining different and alternative frameworks and theories to explain ways of how people make decisions and what influences them upon making their decisions. The future of judgment and decision-making research within psychology lies in its capability and capacity to develop other theories and frameworks that make associations with research on emotions and cognition, in addition to social and institutional factors. Such associations will definitely influence and affect our views in decision making and adjustability and provide good foundations for research in many years ahead.

Influence of an Individual’s Perceptions and Interpretation In Decision-Making and Judgments

Every single day, people are faced with decisions whether be it as simple as what to do or what to wear for the day. Ev...

Economic Aspects of China

INTRODUCTION   The expansion of the economic aspect of the country of China has been under the observation of a lot of analysts. On its way to becoming among the superpowers of the modern world, the economic development that has been taking place in the said country may appear to be a threat in the neighbouring regions with regards to foreign direct investments. However, upon probing deeper in the situation, one could surmise that this is not the case. The following discussions will present that the existence of the Chinese development does not affect the countries in the Southeast Asian region. Discussion with regards to its historical dealings, foreign policies, and regional plans will be among the bases of establishing of the position of this paper regarding the issue of China and FDI of Southeast Asia.         HISTORIC INTERACTIONS OF CHINA AND SOUTHEAST ASIA   China’s affairs with Southeast Asia have grown to be ever closer. China’s return to Southeast Asia is not merely history replicating itself. In the end, the tenure of the 'Son of Heaven' has departed long ago, and China no longer perceives itself as the centre of humankind. (Stuart-Fox, 2003) The Middle Kingdom is dwelling in a new world with novel strategic objectives. Its global perspective and method to Southeast Asia have to transform. China's affairs with Southeast Asia have been well documented. What is prominent as an important strong point of the work of Stuart-Fox (2003) is its effort to recognize what it labelled as the 'international relations culture' that takes into account the principles, standards, and prospects concerning the appropriate accomplishment of international relations. Conventional Chinese international affairs traditions were anchored on the Chinese perspective that is looked into at the beginning of Stuart-Fox’s (2003) study. Traditionally, the Chinese perspective of the world highlighted the harmony of Heaven, Earth and people, the authority of the emperor and the conviction that barbarians would be represented by the means of the emperor to distinguish the dominance of Chinese society and the cosmic standing of the emperor. The acknowledgment was represented by the tributary system. This is characterized as a system where barbarians respectfully tender their tribute at Chinese court and appreciatively acquiring presents in return.   This tributary system prevailed over China's affairs with Southeast Asia up until the later part of the nineteenth century, when China was considerably frail to defend against Western incursion and Southeast Asia developed into colonies of European powers. (Stuart-Fox, 2003) Moreover, the tributary system was not actually onerous for Southeast Asian polities. It similarly indicated that China as an empire stretched out but was not predominantly in an expansionist level.   Moreover, China's global relations traditions in the years of the Cold War developed from its past. Being 'a civilisation whose pretensions to superiority are deeply embedded in the national psyche', (Stuart-Fox, 2003) China was intending to develop into an international great power and to resume international ranking and deference. It required to be acknowledged as such within its individual direct field of influence. The People's Republic, similar to empire China historically, similarly had faith in the authority and dominance of Chinese paradigm. Traditionally, it was the good worth of the emperor that granted the ultimate model. During the Cold War, it was China's radical revolutionary, communist agenda that prevailed. Moral dominance was another historical component that continued to have an effect on China's foreign policy. Its Bandung directive of co-existence and non-intrusion in the dealings of other nations and later procedures of anti-hegemonism were declared as moral standards. This historical perception of China's global affairs traditions does give some explanation on China's participation in the two Indo-China wars and its sustenance for revolutionary actions in Southeast Asia.   That account still functions a huge part in today's affairs involving China and Southeast Asia is apparent in discussion of 'bilateral relations regimes'. Even supposing that early regimes were determined by China, they were acknowledged by Southeast Asian governing leaders. (Stuart-Fox, 2003) The development of bilateral affairs regimes anchored on not only a happenstance of interests but similarly a level of concurrence of worldviews and mutual historical knowledge. Alongside this setting, Southeast Asian nations will not adhere to a balance-of-power alliance to control China and will together favour accommodation with China. (Stuart-Fox, 2003)   POLICIES OF CHINA WITH REGARDS TO SOUTHEAST ASIA   Based on the previous discussion, there has been historical basis on the affairs of China and the Southeast Asian region. This entails the creation of such policies on the part of China. It appears that the Chinese leadership is satisfied with the balance of power scheme on the part of the Southeast Asian countries. The subsequent efforts to preserve and uphold a balanced relationship with the United States, Japan, and China; together, it evades abandoning other countries such as Russia and India. (Cheng, 1999) This ASEAN plan assists to put off any key power, counting the United States, from controlling the Asia-Pacific region in terms of trade. This is in proportion to China's strategic concerns given that China does not have the wherewithal and consequently the purpose to develop into the major authority in regional affairs. Therefore, China receives the ASEAN's balance of power scheme and espouses the regional organization in participating in a dynamic position in the Asia-Pacific region.   In addition, Chinese leaders recognize China and the ASEAN countries as developing nations in Asia; they have a substantial sense of shared identity; and they possess comparable perspectives on values, human rights, democracy, and several concerns in global relations. Therefore, they should be capable of lending a hand, present each other aid, and equally be in opposition to hegemonism and power politics. Chinese leaders do not deem that ASEAN will turn out to be a component of a coalition intended to controlling China. In its place, ASEAN's dynamic diplomatic profile is perceived as easing the progress on the direction of multipolarity in the Asia-Pacific region, and causative to regional permanence. (Cheng, 1999) Furthermore, ASEAN is alleged as functioning as a balance in the middle of the United States, Japan, and China and as a force evening out in this triangular association. Similarly, the ASEAN will also assist to discourage the hegemonism of Western powers in the area, in so doing lessening the latter's stress on China and convalescing the diplomatic setting for it.   CHINA’S AIMS IN THE ASIAN REGION   China’s regional aims in Southeast Asia seem to be connected to China’s general strategic stance. Even as some analysts acquire a “zero sum” technique to mounting Chinese authority and American power in the region, others involve the highlighting in China on the strategy of a “peaceful rise” or “peaceful development” and acquire a more benevolent outlook of China’s objects, both internationally and inside a regional background in Southeast Asia. China’s quiet increase possibly stands for a major departure from previous policy which intended to wear away America’s control in the region. (Sutter, 2004) Confirmation of Chinese restlessness with America’s attendance in Asia carries on. To some Chinese observers America’s long-drawn-out global posture ever since the September 11 terror attacks has brought about an American squeeze of China. Others acquire a perspective that China’s foreign policy on the direction Southeast Asia is an offshoot of its conventional imperial tribute system.   Ever since the middle part of the 90s, China has been aggressively looking to expand its connection with Southeast Asia by means of more accommodating approaches. This is chiefly obvious in the episode from the financial crisis of 97. (Stuart-Fox, 2003) Similarly, China’s 2002 agreement to the ASEAN code of conduct on disagreements in the South China Sea, the change in importance to ASEAN in addition to China, Japan and South Korea, as against the Asia Pacific Economic Cooperation (APEC) structure which takes account of the US, and progress on the direction of an ASEAN-China Free Trade region all signify a basic change in the affairs involving China and ASEAN. (Stuart-Fox, 2003) This highlighting on economic and diplomatic relationships is a major variation from earlier military confrontation as confirmed by past border and territorial disagreements. China’s deeds point to some that it is concerned in more than merely extended economic and trade connections with the region.   FOREIGN DIRECT INVESTMENTS OF CHINA AND SOUTHEAST ASIA   Regardless of substantial concerns in policy spheres that a boost in foreign direct investment flow to China is to the detriment of other regional economies, it has been established that those economies can essentially take advantage from it. (Chantasasawat, Fung, Iizaka, Siu, 2004) This may possibly be connected to the production networking actions among Asian nations in addition to the augmented resource demand by a rising China. The proof of production-networking among China and other Asian economies can be established in the extensive two-way trade of intermediate and final goods in the similar industries among those nations. The Table below summarizes the FDI of China from the early seventies to the recent years.   A lot of the nations observed in the study of Chantasasawat, Fung, Iizaka, Siu (2004) are greatly concerned in vertical specialization which can be perceived in the allocation of two-way trade in the similar industry in the whole quantity of trade among the states. The economic connections of mutual reliance among them have been getting deeper swiftly since the 90s. The importance of the effect of the development of China in the context of FDI inflows to this group of Asian states may reveal such interdependence. (Chantasasawat, Fung, Iizaka, Siu, 2004)  Thus a boost in China’s FDI is certainly and considerably connected to FDI inflows in other Asian countries. It is thus observed that until now the investment-developing consequences prevail over the investment-diversion impact so that on the whole, China is a positive power for FDI inflows into other Asian nations with regards to their economy.   The minor consequence of trade liberalization of the Asian states on the inflow of FDI can be in excess of double of that of the effect of the economic development in China. Trade obstacles can acquire a variety of shapes like local content conditions, technology transfer conditions, domestic sales and export prerequisites. This connotes that decreases in the different kinds of trade obstructions can take part in a crucial function in developing FDI to those states. (Chantasasawat, Fung, Iizaka, Siu, 2004) In general, issues that have an effect on the FDI inflows into Southeast Asia are the positive impact of the economic development China, policy variables like the level of openness to trade and the excellence of infrastructure and the world provision of the FDI. Moreover, the overriding indicators of the Asian economies' components of FDI into all developing nations are the unconstructive effects the economic development in China, policy variables like openness to trade, corporate tax charges and infrastructure in addition to the institutional issue of government firmness.   CONCLUSION   China requires a peaceful global setting to focus on economic progress. Therefore, the Chinese leadership favours a multipolar world in which the superpowers can build up responsive relations with each other and in which non-zero-sum competitions are the standard. Both China and ASEAN mean to function a more noteworthy role in the Asia-Pacific region and in the international community, particularly in the UN. Their quests are a non-zero-sum competition and can be equally helpful. The Asia-Pacific region requires efficient agents in intercessions with the Western nations and in a variety of global organizations. China and ASEAN, on the strength of close bilateral and regional discussions, can carry out that task jointly. In spite of everything, they have no purpose of separating each other in regional matters, and they do not have the objective and aspiration of acquiring a major leadership position in the region.

Economic Aspects of China

INTRODUCTION The expansion of the economic aspect of the country of China has been under the observation of a lot o...

EUROPE-INDIA BUSINESS RELATIONS

Europe-India Business Relation   Introduction               European Union (EU)-India relations originated in the year 1960s when India was among the first countries to set up diplomatic relations with the European Economic Community (EEC).  It was then followed by the signing of agreements in 1973 and 1981.  Additionally, there was a 3rd generation agreement signed on December 20, 1993, the current 1994 Co-operation Agreement which goes beyond trade and economic co-operation between Europe and India.    Another approach to improve EU-India relationship was the 1996 Commission Communication for an EU-India Enhanced Partnership that was endorsed by the Council and EP.  The Commission served as another milestone for the reason that it sets out concrete proposals to upgrade the relationship to a Strategic Partnership.  The said Strategic Partnership was then launched on November 2004 in The Hague Summit agreement.  This was the summit aimed to implement through an Action Plan that set the scene for another quantum leap in EU-India relations.  The Action Plan spells out concrete areas where the EU and India should become active and influential collaborators in global political, economic and social developments.    European Union (EU)               The European Union is a union of twenty-five independent states based on the European Communities and founded to enhance political, economic, and social co-operation.  This union is formerly known as European Community (EC) or European Economic Community (EEC) which started with only six members in 1958 and grew to 25 in 2004.    Assessing European Financial Market               Financial development can affect growth via three channels ( 1993): (1) it can raise the fraction of savings funneled to investment, reducing the costs of financial intermediation; (2) it may improve the allocation of resources across investment projects, thus increasing the social marginal productivity of capital; and (3) it can influence households’ saving rate.                Despite the fact that the first two cases the effect is generally positive, the third one seems vague.  Financial development may also reduce saving, and thereby growth.  As capital markets develop, households gain better insurance against endowment shocks and better diversification of rate-of-return risk, consumer credit becomes more readily and cheaply available, and the wedge between lending and borrowing rates shrinks.  In connection with this case, the effect on saving and growth is ambiguous.  Nevertheless, domestic investment is unlikely to affect the growth rate via changes in the saving rate especially in economies open to capital flows.  It is much more likely to do so either via the first and second channel, that is, by reducing the cost of financial intermediation or by improving the allocation of capital across projects.              Financial development can enhance growth by reducing the cost of financial intermediation in two ways.  First, financial development can increase the degree of competition in financial markets and thereby curtail monopoly rents to the extent that it is associated with the entry or creation of new intermediaries.  The interest rate margin charged by the banks will tend to be compressed below the level that incumbents would have chosen otherwise, and the availability of credit will correspondingly tend to increase.  Secondly, more developed financial systems can reduce the cost of financial intermediation for the reason that they can deal better with the problems of asymmetric information that are pervasive in financial markets.  To further illustrate, financial systems may vary in their ability to prevent borrowers from using loans to their own private benefit instead of investing in productive assets, or in their ability to control the risks taken by the borrowers.  Close bank relationships or efficient information production by large investors may mitigate such opportunistic behavior by borrowers, and in this manner allow intermediaries to require a lower return and/or increase funding.                Another contribution of financial development to growth is by allocating capital more efficiently across alternative investment projects.  First, by facilitating the trading, hedging and pooling of risks a more developed financial sector allows investors to fund highly profitable, but risky investment opportunities that would otherwise be forgone.  Secondly, funds are allocated to more profitable projects, and the productivity of the economy will increase to the extent that more sophisticated intermediaries are more effective in distinguishing good and bad projects.                An important issue is whether financial development has mainly “level effects” that is to say, allows countries to raise long run per capita output – or rather affects steady state growth.  Both outcomes are possible accounting to principle depending on the nature of the growth process.  Financial development and financial reform would allow countries to grow permanently faster in endogenous models.  While in more traditional models with exogenously-driven technological progress, financial development would grant a transitory increase in the economy’s growth rate and a permanent increase in per-capita GDP by allowing more investment and capital accumulation.                For all of the above-stated reasons, the current consensus view among economists is that financial development spurs investment and growth, even though opinions differ considerably about the quantitative importance of this relationship.  Undeniably, a large and growing literature has documented a robust correlation between finance and growth.  It shows that countries with more developed financial markets grow faster.  In going beyond this mere correlation, on needs to establish if there is a causal relationship running from financial development to growth according to  (1969).  For this reason, any empirical analysis must control carefully for the potential reverse causation from growth to financial development.  To this purpose, researchers have used economic techniques and identification strategies of increasing sophistication.  The weight of the evidence is overwhelming nowadays in favor of the view that financial development is capable of spurring economic growth.  Events that affect the degree of financial development of a country or a group of countries, such as financial integration, may therefore be important for their subsequent economic performance.    European Market Integration               Europe’s move for a Single Market in 1992 was a complex process that tends to create events of a combination of both bet and a challenge.  Single Market was an experiment that succeeded not just because it has appealed to the enlightened self-interest of European producers and consumers but also because of the vision of its founders that encompassed and yet transcended the material needed for the realization.  Additionally, it succeeded for the reason that it also held out the higher goal of political as well as economic barriers overcome, which is of Europe united.                The nature of the Single Market is inseparable from the concept of liberalization.  The 1992 move may seem like a pure process of integration and aggregation.  However, the push toward a Single Market is the result of (1) integration and harmonization; and (2) deregulation and liberalization.  Both these factors cannot stand alone to carry the Single Market into completion instead it should go together.  Europe creates a unified market with the combination of market integration with measures liberalizing it.  As a result, Europe sets off in the right direction in a more effective way.                The economy of the 12 European states is an economy particularly open to foreign trade.  Europe’s economy rises up ahead from United States and Japan during the 1989 import of goods.  The strengthening of Europe’s economy through the Single Market brings about increased demand to be put at the disposal of the whole world.              Dynamic Growth               India gained a lot of improvement on business outsourcing, however, it is largely because of India’s entrepreneurial skills and the ability to innovate that made a significant economic boom, says Sanjay Dalmia, Chairman of the Dalmia group of companies.  A growing number of Indian companies were present in the UK alone majority of which is from IT sector.              There are similarities between Europe and India that makes their partnership a perfect combination.  According to , Director, World Economic Forum (Switzerland), “India is more comparable to Europe than any other single country in the world due to its cultural diversity and shared values of democracy, rule of law and fundamental freedoms (as cited in ).   Business Implications and recommendations               A conference on “EU-India strategic plan: Enhancing trade and investment”, found a key weakness of India as compared to many of its competitors.  It was suggested that India should concentrate first on infrastructure sector (i.e. transportation, electricity and power, and telecommunication).    Recommendations   <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Clear the pathways for Foreign Direct Investment (FDI) inflow into India</li> </ul>   For the reason that India is missing out on large flows of capital investment that are now going elsewhere, the low flow of foreign direct investment into India should be a matter of serious policy concern for the government.  Regulatory shortcomings, tardy privatization of public sector undertakings and free electricity to a large number of customers are also cited as some of the reasons for poor flow of FDI into India. The regulatory environment is even more problematic. The political setting too has not been as supportive as it needs to be for foreign direct investment.   <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Strengthen institutions in India</li> </ul>   It is clear that both continents have enormous potential to increase trade in both directions.  India has its strength and weaknesses.  India needs to ensure protection of investment, good governance and transparency and most importantly a stable political situation.  <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Address the European attitude problem</li> </ul>   One of the missing important factors that European investors don’t have in doing business with India is the right attitude and awareness.  The EU and India could improve synergies between companies, corporations and sectors and bridge this gap.  There is higher awareness among US companies about investing in Research & Development in India whereas European companies are poorly represented in this respect.    <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Leverage Indian overseas investment</li> </ul>   Notwithstanding the fact that the Indian business environment is improving in multiple respects and Indian overseas investment is more that $5.4 billion as of 2005, India has long way to go.  Many Indian companies are going global with their business strategies and are acquiring global competitiveness.  They are also going beyond the traditional sector like IT and Pharmaceuticals.  Such companies are now investing abroad partly to escape weaknesses in the domestic business environment and to build assets and skills that are slow to develop at home.  <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Improve the infrastructure sector</li> </ul>   As stated earlier, infrastructure is the greatest impediment that hinders India in the journey to development.  The Indian economy is capable of absorbing massive foreign direct investment in the infrastructure sector over the next ten years in which public-private partnership can thrive.  Capitals needed in infrastructure are very large.  The Indian government has created an interesting action plan to set up a regulatory framework for infrastructure to make an enabling environment for attracting FDI.  However, much will be spend on its transparency and independency based on international best practice.    <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Increase mutual transparency in investment regulations and guidelines</li> </ul>   The role of the political system and the bureaucracy is that of facilitation by removing hindrance to free trade and commerce between the citizens.  Unfortunately this is hard to achieve in India and in the EU under the current complex political situation. Further, lack of specific investment regulations and guidelines on both sides prevent enterprises from venturing into each other’s countries except for a few big companies.   <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Improve Center-State synergy in India to woo foreign investors</li> </ul>   It is not enough for the Central government to woo investors. State Governments too must accept the task with both hands. Despite India's political diversity and sharp inter-party differences on certain issues, the Centre and the States need to work in tandem to create attractive investment destinations.   <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Heighten Europe-India business and trade dialogue</li> </ul>   The integration of Europe has valuable lessons for India. The strengthening of trade relations and continuous exchange of trade delegations between Europe and India would help both countries to bridge the gap in trade and commerce. Regular discussions between the European and Indian business bodies such as the chambers of commerce in both countries should be encouraged.   <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Overhaul the European visa regime in India</li> </ul>   Stringent enforcement by the EU countries of their visa policy in India is not only scaring away Indian business people from Europe but also dampening the investment climate of the EU countries thus taking a toll on its economy. Mechanisms should be developed between the Government of India and the EU countries to remove non-tariff barriers particularly in relation to the visa issue. In spite of the best efforts from all sides to increase Indo–European trade relations, it is being increasingly noticed that the Schengen Visa is denied even to a bona fide Indian corporate executive. In spite of submitting all the demanded supporting documentation with the application, the visa departments of the EU member states in their respective Missions in India show total callousness and disrespect and behave in a highly arbitrary manner seeking very unreasonable and sometimes personal and confidential information. The methods and techniques of theembassies of the EU member-states in India amount to unwarranted obstruction in free and smooth trade flows and this is a serious problem that needs to be addressed.  The EU-India Strategic Partnership Agreement is defeated by the negative bureaucratic approach taken by the embassies of EU nations in India.   <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Address the problem of innovation in Europe</li> </ul>   The current problems in the EU relating to growing unemployment and declining GDP are to be seen in relation to the lack of serious innovation as compared to the immediately preceding centuries and not in terms of external attacks being mounted on fortress Europe.  Closer examination of links between Europe and India in the areas of university and industrial research could aid the innovation process in Europe.   <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Recognize and respond to European diversity</li> </ul>   India should not view Europe as a monolith but recognize broad areas of differing cultural, social, industrial and economic patterns and respond appropriately. The current tendency to approach Europe with a one-size-fits-all policy should be eschewed. In some of the newer EU member-states GDP is currently growing at between 8 and 11.6% and these should be approached with a stance different from those parts of Europe where the growth is around 2%. <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Support the pan-European effort of the EICC</li> </ul>   While the EICC will rise from its own strength acting as a catalyst between EU and India in promoting better trade relations and create a lobby in the EU and in India among opinion leaders in support of enlarging the scope of trade relations and act as a one-stop facilitating centre for providing insight information on key issues in relation to the institutions of the EU, the Government of India was called upon to give its full support and assistance to the EICC.               The above Recommendations were reached at a Conference in Brussels on 8-9 November 2005 organized by the Europe India Chamber of Commerce (EICC) in partnership with Commonwealth Business Council (CBC) and Global Organization of People of Indian Origin (GOPIO) and in association with the Embassy of India.    REFERENCES

EUROPE-INDIA BUSINESS RELATIONS

Europe-India Business Relation Introduction European Union (EU)-India relations originated in the year 1960s when ...