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Corporate governance in Saudi Arabia focusing on the responsibility of board of directors

Corporate governance in Saudi Arabia focusing on the responsibility of board of directors

1.0 Chapter

1.1 IntroductionThe present study seeks to examine corporate governance in Saudi Arabia focusing on the responsibility of board of directors. Effective corporate governance is key in ensuring that firms utilize their limited resources in an efficient manner, protects the interests of all shareholders, makes prudent decisions and strengthens relationship with employees, suppliers, creditors, communities and all stakeholders. As noted by Rashidah,& Yaseen, (2006) good corporate governance practices is needed for attracting the more capital required for continued long-term growth of any firm.

The proposed study shall therefore attempt ton examine the role of board of directors play in corporate governance in Saudi Arabia. By studying and examining the main duties of the board of directors, the responsibilities of the board, its formation, meetings and committees, and through careful examination of the corporate governance regulations in Saudi Arabia, the study shall explore how the board of directors function and work towards implementation of corporate governance with firms operating in Saudi Arabia.

Of late, there has been increased awareness and interest of importance of corporate governance in Saudi Arabia. In the aftermath of market correction that occurred in 2006, when the Saudi Stock Market (SSM) faced a big market crash, resulting in the Capital Market Authority (CMA) to cancel the trading of these two companies Al Sanie and Saad Group. Accordingly, these events raised serious questions regarding the role of different motoring bodies such as the board of directors in protecting the interests of investors. This forced the Saudi government and market regulators to respond by directing companies to improve their corporate governance as well as undertake legal and institutional reforms. This for example, resulted in Corporate Governance Regulation (CGR) (2006), framework on corporate governance best practices to be followed by banks, and strengthening of supervisory roles within the financial sector (The World Bank, 2009). Though these measures point to the right direction, the board of directors is needed to ensure that companies are implementing these measures as demanded by the authorities and the regulatory bodies.

This study will contribute to the knowledge of corporate governance in Saudi Arabia and help companies to develop regulators in developing suitable roles for board of directors in regard to corporate governance. Therefore, the Capital Market Authority may need to improve skills and responsibilities of boards

1.2 The importance of the topic

Presently, the importance of good corporate governance is being underline by governments and regulatory bodies to avoid corporate scandals that have witnessed in several countries. Certainly, the, corporate governance is an important tool in developing and controlling business. This is underpinned by the fact that corporate governance advocates for principles like fairness to shareholders, helping immediate communities, fighting unethical conduct and encourages companies to disclose their information. Several factors also indicate that corporate governance performance is affected by internal and external systems, one of them being the board of directors. It has been observed that there is a positive relationship between the board of directors and the firm’s performance.

Saudi Arabia like many other economies is going through increase market activities that are putting a lot of pressure for companies operating within the country to enhance their corporate governance practices. Owing to this, board of directors has a duty to ensure that corporate implement effective corporate governance practices. It is against this understood that it has become important to study the responsibility of the board of directors in corporate governance in Saudi Arabia.

1.3 Problem of study

This research study aims at analyzing the responsibility of board of directors in corporate governance in Saudi Arabia. As stated in the introduction part, Saudi Arabia in the recent past faced extraordinary stock market crash in 2006 that brought to the core the important role played by corporate governance (Al-Matari, 2012). However, there has been little research on the responsibility of the board of directors in corporate governance in Saudi Arabia. The effectiveness and efficiency of board or directors in performing the oversight role in corporate governance is expressed in different terms like composition and size. However, studies have varied on the which factors create an effective board of directors that can be used to ensure that an organization adopts corporate governance practices that will result in positive performance of the organization. This creates the need to analyze the responsibility of board of directors in corporate governance in Saudi Arabia.

1.4 Study Questions

The study questions for this research have been selected with the objective of understanding the role of the board of directors in corporate governance. This implies that each research question will be further expanded in subsequent chapters of the study. This further examination of the study questions will help in answering the present research question concerning the responsibility of Board of directors in corporate governance in Saudi Arabia. To achieve this aim the following research questions have formulated.

What are corporate governance practices in Saudi Arabia?

What are the responsibilities of board of directors in corporate governance in Saudi Arabia?

What is the improvement required on corporate governance provisions in regard to the responsibilities of the board of directors?

To answer the questions above, the main broad objective of the research study is to investigate corporate governance in Saudi Arabia and its relationship with board of directors. Alongside this broad objective the following specific objectives are also significant to the study:

to investigate the relationship between board size and firm performance in Saudi Arabia

To investigate the relationship between the independence of the audit committee and firm performance

To investigate how frequency of meetings affects firm performance

1.5 The reasons for choosing the topic

The current topic has been selected because Saudi Arabia as an emerging economy is facing increased interest to improve its corporate governance. This is because good and effective corporate governance will reduce the vulnerability of the Saudi stock market; enhance the property rights and lower transactions costs. In addition, strong corporate governance increases the investor confidence within the markets. However, the board of directors has a big responsibility in success of corporate governance. This research is interested in understanding the responsibilities of board of directors in relation to corporate governance. Understanding these responsibilities will assist in formulating strategies to improve oversight work of the board of directors regarding corporate governance.

1.6 The Structure of the Study

The dissertation is arranged in 5 chapters as underlined below

Chapter 1: Introduction: this chapter opens the with research paper by providing the background information of the dissertation, outlining the importance of the topic, pproblem of study, study questions and T reasons for choosing the topic.

Chapter 2: the literature review: this reviews the past literature on corporate governance and role of the board of directors in Saudi Arabia.

Chapter 3: methodology: this chapter describes the research methodology, instruments and techniques adopted by this dissertation to gather and analyze the data.

Chapter 4: data analysis: Describes both qualitative and quantitative techniques to be used in presenting and interpretation of the data in graphical forms and explains the findings.

Chapter 5: Conclusions, Recommendations: This is the final chapter, it summarizes the findings in each of the chapters as a conclusion, and offers recommendation based on the findings of the present research.

Literature review

Background of Corporate governance in Saudi Arabia

Corporate governance in Saudi Arabia was entrenched in 1985, when the ministry of commerce and industry enacted the disclosure and transparency standard. Al-Mulhem (1997) explains that corporate governance was strengthened in Saudi Arabia through this standard, owing to the fact that disclosure and transparency is viewed as one of core factor of corporate governance best practice. Al-Mulhem (1997) restates that the enactment f this standard in Saudi Arabia was an important decision that enhanced accounting and reporting in the country. Before, 1985, disclosure requirements in Saudi Arabia were awfully low. Advancement in corporate governance was made in 2006, when developed code of corporate governance. This code was developed to harmonize the standards of Saudi Arabia with international standards of corporate governance for example, the OECD code. The Saudi Arabia code of corporate governance comprises of three sections, Al-Janadi, et al (2013, 26) names them as “the rights of shareholders, the general assembly, disclosure and transparency and board of directors”.

Board independence

Past empirical studies have found a positive relationship between board independence and corporate voluntary disclosure. One such study was carried out by Forker (1992), which found a positive relationship between the number of external directors on the boards and comprehensiveness of the financial disclosure given. Similar findings have been reported by Laksamana (2008); Boesso and Kumar (2007) and Arcay & Vazquez (2005). Some studies have attempted to explain this positive relationship. For instance, Klein (2002); Beasley (1996) both established that the possibility of corporate managers to manage earning and engage in fraud is reduced when the number of non-executive directors on board is high. More so, Gul and Leng (2004) assert that a larger number of independent directors enhance the role board monitoring and increases the degree of corporate transparency.

On the contra, some empirical studies have found a negative relationship between external directors on boards and the degree of voluntary disclosure. For example,

Eng and Mak (2003) and Hoitash, et al (2009) found this negative relationship. similarly some studies such as Ho and Wong, (2001); Haniffa and Cooke, (2002)have found insignificant difference between independence of boards and voluntary disclosure.

According to Rashidah, and Yaseen, (2006) the board independence indicates the level of the independence of the board from the management of the company. The independence depends on the number of external board directors. Al-Matari et al (2012) note that including independent external directors is a critical tool to help the board of directors in overseeing the activities of the management of the company. Abbott et al (2004) explain that the OECD code of corporate governance (2004) outlines that independent board members have the ability to contribute considerably to the decisions taken by the board. Independent board directors are thought to be more objective in examining the performance of the management. More so, these independent directors play a crucial function in areas where the varying interests of the management, the shareholders and the company may differ, for example on succession, corporate control, audit function and executive remuneration.

Understanding that significance of having a high number of independent directors on the board of directors is important for a company. Indeed, as stated before, a numbers of researchers have found a positive link between board independence and shareholder interest. In addition, the proportion of independent or external directors on the board is usually used to assess the board independence. According to Al-Matari et al (2012) past findings have consistently reported that the number of independent directly has a positive relationship with the monitoring and financial reports. Instance, Beekes et al., (2004) in their study found that companies with a comparatively high percentage of external directors on the board, increased the conservativeness of these boards. Similar findings have been reported by Kiel and Nicholson (2003) who investigated the link between board demographics and corporate performance in selected Australian big public traded companies. Their study also revealed that there exists a positive link between the number of external directors and the performance of the company.

The size of the Board of Directors

The board of directors is responsible for overseeing the operations of the organization on behalf of the shareholders. The size of the board of directors therefore its effectiveness has drawn a lot of argument among various scholars. When talking of the board of directors of a given company, reference is made to the total number of directors who constitute the board. In this perspective and basing on the number of directors who sit in the board, there could be a small or large board of a company. A lot of contrast has existed among various researches who have studied the effectiveness of both small and large boards of directors in minimizing the agency costs of their companies as well as the suitability of their management practices.

Board size

Researchers on one side have argued that larger boards are effective when it comes to safeguarding the interests of the shareholders because the large boards varied expertise in addition to a wide range of experience which constitutes the some of the greatest assets in the synergistic governance by the board. Additionally, a large board is powerful and this is vital when it comes to advising and counseling on strategic options of the firm. Some writers such as Abdul Rahman and Ali (2006) as well as Zahra and Pearce (1989) have argued that having a large board is crucial because it helps create corporate identity as well as strengthening the link between the environment and the firm. To further support this stand, Forbes and Milliken (1999) have argued that the size of the board has a bearing on its effectiveness. For instance, they say that for a large board a wide range of skills and knowledge is at their disposal. Additionally, cognitive conflict is enhanced by the huge perspective assembled by a large board. According to Pfeffer (1972) the resource dependency theory points to the fact that the variety of knowledge present in large boards is crucial for resource management.

On the contrary some scholars have strongly advocated for a smaller board of directors citing various reasons. First of all, such researchers have criticized the credibility of large boards by saying that a larger number of directors frustrate decision making, coordination and communication as these processes become increasingly complex in the large boards. Again, in large boards it is argued that coordination of the various contributions of group members is very difficult. Proponents of this idea point to the fact that when the board is large, effective utilization of skills and knowledge is also difficult. Large boards are criticized on the basis that building trust, having strong cohesion, maintaining norms, building and maintaining trust and personal relationships is a daunting task. According to Lipton and Lorsch (1992) a large board is dysfunctional because it is easier for top managers to control the large board that does not realistically criticize the management decisions.

After analyzing various views on the size of the board, Abdellatif (2009) came to a conclusion that the performance of a corporation was negatively related to the size of the board but the size of the board was positively related to the value of the firm. The scholar also said that large boards did not necessarily add value or influence the value of accounting information. Supporters of a small board say that contradiction in objectives of the firm does not exist. Various reports and committees best practices in corporate governance supports small sizes of the boards of directors. For instance the Hampel Report (1998), Saudi Code of Corporate Governance (2006) and the Malaysian Code on Corporate Governance (2000, Revised 2007) support a smaller size of the board. Studies by Byard, Lin and Weintrop (2006), Yermack (1996) and Vafeas (2000) have found an association between disclosure and board size. The small size of the board therefore aids in quality management and better disclosure.

Board Member Perspective

There may be a difficulty in pinning a responsibility or accountability to the board of governors without understanding the role this board plays in terms of each board member or based on the role generally assigned to each board member. While members of the board may be appointed based on the individual’s expertise, the members have to understand that the authority they have is not exercisable collectively (Al-Matari et al 2012). According to the Saudi Arabia regulations on corporate governance (2011), there are rules and standards that control the management of joint stock companies that are listed on the Saudi Stock Exchange to guarantee that there is compliance with the best practices in governance to ensure that the rights of stakeholders are protected. According to the regulations, the board of directors is responsible for approving the corporate body’s strategic plans and key objectives. Besides this, the board of directors is also responsible for supervision of their implementation. As is evident, this mandate implies that the board of directors is answerable if and when the company’s strategic plans and objectives are not steering the company in the right direction. By and large, the board is thus culpable when a corporate body fails because it has an approval and a supervisory role in the formulation and implementation of the strategic plans as well as the objectives. Among the roles and functions of the board mandated by the Saudi Arabia corporate governance regulations, the board must lay down a comprehensive plan for the corporate body or company, detailing the main work plan and the strategy regarding management of any risk, review and revision of such policy. Determination of capital structure is also part of what the board is mandated to take care of and this includes establishing the accompanying financial objectives and then approval of annual budgets. This aspect of the role of board of governors shows that even financial failure of the corporate body shall ultimately cast culpability on the board. Coupled with the fact that another regulation (Corporate Governance Regulation 1(2) 2011) mandates the board of governors to supervise the main capital expenses and the acquisition or disposal of assets implies that almost everything that happens in the corporate body is in the limelight of the board and it is culpable when almost anything goes bad.

Audit Committee Variables

Independence of Audit Committee and Firm Performance

There are a number of factors that are related to the audit committee and which have a direct impact on the firm performance. Past studies have delved into investigating the impact of various audit committee variables on firm performance. For instance, the study by Chan and Li (2008) brought out the empirical result of the relationship that exists between audit committee independence and firm performance though the results generally showed that it is ambiguous. In the same study, Chan and Li (2008) established that autonomy of the audit committee such that there are at least 50% of expert-independent directors perform on audit committee has a positive impact on the performance of the firm based on the measurement of Tobin’s Q. in a similar light, the study by Ilona, (2008) established that there is a positive correlation between audit committee independence and performance of the firm performance when analyzed from the Return on Assets (ROA) basis.

Additionally, Erickson et al (2005) contended that independent directors can lessen agency problems. Founded on the contention provided by Erickson et al (2005) that the independence of a firm’s directors can help in reducing the agency problem, it can equally be argued that independence of audit committee can also help in reducing the agency problems. What this means is that a positive relationship between the independence of audit committee and firm performance is not only expected but also justified. Following from the above contention with reference to the agency theory, it is possible to empirically test the hypothesis that there is a positive correlation between the autonomy of the audit committee members and firm performance.

Audit committee meeting and Firm Performance

The frequency which members of the audit committee hold meetings should be considered to be an imperative attribute for the monitoring effectiveness of the audit committee (Lin et al 2006). In another study, Anderson et al (2004) argued that audit committee supervises the internal control and supplies steadfast information to the shareholders. For that reason, according to Hsu (2007) audit committee reinforces the internal auditing function and watches over management’s evaluation of business risk.

Xie et al (2003) add that the frequency of audit committee meetings is deemed as a surrogate for audit committee function.

The point by Xie et al (2003) as noted above therefore implies that the audit committee that meets more regularly with the internal auditors has better information about issues that relate to auditing and accounting. When a significant auditing or accounting concern comes up, the audit committee can direct the appropriate level of internal audit function to deal with the problem without delay. As a consequence, an audit committee that conducts meetings frequently can mitigate the likelihood of financial fraud in the firm (Abbott et al 2004). Audit committees that essentially inactive and which conduct with smaller number of meetings are not likely to effectively take charge of management. In a study conducted by Beasley et al (2000), the authors found that fraudulent companies with corrupted earnings and financial reports have smaller number of audit committee conventions than firms that do not experience such fraudulent cases such as misstatement of earnings. An audit committee that regularly conducts meetings has sufficient time to supervise the financial reporting practice, detect and ascertain management risk and monitor internal controls. Accordingly, firm performance strengthens with audit committee activity. More outstandingly, there have not been many studies that have focused on examining the impact of audit committee meeting on performance of the firm performance. As a point of illustration, Hsu (2007) established that audit committee meeting has appositive relationship with firm performance. This implies that on the basis of investig7ation into the subject of audit committee meetings, it is justifiable to empirically test the hypothesis that the frequency of audit committee meeting has a positive correlation with firm performance.

Audit Committee Size and Firm Performance

Another variable that relates to audit committee is its size and this is a relevant characteristic regarded as being relevant to the successful discharge of its duties (Al-Matari et al 2012). According to assessment done by Al-Matari et al (2012) it is generally proposed that an audit committee should have a minimum of three audit committee directors; and among the corporate governance reports that recommend this include the Capital Markets Authority and the New York Stocks Exchange. These recommendations not only provide evidence of the significant role the size of the audit committee plays but also points to the significance of the main argument behind audit committee size, which holds that a bigger committee size has superior organizational standing and authority (Al-Matari et al 2012) and an extensive knowledge base (Karamanou & Vafeas, 2005). Nevertheless, an audit committee can experience process losses and dilution or dispersal of responsibility if it becomes extremely. Similarly, just as the previous hypotheses that have been fronted for investigation and testing, the aspect of audit committee size can also be empirically investigated by testing the hypothesis that the size of the audit committee has a positive correlation with firm performance.

Research Method and the Study Models

This research undertaking only focuses on the listed companies in Saudi Arabia, without including financial companies at the end of the year 2010. The total number of companies in Saudi Stock Market (TADWAUL) is 176 companies at the end of the year 2010.

Quantitative Research Design

This study applies quantitative research approach. This is what can also be referred to as the research design in the study. Creswell (2003) offers an explanation of research design by observing that research design is a framework that guides the researcher in carrying out the study. They go on to state that research design links the research questions to the data collected. There are several research designs that a study can employ, these designs are grouped based on their logic, results, process and objective of the study. It is also possible to describe a single project using different ways.

One of the research designs is quantitative research which is used to measure individuals, cases or units and evaluate limited aspects using numbers. On the other hand, qualitative research normally entails qualitative data and assesses a lot of aspects of a small population of cases over a short or long time and explains those aspects. Similarly, a researcher can use a mixed approach where he combines both quantitative and qualitative research methods.

Accordingly, this can be observed in the present research in that element of qualitative; however small or minute, mixed with the quantitative aspects boil up to applied a mixed research design. In addition, Creswell (2009) provides support for this notion by noting that that approach helps the researcher to get better results since the each design complement another. As observed Creswell and Plano-Clark (2011), the mixed approach provides better insights in the aspect being researched. However, while the research basically focuses on quantitative approach as the most preferred strategy, it would not go without realizing the advantages of the approach by comparing it with the aspects of the sister approach: the qualitative approach. Creswell (2009) provides a good starting point on the basis of giving the merit of the qualitative study by opining that qualitative method provides verbal data instead of numerical values which means that qualitative method does not use statistical analysis, but rather uses content analysis to describe and understand the research findings. Following this reasoning and understanding, it implies that to use the qualitative method, a research employs inductive reasoning and not deductive. Creswell (2009) turns to the quantitative methodology and explains that the key aspect projected through quantitative methods is the validity of the measurement and its reliability. Using these two aspects, the researcher can generalize the findings and have a clear predication of the cause and effect. This explanation shows how generalization is an important strength that is keenly put into account in the case where quantitative approach is used.

Philosophical Basis for Research DesignRationale for choice of quantitative bias in approach mixed method design as the best research design for the study was arrived at based on several aspects of the research study that call for a mixed methodology approach in order to be effective. First off, the study encompasses multilevel perspectives that that are intended to solve research questions that require real-life contextual understandings. For this to be achieved effectively, Creswell (2003) admonitions that a quantitative method approach is essential to ensure that the advantages of employing quantitative research are of benefit to the study. The first advantage comes from the fact that quantitative rese4arch approach employs prescribed procedures that make it more standard and can be replicated easily under similar circumstances. When analyzed on the perspective, this point basically implies that quantitative research commands better grounds on the basis of generalizability. The quantitative approach allows for a broader study approach to be carried thereby enhancing the generalization of results and it also brings the researcher to the platform of using and building upon good data collection methods such as standardized methods such as in-depth interviews and survey questionnaires. Creswell (2003) further points out that taking the quantitative method approach enables the research study to draw from the strengths of the quantitative that relate to avoiding bias in the study. Using quantitative approach helps in avoiding personal bias that can jeopardize reliability (Creswell 2009). Quantitative research also allows for greater objectivity and accuracy of results and these are important when considering the validity and reliability.

In addition to the philosophical bases provided above for choice of research design, there is yet another basis for the choice of quantitative methodology approach as identified by Greene (2007). Greene points out that generally researchers and investigators collect diverse types of data and these will ultimately need to be quantitatively analyzed in order to make sense in terms of decision making (Greene 2007).

Quantitative Data Analysis

According to Creswell and Plano Clark (2011) there are about four issues in quantitative research method and they mainly concern the quantitative data analysis. The first is the aspect dealing with hypotheses, and then there is causality, generalizability and reliability. The authors point out that since quantitative research is often concerned with establishing evidence to either concur with or contradict a formulated hypothesis or a held idea; hypothesis testing is a very essential part of the entire quantitative research. Formulating hypotheses for testing starts with formulation of two hypotheses where the null hypothesis forms the backbone of what is being tested since it is the one that indicates no change and it is the one to be rejected or accepted (Gupta 2011). Hewitt and Cramer (2007) add that the formulation of null hypothesis provides good basis for selecting a sample from which evidence is sought to support the null hypothesis or if it does not support the null hypothesis then it supports the alternative hypothesis. The alternative hypothesis is basically the experimental hypothesis that allows the researcher to have an alternative option for decision making when the null hypothesis is rejected. The other issue that quantitative research has to take care of is the causality and this is essentially concerned with cause and effect hence it ensures that the researcher clearly identifies the independent and dependent variables correctly. Gupta (2011) explains that independent factor in research study is the variable that is deliberately manipulated to determine what effect it has on another variable while the dependent variable is the one that the researcher measures to find out the effect of the independent factor. In this study, the dependent variable is “firm performance” and it shall be evaluated on the basis the company’s To

Corporate Governance Practices In The Uk The Case Of Greene King Plc

Corporate Governance Practices In The UK: The Case Of Greene King Plc

Contents

TOC o “1-3” h z u HYPERLINK l “_Toc376172867” Overview of the Case Study Organisation PAGEREF _Toc376172867 h 1

HYPERLINK l “_Toc376172868” Greene King’s Compliance and Disclosure Issues PAGEREF _Toc376172868 h 1

HYPERLINK l “_Toc376172869” Shareholder Relations PAGEREF _Toc376172869 h 5

Overview of the Case Study Organisation

Greene King is a leading UK brewery located in Bury St Edmunds, Suffolk. The brewery is made up of three core businesses – retail, pub partners as well as brewing & brands. Retailing involves company operated pubs, hotels and restaurants, pub partners involves agent operated pubs while brewing & brands involves two breweries, one in Bury St Edmunds and another in Dunbar (Greene King, 2012). Currently, the brewery occupies about 2 percent of the UK beer market and is a constituent of the FTSE 250 share index and the London Stock Exchange (Euromonitor, 2010). By local standards, a 2 percent market share can be considered modest given the humble beginnings of the company – it started as a small family brewery back in 1799. Greene King’s current market share can be attributed to a series of acquisitions. Some of the most notable acquisitions include Ridley’s in 2005, Morland in 1999, Hardays and Hansons 2006 and Belhaven in 2005 (Greene King, 2012). Moreover, this modest market share can be attributed to the strong “Greene King” brand attached to a host of popular beers such as Abbot Ale, IPA Export, St Edmunds and IPA (Euromonitor, 2010).

However, the company has been involved in a number of controversies in the recent years due to its shrewd acquisition strategy. The company has been accused by consumer groups for trying to create a near monopoly by acquiring competing breweries and suspending the sale of locally brewed beers. For instance, the company was involved in a controversy with revellers of Lewes Arms pub located in Lewes, East Sussex for withdrawing the sale of a locally brewed beer (Davies, 2006). In view of this controversially successful business strategy there is need to examine how the company undertakes its core corporate governance obligations. This concern forms the major aim of this report. Specifically, the report examines the company’s disclosure and a compliance practices as well as its treatment of stakeholders. For purposes of referencing and comparability, this examination will be based on the provisions of the UK Corporate Governance Code.

Greene King’s Compliance and Disclosure IssuesThe UK has one of the most responsive corporate governance laws in the world. Governance of listed companies in the UK is regulated by the UK Corporate Governance Act firstly enacted in 1992 and as amended severally. The code is based on the principle of “comply or explain” – listed companies are expected to disclose any incidences of non-compliance stating reasons for non-compliance (Solomon, 2011). Specifically, the law stipulates best practices guiding key corporate undertakings such as composition of the executive board, shareholder relations, director remuneration, accountability, and effectiveness of the board (Mallin, 2007). Companies that fail to comply with the set governance standards are expected to give out the reasons for non-compliance and how they plan to address similar governance concerns in the future. Those who fail to do so face heavy fines as stipulated in the Listing Rules (Solomon, 2001).

Greene King commits itself in maintaining high corporate governance standards. This is because the brewery understands that high corporate governance standards are critical to the achievement of organisational goals, creation of strong shareholder value, safeguarding stakeholder interests, and delivery of business and corporate level strategies (Clarke, 2004; Solomon, 2011). Greene King believes that it complies with the UK Corporate Governance Code and the Financial Services Authority (FSA) regulations insofar as addressing of shareholder interests is concerned. Specifically, it believes that its strategies to invest in its people through popular value adding brands and long term growth through acquisitions qualify as best corporate governance practices (Greene King, 2012).

At a glance, Greene King’s compliance with the UK Corporate Governance Code can be summarised into the following key indicators: it has in place competent board made up of competitively elected persons with balanced skills and knowledge of the company activities, it employs a performance-based executive remuneration procedure, it adheres to accountability procedures such as risk management, auditing and regular financial reporting, and it has a good rapport with its shareholders (Greene King, 2012). Analytically, these corporate undertakings exemplify good principles of governance and go a long way in helping the company to achieve its long term strategy of delivering value, quality and service to its stakeholders.

Moreover, the company discloses a number of non-compliance incidences. In respect to the UK Corporate Governance Code and the Financial Services Authority (FSA), Greene King discloses the following non-compliance incidences during the 2012 financial year as related to B.7.1 and C.3.1 requirements of the Code (Greene King, 2012). B.7.1 of the Code requires companies forming the FTSE index to subject their directors to annual election by shareholders while on the other hand, regulation C.3.1 of the Code requires listed companies to include at least three directors and all non-executive directors (Mallin, 2007).

In regards to the first non-compliance, the company discloses that it did not subject its directors to the required annual shareholder re-election exercise because there was a clear indicator that a majority of institutional shareholders were not in favour of this requirement. Moreover, it discloses that the decision not to subject its directors to the annual shareholder re-election was as a result of specific circumstances. These specific circumstances included the fact at the time there were only five serving directors, three of whom were re-elected in 2010 and the other two were re-elected in 2011 AGM as well as two new ones who joined the company in 2011 (Greene King, 2012).

On the other hand, the company discloses that it did not meet the minimum requirement regarding the composition of the audit committee membership between 2 May and 26 July 2011. This is because during this time, the audit committee comprised of only two members. However, the company rectified this glitch by appointing Mike Coupe to the committee in the capacity of an independent non-executive director (Greene King, 2012).

These two disclosures underscore the company’s commitment to enhancing corporate integrity. According to Bowen (2008), governance integrity from an Anglo-American model of corporate governance entails fulfilling of shareholders’ interests. Specifically, E.1 and E.2, B.7, C.1 and C.3 regulations of the Code regarding shareholder relations, re-election of board members and transparency require listed companies to hold dialogue with shareholders and to fulfil their interests at all times. This should be enhanced through shareholder participation during AGM and election of board members (Cadbury, 1992). A company that believes in corporate integrity should allow monitoring by large institutional shareholders, should peg director remuneration to their performance, should spread powers among board members – the president should not be the treasurer, should encourage monitoring from the board members and should institute sound internal auditing procedures (Mallin, 2007). In respect to these controls and in view of the foregoing non-compliance disclosures, it is arguable that Greene King’s leadership practices meet the minimum governance integrity threshold. Specifically, the disclosure underscores the integrity of the company’s governance particularly in regards to the composition and effectiveness of its board – though it did not subject its directors to the annual shareholder re-election the current directors are equally qualified to execute their mandate in a professional and unbiased manner.

Nevertheless, the extent to which Green King governance meets the minimum integrity requirements is questionable. One major incidence that puts the integrity of Greene King’s corporate governance practices to question is the Lewes Arms pub stalemate where the company’s decision to withdrawal a popular local beer (Harvey’s Sussex Best Bitter ale), from sale in the pub caused year-long crisis with the pub’s regulars (Davies, 2006). The company was forced to change its policy and to relieve one of its Directors, Mark Angela of his duties following what reports termed as a major corporate climb-down (Minogue, 2007). Based on the overarching notion that one of the core aims of corporate governance is to mitigate stakeholder conflicts and to enhance cohesion among stakeholders (OECD, 2004), it is arguable that Greene King decision to pull down Harvey’s from Lewes Arms shelves was done in complete disregard to stakeholders needs. Specifically, the Code requires the company to develop and implement policies that take into considerations the needs of the internal and external stakeholders. The foregoing disclosures notwithstanding, the Lewes Arms controversy as well as a host of other questionable acquisitions undermines Greene King’s corporate integrity threshold.

These controversies lower the company’s integrity threshold. According to the Anglo-American corporate governance model espoused in the Code, listed companies should roll out business strategies that take into consideration the local communities interests – though the business of any for-profit entity is to make profit, companies should not implement strategies that disrupt the lives of the locals but rather should aim at adding value to the lives of the local communities (Madura, 2009). Specifically, as part of its social corporate responsibilities, Greene King is expected to align its businesses to the local cultural values including availing for sale beer brands such as Harvey’s that have deep meaning to the lives of the communities (Haidar, 2009). Yet the pub has earned a name among revellers in the UK as an aloof brewery interested in enhancing its corporate position in the local beer market, that has lost focus of the local beer tastes and that will not hesitate to close a pub if it feels Overall, any attempt to deprive the local communities of their closely held cultural values is as good as to bad governance.

Insofar as the agency problem is concerned, Greene King’s B.7 and C.3 disclosures amount to good principles of governance. According to Solomon (2011), the agency problem posits that while the manager (agent) is tasked with the core responsibility of safeguarding the shareholders (principals) interests, most of the times managers act out of self interest to maximise their overall returns at the expense of their principals. Some of the most evident ways that managers act in conflict with the shareholder interest is approving unrealistic remuneration packages for directors while declaring low dividends for the shareholders (Madura, 2009). While acknowledging the reality that it is very hard for a company to completely eliminate the agency problem, it is arguable that Greene King fares relatively well insofar as reducing the agency problem is concerns. It achieves this by pursuing a performance-based compensation approach for its directors that allows a direct shareholder influence through AGM and voting. The two disclosures show that the company is committed to giving shareholders the opportunity to determine the composition and hence the effectiveness of the board of directors (Haidar, 2009). Moreover, they show that the company is committed to accountability in reporting to the shareholders the annual performance as well as the projected growth (Solomon, 2001).

From a different front, the two foregoing disclosures underscore Greene King’s commitment to identifying and managing organisational risks brought about by moral hazards and adverse selection. According to Arcot, Bruno and Faure-Grimaud (2005), OECD (2004) and Solomon (2011), company’s can mitigate potential risks by streamlining their boards – only selecting highly experienced, knowledgeable, and committed directors with a clear understanding of the company’s activities. To this effect, Greene King selects directs based on merit – only qualified candidates are shortlisted for approval by the shareholders.

Through the audit committee whose composition forms part of the C.3 non-compliance disclosure discussed above, the company’s competent board manages potential risks by scrutinising the viability of its long term strategies, their impact on shareholders’ interests. Since a competitively elected board is not only capable of achieving its objectives, working as a team, and optimising the utility of key organisational resources such as time, finance, and human capital (Haidar, 2009), it is arguable that Greene King governance practices are capable of mitigating risks such as agency problem. This is true since the board is responsible for the approval of long term strategies and their implementation, approving budgets and financial statements, approving acquisitions and disposals, and overseeing the overall operations of the company as per the set strategic paths (Greene King, 2012).

Moreover, Greene King reduces risks through

Shareholder RelationsAs a leading brewery in the UK, Greene King’s has many stakeholders. These include shareholders, suppliers, customers, government, competitors, trade partners, communities, creditors, debt holders, board members, executives, and normal employees. However, some of these stakeholders are not significant enough to warrant major concern from the day-to-day execution of company strategies (Aglietta & Rebérioux, 2005). For instance, the company is not under any obligations to fulfil the needs of its competitors and business partners. However, other stakeholders such as the government and shareholders warrant much attention. While drawing on the Anglo-American corporate governance model as described by Mallin (2007) and Solomon (2011), these stakeholders can be broadly grouped into two broad categories depending on their position in the company’s corporate governance chart. The two broad categories are external and internal stakeholders. Board members, executive managers, and normal employees fall in the internal category while the other stakeholders fall in the external category.

From an Anglo-American corporate governance model standpoint, it is arguable that the company should be more concerned with the external stakeholders than internal ones. This argument draws from contemporary business practices in the EU and the United States where bulk of shareholders are made of large institutional investors with ownership and controlling powers (Madura, 2009). As a matter of fact, the composition of boards of large multinational companies operating in the EU is purely based on shareholders’ interests – companies create boards that have a clear understanding of their activities, their market, their industry, and their long term customer dynamics (Clarke, 2004; Clarke & Chanlat, 2009). Greene King’s non-compliance disclosure of the B.7 and C.3 underscores this argument – it listened to its institutional investors in its decision not to subject its board of directors from the annual shareholder re-election.

Nevertheless, not all external stakeholders are significant to Greene King’s operations within the UK. According to Clarke and Dela-Rama (2008), the business of for-profit organisations is to maximise returns by leveraging its core competencies and resources. This argument suggests that for-profit organisations are only obligated to serving their customers, abiding by the set regulatory frameworks, and giving back to the local communities through sponsorships and environment-friendly practices. To this effect, Green King should put its emphasis on shareholders, government agencies, and local communities. The nature of the beer UK industry demands breweries to closely monitor customers’ tastes and dutifully respond to any changes thereof. As a matter of fact, Davies (2006) and Minogue (2007) point out that beer drinking is not only a matter of getting tipsy but rather catching up on local issues such as sports, politics, healthcare, and business matters. It is assumed serving its shareholders amounts to serving the local communities (customers) – Greene King’s customers are its shareholders too. This arguments draws from the evidence that customers will tend to buy from company they have invested in (Aglietta & Rebérioux, 2005). Moreover, the company cannot however serve its customers well without honouring its corporate governance obligations as stipulated in the Code and as required by the FSA. Overall, serving shareholders, government agencies and local communities (customers) should be perceived as a single obligation. Of course the company should ensure that it has an effective board of directors so as to better serve its shareholders, government agencies, and the local communities. Since the Code requires the company to put in place an effective board of directors (Clarke & Chanlat, 2009), it is only fair to assert that such board is meant to safeguard the interests of the shareholders, government agencies, and local communities.

Currently, Greene King has very little respect for the local communities. The Lewes Arms pub stalemate highlighted above show that the company gives little emphasis to its regular consumers’ beer tastes and other social values. As a matter of fact, Minogue (2007) point out that Greene King as well as other big beer companies are on the verge of possessing all major beer outlets and converting them into other businesses such as such as restaurants or even residential flats to maximise on profits at the expense of the role such pubs plays in the local communities. It should be noted that the beer industry in the UK is much more of a social industry than a commercial one insofar as customer loyalty and the taste for new products is concerned (Davies, 2006; Minogue, 2007). The Lewes Arms pub, for example, hosts many local activities including sports which are coordinated by the revellers and not by the management. Moreover, some of the pub’s customers are renowned persons while others have been regulars since 1970s (Minogue, 2007). It is therefore ironical for Greene King to withdraw a popular beer with a huge socio-economic connotation without seeking the approval of the regulars.

Overall, the Lewes Arms stalemate taints Greene King’s corporate standing. Greene King has been accused of monopolising the beer market through controversial acquisitions some of which are not approved by its shareholders or even by the local communities (Minogue, 2007). Interestingly, the company does not disclose this major governance weakness as part of the C.2 requirement regarding risk management and internal control. Actually, it reports in its website that it fulfils the risk management and internal control requirement when undertaking its acquisition and expansion strategies (Greene King, 2012). To some extent, this is not true especially when the Lewes Arms stalemate and other acquisitions-related controversies are taken into consideration. Analytically, these actions underscore the argument that the company is yet to accept the contemporary corporate governance practices within the Anglo-American region that put shareholders at the prime position among all other company stakeholders.

Conclusion

Corporate governance from an Anglo-American perspective is all about giving emphasis to shareholder interests. Large corporations such as Greene King are expected by the Code to put in place competitively elected boards, employ performance-based remuneration system for its directors, conform to conventional accountability practices, cultivate sustainable shareholder relations, and subscribe to ethical business practices such as giving back to the community and partnering with community-based groups in addressing climate change concerns. In the event a company does not achieve any of the above feats, it must make a disclosure to that effect and how it is planning to address the non-compliance. Green King fares relatively well insofar as abiding by fulfilling its corporate governance obligations are concerned. It even discloses where it feels it has not fulfilled the regulations. However, the company needs to work closely with the local communities (customers) to reduce incidences of stakeholder conflicts such as the Lewes Arms stalemate. Given the social nature of the UK beer industry, Greene King should work closely with the regulars as part of its long term strategy to create value, quality, and service.

References

Aglietta, M. & Rebérioux, A. (2005). Corporate Governance Adrift: A Critique of Shareholder Value. Northampton, MA: Edward Elgar.

Arcot, S., Bruno, V. & Faure-Grimaud, A. (December 2005). ‘Corporate Governance in the U.K.: is the comply-or-explain working?’ FMG CG Working paper 001.

Bowen, W. G, (2008). The Board Book: An Insider’s Guide for Directors and Trustees. New York, NY: W.W. Norton & Company.

Cadbury, A. (1992). Report of the Committee on the Financial Aspects of Corporate Governance. Gee, London, December, 1992, Sections 3.4.

Clarke, T. & Chanlat, J. (eds.) (2009). European Corporate Governance. New York, NY: Routledge.

Clarke, T. & Dela-Rama, M. (eds.) (2008). Fundamentals of Corporate Governance (4 Volume Series). London and Thousand Oaks, CA: Sage.

Clarke, T. (ed.) (2004) “Theories of Corporate Governance: The Philosophical Foundations of Corporate Governance,” London and New York: Routledge.

Davies, N. (November 4, 2006). Bonfire night protest turns heat on brewery. The Guardian. [Online]. Available at: HYPERLINK “http://www.guardian.co.uk/uk/2006/nov/04/nickdavies.uknews2/” http://www.guardian.co.uk/uk/2006/nov/04/nickdavies.uknews2/ (accessed August 19, 2012).

Euromonitor (2010). Company shares of beer by national brand owner 2006-2010. Europmonitor. [Online]. Available at: HYPERLINK “http://www.euromonitor.com/beer-in-the-united-kingdom/report/” www.euromonitor.com/beer-in-the-united-kingdom/report/ (accessed August 19, 2012).

Greene King (2012). Time well spent: Annual report 2012. Greene King Plc. [Online]. Available at: HYPERLINK “http://www.greenekingreports.com/financial_statements/group_accounts/independent_auditors_report_group/” http://www.greenekingreports.com/financial_statements/group_accounts/independent_auditors_report_group/ (accessed August 19, 2012).

Haidar, J.I. (2009). ‘Investor protections and economic growth’, Economics Letters, Elsevier, Vol. 103(1), pp. 1-4.

Madura, J. (2010). International financial management. Australia, South-Western Cengage Learning.

Mallin, C. (2007). Corporate governance, 7th Ed. New York, NY: Oxford University Press.

Minogue, T. (March 23, 2007). ‘Last orders’. [Online]. Available at: HYPERLINK “http://www.guardian.co.uk/uk/2007/mar/23/britishidentity.travel /” http://www.guardian.co.uk/uk/2007/mar/23/britishidentity.travel / (accessed August 19, 2012).

OECD (2004). ‘OECD Principals of Corporate Governance, 2004, Articles I and V’. OECD. [Online]. Available at: HYPERLINK “http://www.oecd.org/dataoecd/32/18/31557724.pdf/” http://www.oecd.org/dataoecd/32/18/31557724.pdf/ (accessed August 19, 2012).

Solomon, J. (2011). Corporate Governance and Accountability, 2nd ed. West Sussex: John Wiley & Sons.

Conflicts in healthcare Settings

Conflicts in healthcare Settings

Name:

Institution:

Date:

Final Written ProjectIn 2014, business and management professionals are concerned with the conflict that takes place in their organizations and its destructive potential – even though conflict can be positive and useful in some situations. There are numerous conflict issues in today’s global workplace, especially with the current international economic situation. As a new business and/or HR Director, you have decided to start a new professional development and learning program for employees. You will be presenting different topics during noon lectures on issues that are relevant to your company or organization.

For the first lecture, you should select one of these topics and prepare a written report that will be distributed to everyone (25%).

Select any one of these topics for your Current Issues Report (CIR):

Conflict management system design (also known as resolution system design) – approaches to the design of complaint-handling (grievance) systems that emphasize interest-based over rights-based dispute resolution.

Managing conflict in healthcare organizations – the impact and forms of conflict in hospitals and other health care institutions.

Conflict and disability management – management of conflicts that arise from employee disabilities and reasonable accommodation disputes.

Conflict and its resolution in the construction industry – the impact of conflict and the role of mediation and other forms of dispute resolution among owners, contractors, subcontractors, architects, suppliers, lenders, insurance carriers, and bonding companies.

Conflict and its resolution in the religious organizations – conflict within congregations and within church hierarchy.

Conflict and its resolution in the real estate industry – the impact of conflict and methods of resolution of disputes among buyers, sellers, and agents.

Conflict and its resolution in government organizations – the forms of conflict and methods of resolution in government organizations. Government organizations include DOD, military, and federal and state government.

Conflict and its resolution in the financial industry – the forms of conflict and methods of resolution in financial organizations – the impact of conflict and methods of resolution of disputes among all parties.

Other Conflict Issues – could be as applied to a particular situation, concern, or issue. (Ask permissions first)

Conflict and its resolution in “my” particular company/industry – the forms and impact of conflict between managers and employees and among employees. Think about an organization with which you are currently associated. This company or organization can be the place where you work or any other organization such as a team, club, volunteer organization, etc. It must be an organization in which your involvement is significant enough to enable you to address the issues.

A conflict may occur in a situation when two or more perspectives, opinions, and values are contradictory to one another and have not been agreed upon or aligned (Dinkin, Filner & Maxwell, 2013). Conflicts are always common among individuals and groups. It is always an inevitable condition through which change may be enhanced. Conflicts are always experienced in all kinds of work environments due to the fact that there are disagreements regarding attitudes, beliefs, ideas, goals, values, opinions, perceptions, feelings, and actions concerning issues of importance. In nursing settings, conflicts are inevitable and there are four types of conflicts that may be experienced. These include intrapersonal conflicts, interpersonal conflicts, intragroup conflicts, and intergroup conflicts.

The first type of conflict is intrapersonal conflict. This type of conflict normally takes place within an individual. An example is a situation where a certain healthcare employee has a sick person at home and he/she is the only one who is responsible for taking care of the sick person. In such a situation, the healthcare employee has an intrapersonal conflict, which involves the need of taking care of the sick relative at home versus the need of being at the healthcare workplace. The other good example that illustrates intrapersonal conflict involves a situation when a healthcare employee intends to advance her/his career, but the given employee does not have the time nor the resources to attend school.

The second type of conflict is interpersonal conflict. This type of conflict is normally experienced in a situation where two or more individuals are not in agreement on the best ways that can be applied to best manage a certain problem. An example of an interpersonal conflict is a situation when a patient does not comply with the orders of the physician, regarding his/her treatment prescriptions. Another example is when a staff member does not like his/her assignments. Another situation involves a case where an individual who has been floated feels that he/she has been given a heavier assignment. All the above examples cause interpersonal conflicts in a healthcare setting (Dinkin, Filner & Maxwell, 2013).

The third type of conflict is intragroup conflict. This type of conflict normally occurs between persons that are in a certain specific group (Wolf, 2011). Intragroup conflicts are normally rooted in objective differences and elevated by controlling or antagonistic attitudes and behaviors. The main factors that cause this type of conflict include the struggle for power, economic incentives, position, and value differences.

The fourth type of conflict that may be encountered in a healthcare setting is intergroup conflict. This type of healthcare setting, conflict arises due to the incompatibility in the beliefs, goals, behaviors or attitudes between groups (Wolf, 2011). It normally arises between two competing or distinct groups. Conflicts are thus a result of the mutual dependence of the activities of various groups within the healthcare setting.

The type of conflict that I have experienced in a healthcare setting is an interpersonal conflict involving the program manager, Susy Miller, and Dr. Kincaid. The conflict arose from the way in which the Batriatric program manager scheduled surgeries in a way that the involved surgeons felt that it could not enable them to perform their activities, which are complicated, in an effective manner. The manager’s schedules, according to the providers, will lead to poor patient outcomes (Marcus, Dorn & McNulty, 2011).

This conflicting situation has effects on both the organization and the Bariatric program. The first effect is the negative outcomes of the program. This arises from the fact that the providers of the program feel that they are not given enough time for preparation for the surgeries and also the scheduling, which they believe that won’t allow them to perform the surgeries in an efficient manner. The second effect is that the program will lead to cases of discrimination. This results from the provider’s allegations that the program managers favors some of the providers in the program. The third effect majorly concerns the organization. The organization will have to make some program changes to ensure that the program is favorable to all the providers, without any forms of favoritism (Williams, Dickinson & Robinson, 2012).

There are several solutions that can be applied in the above case scenario. The first one is the introduction of a new Bariatric program manager to avoid any form of favoritism on the providers. The second solution is the restructuring of the Bariatric program to schedules that favors better results from the providers and also that gives the providers enough time to prepare for their surgeries. Considering all the aspects presented in the scenario, the best option would be the restructuring of the Bariatric program to encourage better results from the providers and also to allow the providers enough time to prepare for surgeries before they perform them (Marcus, Dorn & McNulty, 2011).

I believe that both Ms Miller and Dr. Kincaid will be in support of the solution to the conflict. The only person who will have a difficulty will be the program manager, since he will lose some of his powers if the changes are made.

Reference

Dinkin, S., Filner, B., & Maxwell, L. (2013). The exchange strategy for managing conflict in health care: How to defuse emotions and create solutions when the stakes are high. New York: McGraw-Hill.

Marcus, L. J., Dorn, B. C., & McNulty, E. J. (2011). Renegotiating health care: Resolving conflict to build collaboration. San Francisco: Jossey-Bass.

Williams, I., Dickinson, H., & Robinson, S. (2012). Rationing in health care: The theory and practice of priority setting. Bristol: Policy Press.

Wolf, J. A. (2011). Organization development in healthcare: Conversations on research and strategies. Bingley: Emerald Group.

Conflicts over Efficiency, Equity and Voice

Conflicts over Efficiency, Equity and Voice

Name:

Professor

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Course

Date

In a bid to ensure that a contract is renewed, negotiations are taking place between Communication Workers of America and Verizon. At the same time, in the month of August, a two weeks strike was held by members of CWA. Meanwhile, talks are now underway in an attempt to come to an agreement concerning the matter. The management has been involved in pursuing and arguing on matters of efficiency, VOICE and Equity. At Verizon Communications the number of workers is 35000 who are represented by the CWA. The latter want the dispute and strike to be supported by congress. The issues being addressed are on VOICE, Equity and Efficiency (Banerjee, 2011).

There is a need to ensure that jobs, which are middle class, are not destroyed, as well as the employees having rights to collective bargaining. It is believed that the workers who are striking have more advantages, as compared to others. For example, they get time off and their health care is paid for. Verizon does not want to continue awarding these rights to the employees. The striking workers want their wages to be increased (Banerjee, 2011).In turn, management will agree to this so long as evaluation is done and the worker has the requirements. This means that there will be increases, based on progression as well as on an annual basis. There will not be any increase in wages if the worker is not able to meet the requirements of their position.

Workers in the business and consumer call centers will have job titles, which are new created for them. The Efficiency issues are many and should be addressed. The schedule will ensure that the workers are on a wage, which is commissioned based. In turn, the workers will be entitled to pensions. Those who do not meet this requirement will not benefit from the Cash-out option, as well as the death and sickness benefit (Banerjee, 2011). The other issue is that workers will be entitled to benefits such as health care. Those missing out on these benefits will not be entitled to benefits such as dental, accident disability, vision plans, among others.

The issues are many such as Job security, which has been raised. This is meant to ensure that the workers are entitled to provisions of job security. This also applies to Movement of Work Protection as well as the transfer provision, which is 35 miles. Verizon wants to ensure that the new agreement initiatives are disbanded. The purpose of this is to ensure that the contracting levels are increased (Equity News, 2011). The VOICE issues raised are that on Christmas Eve, it will not be half day; the Program for next step will not exist as well. The workers will have to cope without the Reimbursement Fund for Dependent Care. Collective bargaining is another VOICE issue.

CWA wants to ensure that it benefits from the earnings, which Verizon makes. It believes that in order to remain competitive it has to change its cost structure. In regards to the issues, which were raised, CWA wants to change polices and rules at Verizon to cater to the demands of the employees who are striking. The union believes that their pay should increase as the company is earning extremely high profits is an Equity issue. According to many analysts of labor management, the chances of the contract being renewed is extremely unlikely. In conclusion, the management should try and be more accommodating to the demands of the CWA. In turn, they will not suffer from failed businesses as well as reduction in customer numbers (Equity News, 2011).

References

Banerjee, Devin. (2011). Bloomberg BusinessWeek. CWA Union, Verizon Appeal to Congress Amid 4th Day of Strike. Retrieved from http://www.businessweek.com/news/2011-08-10/cwa-union-verizon-appeal-to-congress-amid-4th-day-of-strike.html

Equity News. (2011). Art Brodsky: The Pebble in the Shoe of the Communications Workers Strike against Verizon. Retrieved from http://www.equitynews.info/2011/08/12/art-brodsky-the-pebble-in-the-shoe-of-the-communications-workers-strike-against-verizon

Constant Capital, Variable Capital, and Surplus Value

Constant Capital, Variable Capital, and Surplus Value

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Institution

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Course

Date

Constant Capital, Variable Capital, and Surplus Value

Introduction

Constant capital is the total cost of a production process at a given time that does not change, referred to as the fixed costs of production. This could cover the costs of machinery, setting up the plant, equipments, new technology, computers, fixed assets like furniture, etc. These costs do not change whether production has taken place or not. On the other hand, variable capital is the costs that change with the level of production. This could include cost of raw materials, electricity, fuel, employee wages, etc. Surplus value can be defined as the new value created by workers in excess of their own labour cost or simply referred to as gross profit. This surplus value is the basis of capital accumulation. Thus, capital accumulation is the gathering or amassing of objects of value that increases wealth through concentration. Capital accumulation is the creation of wealth or financial asset which is later invested for the purpose of making more money. Human capital is another form of capital where one can invest to improve his or her abilities through education.

Capitalism from an economic viewpoint is the economic activity that is structured around capital accumulation. Factors of production are those variables that enable inputs to be put in place with the ultimate result of finished goods or services. Therefore, input determines the quantity of output. In economics, factors of production are the inputs into the general production of other useful products, they include, land, capital, labour and the entrepreneur organizing the factors together. Stocks like land and labour and capital goods are referred to as primary factors of production because they facilitate production, but neither becomes part of the product, e.g., Raw materials or become significantly transformed by the production process such as fuel or electricity. Other factors of production include include natural recourses, human capital (Stock of knowledge), state of technology, entrepreneurship, etc.

Role of Constant Capital on Capital Accumulation

Combining certain materials, tools, machines, and labour produces goods and services that people wish to purchase since they consider these goods and services essential. Some economist refers this attribute of commodities as use value, i.e., The production process of combining these different factors of production to make something useful. Therefore, labour power, tools, and machinery are all indispensable factors that can not be made. The problem is how can these factors of production be most efficiently combined by using the fewest input factors. Efficiency is using all the available factors of production to produce the highest possible output. Sometimes the level of unemployment prevails to contain workers’ demand for higher wages, fewer working hours, and better working conditions. Labour power is also wasted workers who are able and willing to work cannot find jobs. This implies that unemployment is foregone production, and cannot be referred to as efficiency. Labour power can be used in a way that it harms the health of workers who will need medical services. This can be averted if higher standards of occupational safety and health are put in place.

Efficiency can be defined economically as the costs a company must incur without considering the side effects the effects the business might have on the environment, health of workers, and the society. The neglect of social costs in mainstream economics leads to aspects of the process of production that will go beyond the minimum input. All companies are concern with profit maximization; therefore, costs must be as low as possible. Economists define profit as the difference between between company revenue and the cost of buying materials, machines, hiring workers, etc. Is labour the ultimate source of a company’s profits? To answer this question, a basic distinction must be made between the working class and the capitalists.

Alot of the money goes to speculating in land, financial assets, and commodities, but these speculations do not produce items of value. So they do not generate profit. It just involves moving existing values amounts from one pocket to another. It is important to note that, money is used to purchase a means of production and hiring employees who produces sellable goods and services can create value. Only when the original value of capital is smaller than the value of the commodities produced, and then revenue a company receives by selling these commodities can be termed as profit. Therefore, the difference between the revenue and the original capital is called the surplus value. Thus, the profit accumulation process begins when with money spent on markets, i.e., labour power and other means of production, and ends with money earned when a firm sells these commodities, i.e., goods and services. A company pays for the means of production and labour power according to the exchange value of these factors. Labour power is quite crucial as the value of raw materials is determined by the time and labour required to extract and process them.

Capitalists force workers to work more hours, and considering the principle of equal exchange, the worker is paid according to the value of his or her labour power (Wage Goods). If they work for more time than are needed to make those wage goods, additional wealth, surplus value is produced.

Rosefielde, (2001), argue that the production of surplus value is the principle reason to hire workers. A company realizes this wealth when it sells all the goods and services that are made within a given time. This labour that produces a value that is higher than the money invested originally, and that portion of the outlay is termed as variable capital. It should be noted that only constant and variable capital represents the cost of buying the means of production. Hiring labour power and the surplus value represents the additional value. Companies use this surplus value to pay dividends for shareholders, interest to creditors, rent to land owners, and salaries to managers, who are the capitalists’ class. The capitalists’ class lives off the surplus value that is produced by the working class. What the capitalist’ class do with the surplus value is up to them, as they own the means of production and the labour power, as well as the commodities produced by their companies. They can hire more managers, live in luxury, invest in additional means of production and labour power, and keeps the process of capital accumulation going. The only factors that can limit this process of capital accumulation and disposal by the capitalists’ are competition from other capitalists’ enterprises and certain technologies.

Neoclassical economic theories analyses inequality, underemployment, poverty, and wages as objectively, yet they are wrong. Inequality manifests differences in productivity. It is imperative to note that minimum wages, and union negotiated wages cause job losses. Welfare and social welfare programs drive people out of the labour force. People are poor and underemployed because they are unproductive. Poor nations will become rich if they accept the neoliberal programs such as free markets, deregulation, privatization, foreign investments, and free trade.

Capitalists’ economies are expansionary in nature, and the rule of the market will always follow. Capitalists will put everything everywhere for sale so long as it brings in profits, and commoditisation of everything, everywhere is as natural, inevitable and good. Neoclassical economics made people believe that it is the system that maintains capitalism. Capitalist economies are engines of economic growth, even the industrial revolution occurred among the capitalist, not in feudalists. Capitalism paved way for technological innovations and rapidly rising output. Growth is uneven among nations, with most of the growth concentrated in few rich capitalist countries. The output produced in capitalist economies could be harmful to human beings and the natural world.

According to Keen,(2004), Compared to other economic systems, capitalism can deliver lots of goods and services. What makes the growth of output possible in capitalists’ societies is the difference between radical economics and neoclassical economics, i.e., the profits of the capitalists. Only if, they make profits will they produce output; and will they invest these profits in new means of production and cause the economy to grow. They begin with some money and end up with a larger sum. Profits are made possible by the exploitation of wage workers, therefore, capitalism can be described as a system whose motto is the accumulation of capital. This ceaseless drive by individual capitalists to make money and achieve growth, (accumulation of capital) is predicated upon the extraction of a surplus from the labour of the workers (Rosefielde, 2001).

Accumulation of Capital

To become a capitalist, it is important to have enough money as it is the main stay of such organizations or systems. Capitalist enterprises cannot be started without money; money is the starting point of capitalist production. This capital money is the one that is used to organise the production of output, i.e., the money capital must undergo a series of transformation with the ultimate aim of converting the original sum into a large sum of money. When they still have capital, the means of production are acquired to facilitate efficiency in production. These inputs are called commodity, capital which includes all nonhuman means of production: factors such as land, buildings, equipment, machinery, and raw materials (constant capital). Others will be used to purchase human means of production, i.e., labour power, which is purchased like any other commodity (variable capital). Once the required amounts of variable and constant capitals are bought, under the control of the capitalist, it is used to produce the desired output. The output is considered as commodities of sale which are returned into the market for selling. If the money obtained from the sale is successful, profits are made accumulation of wealth (Karl, 1997).

Conclusion

Businesses must use a large part of the profits to begin another process of capital accumulation. Capitalists must not only make profits but must see that their capital grows. This is not based on greed, but the kind of competition they are facing. If capitalists do not invest profits in expanded production, and their rivals do. They will not be able to compete effectively in the long run. They may not acquire the best equipment, develop a research facility, enlarge their advertisement budgets, or get bank loans at favourable terms. Failure to do so might lead to disastrous consequences such as closure or bankruptcy, and all amenities such as prestige, high incomes, and political power. Competition forces each capitalist to make profits grow, i.e., accumulate capital.

References

Keen s. (2004). Debunking Economics; The Naked Emperor of the Social Sciences, 2004, p. 294

Karl M., (1997)”Constant capital and variable capital”, in Capital Vol. 1, Chapter 8

Rosefielde, S., (2001), Premature Deaths: Russia’s Radical Economic Transition in Soviet Perspective. Europe-Asia Studies, Vol. 53, No. 8 (Dec., 2001), pp. 1159-1176 : Taylor & Francis, Ltd.

Consulting Company

Name

Course Name

Case Study 2

Date

Instructor’s Name

Consulting Company

Early Riser Consultants is a company that offers organizational behavior consulting practice. The organization specializes in cross-cultural group as well as team dynamics and problems. As organizations are going global, there is need to successfully manage cross-cultural teams. The company is in need of an organizational behavior practitioner who will be responsible for identifying, documenting, analyzing and assessing behavioral problems and issues and recommending intervention strategies, tools and methods for successfully restructuring the company, enhancing team effectiveness and performance and hence organizational performance. Bon Vivant Specialties on the other hand is a company in need of an OB specialist who will offer the services offered by Early Riser Consultants. As the manager of Early Riser Consultants, I am the best candidate that Chinn needs to be hired by Chinn.

Knowledge, Skills and Abilities

Some of the knowledge, skills and abilities that I possess include the following:

Self-competency

I have applied the knowledge, skills and abilities for assessing my own weaknesses and strengths, setting and pursuing personal and professional goals and balancing personal life and work.

Communication competency

I have applied knowledge, skills and abilities that can enable me to use electronic, written, nonverbal, verbal and listening modes of communication to transmit understand and receive feelings, thoughts and ideas. This greatly facilitated the communication in the company that I was working for (Nelson & Quick, 2012).

Diversity competency

I have applied the knowledge, skills and abilities for valuing unique organizational, group and individual characteristics and embracing such qualities as potential roots of strength and appreciating the uniqueness of each.

Across cultures competency

I have applied knowledge, skills and abilities for recognizing and embracing differences and similarities among cultures and nations and approaching key issues with a curious and open mind. This enabled cultural diversity where different cultures came together and worked without any consideration of the existing differences (Schermerhorn, 2012).

Team competency

I have applied the knowledge, skills and abilities for developing, supporting and leading groups to achieve their goals. The teams in the organizations that hired me became very effective and productive and the organization achieved its performance goals.

Change Competency

I have applied the knowledge, skills and abilities for recognizing and implementing new transformations or needed adaptations in the technologies, structures, strategies, tasks and people. This brought a lot of positive change in the company that hired me (Nelson & Quick, 2012).

Problems associated with cross cultural team

1). Misunderstandings: This result from inadequate information or communication problems in the organization. Different cultures have different beliefs and tastes. If these cultures are not well managed, the differences can bring a lot of misunderstanding as the company is going global and embracing diverse cultures (Nelson & Quick, 1996).

2). Parochial self-interests: this arises when individuals in the organization are more concerned with the personal implications.

3). Disagreement over the necessity for change: This arises from no justification for change from some of the board, and the possibility of an outcrop in the disagreement between the advantages and the disadvantages of the proposed change (Schermerhorn, 2012).

4). Low tolerance for the proposed change: this might result from the difference in the assessment of the solution or the perception of sense of insecurity among the employees in the organization.

5). Possible organizational changes to change: existing power structures, resistance presented by the work groups, failures from the previously tried change initiatives, and the already existing power structures in the organization (Nelson & Quick, 2012).

Recommendation

1). Relationship management: This action will be helpful because it aids in the development of relationship contracts and networks that are necessary for the achievement of the set goals in the team

2). Change leadership: Change leadership will enable an effective communication of the team’s initiatives in an approach that aids in the inspiration of adaptive action.

3). Team facilitation: Team facilitation generally aids in the utilization of group processes skills in the inspiration of better working relationship among team members who are diversified in order to achieve the goals of the team (Nelson & Quick, 1996).

4). Empowerment: The inclusion of empowerment in the effective leadership will enhance the ability of sharing information, delegation of meaningful responsibility, participitative soliciting of the ideas, and enabling employees to feel motivated and capable of assuming greater responsibilities (Schermerhorn, 2012).

5). Flexibility: This enhances the ability to change procedures and processes whenever they are necessary in the organization.

6). Interpersonal Understanding: This enables the ability to value and understand the inputs of the diverse individuals in the organization.

7). Entrepreneurial Innovation: This enables the championing of new production processes, services, and products in the organization.

8). Strategic Thinking: this enables the ability to study and understanding the changes in the conditions in the markets, the trends, opportunities, and the identification of optimal conditions.

References:

Nelson, D. L., & Quick, J. C. (2012). Organizational behavior: Science, the real world, and you. Mason, Ohio: South-Western.

Schermerhorn, J. R. (2012). Organizational behavior. Hoboken, N.J: Wiley.

Nelson, D. L., & Quick, J. C. (1996). Organizational behavior: The essentials. Minneapolis, MN: West Publ.

Consulting Project

Consulting Project

Name

Institution

Year

Part 1

Employee selection is a very complex process that seeks to identify talents, abilities, and skills that the job seeker brings to the organization. One of the main merits used when look for an employee is the skill level that can be measured from different angles. The employee section at the organization takes many forms and guided by how and where the value of talent or productivity lies. One of the prime avenues to make value in an organization is to always derive and get the best skills or talents that can help drive the agenda or objectives forward. In line with this, the progressive growth and goal accomplishment relies on the talents that an organza ion relies on in the delivery of tasks. Right from the managerial task to minor tasks, skill searching is done with a key focus on the best persons to deliver the tasks. Being a legal profession, employee selection is first done on the basis of the persons who are eligible in legal matters.

The selection is thus done on the line of value addition that has to be derived from the most inclusive values and talents. To select the employees, key strengths like cognitive ability, personality, interests, values, physical abilities are utilized. One of the most important of this is the cognitive and personality values that are key in this profession. The other key aspects in the selectin is the person’s interest and ascribed values that have to be tied to what and how they value the profession. Area of interest is vital when looking at the key elements of performance that a person needs to deliver the given tasks. The other major parameter used in the employee selectin is the values and level of profession. An individual seeking to work in the organization is required to have attained the minimum professional or academic merits. The other aspect would be the level of experience for those who have worked in other organization. The minimum requirement in terms of years of experience is three years. These requirements are key when determining those who qualify and can deliver to their best.

To improve the organization’s employee selection methods, I would propose for a review of the merits that are applied in every job rank. In particular, I would recommend for a more skill-based selection approach than the level of experience. This would ensure that the selected persons have what it takes to run the tasks given. The other change would be to focus on one’s interest and passion that would help recognize those who have the right spirt to do the job. I believe that passion and interest are key to defining one’s love for the job that would help measure how best they will freely deliver on the given tasks. In addition, the best avenue to attaining the right results and performance is to have the most qualified persons. This brings the need for in-depth analysis ad review of what the employee can do even without close supervision. There is therefore a need to employ persons based on their level of skill and passion or interest in the profession.

Part 2

Question 4

Job training is a key aspect of value addition that ensures good performance. The performance is centered on a valid and integral aspect of improving skill level of the workforce. The key to ensuring that the workers have the right skills is by adding value to what they already pose (Rawat et al., 2016). The training and value addition are thus a key component of the performance improvement. Training at the organization has been the pillar to good performance and efficiency. Over the years, training has been done with an objective to build talents and to enhance efficiency that is the root to good performance. To ensure that training is effective and directed to its intended areas, job evaluation and performance is done at a regular pattern. The areas of weakness are noted and more efforts directed to putting the right efforts and building the right avenues to skill enhancement. One of the key values of a strong training model is to have the talent identification process through which skills can be directed and enhanced. This makes training at the organization effective on the aspects of creating an outlet for stable and productive workforce. The other approach to training is having a goal directed factor that seeks to ensure that every employee performs within his or her area of expertise. This makes training easy because the value addition process is directed towards the intended area. Another way to look at training at the organization is its inclusivity to all areas of performance and departments. The key here is to build a strong work development module that is centered around talents and productivity of the workers. One of the guiding principles in the way the training is done has always been the performance rate or effectiveness ratio. The input-output approach has proven an effective value when creating the right talents and improving the worker performance.

The training programs were in particular effective as they were the basis to the creatin of the right skill enhancement. The skill improvement under the training programs was mainly directed to creating the right outlet for ideas and helping improve on work delivery

(Bryson et al., 2017). The training also helped create the link between the output and efficiency where the performance was measured through the task delivery and ease of carrying out the various roles. In most cases, the value for an inclusive module and the derived skill improvement as stated in the training modules weas greatly encouraged. The training was thus a vital channel to add value to the talents at the work place as well as improving how the tasks were delivered. In particular, the training helped model the workers to positive thinning and productivity that was greatly needed in the delivery of the tasks. One of the key areas that the training helped was in diverting the energy and talents to one point or the right channels to enhance productivity as well as in improving the task delivery. The training programs were beneficial when looking at the inclusive learning and skill improvement platform they provided. In particular, the training helped create the right value for key skills where people could not understand and generate the right efforts to learning.

To improve the training skills and the approach to performance enhancement, I would propose some key changes in regard to the program structure. First, the training should be hinged on ensuring that the workers understand the tasks they should handle. The second approach is to ensure that there is adequate information sharing that will help link the workers and thus improve ideas are passed on easily (Nielsen et al., 2017). The other major step would be to create the right avenue that would be vital in enhancing the effectiveness of the raining. The training should also be geared towards enhancing the areas of weakness that should be directed to the most urgent needs.

To improve on this job, I would propose for an inclusive review of the key performance evaluation. Performance has to be hinged on the real and inclusive modules that are directed to the right areas. One of the ways to boost performance is to look at how and where the workers are failing to deliver. The performance enhancement methods should also be inclusive and have the full capacity in improving the key areas (Bryson et al., 2017). One of the best ways towards this is to look at what and how the performance can be laid down and directed towards the right areas. Still, there is need to have the best task delivery modules as noted above that have to align and pinpoint to what is needed in the current modules. Another area of concern is the inclusive and diverse mechanisms that can be applied when looking at both the input-output element of task delivery that should be directed to making sure that there is efficiency and productivity. In order to boost the value of the task delivered, there should be regular assessment that can and must align with the laid down objectives.

Part 3

Question 1

SMEs operate under a very tight and competitive niche in the field of business or corporate sector. The key to good performance is always about the motivation and the boost to work that comes with various values tied to results (Nielsen et al., 2017). The employees as the key factor in an SME have a key role to play but must also be motivated to work. One of the main ways to motivate the employees is to reward them for the good results they produce. Additionally, the performance should be measured and rewards given as a way to encourage others to do their best. The idea of having effective reward system should be upheld as it is one of the main ways to boost performance (Gerhart & Fang, 2015). Rewarding employees on performance basis is key to deriving the right productivity in an SME. The other main approach is to create the right work environment that will be conducive to productivity and thus motivate performance.

Conducive working environment goes a long way in motivating the employees to deliver good results. Just like in a reward system, good working environment helps induce good work spirit and thus the workers are able to produce good results. To boost work delivery or motivate workers in this organization, I would propose that the management adopts the right reward systems. This can vary from monetary to non-monetary rewards. For example, the management can create the right performance timeline where results are measured at a given time and rewards given to those who give the best results. The reward system should also be base don improvement basis where those who add value to their previous results get recognized and rewarded. Such measures will also encourage the other employees to work hard in a bid to get recognized and rewarded.

Maslow’s Need Hierarchy Theory best fits the explanation for motivation at work place. The theory states that performance is always an end result of motivation that a worker gets when performing a task. The theory helps explain how people derive good sprit in work with the focus on the reward they will get when the deliver the needed results (Ojo et al., 2018). Abraham Maslow’s theory argues that humans have a series of needs, some of which must be met before they can turn their attention toward others. Certain universal needs are the most pressing, while more “acquired” emotions are of secondary importance. Motivation and Performance. Motivation is the combination of a person’s desire and energy directed at achieving a goal. It is the cause of action. It is the cause of action. Motivation can be intrinsic, such as satisfaction and feelings of achievement; or extrinsic, such as rewards, punishment, and goal attainment. Collective and performance-based rewards can help motivate the employees in task delivery (Gerhart & Fang, 2015). For example, the management at the firm can establish means of rewarding like in cash, paid holidays, or job promotion. These direct and strong reward models have proven to be effective avenues to motivating workers to do better in their respective tasks. Most importantly, the reward should target the low ranks or junior employees who should be encouraged to do better to rise in ranks. The job promotion is always strong way to reward the best performing employees and thus boosting performance.

Question 2

One of the main job stressors is workload that often results from accumulated tasks. The job stressor can be termed as the tedious aspect of the profession mainly in terms of time constraints. The major source of stress in the job is the time pressure where the workers find themselves cornered by time and job overload (Nielsen et al., 2017). The issue hinders effectiveness in task delivery thus putting the works under more pressure. Stressors at work place can vary in terms of intensity and nature. One of the main ways to identify the stressors in the workplace is to look at how and where the employees are complaining on the work lateness or time pressure. These factors can help identify the various stressors that hinder effectiveness at the workplace.

Job stressors also arise from the increased tasks that often lead to pressure in the delivery. In some cases, some workers are forced to work overtime thus adding more pressure to their schedules. The issue is often caused by the lack of effectiveness when dealing with the added tasks as well as the time limit during weekdays. To fight this work stress, the management lays down the work protocol by prioritizing on the most demanding tasks. Task urgency is also a vital aspect when allocating the various duties that have to be done. In line with this, the management has derived the right procedures that can be applied when there is work overload. These aspects of work division and sharing of tasks has helped minimize cases of work overload stress. The other aspect is the maximizing of the available time that has added to the task delivery efficiency. These factors are key when addressing the issue of work stress as well as improving work delivery.

References

Bryson, A., Forth, J., & Stokes, L. (2017). Does employees’ subjective well-being affect workplace performance?. Human relations, 70(8), 1017-1037.

Gerhart, B., & Fang, M. (2015). Pay, intrinsic motivation, extrinsic motivation, performance, and creativity in the workplace: Revisiting long-held beliefs.

Nielsen, K., Nielsen, M. B., Ogbonnaya, C., Känsälä, M., Saari, E., & Isaksson, K. (2017). Workplace resources to improve both employee well-being and performance: A systematic review and meta-analysis. Work & Stress, 31(2), 101-120.

Ojo, S. O., Bailey, D. P., Chater, A. M., & Hewson, D. J. (2018). The impact of active workstations on workplace productivity and performance: a systematic review. International journal of environmental research and public health, 15(3), 417.

Rawat, P. S., & Basergekar, P. (2016). Managing workplace diversity: Performance of minority employees. Indian Journal of Industrial Relations, 488-501.

Consumer blogs have a great impact on company strategies

Consumer blogs have a great impact on company strategies. Consumer blogs are very important sources of feedback gathering and as such consumer should be asked to blog their views of the product on the internet or on the blogging sites created by the company .Blogs are a good source of feedback for the company and shows the real feel of the market. It can be seen that blogs have become a very important source of information gathering especially for testing the market for the feedback on the product and service. These blogs also help the firm to advertise their products as almost all firms have their own online presentations in the form of blogs an since the internet provides a greater coverage to people who remain connected throughout and consumers rely more on peer group reviews , the blogs from a very potent source of getting information from the public. . Blogs also design very important feedback systems and invoke generic responses to the product. It can also help in designing and changing marketing strategies because many of the bloggers are quite honest in their views.

Blogs create unnecessary rumors about the product. If a consumer has had a bad experience with the firm he may blog the same and then it is viewed by so many people leading to bad reputation. Blogs can also make competitors write misleading statements about the firm. Blogs also make consumers vary about product and services.

Consumer Decision Making Process Grading Guide

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Consumer Decision Making Process Grading Guide

MKT/435 Version 7

Consumer Behavior

Copyright

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Individual Assignment: Consumer Decision Making Process

Purpose of Assignment

The assignment due in Week 4 provides students with an overview of the consumer decision-making process. Students apply this understanding of the purchase process by applying it to their own recent purchase of a durable good. By applying a personal real world example, the idea of a purchasing process converts from theory to practice.

Grading Guide

Content Met Partially Met Not Met Comments:

The student analyzes a recent purchase they made of a durable good.  

The student reviews the steps taken in making this purchase decision: (1) Problem recognition, (2) Information search, (3) Alternative evaluation, (4) Purchase, (5) Use, (6) Evaluation.

The student discusses which steps they went through and which steps in the purchasing process were most important. The student, if certain stages were skipped, reviews what marketing or previous experience influenced them to skip this stage. The student discusses what the selling organization could have done more effectively from a marketing standpoint to help move through these stages. The paper is 1,050 to 1,400 words in length. Total Available Total Earned 7 #/7 Writing Guidelines Met Partially Met Not Met Comments:

The paper—including tables and graphs, headings, title page, and reference page—is consistent with APA formatting guidelines and meets course-level requirements. Intellectual property is recognized with in-text citations and a reference page. Paragraph and sentence transitions are present, logical, and maintain the flow throughout the paper. Sentences are complete, clear, and concise. Rules of grammar and usage are followed including spelling and punctuation. Total Available Total Earned   3 #/3 Assignment Total # 10 #/10 Additional comments:

Consumer Power

Name

Professor

Course

Date

Consumer Power

Introduction

There has been a growing sensation of consumers to use their shopping baskets to drive their point home, about the products or services that they are spending their money on. This increasing tide of these consumers is making companies to respond by increasing have to watch evry consumer’s steps. Consumer power can be defined as the collective influence consumers can have on an industry locally or internationally. The consumers can exert their power upon the industry by lobbying, letter writing, or boycotting.

Hughes, &, Allen, (173–183) argue that Companies which wish to remain in business must consider the customers as partners in business. To equally compete for the market share, they must continually adapt their policies and working methodologies as they respond to the ever changing demands of the consumers. When consumers feel strongly about a particular issue in relation to a product or service, they may stop using the product or stop interacting with the business. They generally form consumer pressure groups such as Greenpeace, The National Consumer Council, Friends of the earth, and the Fair Trade federation, to actively lobby businesses and governments to convince them to change their policies and procedures. Consumer power thus makes companies and businesses to react positively to social and environmental responsibilities. There is a general trend of marketers shifting their marketing management strategies to developing markets, therefore, advertisement agencies and other marketing organisations must follow suite

Crowned at Last

In the ever changing market place, consumers have the power to choose the types of products and services they want as never before. Businesses always have the quote that the customers come first, and therefore, is the king, or is the reason why the business is in existence. The advertising industry has responded to this paradigm by producing advertisements that are very creative and entertaining. The question most market researchers or market insight analyst ask is whether this advertisements translates into improved sales (Welford, 1-7).

The new trends in consumer power have changed the shopping landscape worldwide, with the consumers having the capability of obtaining information about whatever they need, whenever they want it, and this has given buyers unprecedented power. In markets that are highly transparent in pricing, the consumers surely have been crowned. Today’s consumers are not just influenced by the advertisements they see, before they buy any product or service, they want to see exactly what the product or service package covers, and to refer to what other users are commenting on their proposed purchase. Marketing, advertising, and communications firms must come up with innovative ways to promote their products and services if they hope to pass the right message home, as the consumers are becoming increasingly empowered (Tapper, 351-366).

Most companies in the United States are still mainly focused on business footprint and management structure. This needs to change and marketers should adapt appropriately. Consumer power is highly related to consumer protection laws. Marketers should deliver advertisements that that are transparent on the pricing, quality, and product information. In developing new ways of behavioural targeting, advertisements should be relevant to groups of consumers with common interest, and as the world is becoming more and more digital, many consumers are able to access not only the sales blurb, but also how other consumers are viewing the product or service. The growing consumer power is evident from the fact that customers are spending more time with a variety of media, and measuring the effectiveness of advertisement efforts easy. Marketers must catch up with the new media (Azamat, 377-386).

Warfare in the Aisles

Competition is getting stiffer among the variety of products and services available for the consumers to choose from. Competition has given rise to state on the consumer that he or she gets confused at what they want, depending on the many brands or variety of the product or service that they might require. For example in supermarkets, the so many items on offer are so jumbled up that a customer cannot really find what he or she is looking for. Considering TVs available, there are so many High Definition TVs that the consumers gets confused at the wide choices they have. With immense levels of choice and information available, shoppers cannot just ignore brands, as much as they need to make purely rational, economic decisions on the items they want to purchase. Brands offers trust, and companies should invest more in brands, because consumers are shifting their interests from traditional media like TV, radio, print, and other forms of promotions (Ritzer, 193−209)

Man’s Best friend

The mobile phone has replaced the dog as the man’s best friend, and mobile telephony has become a powerful marketing medium, as more and more people getting access to them. Mobile media consumption is likely to overrule many marketing assumptions. Therefore mobile marketing advertisement must evolve with the changing mobile media consumption. Given that mobile phones are a very personal gadget, mobile platform marketers must be very respectful to the mobile users and their time, demonstrating consumer power. The service providers should not let annoying advertisements reach the consumers (Kotler, & Lee, 2006).

Motoring Online

Automobile manufacturers have realized that the website has become a core part of doing business with customers, and therefore, all their advertisements provide their website addresses. Websites are more effective than TV advertisements since the internet can hold the customers attention for more time than a few seconds that TV advertisements provide. Many customers are using the internet to plan their purchases, and thus marketers should adapt from using traditional media such as television, print, or outdoor advertisement. A website can be equated to a living brochure, many car dealers have resisted giving consumers power to road test, perform vehicle comparisons, check trade in values, and compare average selling prices. The consumers now have the power to do this online (Miller, 589–598).

.

Target Practice

The advertisement landscape has changed over the period, now it has to be a variety of different things to different people. The advertising industry has changed the rules, such as previously they used to publish the top advertisements houses, but now they include creative side variable such as expertise in various related disciplines, interactive advertising, direct marketing, and public relations. Most networked media will be applying internet based technologies and protocols. This will improve consumer experience with advertising. The consumer has been crowned since he or she does not want to be bombarded by numerous advertisements, and on the other hand, measuring the return on investment on advertisements is not easy.

Buying the Future

Now that the customers have the consumer power, the question remains on how they will apply the acquired power. Consumer power has been beefed up by a myriad of legislations such as the consumer protection laws. There is so much information available for the consumers, and the internet makes it easy for consumers to discover what they need, and who is offering the best deal where. This shift of power has been brought about by competition (Ajzen, 665-68).

E commerce is growing tremendously fast globally, and spending patterns on the internet nearly resembles street hawking. Having achieved this power, the consumers will not let it go easily, this will in turn lead to more market fragmentation, consumer’s wants will be more diversified, consumer sophistication will continue to grow, and their empowerment will continue. Advertisers will also have to change with the changing consumer preferences, and they may need permission to let their advertisement s reach individual consumers, and offer more incentives such as attractive bargains.

Conclusion

Consumers will remain the King, and so consumer power will continue to evolve in mundane ways. The consumer may decide not to watch Super Bowl on TV, which offers very expensive advertisement rates for producers. As the media becomes more interactive, will give the consumers more power of choice on what they want to consume. So advertisements must adapt to be more relevant, educative, and make advertising optional. Consumer power will definitely influence the prices charged on products and services , and will encourage innovation and product development.

Work cited

Ajzen I. Perceived Behavioural control, self-efficacy, locus of control, and the Theory of Planned Behaviour. J. Appl. Soc. Psychol., 32: 665-68. (2002).Print

Kotler P, Lee N (2006). Corporate social responsibility: doing the most good for your company and your cause. Hoboken: John Wiley. Print

Miller G. Corporate responsibility in the UK tourism industry. Tourism Manage., 22(6): 589–598. (2001).

Ritzer M. Rethinking globalization: Glocalization/ grobalization and something/ nothing. Soc. Theor., 21(3): 193−209. (2003).

Azamat F. Exploring social responsibility of immigrant entrepreneurs: do home country contextual factors play a role? Eur.Manage. J., 28(5): 377-386. (2010).

Tapper R. Tourism and Socio-economic Development: UK Tour-Operators’ Business Approaches in the Context of the New International Agenda. Int. J. Tourism Res., 3: 351-366. (2001).

Hughes H, &, Allen D. Cultural tourism in Central and Eastern Europe: the views of ‘induced image formation agents’. Tourism Manag., 26: 173–183. (2005).

Welford R.Globalization, corporate social responsibility and human rights. Corp. Soc. Responsib. Environ. Manage. 9(1): 1-7. (2002).