Strategic Management Accounting The Beginning Essay

Executive Summary Introduction Discussion 1. Strategic Management Accounting: The Beginning To survive and succeed in the ever-evolving global business climate requires an understanding on how to formulate business strategies that are future proof (Daud, 2012). In reaction to this growing pressure firms are looking for innovative ways to remain competitive and apply a strategic perspective in every aspect of their business. This led to a close up on conventional management and cost accounting practices and sparked criticism for its lack of a strategic focus. It was argued that traditional methods fail to provide relevant information for strategizing due to time delay, bias towards financial reporting requirements and its short term perspective (Johnson and Kaplan, 1987). This saw the emergence of Strategic Management Accounting (SMA). Despite growing interest globally, there is still no definitive consensus about what SMA actually is, what it involves and how it is distinguished from management accounting (Agasisti et al, 2008). 1.1 What is it Essentially SMA falls within the management accounting umbrella. It is management accounting practices becoming strategic through its use within business activities through which strategy is enacted (Cuganesan et al, 2012). The term was coined originally by Simmonds who described it as a collection of management accounting information about the business and its competitors, which are then used in the development and maintenance of theShow MoreRelatedStrategic Management Accounting : Cost Advantage And Differentiation Advantage996 Words   |  4 PagesTraditional management accounting is cost driven with short-term pricing and profit motive. It is fragmented and has internal and financial focus. 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What Is Foreign Direct Investment - Free Essay Example

Sample details Pages: 19 Words: 5689 Downloads: 6 Date added: 2017/06/26 Category Business Essay Type Narrative essay Did you like this example? The removal of cross-border restrictions on international capital flows and the trend toward an integrated world economy has been a substantial progress over recent two decades. Hence, it has increased the growth of foreign direct investment (FDI) activity. Madura and Fox (2007) define foreign direct investment (FDI) as the investment in real assets (such as land, buildings, or even existing plants) in foreign countries. They also find that multinational corporations (MNCs) commonly capitalize on foreign business opportunities by engaging in FDI. They engage in joint ventures with foreign firms, acquire foreign firms, and form new foreign subsidiaries. These types of FDI can generate high returns when managed properly. A substantial investment is required, and thus can increase the risk to capital. It may be difficult for multinational corporations to sell the foreign project when the investment does not perform well as expected. In order to maximize the corpor ations value, it is significant for MNCs to understand the potential return and risk of FDI and analyze the potential benefits and costs before making investment decisions. 2.1.2 Motives for FDI The reason why firms locate production overseas rather than exporting from the home country or licensing production in the host country, and the reason why firms seek to extend corporate control overseas by forming multinational corporations have been developed by many scholars. Kindleberger(1969) and Hymer(1976), emphasize various market imperfections in product, factor, and capital markets as the key motivating forces to accelerate FDI. Eun and Resnick (2004) explore some key factors that are important for corporations making decisions to invest overseas. These factors include trade barriers, imperfect labor market, intangible assets, vertical integration, product life cycle and shareholder diversification services. Madura and Fox (2007) indicate that MNCs engage in foreign direct investment widely because it can improve profitability and enhance shareholder wealth. In most cases, MNCs utilize FDI to boost revenues, reduce costs, or both. Revenue-related motives include attracting new source of demand, enter profitable markets, exploit monopolistic advantages, react to trade restrictions and diversify internationally. Cost-related motives involve full benefit from economies of scale, use foreign factors, use foreign raw materials, use foreign technology and react to exchange rate movements. 2.1.3 Benefits of FDI It seems unwise to conclude that both forms of geographic diversification are likely to be equally profitable or unprofitable. Errunza and Senbet (1981, 1984) find evidence to support a positive relation between excess firm value and the firms extent of international diversity by using multinational firms only. Focusing on international acquisitions, Doukas and Travlos (1988) and Doukas (1995) document that US bidders gain from industrial and i nternational diversification. Similarly, Morck and Yeung (1991, 2001) find a positive relation between international diversification and firm value. However, they show that industrial diversification and international diversification add or destroy value in the presence or absence of intangible assets. Their findings support the view that the synergistic benefits of international diversification stem from the information-based assets of the firm. Christophe and Pfeiffer (1998) and Click and Harrison (2000) find that multinational firms trade at a discount relative to domestic firms. More recently Denis, Denis and Yost (2002), using the Berger and Ofek (1995) excess value measure and aggregate data, show that global diversification reduces shareholder value by 18%, whereas industrial diversification results in 20% shareholder loss. In contrast, Bodnar, Tang and Weintrop (1999), relying on a similar valuation measure, find share-holder value to increase with global diversification. Doukas and Lang (2003) take firms which made foreign new plant announcements during the period 1980 1992 as a sample, regardless of the industrial structure of the firm, they interpret that unrelated foreign direct investments are associated with negative announcement effects and long-term performance decreases in subsequent years, whereas related investments are associated with positive short-term and long-term performance. Although their findings indicate that both specialized and diversified firms benefit from core-business-related rather than non-core-business-related foreign direct investments, the gains are larger for diversified firms. They conclude that geographic expansion of the firms core business itself is beneficial to shareholder value. In contrast, they find that geographic expansion of the firms peripheral (non-core) business harms firm value and performance. Hence the evidence indicates that the internalization theory is more consistent with the international expa nsion of the core rather than the non-core business of the firm. That is, the positive synergies from global diversification are rooted in the firms core competencies. Theories of foreign direct investment (FDI) agree on at least one major point: foreign firms mush have inherent advantages that allow them to overcome the higher costs of becoming a multinational (Hymer, 1976). These advantages may be tangible, such as an improved production process or a product innovation. They also may be intangible, such as brand names, better management structures or the technical knowledge of employees. Girma, Greenaway and Wakelin (2001) conclude that foreign firms do have higher productivity than domestic firms and they pay higher wages in the UK after their investigation. They do not find aggregate evidence of intra-industry spillovers. However, firms with low productivity relate to the sector average, in low-skill low foreign competition sectors gain less from foreign firms. FDI brin gs two main benefits to the host country. First, it introduces new production facilities into the domestic economy directly, or may rescue failing firms in the case of acquisition, raising overall output, employment and exports. Second, domestic governments hope that foreign firms will be unable to internalise their advantages fully, and local firms can benefit through spillover. 2.1.4 Effects of FDI Borensztein, Gregorio and Lee (1998) test the effect of foreign direct investment (FDI) on economic growth in a cross-country regression framework by utilizing data on FDI flows from industrial countries to 69 developing countries over the last two decades. The results suggest that FDI is significant for transfer technology, and contributes more to growth than domestic investment. Moreover, they find that the contribution of FDI to economic growth is improved by its interaction with the level of human capital in the host country. However, the empirical results imply that FDI is mo re productive than domestic investment only when the host country has a minimum threshold stock of human capital. Thus, FDI contributes to economic growth only when a sufficient absorptive capability of the advanced technologies is available in the host economy. Investigating the effect of FDI on domestic investment, they find that the inflow of foreign capital crowds in domestic investment rather than crowds out. FDI support the expansion of domestic firms by complementarity in production or by increasing productivity through the spillover of advanced technology. A one-dollar increase in the net inflow of FDI is associated with an increase in total investment in the host economy of more than one dollar, but do not appear to be very robust. Thus, it appears that the main channel through which FDI contributes to economic growth is by stimulating technological progress, rather than by increasing total capital accumulation in the host economy. Markusen and Venables (1999) develop s an analytical framework to assess the effects how an FDI project affect local firms in the same industry. There are two forces for the effect of entry of a multinational firm on the domestic industry. One is a competition effect, under which multinationals displace domestic final-goods producers, and the other is a linkage effect back to intermediate-goods producers, creating complementarities which could benefit domestic final-goods producers. They explore the determinants of the relative strengths of these effects. In circumstances of initial equilibrium with no local production, multinational entry can push the economy over to an equilibrium with local production in both the intermediate and final-goods industries, with a resulting welfare improvement. They then pay attention to endogenise the entry decision of multinational firms. It may now also be the case that multinationals provide the initial impetus for industrialisation, but the developed local industry creates suffi ciently intense competition to eventually drive the multinationals out of the market. Hobday (1995) finds initial multinational investments in developing East Asia created backward linkage effects to local suppliers in a large number of situations. There are some examples such as computer keyboards, personal computers, sewing machines, athletic shoes, and bicycles in Taiwan. 2.2 Cost of capital and capital structure Many major firms through the world have begun to internationalize their capital structure by raising funds from foreign as well as domestic sources. As a result, these corporations become multinational not only in the scope of their business activities but also in their capital structure. This trend reflects not only a conscious effort on the part of firms to lower the cost of capital by international sourcing of funds but also the ongoing liberalization and deregulation of international financial markets. If international financial markets were completely integ rated, it would not matter whether firms raised capital from domestic or foreign sources because the cost of capital would be equalized across countries. On the other hand, some markets are less than fully integrated, firms may be able to create value for their shareholders by issuing securities in foreign as well as domestic markets. Cross-listing of a firms shares on foreign stock exchanges is one way a firm operating in a segmented capital market can lessen the negative effects of segmentation and also internationalize the firms capital structure. For example, IBM, Sony, and British Petroleum are simultaneously listed and traded on the New York, London, and Tokyo stock exchanges. By internationalizing its corporate ownership structure, a firm can generally increase its shares price and lower its cost of capital. 2.2.1 Definition of cost of capital Eun and Resnick define the cost of capital as the minimum rate of return an investment project must generate in order to pay its financing costs. If the return on an investment project is equal to the cost of capital, under taking the project will leave the firms value unaffected. When a firm identifies and undertakes an investment project that generates a return exceeding its cost of capital, the firms value will increase. It is significant for a value-maximizing firm to try to lower its cost of capital. Madura and Fox (2007) explain that a firms weighted average cost of capital (referred to as Kc ) can be measured as: Kc = [D/(D+E )] * Kd * ( 1-t ) + [E / (D+E)] * Ke Where: D = market value of firms debt Kd = the before-tax cost of its debt t = the corporate tax rate E = the firms equity at market value Ke = the cost of financing with equity The ratios reflect the percentage of capital represented by debt and equity, respectively. In total the cost f capital, Kc is the average cost of all providers of finance to the firms. A multinational company finances its operations by using a mixture of fixed interest borrowing and equity financing that can minimize the overall cost of capital (the weighted average of its interest rate and dividend payment). By minimizing the cost of capital used to finance a given size and risk of operations, financial managers can maximize the value of the company and therefore maximize shareholder wealth. According to the size of firm, international diversification, exposure to exchange rate change, access to international capital markets and exposure to country risk, the cost of capital for MNCs may be different from that for domestic firms. 2.2.2 Costs of capital across countries Madura and Fox (2007) interpret that an understanding to why the cost of capital can vary among countries is relevant for three reasons. First, it can explain why MNCs based in some countries may have a competitive advantage over others. Just as technology and resources differ across countries, so does the cost of capital. MNCs based in some coun tries will have a larger set of feasible (positive net present value) projects because their cost of capital is lower; hence these MNCs can more easily increase their world market share. MNCs operating in countries with a high cost of capital will be forced to decline projects. Second, MNCs may be able to adjust their international operations and sources of funds to capitalize on differences in the cost of capital among countries. Third, differences in the costs of each capital component ( debt and equity ) can help explain why MNCs based in some countries tend to use a more debt-intensive capital structure than MNCs base elsewhere. The cost of debt to a firm is primarily determined by the prevailing risk-free interest rate in the currency borrowed and the risk premium required by creditors. The cost of debt for firms is higher in some countries than in others because the corresponding risk-free rate is higher at a specific point in time or because the risk premium is higher. Cou ntries differences in the cost of debt include differences in the risk-free rate, differences in the risk premium and comparative costs of debt across countries. A firms cost of equity represents an opportunity cost: what shareholders could earn on investments with similar risk if the equity funds were distributed to them. This return on equity can be measured as a risk-free interest rate that could have been earned by shareholders, plus a premium to reflect the risk of the firm. The risk premium and hence the cost of equity will vary according to different economic environments. The costs of debt and equity can be combined to derive an overall cost of capital. The relative proportions of debt and equity used by firms in each country must be applied as weights to reasonably estimate this cost of capital. 2.2.3 MNCs capital structure decision Bancel and Mittoo (2004) survey on the cross-country comparisons of managerial views on determinants of capital structure in a samp le of 16 European countries: Austria, Belgium, Greece, Denmark, Finland, Ireland, Italy, France, Germany, Netherlands, Norway, Portugal, Spain, Switzerland, Sweden, and the UK. They show that factors related to debt are influenced more, and those related to equity are influenced less, by the countrys institutional structure, especially the quality of its legal system. They find that financial flexibility and earnings per share dilution are primary concerns of managers in issuing debt and common stock, respectively. Managers also value hedging considerations and use windows of opportunity when raising capital. This evidence strengthens arguments of La Porta et al. (1997, 1998) that the availability of external financing in a country is influenced primarily by its legal environment. Since agency costs of debt are likely to be higher in countries with lower quality of legal systems, this evidence is also consistent with theories of capital structure such as agency theory that assign a central role to debt contracts and bankruptcy law (Harris and Raviv, 1991). They find that although a countrys legal environment is an important determinant of debt policy, but it plays a minimal role in common stock policy. They find that firms financing policies are influenced by both their institutional environment and their international operations. They also show that firms can adopt strategies to mitigate the negative effects of the quality of the legal environment in their home country. For instance, firms in civil-law countries have significantly higher concerns for maintaining target debt-to-equity ratios and matching maturity than do their peers in the common-law countries. Further, they find that firms operating internationally have significantly different views than do their peers in several ways. For example, firms that have issued foreign debt or equity in the sample during the last ten years are more concerned about credit ratings. Firm-specific variables that are commonly used in the capital structure literature to explain leverage also explain cross-country differences in managerial rankings of several factors. For example, large firms are less concerned about bankruptcy costs, and high growth firms consider common stock as the cheapest source of funds and use windows of opportunity to issue common stock. These results support the arguement by Rajan and Zingales (1995, 2003), that firms capital structures are the result of a complex interaction of several institutional features as well as firm characteristics in the home country. Their results support that most firms determine their optimal capital structure by trading off factors such as tax advantage of debt, bankruptcy costs, agency costs, and accessibility to external financing. They confirm the conclusions of Titman (2002): Corporate treasurers do occasionally think about the kind of trade-offs between tax savings and financial distress costs that we teach in our corporate finance c lasses. However, since this trade-off does not change much over time, the balancing of the costs and benefits of debt financing that they emphasize much is not MNCs major concern. They spend much more time thinking about changes in market conditions and the implications of these changes on how firms should be financed. Lee and Kwok (1988) examine the impact of international environmental factors on some firm-related capital structure determinants which in turn affect the MNCs overall capital structure. They consider international environmental variables of political risk, international market imperfections, complexity of operations, opportunities for international diversification, foreign exchange risk and local factors of host countries, and test agency costs and bankruptcy costs. They find that MNCs tend to have higher agency costs of debt according to Myers definition than DCs. This finding remained unchanged even when size and industry effects were controlled. Though MNCs app eared to have lower bankruptcy costs than DCs, the difference largely disappeared when the size effect was controlled. Quite contrary to the conventional wisdom, the empirical findings showed that MNCs tended to be less leveraged than DCs. This finding remained even when the size effect was controlled. However, when companies were separated under different industry groups, the results varied significantly. Burgman (1996) directly estimate the effect of foreign exchange risk and political risk on the capital structure of MNCs. Using the foreign tax ratio to classify firms as either MNCs or DCs and controlling for industry and size effects, Burgman finds that MNCs have lower debt ratios and higher agency costs than DCs. Furthermore, international diversification does not appear to lower earnings volatility. To estimate the sensitivity of a firm to foreign exchange risk, Burgman conducts a regression analysis of the stock returns of each sample firm on the returns of an index of U.S . stocks and on the U.S.$:SDR returns. His political risk measure is based on the following ratio: number of low political risk countries to the total number of countries in which the firm operates. Low political risk countries are the top 20 in the country risk rankings provided by Euromoney in 1989. The results of a regression analysis for his sample of MNCs suggest that the debt ratios of these companies are positively related to both risks. Burgman concludes that this evidence is consistent with the hypothesis that MNCs use debt policy as a tool to hedge foreign exchange risk and political risk. Chen et al. (1997) conducted regression analyses to investigate the effect of international activities (as measured by foreign pre-tax income) on capital structure. They report that even after controlling for firm size, agency costs of debt, bankruptcy costs and profitability, the long-term debt ratios of MNCs are lower than those of DCs. However, within their sample of MNCs, debt rat ios increase with the level of international activities. 2.2.4 Segmented capital market A capital market for asset claims is integrated when the opportunity set of investments available to each and every investor is the universe of all possible asset claims. In contrast, a capital market is segmented when certain groups of investors limit their investments to a subset of the universe of all possible asset claims. Such market segmentation can occur because of ignorance about the universe of possible asset claims, or because of transactions costs (brokerage costs, taxes, or information acquisition costs), or because of legal impediments. From an international perspective, market segmentation typically occurs along national borders, a condition wherein investors in each country acquire only domestic asset claims. Grubel, Levy and Sarnat, and Lessard employ a mean-variance portfolio theoretic framework, have stressed the benefits of diversifying investments across national bord ers, namely the pooling of risks that results from investing in projects that are less than perfectly correlated. Subrahmanyam points out that when segmented capital markets are integrated, in addition to the diversification effect (always positive), there is a wealth effect (possibly negative) which arises out of changes in the macro-parameters of the risk-return relationship. For the special cases of quadratic, exponential, and logarithmic utility functions, it can be shown that international capital market integration is Pareto-optimal, that is, the welfare of individuals in the integrated economies will not decline, and will generally improve. The positive effect of an expansion in the opportunity set offsets any negative wealth effect. The market reformed and liberalized in developed economies in the 1970s and emerging economies during the second half of the 1980s led to the removal of many barriers. The deregulation and the development of local equity markets allowed the po ssibility of foreign portfolio investments (FPIs). Overall, FPIs would provide a new source of capital and internationalize the domestic capital markets. Subsequent improvements in risk sharing and risk matching would cause the cost of capital to fall. Errunza and Miller (2000 ) use a sample of 126 firms from 32 countries, document a significant decline of 42% in the cost of capital. In addition, they show the decline is driven by the ability of U.S. investors to span the foreign security prior to cross-listing. The findings support the hypothesis that financial market liberalizations have significant economic benefits. 2.2.5 Interaction between subsidiary and parent financing decisions In segmented markets the parent and its subsidiaries will generally have different valuation objectives and investment-acceptance criteria. Under some conditions these depend on the international financing mix. Decentralization can be optimal in the sense of global maximization, provided that t he parent is unrealistically free, ex-ante, to optimize its percentage ownership in the subsidiaries at the beginning of each planning period. In the case of a two-country firm, the subsidiaries maximands are independent of the parents. But when the parents ownership position is predetermined at a fixed level, as it is normally, the situation is radically different. Market values cannot then be maximized independently and Pareto optimization is required. Michaels (1974) main result is that, unless agreement can be reached on a compensation principle, the joint ventures cost of capital will be indeterminate. In such circumstances optimal financial planning for the MNC as a whole may be impossible. Concluding remarks draw attention to the attendant possibility that the MNC in this case may be unstable and/or inefficient. 2.2.6 The MNCs capital structure decision An MNCs capital structure decision involves the choice of debt versus equity financing within all of its subsidiaries. Thus, its overall capital structure is essentially a combination of all of its subsidiaries capital structures. MNCs recognize the tradeoff between using debt and using equity for financing their operations. The advantages of using debt as opposed to equity vary with corporate characteristics specific to each MNC and specific to the countries where the MNC has established subsidiaries. Madera and Fox (2007) indicate some common firm-specific characteristics that affect the Macs capital structure such as stability of Macs cash flows, Macs credit risk, Macs access to retained earnings, Macs guarantees on debt and Macs agency problems. They also point the unique host country characteristics can influence the MNCs choice of debt versus equity financing and therefore influence the MNCs capital structure. These characteristics include stock restrictions in host countries, interest rates in hose countries, strength of host country currencies, country risk in host countries and tax laws in host countries. 2.3 Risk analysis 2.3.1 Political risk With operations under the jurisdiction of a foreign government the firm is also exposed to political risk, therefore it must estimate the potential costs it will face due to unstable governments, regime change and changes in policies. Political risk may be defined as a particular exposure to risk which depends on the actions of a government, and its assessment or analysis for a MNC is a decision-making tool for investing in foreign countries. Over recent decades, there has been a significant increase in political risk for MNCs. This is true not only for an MNCs operations in developing countries, but also for those in developed countries. Governments have felt the need to respond to various pressure groups aimed at curbing the power of MNCs. For example, oil companies may face unfavourable legislation designed to pay for the damage to environment. Developing countries may have to respond to populist sentiments or worsening economic circumstances by seeking to renege on contracts signed by previous regimes. Another risk area which has grown in recent years has been the strength of fundamentalist religious groups in a number of economically important regions. Shapiro (1999) and Buckley, 2000) argue that government intervention in the economy increases the likelihood of political risk for the MNCs. Proponents of free markets strongly support this view, arguing that government intervention creates a number of inefficiencies in the markets that discourage competition, justify the privilege of state-controlled enterprises, promote unnecessary bureaucracy, and overall stifle initiative. Clark and Marois(1996) and Wilkin (2000) categorise negative political risks as macro and micro risks. Macro political risks are those which affect MNCs in general, whereas micro political risks are those which relate to specific firms in specific countries. Shapiro identifies them as: expropriation; currency an d trade controls; changes in tax and labour laws; regulatory restrictions; and requirements for additional local production( 1996:747). Simons framework includes wider societal issues such as public opinion, alliance shifts, revolutions and coups (quoted in Demirag and Goddard, 1994). Expropriation is generally regarded as the most obvious and extreme form of political risk. The realities of the current global economic climate mean that many countries may not resort to such drastic measures, due to the very unfavourable situation that such an action may create for them in the long term. This could be in the form of international economic isolation and cessation of support from the International Monetary Fund and the World Bank. This support is vital for continued economic progress in developing countries, and any cessation of it may mean an even tougher economic environment for these countries. Before commencing operations an MNC should undertake a dispassionate and careful an alysis of the political risk of operating in the foreign country concerned. Operations in developing countries may require a more thorough analysis of the costs versus benefits, and a large degree of uncertainty may always be present in starting operations in a developing country. This should be weighed against the perceived benefits and calculated returns on investment. It is important for the MNC to take a calculated and educated view of the situation. There is no commercial activity without risk, and a degree of risk will therefore have to be accepted. Some of the important aspects that need to be looked at are: political stability, or degree of acceptable instability; economic factors; savings, development and social stability; government budget deficits; and transparency and openness of the economy. It must also be recognised that recent developments in terrorism risk are bringing a new dimension to political risks. While terrorism in the past may have been identifiable as a county risk, such as the IRA in the UK, Abu Nidal in Israel and the Shining Path in Peru. There is the growth of terrorist groups in the 21st century who are not associated with a specific nation-state or narrow geographical region. The actions of such groups may disrupt a business across a range of activities and locations, rather than simply disrupting operations in a specific country. The most obvious answer when faced with political risk would perhaps be to avoid it completely by deciding not to do business in a particular country, but this has to be balanced against the loss of an opportunity to make a profit, and the more global nature of certain political risks. Given the risks inherent in business generally, it would normally only be the most extreme situations that require avoidance. The decision would most probably be made, on commercial grounds, to accept a degree of political risk and attempt to manage such risk effectively. Political risk, like other risks, may be m anaged by diversification across various territories. Henisz (2000) shows that multinationals face an increasing threat of expropriation if political hazard in the host country increases. However, the degree of risks depends on the strategic behaviour of the multinational, which may partner with host-country firms that have a comparative advantage in interactions with the host-country government. Harms (2002) estimated the impact of financial risk on equity investment flows which includes the sum of FDI and portfolio investment to developing countries. Using a panel data set of 55 developing countries and the period 1987 to 1995, he find that lower financial risk is associated with an increase in FDI and portfolio investment. On the other hand, Egger and Winner (2005), utilize a sample of 73 countries over the period 1995 to 1999 and find a positive linkage between corruption and FDI. In the presence of excessive regulation and other administrative controls, they propose that cor ruption may act as a helping hand to encourage FDI inflows. Recently, several studies have analysed the relationship between fundamental democratic rights and FDI. Using different econometric techniques and periods, Harms and Ursprung (2002), Jensen (2003), and Busse (2004) interpret that multinational corporations are more likely to be attracted where there is democracy. On the other hand, Li and Resnick (2003) argue that competing causal linkages are at work. They find that democratic rights lead to improved property rights protection, which increases foreign investment. Apart from this indirect impact on FDI, increases in democracy may reduce FDI. These studies use pooled time-series analysis, but not all of them account for possible endogeneity of the independent variables while some often focus on very specific indicators such as democratic rights, omitting a broader range of policy-related variables. Busse and Hefeker (2007) explore the linkages among political risk, ins titutions, and foreign direct investment inflows and show that government stability, internal and external conflict, corruption and ethnic tensions, law and order, democratic accountability of government, and quality of bureaucracy are highly significant determinants of foreign investment inflows. 2.3.2 Exchange rate risk In foreign direct investment (FDI), most firms face exchange rate risk because the exchange rate between the home and host currencies might change in the future. When transactions are contractually finalized (transactions exposure), the firms value might change because of the sensitive exchange rate movements (economic exposure). The importance of exchange-rate variability for domestic and international investment flows has been argued quite a lot. In industrialized economies, the presumed effects of exchange-rate variability have influenced the choice of international monetary regimes. The Smithsonian Agreement was discussed in the early 1970s and again a t the time of the Plaza Accord during the mid-1980s. In the early 1990s, the negative implication of variable exchange rates was a theme for designing the Exchange Rate Mechanism (ERM) operable over currencies in the European Monetary System (EMS). The currency crises within the ERM in September 1992 and Spring 1993 refocused attention on the rationale for limiting short-term nominal exchange rate movements and on the validity of arguments that exchange rate variability is costly and dampens real economic activity. Igawa (1983), Cushman (1985, 1988) and Goldberg and Kolstad (1995) examine bilateral FDI flows between the U.S. and a few of developed countries (U.K., France, Germany, Canada and Japan), they find a positive relationship between exchange rate risk and FDI. On the other hand, Kelly and Philippatos (1982) argue that the investments appeal less when the exchange rate risk is greater. Clare (1992, 1998), Benassy-Quere, Fontagne, and Lahreche-Revil (2001) and Brzozowski (2 006) focus on cross-country studies and all find a negative relationship between exchange rate risk and FDI. Benassy-Quere, Fontagne, and Lahreche-Revils (2001) study covers FDI flows from 17 OECD nations to 42 developing countries, finding a negative response to exchange rate risk. Brzozowskis (2006) study covers FDI flows to 32 transition and emerging countries, and shows a relationship not as strong as expected, is still negative. Clares (1992) study covers the FDI flow from the U.S. to 14 developed and 15 developing countries, and finds a strong negative relationship for each set of countries as well as across the entire spectrum of countries. Clark, Hooper and Kohlhagen, Gotur, Cushman (1983, 1988), De Grauwe, Maskus, and others focus on tudies of the effects of exchange rate risk on trade and find that exchange rate risk reduces trade. However, earlier results (Hooper and Kohlhagen) lend little support to this hypothesis; although Cushman (1988) find significant adverse eff ects of exchange rate risk on U.S. trade flows. Pick (1990) analyzes the effects of exchange rate risk on U.S. agricultural exports to ten different countries and estimate a model which incorporates exchange rate risk. but it also shows that exchange rate risk is not always important. His results suggest that the exchange rate risk was not significant in the seven developed markets, but significant to determine U.S. agricultural exports. Anderson and Garcia ( 1989) examine the effects of exchange rate uncertainty on bilateral soybean trade flows and finds that imports for Japan, France, and Spain are sensitive to short-term variations in nominal bilateral exchange rates. 3. Methodology 3.1 Reseach methods and data (not be finished) Here, this dissertation use the second data gathered from the companies and research based on other scholars research. 3.2 The International Capital Asset Pricing Model(ICAPM) Madura and Fox (2007) indicate that the International Capital As set Prcing Model (ICAPM) can be regarded as more formal treatment of the cost of capital elements than mentioned before. This model is an international extension of the Capital Asset Pricing Model (CAPM). The CAPM addresses a single currency area and single financial market where there are no restrictions on financial transactions. The ICAPM extends this analysis to multiple currency areas and multiple financial markets. Both these two models seek to answer the question what discount rate should be applied to the future cash flows of a particular project. Kj = Rf + ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²j ( Rm Rf ) Where: Rf = risk free rate of return Rm = market return ÃÆ'Ã… ½Ãƒ ¢Ã¢â€š ¬Ã¢â€ž ¢ = beta of a particular share or a project The application of the CAPM model and the ICAPM model presents considerable practical problems for an MNC. The company first has to find a like project of a similar risk class to identify an appropriate beta. Highly correlated measures of return can produ ce very different betas. There is a problem of meaning. Why a beta is particularly high or low or why it changes is not easy to explain. Selecting the appropriate beta may well not be easy. A final critique is that the model is not complete. The application of the ICAPM or any discount cash flow model does not account for the role of real options in investments. Don’t waste time! Our writers will create an original "What Is Foreign Direct Investment" essay for you Create order

Religion and Environmental Ethics Free Essays

string(88) " can be employed to depict the destruction and occupation of conquered territory \(Num\." RELS5149 Religion and Envirnomental Ethics Student#1155012742 – Li Wai Tat, Victor Does Christianity have a â€Å"Burden of Guilt† in our Ecological Crisis? Introduction and Methods In 1967, Lynn White Jr. , published a paper in Science (Vol 155, 1967, pp 1203-1207) â€Å"The Historical Roots of Our Ecological Crisis†, which was to become a seminal work on the relationship of Ecology and Christianity and had since then provoked enumerous debates on the topic. In the paper he wrote â€Å"Christianity bears a huge burden of guilt† and concludes that â€Å"Hence we shall continue to have a worsening ecologic crisis until we reject the Christian axiom that nature has no reason for existence save to serve man. We will write a custom essay sample on Religion and Environmental Ethics or any similar topic only for you Order Now † White depicted Western Christianity as seeing the world existing primarily for the benefit of man, and man, bearing God’s image and sharing in great measure God’s transcendence of nature, exploit nature for his proper ends according to God’s will. This thesis of White shall be referred to as â€Å"Dominion Hypothesis† for ease of identification in this paper. But are the claims in his Dominion Hypothesis valid? Does Christianity bear a burden of guilt for the ecological crisis of the world? The purpose of this paper is to assess the strength of his thesis by firstly analysing what the biblical scriptures and theologians have to say with regard to the relationship of God, man and the environment. Next the symptoms and origins of our ecological crisis are examined, after which their ties with Western Christianity are assessed to determine whether the later has causal relationship with the former. Finally, after arriving at the conclusion, some recommendations are presented. 1 White’s Thesis White’s thesis can briefly be summarized as: â€Å"All forms of life modify their contexts, and the human race has in one sense simply done this more than others. However, the human impact on the environment, whilst frequently detrimental in the past, was given an added impetus by Christianity in its Westernized form. Western society, as a product of Westernized Christianity, inherits an exploitative attitude to the natural world which is the key to our present ecological crisis. † (Richardson, 1998) . White depicted Western Christianity as seeing the world existing primarily for the benefit of man, and it is according to God’s will that man exploit nature for his proper ends. Biblical verses that align to the Dominion Hypothesis Arguably the following passages from the Bible are aligned to the Dominion Hypothesis and are most frequently cited by ecology critics of the Bible. Then God said, ‘Let us make man in our image, after our likeness; and let them have dominion over the fish of the sea, and over the birds of trhe air, and over the the cattle, and over all the earth, and over every creeping thinng that creeps upon the earth’ So god created man in his own image, in the image of God he created him; male and female he created them. And God blessed them, and God said to them ‘Be fruitful and multiply, and fill the earth and subdue it; and have dominion over the fish of the sea and over every living thing that moves upon the earth. And God said, ‘Behold, I have given you every plant yielding seed which is upon the face of all the earth, and every tree with seed in its fruit; you shall have them for food. ‘ † (Gen. 1:26-29) â€Å"Yet thou has made him little less than God, and dost crown him with glory and honor. Thous hast given him dominion over the works of thy hands; thous hast put all things under his feet; all sheep and oxen, and also the beasts of the field, the birds of the air, and the fish of the sea, whatever passes along the paths of the sea. † (Ps. 8:5-8) 2 And God blessed Noah and his sons, and said to them, ‘Be fruitful and multiply, and fill the earth. The fear of you and the dread of you shall be upon every beast of the earth, and upon every bird of the air, upon everything that creeps on the grou nd and all the fish of the sea; into your hand they are delivered. Every moving thing that lives shall be food for you; and as I gave you the green plants, I give you everything. † (Gen. 9:1-3) â€Å"You have made them to be a kingdom and priests serving our God, and they will reign on earth† (Rev. 5:10). According to exegeses by theology scholar (Hiebert, 1996), â€Å"the term ‘dominion,’ from the Hebrew verb â€Å"radah†, implies that it grants humans the right and responsibility to rule, to govern the rest of creation. It connotes a hierarchy of power and authority in which the human race is positioned above the rest of the natural world, although the verb radah does not itself define how this dominion is to be exercised, whether benevolently or malevolently. The laws of Leviticus, when they stipulate that household servants are not to be *ruled* harshly (Lev. 25:43, 46, 53), imply that this kind of dominion may be kind and humane. Yet the use of radah in the context of international relations, where it is more commonly employed, carries a decidedly more antagonistic tinge, since it signifies rule over one*s enemies. It occurs frequently in descriptions of military conquest, where it is paired with such verbs as *destroy* (Num. 24:19) and *strike down* (Lev. 26:17; Isa. 14:6). When used of the Israelite king, radah always refers to dominion over his enemies, not to rule over his own Israelite subjects, for which the verb malak, *reign,* is the usual term. Similar conclusions may be drawn about the phrase *subdue the earth* in Gen. :28. The verb *subdue,* from the Hebrew kavash, depicts a hierarchical relationship in which humans are positioned above the earth and are granted power and control over it. The verb kavash is even more forceful than radah, describing the actual act of subjugation, of forcing another into a subordinate position. It is used for military conquest, where the same phrase used in Gen. 1:28 , *subdue the earth/land,* can be employed to depict the destruction and occupation of conquered territory (Num. You read "Religion and Environmental Ethics" in category "Essay examples" 32:22, 29). It is also used of the king*s forcing his people into slavery against God*s wishes (Jer. 4:11, 16), and of rape (Esther 7:8; Neh. 5:5). In many of these cases, the abuse {19} of power is patently obvious. † 3 Biblical verses that align to the Eco-Friendly perspective On the other hand, the following verses can be interpreted as being aligned to an EcoFriendly view:†Let the heavens be glad, and let the earth rejoice; let the sea roar, and all that fills it; let the field exult, and everything in it! Then shall all the trees of the forest sing for joy before the LORD, for he comes, for he comes to judge the earth. He will judge the world in righteousness, and the peoples in his faithfulness. (Psalm 96:11-13) â€Å"Praise the LORD! Praise the LORD from the heavens; praise him i n the heights! Praise him, all his angels; praise him, all his hosts! Praise him, sun and moon, praise him, all you shining stars! Praise him, you highest heavens, and you waters above the heavens! Let them praise the name of the LORD! For he commanded and they were created. And he established them forever and ever; he gave a decree, and it shall not pass away. a Praise the LORD from the earth, you great sea creatures and all deeps, fire and hail, snow and mist, stormy wind fulfilling his word! Mountains and all hills, fruit trees and all cedars! Beasts and all livestock, creeping things and flying birds! Kings of the earth and all peoples, princes and all rulers of the earth! Young men and maidens together, old men and children! Let them praise the name of the LORD, for his name alone is exalted; his majesty is above earth and heaven. † (Psalm 148:1-13) *When you besiege a city a long time, to make war against it in order to capture it, you shall not destroy its trees by swin ging an axe against them; for you may eat from them, and you shall not cut them down. For is the tree of the field a man, that it should [m]be besieged by you? Only the trees which you known are not fruit trees you shall destroy and cut down, that you may construct siegeworks against the city that is making war with you until it falls. † (Deuteronomy 20:19-20) *When you enter the land and plant any kind of fruit tree, regard its fruit as forbidden. For three years you are to consider it forbidden; it must not be eaten. In the fourth year all its fruit will be holy, an offering of praise to the Lord. But in the fifth year you may eat its fruit. In this way your harvest will be increased. I am the Lord your God. † (Leviticus 19:2325) â€Å"You shall not let your cattle breed with a different kind; you shall not sow your field with two kinds of seed; nor shall there come upon you a garment of cloth made of two kinds of stuff. † (Leviticus 19:19) â€Å"For six years you shall sow your land and gather in its yield; but the seventh year you shall let it rest and lie fallow, that the poor of your people may eat; and what they leave the wild beasts may eat. † (Exodus 23: 10-11) 5 â€Å"The nations were angry, and your wrath has come. The time has come for judging the dead, and for rewarding your servants the prophets and your people who revere your name, both great and small * and for destroying those who destroy the earth. * (Rev 11:18) â€Å"For true and righteous are his judgments: for he hath judged the great whore, which did corrupt the earth with her fornication, and hath avenged the blood of his servants at her hand. † (Rev 19:2) â€Å"They will neither harm nor destroy on all my holy mountain, for the earth will be filled with the knowledge of the Lord as the waters cover the sea. (Isaiah 11:9) â€Å"The wolf and the lamb will feed together, and the lion will eat straw like the ox, but dust will be the serpent’s food. They will neither harm nor destroy on all my holy mountain,† says the LORD. † (Isaiah 65:25) Theology scholars commenting on this view of nature of the Old Testament wrote : â€Å"†¦ It is therefore fair to conclude that nature is far from ‘de-animated ’ in Biblical thought. † (Wybrow, 1990), â€Å"The natural world may not be seen as sacred or divine in the Bible, but it is certainly not dead, lifeless, and outside the divine moral framework†¦ here are no scriptures suggesting that nature was viewed as dead matter to be manipulated by man.. † (Kinsley, 1995). Referring to the theme of the kingdom of God running through the New Testament, Zerbe (1992) argues that the New Testament has significant ecological implications, he explained: â€Å"Isaiah*s vision of restored humanity and nature climaxes with the statement that there will no longer be any hurt or destruction in creation (Isa. 11:9; 65:25). And John*s vision of judgment states that those who destroy the earth will themselves be destroyed (Rev. 11:18; 19:2). It is noteworthy that the prophetic critique of Rome in Rev. 17:1-19:4 closely connects greed and the earth*s destruction: the insatiable desire for consumption and wealth is what results in the destruction of people and the earth. † The corresponding passages are as quoted above. 6 Alternative view: Dominion Theology in Genesis 1 vs. Dependence Theology in Genesis 2 And lastly, but most importantly, consider the following two verses, both from Genesis 2:†Then the Lord God formed a man from the dust of the ground and breathed into his nostrils the breath of life, and the man became a living being. (Genesis 2:7) â€Å"The Lord God took the man and put him in the Garden of Eden to work it and take care of it. † (Genesis 2:15) What is very important to the discussion in this paper is that according to Hiebert (1996), as evident in the above verses, Genesis 2 presents an alternative to the dominion theology of Genesis 1, which he calls dependence theology. His thesis b eing that the first human is made of the same arable soil as are all of other forms of life; and the divine breath into which his nostrils blown is the same with which all the animals live and breathe (Gen. :7; 7:22). The role of the human in the earth described is not that of mastery but of servanthood. In this account of creation, the theology of the human place in creation is not a theology of dominion but a theology of dependence (Hiebert, 1996). This theology is evident in other parts of Scripture, examples including Psalm 104 and the Book of Job (McKibben,1994). According to Hiebert: â€Å"†¦ In this tradition (Genesis 2), the human being is positioned very differently within the world of nature. Here the archetypal human is made not in the image of God but out of topsoil, out of the arable land that was cultivated by Israelite farmers (Gen. 2:7). As a result of this kind of creation, humans hold no distinctive position among living beings, since plants and animals also were produced from this same arable soil (2:9, 19). Moreover, the role assigned humans within creation in this story is not to rule (radah) and to subdue (kavash) but rather to {23} *serve* (avad; Gen. 2:15; 3:23). The Hebrew term avad is properly translated *till* in these verses (NRSV), since it clearly refers to the cultivation of arable land. But avad is in fact the ordinary Hebrew verb *serve,* used of slaves serving masters and of humans serving God (Gen. 12:16; Exod. 4:23). â€Å", the conflicts of Genesis I and Genesis 2 notwithstanding, there are lots of thesis arguing that there is no inconsistency between the two chapters and the ouvert differences are due to different ways in recapitulation only . (Young, 1960),(Archer, 1964),(Kitchen,1966) On another plane of our discussion, we shall now turn to a brief discussion of the historical origins of our ecological crisis. 7 The Historical Origins of our Ecological Crisis There is general consensus that the planet earth is heading towards environmental catastrophe due to alarming development at different fronts: the green house effect, acid rain, damage to ozone layer, deforestation, loss of biodiversity, chemical pollution, freshwater shortage, etc. , amongst others. (Magdoff Foster, 2011).. But how did all these pollutions started? according to Thorsheim (2006), in his book â€Å"The Invention of Pollution†, it all started with the use of fossil energy, which was conducive to the Industrial Revolution. The first largescale commercial use of fossil energy was coal in Britain in the 1800’s, which he referred to as a â€Å"Faustian bargain† for Britain, since on the one hand it helped to bring tremendous wealth, advance and power to the country, whilst on the other coal also filled the air with immense smoke and acidic vapors, which was one of the origins of what we now call the â€Å"green house effect† and â€Å"acid rain†. Fossil oil as energy had also been popularized ever since Edwin L. Drake drilled the first oil well in 1853, but the impact on the environment is equally as detrimental as Coal, if not more so. The fossil energy application was conducive to the Industrial Revolution, and the Industrial Revolution had led to the advance in comfort, convenience and enjoyment, from dwelling comfort to transport convenience to material needs, leading to the abundance and later overabundance in supply of products. Consumerism in the past decades had eventually been invented in order to â€Å"help† us to recognize our needs, and due to the needs for growth of enterprises, some products have also began to be designed with â€Å"built-in obsolescence†. All these initiatives had contributed to the generation of ever more wastes than in the centuries before the industrial revolution, much more than can be â€Å"sinked† by the earth, which contributed to the chemical pollution of soil, water, which has also altered the bio-diversity of the Earth. 8 Ever since the Industrial Revolution, the consumption of energy has experienced exponential growth (see figure 1. 1). Concomitantly, different kind of detrimental impacts had been inflicted upon the ecology of the earth (see figure 1. 2). As an in-depth analysis of our ecological crisis is out of the scope of this paper, focus is now centred on the â€Å"origin† of the crisis, viz. the advent of fossil energy application, which shall be discussed below. Some key developments relating to fossil energy application:1665 Invention of the first modern industrial steam engine by English inventor Edward Somerset which can use wood or coal as fuel 1794 First produce of Coal Gas by William Murdoch 1853 First refinement of Kerosene by Abraham Gesner 1859 Drilling of first Oil Well by Edwin Drake 1859 Building of the first practical self-combustion engine by Etienne Lenoir Religious Background of the Inventors / Innovators Astonishingly, what the above key developments have in common, according to research by the author, is that all the inventors / innovators were Judeao-Christian in religious belief, as can be listed below according to extant data. Inventor/Innovator Place of Birth Religion Edward Somerset (1601-67) Monm outhshire, Britain Roman Catholic William Murdoch (1754 – 1839) Cumnock, Scotland Roman Catholic Abraham Gesner (1797-1864) Nova Scotia, Canada Protestant Christian Edwin Drake (1819-1880) New York, U. S. A. Jewish Jean-Joseph-Etienne Lenoir (1822-1900) Mussy-la-Ville, Belgium Roman Catholic However, just as one cannot say that the inventions or innovations in fossil energy application has been due to Western Christianity, as otherwise one will fall into the â€Å"post-hoc ergo procter hoc† fallacy, it is likewise not valid to attribute the ecological crisis directly to Western Christianity. However, If we put the question conversely by asking that if the inventors/innovators were pantheistic, believing that the nature is sacred in itself and should be reverred, then it is highly unlikely that the inventions/innnovations had been conjured and accomplished by them. Science and Christianity It has been argued that science and christianity are coherent to each other, A British Scientist, Robert Clark, once said â€Å"†¦ we may interpret the fact scientific development has only occurred in a Christian culture. The ancients had brains as good as ours. In all civilizations, Babylonia, Egypt, Greece, India, Rome, Persia, China and so on, science developed to a certain point and then stopped. It is easy to argue speculatively that science might have been able to develop in the absence of Christianity, but in fact, it never did. And no wonder. For the non*Christian world felt there was something ethically wrong about science. In Greece, this conviction was enshrined in the legend of Prometheus, the fire*bearer and prototype scientist who stole fire from heaven thus incurring the wrath of the Gods. † 10 Consider also these statements from renowned scientists; William Thomson: â€Å"Do not be afraid to be free thinkers. If you think strongly enough, you will be forced by science to the belief in God. † Isaac Newton: â€Å"This most beautiful system of the sun, planets and comets could only proceed from the counsel and dominion of an intelligent and powerful Being†¦ , Stephen Hawking:†In fact, if one considers the possible constants and laws that could have emerged, the odds against a universe that produced life like ours are immense. † Conclusion This paper has attempted to examine the hypothesis of Lynn White’s that Christianity bears significant responsibility for the earth’s ec ological crisis. The author has attempted to typologize and quote verses from the scriptures, exegeses and writings of theologians on the Biblical scriptures depicting the relationship of God, man and nature. Whilst according to the Dominion theological perspective as discussed above, the hierarchal relationship of God-Man-Nature (see figure 1. 3) is apparent, in the Dependence theological perspective, the hierarchal relationship of God-Man ; God - Nature (see figure 1. 4) is also evident. God God Man Man Nature Nature Figure 1. 3 The Dominion Perspective Figure 1. 4 The Dependence Perspective Other verses as listed under the section â€Å"Passages that echo Eco-Friendly† also act as a counter-argument for the Dominion hypothesis. It would seem therefore that White’s hypothesis that â€Å"†¦ Western Christianity sees the world existing primarily for the benefit of man† and therefore â€Å"Christianity bears a huge burden of guilt† is not grounded solidly, because as mentioned above, there are many verses which encourage man to be benign to our environment, and conversely, there is no single passage asking man to abuse nature for his primarily benefit only. However, if White argued that â€Å"Christians bears a burden of guilt†, then it is less reputable, as explained in the next paragraph. 11 If one concurs that scientific thinking is coherent to Christian belief, as discussed above, and like White argues in his paper, Western Christianity has been contributory in promoting modern science and technological advance, and from the standpoint of the analysing of advent of fossil energy as the origin of our ecological crisis, which does have tremendous detrimental impacts to our environment, it seems evident that Christians do have a direct linkage to the inventions and innovations leading to the mass scale use of fossil energy, the detrimental origin to our ecological system. Recommendations It can be said that with subtlety in the Biblical scriptures, interpretations are often contingent upon the context and the wisdom of the readers, as inspired at different times. What can be said is that given the state of development before the advent of sciences, man had been under the perpetual threats of nature, from attacks by animals, storms, sickness to famines and other disasters. The Dominion theological perspective no doubt inspired man to develop creative thinking about mastering the nature for the betterment of his lifelihood and survival, lacking which man might still be living rather primitively. The advent of sciences and most notably the Industrial Revolution can be depicted as the epitome of this mentality. As our civilization, technology and wisdom progresses, we should now be in a position to recognize that a Dominion mentality to the nature is detrimental to our environment and it is time that we revisit the scriptures to investigate whether we have overlooked an alternative theology in the Bible for seeing our relationship with nature-the Dependence approach, treating the nature as equals of ours, in which we serve god to ensure its goodness, and ensuring its long term sustainability to prepare for the â€Å"Kingdom of God†. 2 Bibliography Lynne White Jr (1967), ‘The Historical Roots of Our Ecological Crisis’, reproduced in John Barr (ed), The Environmental Handbook (London: Ballantine/Friends of the Earth, 1971) pp 3-16. David Kinsley, Ecology and Religion: Ecological Spirituality in Cross-Cultural Perspective (Englewood Cliffs, N. J. : Prentice Ha ll, 1995) Richard Cameron Wybrow â€Å"The Bible, Baconism, and Mastery over Nature: The Old Testament and Its Moderrn Misreading† (Ph. D disserrtation, McMaster University, Hamillton Ont. Canada, 1990) p. 206 Theodore Hiebert, Professor of Old Testament at McCormick Theological Seminary, Chicago, Illinois. , Direction (Winnipeg, MB), 1996 Gordon Zerbe, Assistant Professor of New Testament at Canadian Mennonite Bible College, Winnipeg, Manitoba. , Direction (Winnipeg, MB), 1992 Howard Snyder, Liberating the Church: The Ecology of Church and Kingdom (Downers Grove: Inter-Varsity Press, 1983) 45-51. Young, Edward J. (1960) An Introduction to the Old Testament (Grand Rapids: Eerdmans Publishing Co. ). Archer, Gleason (1964), A Survey of Old Testament Introduction (Chicago: Moody Press). Kitchen, Kenneth (1966), Ancient Orient and Old Testament (London: Tyndale Press). Thorsheim, Peter (2006), Inventing Pollution: Coal, Smoke and Culture in Britain since 1800 13 How to cite Religion and Environmental Ethics, Essay examples

Intellectual capital in the Serbia industry - Myassignmenthelp.Com

Question: Discuss about the Intellectual capital in the Serbia industry. Answer: 2nd Year of the Business Plan In the hotel business plan, this second part of the report discusses the upcoming years, which is prepared based on the first part of the data report. Therefore, the data report of the business plan will be considered with the first part. SWOT Analysis of the business plan A SWOT analysis is the first stage of business planning and based on the analysis marketers can focus on the key issues, which will be helpful in growing the business. Person, place, product or industry can accomplish SWOT analysis. In this report, SWOT analysis is done for the Hotel industry (Dogancili Tarakio?lu, 2017). It will identify the strength and weakness, which are the internal factors involved with the plan. The Opportunities and the Threats are the external factor of the business plan and both the factors used as a strategic planning and parts of the process that are favorable or unfavorable in achieving the objectives. SWOT or TOWS both is an acronym to analyze the Strength, the Weakness, the Opportunities and the Threats (Kryvinska et al., 2014). Below are the points that show the SWOT analysis: The Strength of the Hotel: The high level of Staff Relation (Mohsin, Lengler Aguzzoli, 2015) The better the team makes a decision the higher will be the profit. Better teamwork and the employee performance help in increasing the revenue of the hotel. Excellent renovation of the interiors of the hotel is a guest attraction. The quality or the standard of the Hotel should be high as compared to the competitors Hotel. The Weakness of the Hotel: The occupancy has some target. Sometime the target could not be achieved. Even though the relation of the staff is high, still the turnover of the staff is higher (Guilding, Lamminmaki McManus 2014). The Debts are high and due to this reason, the hotel might have a possibility of running at a loss. This considered to be as one of the biggest weaknesses of the hotel. The decision making of the hotel booking depends on the season. The Opportunities for the Hotel: To make a strategic decision is a new concept by which the occupancy will be increased. With the increase in occupancy, the revenue will automatically be increased (Lei Lam, 2015). To make use of those potential that has not yet exploited. The business growth of the hotel is with the Tourism. The more the tourist visit the hotel the better the growth will be there in tourism (Bianchi, Pike Lings, 2014). The Threats of the Hotel: Due to the increase in turnover of the staff, there is a shortage of the availability of staff. With increase in the business, the numbers of the competitors are also high. Objectives Below are the lists of objective, which have been taken by observing the data that are present in the 1st year: Financial Objective of the Hotel: In the 1st year, it was observed that $3,872,831 was the total revenue of the hotel room (Masiero, Heo Pan 2015). In this revenue, the percentage of the occupancy was 71.92% and that of the FB was $1,924,324. At the same time, $175,063 was the revenue of the meeting hire or the functions attend. It is necessary the revenue be increased by 15% (Bontis, Janoevi? DÃ… ¾enopoljac, 2015). Whenever there is a chance to take a contract, the rate of the contracts should be higher. It is always better to achieve the revenue target from the budget that has provided. The staff turnover should be reduced. Marketing Objectives of the Hotel: In the 2nd year, the Paradise Hotel provides the following marketing objectives: The higher the promotional campaign the better the marketing objective. Give more priority to the events that are followed. Give incentive to all the market that is targeted. Giving more incentives will attract this market. Strategies Strategies are the new concept for the strategic management. For strategic planning, it is better to determine the goal, complete the activities to achieve the goal and perform an action with the available resources. It is better to recognize the strategic planning of an organization to make it profitable (Bontis, Janoevi? DÃ… ¾enopoljac, 2015). In this case, to fulfill the objectives of the hotel, there should be some strategies to be followed so that the hotel can meet those objectives. There are short-term and long-term strategies to achieve the financial and the marketing objectives: Financial Strategies of the Hotel: To meet the financial objectives, the below marketing strategies have followed: To increase the revenue of the room, it is better to decide the rate of the room during the season as more tourists will be coming and the department of the rooms must look into the revenue that is targeted. A strategy has applied by the hotel to come up with a solution to the problem of staff turnover. They decided to provide training to the employee and increase the wage (Guilding, Lamminmaki McManus 2014). An idea is set to the employees mind to meet the value of the money. This idea is met by giving the guest a better service or quality service during the time they stay. Marketing Strategies of the Hotel: To meet the marketing objectives, marketing strategy have stated below: The promotional campaign has to be increased with the help of different local newspaper and different site of social media. Keep follow up with the events that are present in that year so that promotional campaign can be increased. A package should be created so that the targeted market can be attracted. Build a close relationship with the suppliers and the customers with their work, have a better communication with the brand value, and effectively evaluate the guests needs. Communicate through the promotional campaign to offer the guest with the unique services. References Bianchi, C., Pike, S., Lings, I. (2014). Investigating attitudes towards three South American destinations in an emerging long haul market using a model of consumer-based brand equity (CBBE).Tourism Management,42, 215-223. Bontis, N., Janoevi?, S., DÃ… ¾enopoljac, V. (2015). 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