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Case Analysis: In the shadow of the city

Pages:12

The Case Study Highlights

‘In the Shadow of the City’ published in 1991 by Harvard Business School
highlight issues faced by leaders of social change and resolutions of it is dealt with in the project by a coordinator and the donors. The community development project involves many domains for considerations such as the culture and norms of the community. Similarly, the development requires a new perspective in living a life and participating “change” the city must adapt. The case brings forward the study of the development of three slum neighborhoods located on the fringes of Addis’s primary market. There are few highlighted summaries we must look into to bring up the critical study of the case.

Firstly, collecting donations for a large project that involves physical and mental activity by massive people require vast funding. Now the people who donate may not necessarily isolate themselves from the project. The organizations involved in the Integrated Holistic Approach Urban Development Project (IHAUDP) in Addis’s Ababa a capital city of Ethiopia, British government’s Overseas Development Administration (ODA), the UK based charities such a water Aid and Help the Aged, Bob Geldof’s Band-Aid and Reed Charity.

Secondly, we must refer to the political tension in the region, Ethiopia has been under the rule of aristocrat for many years, and new government offices are introduced. It means the decentralization of the political decisions may lead to the development of the weak areas of the country. The social-economical pressure, such as massive corruption among senior officials, increasing the prices of essential commodities, and it leads us to understand the fundamental economic problem of scarcity of resources. That means, even though there is labour resource available, other resources such as raw material which must be costly because of famine during the last years. Production is lower because of poverty, and people are becoming weaker because there are no jobs available in the factories. This is rather a vicious cycle of small production and poverty in the country. The economic problem is connected with social issues such as hygiene. When we talk about the community as a whole, we have to understand their norms as well. The social security system was invisible from the region. It lacked a basic understanding of health, housing, and community. The community gives little to no value to vaccination to children to prevent them from catching viruses. They live in unsanitary, condemned houses and their mothers are uneducated, alone, and cannot earn enough for family. Again, the vicious cycle is ongoing.

One may point out the norm, such as having latrine besides kitchen lack the primary health education. The community seems to be in dire need of awareness of basic living standards. In the story of Tesfaye in the case, an example might help us highlight the intensity of the issue.

Finally, we have to understand how the previous projects have been in the city, and were they successful? One successful project was in Kebele 41. Jember Teferra was a project officer. The approach was basically to develop the community through a bottom-top approach. It means they are going to address the issues of the city, and development would be considering their problems. It involved the community in specifying their needs and planning how the funds would be used in the project.

In short, the new project is being planned, and Alec Reed is donating significant funding of the project along with other donors. Jember has prepared documentation and submitted a 1000000-pound proposal for a project to develop three kebeles over two years. The plan includes replacing housing and developing communities through various projects.

Discussion and Identify problems

There are few problems in organizing, planning, and funding the project. The case underlines the major donor Alec Reed, and He is an excellent businessman in the UK having 200 agencies. He describes himself demanding at work. Jember Teferra having done graduation in community development. To work on her master’s thesis, she reached out to Alec Reed to work on the project. The working relationship raised many questions on both sides. Here are a few identifiable problems from the case. The probable solution based on concepts will be given later after identifying the issues.

Firstly, communication errors between working partners. In the first meeting, Jember said that she wants to raise enough money for the poor. The answer to it by Alec was that he does not believe in Jember to pull off five time’s bigger projects. In these two dialogues, it can be observed the communication error between parties.

Secondly, the problem of expectation of the process of the project. Alec sees it as a project which one can carry out very quickly in a given period. It neglects the probable problems such as political issues and social norms prevention community development. He sees it as a business project which must be done in a said time using the defined budget. In the first meeting, Alec said that this is a business project and must be carried out efficiently.

Thirdly, another problem is to identify who is leading the project. Alec has funded it and needs the weekly account of the progress of the project. The problem is project need focus and if it is regulated strictly based on development such as several houses made or community projects carried out. It misses the point where building houses will be burdensome at the time due to socio-economic problems.  In case Jember is leading a project, she has to be accountable to all the stakeholders of the project. After having spent 500000 pounds to date, she must deliver at least some parts of expectations.

Finally, the approach to solving a problem seems one-sided. Jember wants the Bottom-top approach, whereas Alec appears to have a Top-Bottom approach, which is common in Business projects. The problem with the current strategy is, Jember is too focused on the issues of the community, including small matters. Jember’s perception of the disagreement underlines her focus that is, the purpose of the population want, being involved in the planning, which is the core of the holistic approach. Similarly, Alec’s perception of disagreement was that he had not seen any development in the area where 500000 pounds is spent. We can purpose a few possible solutions based on the three concepts.


1. Leading social change organizations

The people who have the vision of changing the society and bringing change in the area, they are social change leader to have thought of doing so. However, they become a leader when they implement and execute what they have thought of. To bring the change in the society, they have to understand the area, their history, and social norms and limitedness of their awareness of the dire need of replacement. Some studies highlight the areas which social change leaders must work on to get the most from the collaborative work.There are five areas in which Jember has to work on. Firstly, advancing a relational leadership perspective to explore connectedness. There are two ways of approaching the role of relationships; the first one is known as ‘the entity approach to leadership. It examines the relationship-oriented behavioral styles such as consideration, and relationship-oriented leadership behaviors based on high-quality, trusting work relationships’. The theories focus on relationship-based leadership, which can be strengthened among different stakeholders. The second is ‘the constructionist approach’ which perceives leadership as the outcome of human social constructions emerging from the rich connections and the interdependencies of organizations and their members.

The study of 40 organizations in the US shows the five leadership practices which bring diverse stakeholder together in a collaborative work environment. The five methods are ‘prompting cognitive shifts; naming and shaping identity; engaging dialogue about difference; creating equitable governance mechanisms, and weaving multiple worlds together through interpersonal relationships’. It is also important to minimize power inequalities and recognition of the strategic value of ‘difference’. Alec Reed and Jember would have to name and shape identity to shift the cognitive network of how they see it as a project. It includes how particular issues are understood among these two major stakeholders. It also involves having an excellent conversation between stakeholders to make communication clear.

The cognitive shift means changing the mental model. It means to change the audience’s view of the process of the organizational work. The method of building bridges includes listening to other parties and improving interpersonal relations. Alec Reed may need to understand the concept of ‘from another problem to our problem’. As we have identified in the problems section, he sees it as a business to solve the problem. It means that their challenge of how they are living, one can provide them with housing, and thinking that work is done then it is a problem. The building approach of any leader of social change is first to understand that their problem is our problem. It is then that one knows the struggles they are going through.

Similarly, the concept of naming and shaping identity is a significant process of social change. Identity is a core element to bring stakeholders such as gender or race. In the case study, Alec Reed and Jember will have to understand the need for creating a similar identity. Such as they both somehow relate to the culture of Ethiopia, which means they can increase interpersonal relations. Celebrating identity may foster the community to connect to donors and the project managers. It includes activities, including festivals and sports that may help them relate to community development as a whole.

It is essential to bring forward a similar solution where different perspectives are taken seriously. The problem with the holistic approach seems that only two people are involved. The dialogue misses the needs and interest of community which need development. In the meetings, there was no person of society in the meeting present. If the person would have been and was given a chance to speak of interests and needs required, the donors would have understood the struggles Jember is facing. The heated conversation would have instead been an interactive session of progress.

The problem of different perspectives lies at ensuring different voices in the circle. It means no single person can alone represent various members of the ethnicity and community. Other members must come forward to showcase their issues to stakeholders, and relevant measures can be taken. It also includes recognizing the hard work of people involved in social change, including technicians to garbage pickers. Alec cannot see the job done in the area worth 500000 pounds. Whatever the work is done. He must address and recognize the value of it. It only improves and encourages the people who spent days and nights working on the projects. (Ospina & Foldy, 2010.) If I was to ask and mediate between Jember and Alec. I would suggest bringing forward the community member who is poor and old. He/she is going to tell the socio-economic problems, including political. It will change the perspective of Alec. And through dialogue, Jember would understand that she must speed up the work despite the struggles. It will endure development in the community as well.

  1. Multiple stakeholders and collaboration.

The second concept of multiple stakeholders led to an understanding of the recognition of different people directly or indirectly involved in the project. The research article penned down the term ‘Intergroup leadership’ to highlight the importance of the varying race, ethnicity, age, political party, and sexual orientation in today’s increasingly pluralistic, multicultural world. The intergroup leader confronts the challenges f diversity and brings various groups together in a positive relation. The social change leader must be an intergroup leader because the community development requires people from different backgrounds to come together and work on a singular mission of growth.

The different groups involved in the community development project such as different donors, construction workers, the people who would acquire the houses, and the managers must be encouraged to contact each other. This approach improves intergroup relations and improve positive regard for outgroups and decrease prejudice and stereotyping. It brings equal-status groups, common goals, intergroup cooperation, and recognizing the leader of the project. There are economic, legal, and ethical responsibilities in the community development each have their weight. If I have to put the priority list of the problems one must consider in solving the issues, It would be ethnical responsibilities. It means it will be ethical to bring forward the community members in the meetings and have a different perspective of change and development. (Pittinsky, Simon, 2007).

 

  1. The construct of leadership identity – from traits to trust. 

It focuses on defining the leadership identity, simply put it means to bring up the sense of themselves as to how they see themselves. The individual has to work under personal brands that transcend their organization. The leader is not outside of the whole process of the development but a part of the core team. The leader has to be authentic and engaged in every process of the project.

In the case of the project of Integrated Holistic approach, Jember seems to be an active person in charge of the project. She knows the smallest to most significant problems faced by different groups. However, she has not developed a personal brand to gain the trust of the donors. Which means she has to work on her identity that the world must see her. She works on the project, if she had done it under her name donors such as Alec Reed would have trusted her work.

The Trust as a trait vs Trust as an emergent state.

Traits are defined as a characteristic that is not influenced by the external environment and remains stable over time. It shows that this trait in an individual is static and not changing. However, another concept indicates that it is a new state which means that trust develops over time depending on contextual factors including cognitive, motivation, and affective states.

On the other side is another concept that is trusted as a process. This concept is different from others as it does emerge, but through the series of operations. For example, Alec may not trust Jember on the work done. It shows that he is hesitant over the job or the accountability of the money spent. It wants an immediate result. After the second meeting, Alec seems to trust Jember and continued to listen to her complaints and highlighted his own needs.

Conclusion and Recommendation

In conclusion, the case study has problems considering leadership, communication, and perception of others. The agenda of the stakeholders was different. The solution revolved around connection as the base of the leadership quality. Alec Reed and Jember would have to have a dialogue of differences with understanding and include the community members in the meeting to have a holistic understanding of the context of the project’s development. Learning from the case study, we may consider two recommendations that would help Jember and Alec to have communication without any hindrance.
Firstly, I would recommend to both the major stakeholders of the project to organize a meeting with community members. The reason for that is, as we have discussed above in identifying the problem of perception, to understand each other’s perspective they would have to
include the members of the community. Alec would be able to understand the struggles of the people such as a community member may mention that they have sewerage problems in their area. For that, the housing may not be the immediate solution. They would have to dig in the basements and setup the pipelines for sewerage to work properly. Alec would be able to understand problems atthe micro-level. For Jember, she may need to understand that being extremely involved in every other individual’s problem would not help everyone at the macro level. Rather than paying attention to each problem, she may perceive that working at a given deadline would help the community to build a sense of work at the organizational level.
Secondly, the accounts show that the proposal of budget and actual expenditure needed for physical upgrading. There seems to be a ‘huge’ difference between the proposals and actual needed of expenses. Jember would need to hire expert accountants to calculate the budget accurately. The reason for that is, the proposal suggested expected expenses on physical upgrading 2,766,408 Pounds whereas the actual expenses were 14,076,203 Pounds. The proposal would have pressurized the stakeholders at large to collect enough donations, whereas it shouldn’t be the case considering actual expenses. Therefore, it is recommended to hire experts.

  References

Ospina, S., & Foldy, E., 2010. Building bridges from the margins: The work of leadership in social change organizations.
The Leadership Quarterly, 21(2): 292–307.

Pittinsky, T. L., & Simon, S. 2007. “Intergroup Leadership.” The Leadership Quarterly, 18(6): 586–605

Burke, C. S., Sims, D. E., Lazzara, E. H., & Salas, E. (2007). Trust in leadership: A multi-level review and integration. The leadership

quarterly,18(6), 606-632.

Sinclair, A. (2011). Being leaders: Identities and identity work in leadership. The Sage

Handbook ofLeadership. London: Sage, 508-517.

 

Karl K. Carlson Case

Pages:5

Karl K. Karlson has an idea of starting a website called Aryans R Us. Amongst many other plans on how we want to run this website the one major project is to use it a platform for promoting the ideas he has in his mind. White supremacy, attitudes and theories that assert inherent dominance over other ethnic classes of the lighter-skinned, or “white,” human races. John Philip Jenkins redefines the term “white supremacy” used in this eraby such organizations that espouse ultranationalist, imperialist, or authoritarian ideologies. He is a white supremacist & he has some friends that also share the ideas that he has. (Jenkins, 2020)

He wants to use this website as a platform to post articles that they have been write to promote their cause of making the white people understand their place in the race. Another point of making this website is to call out and arrange the meetups of the white Supremacists mindset. He wants them to meet each other and discuss all the issues they feel are essential. Lastly, he wants to make an eBay type websites on which he wishes to sell Nazi and Neo-Nazi memorabilia. He wants to execute all these three ideas on his website. In this paper,I would argue if a website with such motivations of creation should be allowed to go live.

Keeping in mind that white supremacy movements have a history of frequently focused on aggression to achieve their goals, the website can’t be allowed to go live. The reason why I say this is that it would promote hate speech. People that feel they are racially superior to others they do not say it to hurt people. It could become a movement that attracts like-minded people and destroy the overall fabric of society. Even with a constitution protecting the rights of freedom of speech, there are ethics that need implementation.

The use of digital mediums like “websites” is exercising of Freedom &each individual has the right to do so as per his or her ideas. In this manner, if the website is leading to any movement that would lead to harm humanity and create unrest, these are reason enough not to let it go live.

It should be illegal for a website promoting ideas and memorabilia tied to hate speech to exist. Hate speech leads to creating unrest in society. If its popularity grows, it will ruin the peace of the community. The consequences of running such a campaign are dangerous. As per the harms principle, the only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others. (1978, 9) (stanford.edu, 2017). This website is likely to create a divide in the society as it reflects the pseudo mindset that despite so much struggles to condemn such ideals that promote injustice or unrest in the community can lead to creating harm.

Karl, should not be allowed to make his website, as hate speech is unacceptable in the modern-day world. Most liberal societies have set limitations to freedom of speech crossing the boundaries of hate speech (Stanford, 2017). The US has proven to be a promoter of freedom of expression over the years & the Nazi march through Skokie was one of its examples. Yet if anyone in America should be living their lives feeling safe and happy. Instead of white nationalists and other racist actor’s immunity target refugees, minority groups and religious minorities.

Despite understanding the value of freedom of free speech, the negative consequences of hate speech can’t be denied at all. Racial supremacy as a full-fledged philosophy is much more complicated than pure bias or bigotry. Moreover, most white supremacists today believe that the white race is in danger of extinction because of a growing “flood” of non-whites dominating society. This sort of mindset is hazardous in the log-run and their belief that drastic intervention is required to “save” the white race from being effected by other sports.

People with extremist mindsets always abuse freedom of speech. By definition, hate speech means degrading a person based on race, color, gender, faith, age, disability, or some other related grounds is hateful. (ALA, 2020) Allowing this website to be formed is equal to allowing Karl to gain access to so many like-minded people and spread hatred in the name of white supremacy is not just condemnable but unacceptable. This could lead to rage war between the white and the people of color leading to a violent movement.

Peter Hopkins, in an article, describes the violence spread by the white supremacists against Muslims. They are racially motivated towards shaping the minds of the followers that leads to hate speech that further leads to hate crimes. White supremacists show this attitude publically now near places like religious centers and community buildings where they focus on the teachings of their leaders. The researcher explored the modern types of religious and culturally based abuse that leads to further violence. (Hopkins, 2016) Hence, if this website is allowed, their policies will be aimed at communities who are victims of religious and ethnicity-based abuse. They will be motivated to abuse the rights of people from other races and religion, and they will refuse to accept co-existence of people from all religions and races.

Apart from the argument that how much of it is true, it is extremely dangerous to provide support to such mindsets who have historically chosen violence as their means of expression. The falseness or immorality of Karl’s views is another significant reason not to let this site go live. The message that these sorts of ideals bring, initiate violence in the mind of the viewers and even those who didn’t have any such beliefs start having such thoughts. This aggression is not coming out of thin air. When these loyalists employ racial language and enforce discriminatory policies such as the Muslim Ban, family splitting, silencing colored voters are amongst some of their actions that fuel the minds of their followers. Aggressive actions beget acts of aggression. (civilrights.org, 2019)

After careful consideration of the motives of Karl that include posting articles they have written on white supremacy, using it for white Supremacists to meet and discuss issues of importance to them and selling the things Nazi and Neo-Nazi collectables, I don’t think this website should be allowed to go on air. It clearly can lead to promoting hate speech and develop all sorts of negative mindsets that are unacceptable in the modern world. If they employ racial language and enforce discriminatory policies.

This could lead to campaigns such as the Muslim Ban, silencing colored voters as well as other hate crimes. Adding to that Aggressive actions beget acts of aggression that are also not acceptable at any cost. There should not be any such campaigns running that negatively affects the overall fabric of society. They should not be allowto run this website at any level and giving them the freedom to express their hatred against all other non-white people would only spread hatred and violence in society. Hence my verdict after analyzing all the outcomes of this campaign is no; they should be banned rather than allowed.

References

ALA. (2020). Hate Speech and Hate Crime. Retrieved from http://www.ala.org: http://www.ala.org/advocacy/intfreedom/hate

civilrights.org. (2019). Here Are 10 Things You Can Do To Stop White Supremacy. Retrieved from https://civilrights.org: https://civilrights.org/heres-10-things-you-can-do-to-stop-white-supremacy/

Hopkins, P. (2016, 7 22). Gendering Islamophobia, racism and White supremacy: Gendered violence against those who look Muslim. Retrieved from https://sagepub.com: https://journals.sagepub.com/doi/full/10.1177/2043820616655018

Jenkins, J. P. (2020). White supremacy. Retrieved from https://www.britannica.com: https://www.britannica.com/topic/white-supremacy

stanford. (2017). 2.3 Mill’s Harm Principle and Hate Speech. Retrieved from https://plato.stanford.edu: https://plato.stanford.edu/entries/freedom-speech/#MilHarPriHatSpe

stanford.edu. (2017, 5). Freedom of Speech. Retrieved from https://plato.stanford.edu: https://plato.stanford.edu/entries/freedom-speech/#JohStuMilHarPri

 

 

 

The Harvard Management Company and Inflation-Protected Bonds

Pages:6

Case Questions

 

  1. What are the goals of the Harvard Management Company (HMC)? What are its investment horizon, sources of income/revenue, spending, and growth goals?

The goal of Harvard Management Company (HMC) is to provide active strategic management to the Harvard university endowment funds. Its investment strategy aims at adding value by engaging investment professionals who actively seek superior returns across a diverse array of asset classes. In the fiscal year 2000, the company oversaw the management of $19 billion, of which $15 billion was from the endowment funds. The primary sources of income for HMC was the endowment funds (25%), tuition fees (30%), gifts, and grants.

Moreover, as of 2000, the company’s active management strategy had produced a real return of 11.3% per year for the previous ten years. However, the expenses generated by this proactive strategy had been $93.1 billion; 49 basis points of total assets under management. The long term goal for the endowment was to distribute between 4% and 5% of the endowment to the schools within Harvard University, while at the same time preserving the real value of the endowment and allowing for real growth. Harvard spending had been growing at 3% after inflation. Therefore, it would require a real return between 6% and 7%.

  1. What are the differences between real and nominal returns? Why is HMC focusing on real returns? What other return/risk characteristics does HMC consider?

Nominal returns are what an investment generates before taxes, fees, and inflation. It is the net change in price over time. However, real yields are the actual value of returns after adjusting for inflation, income tax, and fees. The historical average rate of endowment gifts is 1%. Therefore, the goal of 4% and 5% distribution among the schools, and the continued spending of Harvard at 3% after inflation would require an investment real return goals between 6% and 7%.

To determine the relevance of an asset class for its portfolio, the HMC considered three characteristics: expected future real returns, the volatility of real returns, and the correlation of the real return on each asset class with the real return on all other asset classes. To estimate these characteristics, HMC historical data on real returns and the assessment of experts.

  1. What are TIPS? Describe its features. How are they different from regular Treasuries? How do they protect against inflation? When do TIPS underperform Treasuries; when do they outperform?

The U.S. Treasury Inflation-Protected Bonds (TIPS) are bonds whose principal and coupons grow with the general level of prices as measured by the consumer price index (CPI). Therefore, protecting investors from the decline in the value of money contemplated by inflation.

The Inflation-Indexed Notes are issued with maturities of at least one year, but not more than ten years. However, Inflation-Indexed Bonds have maturities of more than ten years. These securities are auctioned in terms of real yield. TIPS are structured in a manner that requires changes in the coupon of the based to change the monthly level of inflation. So technically, the principal value of the security on any date equals the value at the time of issuance.

TIPS pay interest every six months based on a fixed rate determined at the bond’s auction. However, the interest payment amounts can vary since the rate is applied to the adjusted principal or value of the bond. If the principal amount is adjusted higher over time due to rising prices, the interest rate will be multiplied by the increased principal amount. As a result, investors receive higher interest or coupon payments as inflation increases. Conversely, investors will receive lower interest payments if deflation occurs. TIPS have generated higher real returns than the U.S Treasury Bills (T-Bills). TIPS are designed to protect investors from the adverse effects of rising prices over the life of the bond. The par value—principal—increases with inflation and decreases with deflation, as measured by the CPI. When TIPS mature, bondholders are paid the inflation-adjusted principal or original principal, whichever is greater. T-Bills are not inflation-adjusted, so they outperform TIPS whenever inflation goes down, and underperform when inflation goes up.

  1. Why is HMC considering TIPS to add to their portfolio? How are TIPS returns correlated with other assets in HMC portfolio?

TIPS had offered real yield between 3.2% and 4.25%. By contrast, the real yields on T-Bills had been historically around 2%, while that on Treasury nominal bonds was about 3%. HMC believed that TIPS could be a good asset to hold in its portfolio. They thought that the real yield by TIPS suggested that a 2% real return was too low and that a better estimate was 3.5%. To study the volatility and correlation of real return on TIPS with other class of assets, HMC performed a mean-variance-analysis. The highest positive correlation witnessed was between TIPS and domestic bonds – accounted for 50% or 0.5. TIPS did not correlate with emerging markets. However, TIPS had a negative correlation with cash and foreign equity. The expected real return was 4% with a standard deviation of 3%.

  1. Examine the mean-variance analysis in Exhibits 5 and 6. What are the assumptions? How did HMC come up with these assumptions? What do the results of this analysis indicate about the inclusion of TIPS in HMC’s portfolio?

The HMC team performed several optimization tests to find the ‘efficient frontier.” Exhibit 5 showed allocation when portfolio weights for all the included asset classes, except Cash, were bound to lie between 0% and 100%; the constraint for Cash was set between negative 50% and positive 100%. Exhibit 6 shows allocation for all asset classes, except inflation-indexed bonds, were constrained to lie between 10% points above and below the weights of the HMC portfolio that was et before the inclusion of TIPS. In this exercise, the constraint for inflation-indexed bonds was set to 0% and 100%.

Overall, the mean-variance optimizations suggested that inflation-indexed bonds were an attractive asset to hold in a portfolio. Additionally, private equity, real estate, emerging markets, and commodities were also suggested to for long positions (expected to rise).

  1. Compare HMC’s asset allocation with other institutions’ (Exhibit 7). What are the similarities and differences?

From the mean-variance analysis, it was suggested that inflation-indexed bonds were an attractive asset to hold in a diverse portfolio. However, the results were not very conclusive. Therefore, HCM performed an analysis of other institutes and how they allocate their portfolios. From the study, it was suggested that HMC, in comparison to other institutes, had been short on cash and had higher holdings in foreign equities. HMC also had more considerable holdings in emerging markets. HMC had limited allocation in absolute returns, as compared to other institutes. Also, a long position in commodities was witnessed.

However, HMC had a high holding of domestic equities, so did other institutes. Additionally, allocation in private equities was as high as the average of other institutes.

  1. Evaluate HMC’s decision to add TIPS to its portfolio. Do you agree with this decision? Explain. What are the advantages and disadvantages of adding TIPS? Is 7% allocation appropriate? Explain.

After careful consideration of the mean-variance optimization results, and the portfolio of peer institutes, a new Portfolio Policy was recommended that would include a unique position of TIPS of 7%, and no shorting of cash, at the expense of smaller domestic equities and domestic bonds. In the new HMC portfolio, domestic equities will constitute 22%, down from 32% a year ago, and the U.S. bonds would add up to 7%, down from 11% last year. A 1% change was made to absolute returns, commodities, and high yield. TIPS were newly added at the expense of U.S. equities, which performed well in the past.

Nonetheless, it is thought that the new portfolio was a proper formation. Although U.S. equities performed well, they were open to risk and not adjusted to inflation. The standard deviation was very high for U.S. equities as well as for domestic bonds. Even though the inflation rate in the U.S. from 1997 to 1999 was not very high, TIPS still generated a decent return. After 1999 the inflation rate was expected to rise, hence making TIPS an even better option to hold in a diverse portfolio. The inflation factor was terrible for other domestic bonds that were not inflation-protected therefore it was suggested to limit its holdings in the portfolio.

  1. How has HMC asset class allocation changed from 1999 to 2019?

For the fiscal year ended on June 30, 2019, the return on the Harvard endowment fund was 6.5%, and the total value of assets was $40.9 billion. The allocation to public equities has increased (1999-2019) to 26%. A new asset class has been added, accounting for 33% of the total allocation, Hedge Funds. TIPS adds up to 6%, still a sustainable percentage. Allocation to private equity has been increased to 20%, which has generated a 16% return. Moreover, Natural resources have been added as a new asset class that adds up to 4%, which gave a negative 12.4% return. Cash holdings have been increased to 1% to 2%.

Nonetheless, HMC endowment allocation is relatively small to Venture Capitals (a high risk, high reward asset class), which would have generated significantly higher returns in 2018-2019.

 

Case Studies: Business Operations and Systems Management

Pages:3

 

  1. Case F7: Rolls-Royce designs a revolution on the factory floor

Managing a project needs expertise, experience, and professional skills. This management activity is managed by the organization, and it is built on organizational effectiveness. The business performs under the stability forces of project management. Rolls Royce is a global engineering firm that is using advanced technologies for its products. This case study will discuss main concepts, like, product innovation, project management, operations improvement, and lean manufacturing, and process design. The company Rolls Royce is involved in the improvements of its operations to stay competitive in the lean networking. The company has been focusing on the state of the art facilities under its labor-intensive laboratories.

The process design involves key operations flow under various degrees of process dedication. The process design involves visual control, safe working, and the flexibility of layout, short conveyance, built-in quality, and ease of team working. The company has great rivals like General Electric, so it has to maintain its process design cost to set up profit margins. Manufacturing operations of Rolls Royce are getting modernized, and due to research and innovation in its product, it has become the second-largest aero-engine maker. In the past ten years, its factories are making jet engines too. In the company, lean manufacturing techniques were started in 2013. With the improvement of these techniques, the production and design processes experienced benefits.

Operation improvement is a key term used under managerial practices that produce economies of scale. For instance, it worked for Rolls Royce to increase the volume of long & short-haul aircrafts engines. The process design is working on smart operations such as cutting edge is improved from 24 hours to 25 minutes. The operation improvement has allowed the company to work on highly sophisticated blades of turbines, so the overall production of the company is increased. Another example is the use of temperature and wax structures for molding. This structural change in the performance of the company is due to its project management. Modernization of Rolls Royce’s manufacturing was started in 2009 that involved huge experimentation and process design. Project management has a central role in modifying current operational practices in any firm. This activity allows a firm to work on inherent behaviors and align organizational involvement. The scope of project management is extensive because it undertakes key disciplinary actions and prevailing practices.

  1. Case Study

This case study is selected to explain the key business scope. Here term inventory is used for the products offered for sale and material used to manufacture products offered for sale. Inventory is one of the most significant assets of a company because the inventory turnover represents one of the basic revenue generation sources and further making profits for the business’s shareholders. Charlie Mash uses the FIFO (First in First Out) method in its inventory system. As they are one of the biggest suppliers of fresh vegetables, this method allows them to supply the vegetables fresh to their customers.

The maximum number of products that a company can produce or sell in a provided period with the resources available is called capacity. The term capacity can also be used as warehouse capacity where a company can store its ready to sale products. Argos is one of the biggest retail suppliers in the UK. Their storage capacity allows them to supply as many products to their customers in a really short period. They are using different stores in London as last-mile storage warehouses for online orders. This way, it is easy to make their delivery and take away service more efficiently. Resource planning and control refer to the understanding between what market demand and what the resources of business can deliver. It provides the procedures, system, and decisions that bring different features of demand and supply together. Resources include raw materials, workers, etc. for example, Amazon is the biggest example of resource planning and control. They are operating in many countries around the world, with over half a million employees and seventeen supply chains. Resource planning and control is an important aspect to work with good business strategies to increase the profits of a company.

Product and service innovation refers to the development of new products and services by a company. The market environment is constantly changing, with new demands of customers around the world. The manufacturing companies are rapidly developing and innovating new products to meet marketing challenges. The same is with service providers who are working hard to provide new and innovative services to their customers. For example, Wasabi, a Japanese restaurant, is growing really fast in the UK. They are continuously working to improve their quality and services to their consumers. They are offering a variety of food to their consumers and establishing new restaurants all over the UK.

 

Financial Business Case for Wildlife Conservation Society

Pages:8

Requirements:

1. The Not-for-Profit entity is Wildlife Conservation Society.
2. Research financial environment( Fund-raising environment, Registration requirements (Types of Registration) , Bank lending rates )Currency exchange rates, Inflationary conditions,Country risk )
3.Develop a fundraising strategy for the nonprofit organization
4.Forecast a three-year quarterly operating budget for the entity (spreadsheet with supporting assumptions)
5.Create a monthly Cash Flow Budget for year one (Spreadsheet with supporting assumptions)
6. Prepare a three-year annual pro forma Activity Statement and Balance Sheet (spreadsheet with supporting assumptions)
7.Calculate relevant financial ratios for the entity (current and forecast years)
8.Create scenarios for two possible investments and using discounted cash flow analysis evaluate each scenario
9.Identify two of the greatest risks that non-profit faces and assess their implications on financial performance using sensitivity analysis on your pro forma financial statements

Introduction

Our globe is an amalgam of enticing landscapes with majestic wildlife and vast biodiversity. Such creations have provided humanity not only the joy of witnessing eye-catching sceneries but also the much required ecological system for the sole purpose of survival.

Wildlife Conservative Society is a Non-Profit/Non-Government Organization to preserve, conserve, and protect ecologically intact places with the most exceptional biodiversity and resilience to climate change. It started over a century ago from the city of New York but has expanded to over 60 countries worldwide. Till now, WCS has managed to protect 372 areas globally, including terrestrial and coastal/marine; WCS has also assisted in establishing 268 national parks over the world. (Wildlife Conservative Society, 2019)

Mission:

To protect wildlife and wild places around the world through science, education, conservation actions, and inspiring people to value biodiversity. The mission can be further elaborated in two phases;(Wildlife Conservative Society, 2019)

  1. To conserve fourteen ecologically intact areas/region of land and sea;
  2. To hamper the decline of six species groups, including Big Cats, Elephants, Sharks/Rays, Apes, Whales/Dolphins, and Tortoises/Turtles.

How WCS Operates:

WCS core operation spans over operating zoos and aquariums, assisting in conserving areas globally, educating and spreading awareness, collaborating with governments and institutes to help to stop the extinction of rare species, and carrying out research about veterinary science, wildlife health, and disease surveillance. (Wildlife Conservative Society, 2019)

To carry out the activities mentioned above, WCS has the following sources of revenue;

  1. Charities, donations, and grants from individuals, corporations, and governments.
  2. Revenue from the sale of Zoos and Aquarium tickets.
  3. Merchandising and sale of other promotional stuff.

Financial Overview:

Source: Annual Report 2019

Critical Aspect:

For the successful continuation of operations, WCS direly relies on external funding, which includes donations and grants from individuals, institutes, and governments. Hence, any hindrance in the external environment, which WCS doesn’t have any control over, can severely hamper the operations of the WCS. In 2019, revenue from other sources such as zoos and aquarium ticket fees, merchandise licensing, and royalties only accounted for 32% of the total revenue generation. (Wildlife Conservative Society, 2019)

Source: RedLAC

Therefore, for the management, it is of crucial importance to be well aware of external factors. The administration should know what the critical external factors are and how they can impact the funding.

Vital External Factors Impacting on Funding:

Economy:

Operations and profitability of every organization are heavily reliant on the performance of local and global economies. The same is the case with NGOs; even the impact can be more severe as the primary source of cash inflow for most of the NGOs, including WCS, is external donation and funding.

1.      GDP Growth:

Source: Economic Intelligence Unit (EIU)

GDP growth is one the critical parameter of the health of an economy; a country having a high and stable GDP growth can be more inclined towards donations and funding to NGOs.

As currently, due to COVID-19, GDP growths of all of the countries in the world have slowed down, and it is expected that the recovery will only be possible by 2021.

2.      Unemployment rate:

As similar to GDP Growth rate, increased unemployment can also trigger a shortfall in the anticipated donations and charities. A sharp hike can be seen in 2020, which is primarily due to COVID-19; however, the impact is expected to mild by 2021.

Source: Economic Intelligence Unit (EIU)

3.      Lending Rate:

Source: Economic Intelligence Unit (EIU)

Another critical aspect of raising funds is the lending and borrowing environment. Low borrowing rates can be beneficial for NGOs as it can significantly reduce the cost of borrowing money. In developed countries, historical and forecasted lending rates are lower than those of emerging countries like India, Ghana, and Nigeria. NGOs operating globally should take significant benefit from the vast differences between the lending rates of developed and developing countries while raising or borrowing funds.

4.      Country Risk:

Source: Economic Intelligence Unit (EIU)

Developing countries have higher lending rates to compensate for higher risk; there are several kinds of risks when it comes to investing and operating in emerging countries. NGOs that do operations in countries located in Africa and South Asia need to be extra cautious regarding their risks. These risks can be due to political uncertainty, law and order situation, weak financial institutions, and rampant corruption.

Another critical aspect which NGOs should consider while raising money for projects in developing countries is how they will ensure the transparency, as there is a lack of proper documentation and weaker system of controls in emerging countries which can increase the chances of mismanagement of funds.

5.      Other Aspects – Inflation Rate and Currency Exchange Rate:

Source: Economic Intelligence Unit (EIU)
Source: Economic Intelligence Unit (EIU)

Usually, inflation and currency exchange rate are interlinked with the country’s lending rate. Unexpected high or hyperinflation rates can make forecasting difficult for NGOs, which can result in variance in budgets; the currency exchange rate also plays a vital role when NGOs are investing money from a developed country in a developing country. Usually, it is beneficial for NGOs that do business and maintain books in USD and invest in developing countries, as 1 USD can have a higher purchasing power in these countries.

Registration Requirements – Legal Aspect

Establishing a Non-Profit Organization might seem like a simple task. Still, in actuality, it is indeed severely technical and requires a lot of support in terms of legal and financial aspects. If one wants to start an NGO or NPO in the United States of America, it has to acquire a 501c3 status.(Dr. Saumya Arora, n.d.)

501c3 status:

A “501 C” organization in the USA is a Tax-exempt entity that doesn’t have to pay any kind of taxes. The most common among these organizations is “501 C 3,” which are known Profitable Charity organizations; these organizations are exempt from Federal Income Tax and hence allow donors to deduce their taxable incomes. Such exemptions only occur in cases when the organizations are doing charitable operations related to education, literary, religious, environmental, et cetera. (Dr. Saumya Arora, n.d.)

An organization can claim the status of “501 C 3” by filing and submittingIRS Form 1023. A filing fee would be charged, which would depend on the past annual gross receipts of the organization. Previous financial records and a forecasted budget would also be required while filing for this status. (Dr. Saumya Arora, n.d.)

Potential Risk for Fund Raising

Non-Profit Organizations currently face several challenges amid slowing down of the global economy, increasing requirement of transparency, growing competition among NGOs, and rapid increase in global warming.

The sluggish economic growth of the world can hinder NGOs’ abilities to raise potential funds, which can hurt the anticipated and planned programs and events. In this current time, NGOs might face the challenge of a shortage of cash inflows. Another critical problem for today’s Non-Profit Organizations is to maintain transparency over the proper channeling and utilization of donations and funds. Amid rumors of increasing corruption and mismanagement of funds have pushed the legal institutions globally to improve the regulations over raising and usage of funds collected through donations and charities.

The rapid growth rate of global warming has further intensified the operating environment for NGOs working for the conservation of wildlife and wild areas. Amid such happening, NGOs need to fasten their efforts toward their environmental causes, resulting in increased needs of funds and donations.

In order to understand the implication of above mentioned two risks; we can take assistance from the forecasted financial of WCS. There are three hypothetical scenarios; a base case, when everything happens as planned and no severe risk takes place; risk case 1, it is a case when due to COVID-19, donations shrink by 30%; risk case 2, when due to extreme increase in global warming, WCS has to spend 30% more over its global conservation program.

Fund Strategy for a Non-Profit Organization

Non Profit Organizations can’t talk about their plans and programs to support their causes until or unless they also talk about how they would raise enough funds to operationalize those plans. These NPOs and NGOs even can’t succeed in availing significant funds without showcasing their past projects.  Every new successful program or event of an NGO is a promotional change to demonstrate its effectiveness and capability to take on more such projects. There is a global need for innovative ways to spend transparently for the causes like wildlife and wild regions conservation; much of the awareness has been created by international treaties, climate change conferences, and NGOs which are working for such purposes. The ability of any NGO to raise funds successfully direly depends on its capability to strategize and carry out effective programs, harvest partnerships with governments and critical institutes, and market itself efficiently. (Latin America and Caribbean Network of Environmental Funds, 2011)

1.      Know your potential audience

Before devising any successful fundraising strategy, it is of crucial importance that the NGO knows about potential investors or donors. Following is the funding mix for NGOs working for the cause of protecting the environment;

Source: RedLAC

 

2.      Understanding the wants of potential donors:

Organizations looking to raise external funds must study and analyze the needs and wants of potential investors and donors; much of the donors look for following aspects in an NGO while making the donation decisions;

  • Institutional stability
  • Transparency and integrity
  • Expertise
  • Alignment with the donors’ objectives

3.      Clarity over the mission and goals:

After understanding the potential donors and their respective needs, NGOs should work on internal assessments and should develop a clear mission and goals. The goals should SMART; specific, measurable, attainable, results-oriented, and time-bound. (Latin America and Caribbean Network of Environmental Funds, 2011)

4.      Forecasts and budgets:

The next step is to quantify your ambitions and make estimated forecasts and budgets. A forecast would help in telling investors what this program would be able to achieve in the end and how much capital would be required to implement the plan. (Latin America and Caribbean Network of Environmental Funds, 2011)

5.      Analyze the fundraising environment:

This includes having a substantial understanding of current scenarios, including economic, political, and social happenings. This will further help in finessing the fundraising strategy and objectives. (Latin America and Caribbean Network of Environmental Funds, 2011)

  1. Implement:

Now as the NGO has a clear understanding of;

  • who might be the potential donors
  • what are donors looking for in a donation opportunity
  • what it wants to achieve
  • how it will make the goals mentioned above and mission and how much it would cost
  • how the external environment is working

Once an NGO has a firm grip on all the aspects mentioned above, it can proceed further by approaching potential investors and donors. (Latin America and Caribbean Network of Environmental Funds, 2011)

 

 

Possible Cases of Investments:

Let’s consider two hypothetical investment scenarios for Wildlife Conservative Society.

Investment Scenario 1:

In this scenario, WCS’s management decides to establish another national park like Borx Zoo in another city of USA. In order to build such a gigantic park, WCS would require an investment of $1 billion which it plans to collect by a consortium of donors, organizations and government. As per estimates, it will require three years to construct this park and then it would be able to receive 2.5 million visitors in the first year of its operations which will grow annually by 2% for the rest of the projected tenure. Annual operating expense will increase at 3% whereas the park management would also have to incur capital expenditure nearly equal to 10% of the total annual revenue. Following are the details regarding this investment opportunity;

 

Investment Scenario 2:

In this scenario, the management doesn’t have a strategy to collect massive amount like $1 billion to construct a park like Borx Zoo as in scenario 1; the management only have $750 million from donations and charity. The management of WCS decides to build another aquarium like “New York Aquarium” in a city of USA. It will take a construction time of two years and will attract 1.2 million visitors in its first years which will further grow at 5% annually. Annual operating expense will increase at 6% whereas the park management would also have to incur capital expenditure nearly equal to 8% of the total annual revenue. Following are the details regarding this investment opportunity;

 

 

 

Financial Results of both the Scenarios:

Investment Scenario 1:

Investment Scenario 2:

 

Bibliography

Dr. Saumya Arora, n.d. How to set up 501(c) 3 non-profit in the United States, and what are its advantages?. Funds for NGOs.

Latin America and Caribbean Network of Environmental Funds, 2011. Fundraising Strategies Fundraising Strategies, Dar es Salaam: RedLAC.

Wildlife Conservative Society, 2019. WCS General Booklet, New York: Wildlife Conservative Society.

 

 

 

Aldi & Walmart Retail Competition and Growth

Pages:13

Introduction

The internationalization of industry has boomed business, yet it is not a new phenomenon of growth. Many retail sectors are experiencing growth patterns based on innovation and emerging technology (Yadav &Verma, 2015). The speed and breadth in the market expansion are unprecedented. Grocery retailers are facing emerging marketing trends in the face of current consumer demand (Chatterjee, 2017). Increased market share and capabilities are making ways for these stores to make more revenues. In some cases, companies face failure in market performance, so confront unwanted consequences (Cova & Salle, 2017). This report will discuss business marketing strategies by Walmart and Aldi and explore how both of them faced each other and their marketing strategies in the form of distinct capabilities.

Situational Analysis of case

Mainly, the Aldi is targeting consumers and learning to chart their capabilities so that it can deliver value effectively. The firm is adapting to the competitive opportunity as per its rivals. Aldi was initiated from Germany and working to strengthen its economic landscape amid Walmart (Chatterjee, 2017).

Walmart is a strong competitor of Aldi that has substantial experience in the retail industry and managing the supply chain. It came across many challenges and problems in the growth path that helped it thrive in the industry and gain experience from past mistakes (Boswijk, 2017). In 1962, it was opened in Wal-Mart discount city and started selling toys. The essence of the company as wal-martization is to sell goods and bring change around the globe. For a retail store, it is important to unlock the capacity by selling larger than its competitors. Walmart has learned to set up a big picture of its business and bring innovation like Kmart. The business model, unfortunately, did not work more than expectations, and Walmart was not successful in converting it into what the customer wanted. This business model was to achieve predictability about customers’ demand.

The goal of Walmart was to predict and mark the extended value chain for its products on shelves. This capability was managed by offering surplus inventory. In case of lack of inventory, the company faced costs, and lean working capital was started as an innovative aspect of this business model. Walmart shared its point of sale data because of its large vendors. Some of its largest suppliers are Newell and P & G, and its suppliers, as well as logistics, are working on superior precision structure with better efficiency (Hernandez & Simmons, 2006). The stores and the entire inventory of Walmart are passed through check. Its predictability is ensured with the low price mechanism under a steady flow of customers when a period is approaching ending sales.

Aldi is a shorter name of (Albrecht Discount) which established by Kal and Theo Albrecht as a self-owner general store in 1945 in Essen. Aldi is carrying a billion-dollar price competition; this situation must be horrified for the Walmart. Aldi serves 1.5 % grocery market in the U.S, whereas Walmart is 22% (Boswijk, 2017). Aldi’s sales growth increased gradually and rose to 15%, and about Walmart assumed only 2% increased till then 2017.

The business needed strategic and developmental approaches to compete with other followers—this case-based on the Walmart retailing process, and how Aldi overcame the reputation of Walmart. Walmart is a regional company that designed several working models to compete with other organizations on price detecting issues. At that time the Aldi is also making its progress and competing with other grocery stores running into the U.S. The Aldi conducted an exhibition and tried to approach the different customers, where it identified its various abilities, and adjust contentious strategies to serve its products against the competitors (Chatterjee, 2017).

Retail Competition

The Aldi was established in Germany, and now it is increasing its worth in the U.S.A. The Aldi is creating a continuous change into the economic aspects by following the various business patterns. Aldi takes several right decisions associated with its first exhibition. Its first strategy is price control to underserved customers; second is opening the super grocery stores on cut-rate prices into communities for such consumers who are conducting a financial struggle by providing a limited range of merchants (Hernandez & Simmons, 2006).

Aldi follows Walmart and creates a low price conducting business model. But the different business models presented by Aldi, create a competitive environment for Walmart and allow Aldi to open new stores, several new business models are constructed, the step one is prepared to focus on the possible customers, and fixing the competition positions into the market (Voigt, Buliga, &Michl, 2016). Step two is constructed to select a convenient business model to develop the target section. Step three is to maximize the profit constituted in different business models. Four-step is for business development, the profit ratio develops on its priorities, and focusing on different profit-earning aspects.

Walmart is enjoying the developing business model and becoming a substation of business practices. It considered for consumers to buy goods from their stores based on the point of sale (POS) data (Hernandez & Simmons, 2006). By following the industrial methods, Walmart shares its experience of POS data to the other merchants; logistic providers also allow it to start its store to create a network. Further, it established a business network to efficiently the grocery business dealings, all strategies adopted to be an aggressive force in front of its competitors. It slipped because Walmart changed its retail business model to increase its business efficiency model and got stumbled on this practice. Aldi is making its reputation as a hard discounter. It offers such prices that traditional discounters did not offer before yet (Laurenthomas, 2019).

Price-conscious customers purchase a short variety of grocery products. Aldi sells 30,000 grocery products, whereas Walmart has 15,000 items (Alxaedra, 2018).

Aldi believes in discount trade as it did on the Costco megastores chain. Both retailers have influenced the merchants by repackaging their goods to increase the demand for their goods (Manalova, 2018).

Departmental stores provide customers with every kind of product in one place and save time. A superstore provides a complete range of products on a serving pattern. The stock items collection makes it much easier. Aldi does not provide the bag and credit card facility that increases the consumer’s expenses. Consumers use a shopping cart that must be returned after shopping. Aldi connected electronic locks to a shopping cart that fixed the carts to the parking area. Although both retailers focus on the cost of products. Aldi hired experienced staff to maintain control of the price fluctuations in the market. Aldi also appointed a multitasking staff who can perform different kinds of duties on stores, minimum staff hired to perform duties. All tactics helped the retailers to possess the profit (Manalova, 2018). Aldi’s growth is increasing 8% every year, and 40 stores opened in a year from 2004 to 2010 only in the U.S grocery market, and also conscious of increasing the growth into new markets. Most new stores are privately managed. Aldi does not explain its growth to its shareholders.

Aldi focuses on its cost, which has essential performing edges, shows 9.3% in Germany, but its slow success because of its efficient business model (Nassauer, 2018). Aldi establishes its position as a 20th bigger grocer into U.S.A out of 52. All retailer strategies are mentioned in the 2nd exhibition. Product choice, supplier administration, and its workers are pivotal means for Aldi’s business model. Its business methods are easily followed (Meyersohn, 2019).

On the other hand, Walmart shares its sale data with other merchants and analyzes the demand of the consumers and prepares some predictions for its expansion for a particular period. P&G and Newell are also involved in making new and efficient manufacturing plants and to reduce product cost (Mujtaba& Maxwell, 2007). Alternately, the production volume and quantity of stores needed to increase.

SWOT Analysis

Aldi and Walmart are two strong retail brands. Aldi has larger than 1800 stores in California, Mid-Atlantic, Florida, and Mid-west. Aldi is now a strong supermarket chain after Kroger and Walmart in America (Alxaedra, 2018). The aggressive growth rate is forcing the industry to implement new changes that attract customers. Aldi is working on Walmart’s actions and approaching it in competition. Recently it opened a store in Bentonville, which is only one mile away from the corporate headquarters of Walmart. Another strength of Aldi is keeping low prices, so providing the best experience to customers regarding shopping. This privately held company is offering products without reducing quality. According to customers, ’ low priced products provideprovide a distinctive experience (Cova & Salle, 2017).

Another big advantage for Aldi is selling its own natural organic products,, so it makes customers happy, and they save time finding branded goods in the store (Boswijk, 2017). Aldi’s wage rate for workers is higher than average in the market, and it still saves labor costs by hiring few people. Its prices are about 50% cheaper than competitors such as Walmart in Chicago and Houston. Aldi is also investing in its stores to remodel, i.e., $1.9 billion is used to remodel 1300 stores. New technology is the use of zip codes with a $65,822 average household income. It is also providing smart shopping era by offering alternatives like bargain hunters. It is relying on private label brands to win Millennials, who are inclined to low prices and brand agnostic. To counter Walmart, Aldi has opted bare-bones approach under a national advertising campaign. It has pledged to improve sustainable packaging and cut plastic by 2025.

Walmart has lost its way to growth by focusing on thin profit margins and cost leadership strategy. Its key weaknesses are numerous ethical violations and lawsuits it faced against employment discrimination. Poor benefits and a less adequate working environment resulted in high turnover (Yadav &Verma, 2015). Walmart has faced failure regarding experiencing activities like other retailers or make its warehouse a large place to experience; some of its products are of inferior quality (Nassauer, 2018). The growth opportunity it has is to offer more goods to developing countries; it can seek a bargain, including large grocery stores, and offer modern formats (Hardaker, 2018). Aldi has weaknesses in terms of profitability ratio and Net Distribution, which is less than the industry average. Poor financial planning at Aldi is making it vulnerable, so liquid asset ratio and current asset ratio tell that company can use cash efficiently in the current situation. It has a high attrition workforce rat as compared to other retailers.

Aldi has future opportunities in terms of core competencies present, such as GE healthcare research. It has made new environmental policies and better market share due to new technology. This is done with the help of government agreement because free trade agreement is a big opportunity to enter into new markets. Walmart has big opportunities like providing better trendier goods, special products, and gluten-free and organic options. It has also started services like spa, optometry, and banking. Walmart is also facing competition from global retailers, and Aldi is an emerging one.

A successful business always estimates the values which are helpful in business growth. Omnichannel is helpful in examining customer experience. Omnichannel is a multi-business channel that deals with sales of the consumers, and critically analyze the customer needs and expectations and find the solution to meet the consumer’s needs and expectations (Hardaker, 2018). The Omnichannel introduced an online shopping method to give essential retailers.

The omnichannel transformation for Walmart is an advantage because this strategy will improve $1.2 billion. Increased physical stores, fulfillment centers, click and collect, and delivery services are making it successful. This is related to a fully integrated shopping experience and a big approach to marketing. Aldi is also Omni channel retailer with fast development and transformation of its supply chain in the digital growth. The integrated digitalization strategy is acting as a key to transforming it into an omnichannel retailer (Alxaedra, 2018). The financial implications of these processes will be positive and productive for companies and engage better customers.

PESTLE analysis of Aldi & Walmart

Political, economic, social, technical, legal, and economic factors work inherently for any organization. Aldi has applied an approach to analyze and catalog the macro environment and its further perspectives that are implemented on the political, cultural, commercial, environmental, and legal framework which influence a company. This investigation assists in identifying principal factors, these principals consisted of opportunities and threats into the company’s external environment and afterward to overcome these opportunities and threats. Aldi, which is a shorter name of Albert Discount, was operating grocery stores into the U.K environment. Aldi’s achievement was extremely inspired by political and juridical circumstances European Union.

On the other hand, Walmart is an American brand, and dealing with the retail industry, its associated branches render its services around the world. It provides a wider range of products to customers. Grocery, household items, garments, enjoyment, and different other varieties are manufacturing to facilitate its consumers. This company got an unbeatable position to become the world’s best retail industry around the world. Government support retailer business because it provides mixed job opportunities for unemployed people. It also provides job facilities to none experienced and highly attractive payment to experienced, encouraging the living standard of different people by providing them job opportunities.

Aldi also provides part-time job facilities to students and other needy persons. Walmart is based on the macro-environmental factors and such aspects that are directly associated with business and its development. It critically analyzes the positive and negative, direct, and indirect aspects that influence the business structure. It also is known as Walmart PEST. This term helpful to create a trustful relation with U.S.A that implemented on both retailers like Aldi and Walmart. It moderates all political risks that impact business growth, prepares such strategies through the company pay less than five %tax from the other companies, faces an economic crisis, and can control price expansion into the market.

The social factors and social-cultural aspects that impact on consumer attention and inclinations. Social factors present a healthy lifestyle aim, cultural difference, residential movement; these factors create opportunities for the Walmart and Aldi business growth. Thus the companies can increase their production by following various cultural aspects. Aldi and Walmart must follow the technical approaches, by increasing the business self-regulation, business analytics on behalf of data collection, and by providing the transport facility to consumers, these factors are helpful in the expansion of the business growth (Manalova, 2018). The company boosts its production by providing an online facility. Companies can enhance their revenue by using the source of online marketing and selling of products. Environmental protection is a common principle that influences business. According to ecological factors, the impact on business sustainability, and friendly environment is essential for Aldi. To achieve monetary sustainability, Walmart improves its business operations; technical addition also improves business performance.

Change business procedures and production systems that are present to sell into retail stores. Aldi purchased raw material from farmers or other local producers to get sustainable development. Aldi adopts a strategy to attract consumers by providing an attractive label and packaging. Aldi has received Green chill certification by using a viable refrigeration system and adopting an environmentally friendly method. Aldi has faced a copyright issue on brand operational methods. It proves successful for the Aldi brand on Aldi’s products or on non-Aldi, s products. The advertisement also encourages the business into expansion matters. Aldi is a chain of supermarket companies that need to update their technology to meet the production level. Consumers rely on their commodities rather than follow a queue (Hernandez & Simmons, 2006). These retailers provide an e-commerce platform that serves consumers by providing online facilities. Social media like Facebook, Twitter also create the consumer’s interaction with the brand. Walmart is also the largest retailer brand around the world and has a large scale of operations through which it is able to achieve a good economic scale and has developed a technical mode of websites.

Different prosecutions have faced Walmart due to unethical behavior to its workers. Walmart has huge political support. PESTEL analysis on Aldi and Walmart’s business is very valuable and helpful to take initiatives for the business growth to compete with the other business rivals. It provides a complete guideline collection of raw material to production and supply in different stores and countries. It also provides a complete guideline of economic, environmental, and political issues on how to sort out them and how to overcome these situations. It also guides the companies on how to increase productivity growth and how to satisfy the customers. Aldi and Walmart are the two largest retailers’ companies sharing their parts around the world. Thus both companies follow the PESTEL analysis and follow the business growth and focus on its strengthening aspects and gain a trustful relation to customers and making progress day by day (Laurenthomas, 2019).

Conclusion

Aldi’s newest store in Cleveland is making development that Walmart supercenter possessing. Aldi increased its customers by creating a price competition to compete with its rivals. Aldi opened its new stores that are close to Walmart and selling it8s products on discount. Aldi opened new multiple adjoining superstores to Costco in New York City. Its rivals arranged its marketing because a variety of customers trusted Aldi. This plan was constructed to operate 2000 stores into U.S markets in 2018.

Aldi adopts the strategy slowly and steadily wins the race, its slow progress gains the customer trust by providing them the preference, satisfied their expectations at a low price. Aldi and Walmart are two successful retailers performing in many economies of the world. The cut-throat competition of both companies is due to increased demand. This case study shows that Walmart is now becoming vulnerable to Aldi, which is a privately owned firm and working as a grocery chain on an innovative model. Aldi is outcompeting its competitors on the basis of pricing and become a significant competitor in the US grocery market.

 

References

Alxaedra, B. (2018). Business Valuation and Value Drivers. Financial Planning & Analysis and Performance Management, 507–534. doi: 10.1002/9781119491460.ch22

Boswijk, A. (2017). Transforming Business Value through Digitalized Networks: A Case Study on the Value Drivers of Airbnb. Journal of Creating Value, 3(1), 104–114. doi: 10.1177/2394964317697736

Chatterjee, S. (2017). Two efficiency-driven networks on a collision course: ALDI’s innovative grocery business model vs Walmart. Strategy & Leadership, 45(5), 18–25. doi: 10.1108/sl-06-2017-0057

Cova, B., & Salle, R. (2017). Creating superior value through network offerings. Creating and Managing Superior Customer Value Advances in Business Marketing and Purchasing, 317–342. doi: 10.1016/s1069-0964(08)14009-1

Hardaker, S. (2018). Retail Format Competition: The Case of Grocery Discount Stores and Why They Haven’t Conquered the Chinese Market (Yet). Moravian Geographical Reports, 26(3), 220–227. doi: 10.2478/mgr-2018-0018

Hernandez, T., & Simmons, J. (2006). Evolving retail landscapes: power retail in Canada. The Canadian Geographer / Le GéographeCanadien, 50(4), 465–486. doi: 10.1111/j.1541-0064.2006.00158.x

Laurenthomas. (2019, July 3). Walmart’s e-commerce biz is reportedly racking up $1 billion in losses and that’s only one problem it has. Retrieved from https://www.cnbc.com/2019/07/03/walmarts-e-commerce-business-on-track-to-lose-over-1-billion.html

Manalova, T. S. (2018). Small Multinationals in Global Competition: An Industry Perspective. Globalization and Entrepreneurship. doi: 10.4337/9781843767084.00012

Meyersohn, N. (2019). How a cheap, brutally efficient grocery chain is upending America’s supermarkets. Retrieved from https://edition.cnn.com/interactive/2019/05/business/aldi-walmart-low-food-prices/index.html

Mujtaba, B. G., & Maxwell, S. (2007). Wal-Mart In The Global Retail Market: Its Growth And Challenges. Journal of Business Case Studies (JBCS), 3(2), 1–10. doi: 10.19030/jbcs.v3i2.4837

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Why Debt Relief Should Be The Answer To This Coronavirus Crash

Pages:10

Case Study Questions

Pandemics do not just affect health, they also rip individual economies aspect too. For many people  affected  by  the  coronavirus,  including  those  who  do  not  fall  sick,  economic  survival will be a primary concern. When businesses closeand workers no longer get paid, the bills for unpaid  rents,  mortgages  and  consumer  loans  quickly  accumulate.  Cities  have  already  shut down of their transport services, shops, cafes and cinemas. Mass lay-offs are on the horizon. Unemployment insurance willcover some, at least for a time. But self-employed and temporary workers, and households that live pay-cheque to pay-cheque, do not have such buffers.The 2008 crisis should have been a reminder that debt is not a substitute for income. Likewise, ensuring households can afford the basics of everyday life by broadening access to loans and credit cards is no replacement for effective social policy. But instead of heeding these lessons, governments focused on fixing the financial sector, bailing out the banks to ensure they would lend again.As  a  result,  we  are  now  watching  two  overlapping  crises  unfold:  the  coronavirus  pandemic, and the economic threat it poses to our debt-fuelled economy.

 

We urgently need debt relief –especially  for  households  at  the lower  end  of  the  income  and  wealth  spectrum.  Most interventions  that  governments  have  taken  so  far  have  targetedfinancial  markets   and businesses. Unless governments also implement measures aimed at indebted households and renters, such measures are unlikely to prevent a meltdown driven by rapidly falling demand for goods and services. The  economists  Gabriel  Zucman  and  Emmanuel  Saez  have  called  for  asocial  insurance schemeto  tackle  the  economic  shock  wrought  by  coronavirus.  This  would  broaden  the government’s role, making it not just  a  lender  but  a  buyer  of  last  resort.  The  scheme  would compensate for the demand that has evaporated from the economy. With the airline industry, for  example,  if  demand  for  flights  drops  by  80%,  the  government  would  buy  80%  of  plane tickets.  Small  and  medium-size  businesses,  which  are  the  least  insulated  against  economic shocks,  are  most  likely  to  benefit  from  this  intervention.  Still,  on  its  own,  this  would  not alleviate the stress of many deeply indebted households.

 

To  be  sure,  it  is  not  easy  to  tailordebt  relief  to  only  truly  distressed  households.  There  will always be free riders who will take advantage of debt relief packages without needing to do so. But this should not prevent governments from intervening now. There is no better example of an  exogenous  shock  than  coronavirus.  The  overriding  concern  today  should  not  be  moral hazards, but massive default rates that will leave millions of people destitute.To treat the economic fallout of coronavirus, governments should directly assume the debt of high-risk households. It is often said that the public health of the majority is determined by the most vulnerable in society. The same logic applies to a healthy political and economic system: its stability depends on how it treats its weakest members. Hedging our bets on an economic system that has neglected these truths and instead prioritised wealth creation at the top has put us all at risk. There is still a small window to rectify these past wrongs, by urgently granting debt relief to the households worst affected by coronavirus.

Source: Adapted and modified from The Guardian, 18 March 2020, Why debt relief should be the answer to this coronavirus crash, viewed on 26 March 2020, <https://www.theguardian.com/commentisfree/2020/mar/18/debt-relief-coronavirus-crash>.

Question 1

Evidence the group of life-cycle stages being affected most during the Coronavirus crisis?(30 marks)

Question 2

Discuss the financial concern encounter by household during the Coronavirus crisis (note: To answer this question, you need to ask at least FIVE (5) persons regarding the types of financial concern). (30 marks)

Question 3

Diagnose the TWO (2) Malaysian social securities’ being assign by government to ease the financial burden for household? Discuss the mechanism functions on how to help the affected household.  (40 marks)

Case Study Answers

Economy during Coronavirus

Question 1

Evidence the group of life-cycle stages being affected most during the Coronavirus crisis?(30 marks)

 

The economic business cycle is an indicator of the tide the economy usually follows through time. It consists of six major potions namely expansion, boom, recession, depression, trough and recovery in cyclical order and the company business cycle, hence, derives stages from the macro business cycle namely launch, growth, shakeout, maturity, and decline. The coronavirus has become a global crisis in a very short amount of time, and where many economists had predicted a global recession in 2020, they now foresee a world depression because of the severity brought forward by the novel virus and what its solution entails for now. The ripple effect of the virus is extremely important to be studied and analyzed to understand the new situation that the world might face and for that product life-cycles are essential to be looked at. Once the problem has been targeted, it might be easier to deal with it with a focused solution.

It must be understood that in an economic system followed today, one person’s spending is another person’s income. Added to this phenomenon is the undeniable reality of the strongly interconnected world we live in today that entails that if some mega disruption is caused in one part of the world, other countries are bound to feel the impact. The financial indicators used to explain the position of the life cycle commonly include cash flow, sales and profit. Taking a closer look at these will enable analysts to predict which one is being the most negatively impacted by the virus.

Sales mean the sale revenue generated by the exchange of good and services, and because of the virus, buyers are not encouraged to purchase because they are bound to stay at homes and follow social distancing. Profit entails the surplus amount earned on the product by subtracting the total costs from the total selling price, and since the sales have gone down by a large margin, profits have fallen. The most hurt sector appears to be the cash flow as it forms the basis to allow the impact on sales and profits. It is important to remember that the economy is the most stable when it is the most liquid, in other words, when the money flow is continuous, and there are no pauses. However, the epidemic is of such nature that has become a significant barrier in the flow of cash. The global demand has plummeted drastically as a result of almost one-third of the entire world being in lockdown. This can be evidenced by the fall in the oil prices as a result of a fall in demand. Here although this might benefit the oil importers, the oil exporter will lose out.

The hindrance in the cash flow has resulted in negative cash flow where the intake of money is lesser than its outflow. These can be felt by the governing bodies, especially as despite the cut down in spending by the people; the government has to support its people by giving out unemployment benefits, subsidies and easy loans.

Conclusively, the famous statement that “cash is king” is found to be evident in this scenario where the difficulty in cash flows are leading the world into an economic turmoil where many economists predict that it might be worse than the 2008-09 crisis. After analyzing this, decision-makers must introduce reforms and changes to fix the system to minimize the negative impact on the people.

 

 

 

 

Question 2

Discuss the financial concern encounter by the household during the Coronavirus crisis (note: To answer this question, you need to ask at least FIVE (5) persons regarding the types of financial concern). (30 marks)

 

The economic impact of the coronavirus seems unparalleled as many economists are predicting an economic depression to come. Many households are worried how the effect will affect them, but the most stressed are the daily wagers, whose income is dependent upon the very places that are being shut down and due to the lockdown, they are unable to carry out their jobs.

Daily wagers include people who do not have a fixed income but whose wage is dependent on how many orders they receive for their individual assistance, such as plumbers, electricians and labourers who are not linked with any formal sector firm. Lockdowns have been imposed in many countries to reduce the spread of the virus, and resultantly, these people are getting no orders and hence, in essence, are unemployed. Unemployment is the most feared outcome many households might face because of this pandemic. In such cases, many governments have come up with unemployment benefits, such as in Pakistan the Prime Minister announced that 200 Billion Pakistani Rupees would be distributed among daily wagers during this trying period.

Another problem the households are facing includes the payments of loans and rents during this pandemic. Many wagers have received payment cuts due to the pause in production cycles. Hence paying bills, repayment of loans, instalments and paying rent can become a great source of stress for many households.

Moreover, another one of the primary concern for many households appears to be coping up with raised prices of necessary goods in their local markets coupled with the shortages of some products as a result of supply chain disruptions and panic buying.

Furthermore, those households that have a single breadwinner feel severely burdened during this pandemic. Especially the ones who are daily wagers and small business owners who are taking a severe burn from the crisis. The UN reports that 220 Billion Dollar loss might be faced in developing countries.

Additionally, the households that derive their incomes from those industries that are unable to adapt to the most suitable pattern in the crisis, in other words, are unable to convert their business and industry to a digital platform, such as spas, event, tourism, are facing a severe blow as well. Many businesses like the education sector and some medical advisory bodies have digitalized their structures and are rather capitalizing from this epidemic while the business that is unable to do so either because of their nature, or by the lack or skills, resources or structures, are suffering. This domino effect reaches the households of these businesses, and hence they feel the burden of the economic hardships under the covid-19 emergency.

 

 

Question 3

Diagnose the TWO (2) Malaysian social securities’ being assigned by the government to ease the financial burden for the household? Discuss the mechanism functions on how to help the affected house. (40 marks)

 

The Malaysian government has taken plausible action to ease the economic hardships felt by its people. Many social security policies have been made in an attempt to minimize the financial fallout of the coronavirus. According to the Malaysian Inland Revenue Board some leniencies in the taxation department include the announcements that “No penalty will be imposed on late payment of taxes provided the payment is made by 30 April 2020”, “there is an extension of time—until 30 April 2020—to submit Form CP204B, Submission of Notification of Change in Accounting Period, which is due in the period from 18 March 2020 to 29 April 2020”, and “An extension of time until 30 April 2020 is allowed for submitting documents for tax audit or investigation, otherwise due within the period of 18 March 2020 to 29 April 2020”. Further, the interim government of Mahathir Mohamad also came up with economic aid, specially dedicated to the country’s tourism industry. About 4.8 Billion Dollars have been dedicated to supporting the tourism industry on top of the fringe benefits included in the package for the industry. These two policies targeted towards taxation and tourism will ease out the economic strife of many households.

 

The ease in taxation is an indication of the fact that the Malaysian government understands that health comes first and is the primary concern. Hence, the delay in tax payments granted by the government to its people will not only increase people’s trust in the government but will also encourage them to stay at homes and put their heaths as a priority as the date extension has bought them time. The Malaysian households have gotten hope that their government is with them during these trying times and hence has reduced the pressure of filing out tax returns in the middle of an epidemic.

The second policy that is solely targeted towards the tourism industry is an important one is stabilizing the households as tourism is one of the major industries of the country as evidenced by the fact that it forms about 13.3% of the country’s GDP (2018 Report). A large portion of the Malaysians are involved in this business, and many low-income families too are linked with the tourism industry. Hence, providing reliefs to the industry will target the people, low-income households, who are expected to be the most hurt during the economic struggle.

Hence, it can be observed that the Malaysian government is dedicated to standing together with its people in these difficult times by proving them with social relief policies in places where they need it the most. The taxation department and the tourism industry concerns many and covering these two entails that people related to these aspects will find some relief and find peace in their household to an extent.

 

 

A case study of ethical issue at Gucci in Shenzhen, China

Pages:21

Business Ethics: Case of Gucci

Executive summary

Project management in any company needs effective planning and execution. Gucci is managing rapid expansion in the global market under effective managerial techniques and business planning. The company is involved in key managerial processes and implemented a labor model under which employment and recruitment has become easy. Effective workplace requirements involve employees into better working conditions while focusing on mutual cooperation with stakeholders. Company is using responsible workers to accomplish its targets. For example, labor dispatch arrangement service is aligned on managing costs and contractual responsibilities by Gucci in Chinese city Shanghai. This research report focuses on key business considerations by Gucci in China. Company analysis explores its background, history, core values and ethical culture.

This report also includes major stakeholders of Gucci that are involved in project completion process. A stakeholder map is created to know about the action plan and engagement of employees. Gucci has economic, legal, ethical corporate social responsibilities. CSR serves the company in ethical way because it has a specific place to monitor corporate affairs. The report is divided into five main parts, first is about company analysis, its background and history. The second part is about stakeholders’ analysis that has shown stakeholders map. The third part discusses CSR analysis like responsibilities to shareholders. The fourth part is about issues and problems, for instance ethical problems in Gucci, causes and its symptoms, key stakeholders involved and consequences. In the last part, evaluation of company is carried out by specific actions that managers can take.

Part one-Company Analysis

1.1.Company History

Guccio Gucci was a fashion designer and businessman from Italy; he founded The Fashion House of Gucci in 1921. The House of Gucci, also known as Gucci is a luxury fashion and leather products brand in Italy, and as well as around the world, it is a branch of Gucci Group, Kerning, a French investment company, owns it. In 2008 Gucci generated revenue of 4.2 billion Euros worldwide. Also, Gucci was ranked at 41st position in the Top 100 Brands worldwide in 2009. Gucci is still the most significant fashion brand in Italy (Annual Report, M. 2019).

Gucci has presented high quality, leading designer goods to its consumers successfully, unlike several other brands in the market. Throughout these years, the brand has attained overwhelming success levels with each new product released. By 2005, it has started 207 outlets around the globe(Czerniachowicz, 2017). Further to this, Gucci derived 278 company-operated outlets by the end of 2009, with wholesale its merchandizes through large superstores and franchisees. Gucci was valued at 12.1 billion US dollars in 2013. In May 2015, Gucci was ranked 38th in the Most Valuable Brands list of the world by Forbes with a worth of 12.4 billion USD.

Gucci is an international organization with more than 270 company-operated outlets around the world, providing consumers of the best products, and making revenue of billions of dollars every year. It has even noble, luxury, and iconic brand figures in the china region, where its sales are boosted by 35% at the beginning of 2011. Gucci has shown its aim to speed up its process of establishing new outlets in China. Lately, though, the organization came under colossal criticism when five of its ex-employees from its Shenzhen store disclosed online information about the cruel working environment and mistreatment of labor in the organization(Zanda, 2016).

 1.2 Company Core values

The organization aims to turn into the leading brand in the luxury market at the global level. Gucci expresses their company as responsible and cool, and signify them on their fashion and styles. All of these concepts are inter-related; being responsible can also be cool. For Gucci, social responsibly is an integral part of their international strategy. They do business with a comprehensive, yet sensible approach. It is their fundamental responsibility to maintain their position of a luxury brand to promote and pioneer sustainability(Czerniachowicz, 2017).

The Gucci standards are profoundly rooted within moral values, and literally, the organization started to effort on sustainability policy in 2004. Quality should be the supreme priority; also, sustainability for the environment and the society developed as a part of quality policy. Gucci’s stakeholders support the sustainability policy for the betterment of the company.

Gucci introduced 100% eco-friendly packaging in June 2010. And within a short time, Gucci launched a collection of environment-friendly goggles which were made by recycled metal and biodegradable plastic. They also used biodegradable material in their shoe collection with new designs and eco-friendly packaging(Annual Report, M. 2019).

Gucci is focusing on improved performance in the quality on which most demanding consumers put the most significance. The performance compares to the situation where Gucci needs to look for superior quality and needs to continue giving such designs that are worthy to customers with sound knowledge as this brands’ consumers, including film stars and elite families from Europe. It further focuses on the smartest consumers, who are happy to pay for the supreme quality in the most important markets. This relates to the situation where Gucci’s target buyers, including the wealthy European new-born and the developing U. S. rich people(Księżak, 2017).

1.3 Company ethical culture

Good sustainability and behavior are the basis for a business group to work. Trust is an essential element of business sustainability. And the capability to express the everyday commitment to a responsible organization administration is an integral part of such trust (Demir, M. A., &Sepli, A. 2017). Since 1996, when the Gucci developed its first ethics rules and regulations, it made a significant improvement in persistently reinforcing the ethical promise of Gucci management. Landmark including printing Code of Ethics and circulation to every employee of the group in 2005 and then again in 2009, and establishment of Sustainability Department(Księżak, 2017).

Each time the business operates, the Ethics code presents the chance to reaffirm the faith, and the ethical rules and regulations should be precedent. Designed by the categories of stakeholders, the ethics code provides the reference points that can guide every person’s actions. The laws include respect for workers, gender equality in all the professional life aspects, dealing with all kinds of fraud and corruption. Also fighting child labor, compliance of the basic rules and regulations of the International Labour Organization, the safety of the environment, understanding to all stakeholders, and organizing the employees with other societies.

Following the ethical behavior guarantees permanence in business under any circumstances. Sustainable and prosperous progress in the global market depends on the level of trust of the buyers, workers, stakeholders, and social and commercial partners. But, these variations can be designed by some powerful but straightforward shared principles, which should guide our work in the spirit of common sense and responsibility(Yasin, Chan, Reidpath&Allotey, 2012). The ethics code provided to all employees includes performing with trust and integrity, compliance of the applicable regulations and law, respecting the rights and dignity of every person, work with care for the environment, using the organization’s resources and goods with the concern of the business and its stakeholders (Lee, H., Leeminyoung, & Bae, E.-K. 2019).

Part Two- Stakeholders Analysis

2.1 Company stakeholders

Gucci has four main stakeholders. Freeman discussed that stakeholders are the particular group or individuals who can affect by the firm’s achievement of objectives. This provides that it is important to find out the groups that are affected by any abuses etc.key stakeholders of Gucci are individuals who stake its expansion plans in China, employees, no matter if they are resigned or not, and existing employees(Annual Report, M. 2019). Chinese government is also stakeholder of Gucci and it is the responsibility of government to ensure that rights of workers are enforced in its territory. Fourth stakeholder is a foreign government that is likely to be headquartered in the similar territory. Foreign governments have stake and they can also take actions to reduce labor abuse in China because laws are formulated regarding abuse and anti-bribery treaties.

Stakeholders of a company are very significant for its performance and completion of objectives. The stakeholders can either positively or negatively influence the project performance. The stakeholders are involved in project scope statement, plan development and identify constraints that can hinder the development process. They also approve changes or modifications in projects under change control board(O’Kane & Cunningham, 2014). The identification of requirements is carried out by stakeholders and they participate to manage risk. It is also possible that stakeholders can become risk response owners.

  • Stakeholders for company Gucci can manage abusive practices as employees because they can harm the objective of company.
  • China’s capitalism is increasing so human resource management can involve institutional arrangements regarding this abusive act in company.
  • Employees can vice the grievances of victim so get more attention and investigate issues. They can also express the opinions to help enhance bargaining power through employers.
  • Chinese government as the stakeholder can revise its approach to monitor the labor force. In China, workers are under-protected due to organizational work, while trade unions are working to stand up for the rights of employees (Mclaughlin, S. 2018).

2.2. Stakeholders Map

The stakeholders map is created below to describe relationships with the organization. The first step in this regard is the engagement of strategy. This process will set a vision and ambition to engage in future direction(Borodai, 2017). The second step is about stakeholders mapping and it works defining a criteria that can identify and prioritize stakeholders for the better mechanisms of stakeholders. In the third step, a focus on long term goals will be made which is called preparation that will determine the logistics according to rules(Annual Report, M. 2019). The fourth step is engagement that ensures stakeholders and contributors to mitigate any kind of tension and then set the priorities for solution(Yasin, Chan, Reidpath&Allotey, 2012). The last step is action plan. In this figure it can be seen that under action plan the opportunities are identified that can determine goals, actions and strategies that will help in follow up process and enhance engagement for future.

Figure 1 Stakeholders Map

The current process presents a structure of stakeholder mapping. It is a unique approach to settle down the key issues and conflicts. With this process, any central relationships or immediate processing can be considered in the organization. The stakeholder map is a key approach to devise an action plan that will work in the future(O’Kane & Cunningham, 2014). For Gucci, this action plan will determine what Gucci is trying to achieve and how in different stakeholders, it is working to acquire competency (Parker, J. 2017). The stakeholders are also significant to infecund the interest of company but they will work in collaboration because all the objective of company are also linked with these stakeholders. The creation of a map is considerable to learn new dimension of workplace projects.

Part Three- Gucci’s Corporate Social Responsibility (CSR) Analysis

            Corporate social responsibility (CSR) is a self-adjusting business in which an organization is responsible for social accountability. All stakeholders are also involved in this accountability. CSR business follows all traditions and moralities of the society and implements such methods that are beneficial for social rules. CSR is also named Corporate Citizenship. This type of company has to follow all social, economic, and environmental solutions. The primary purpose of CSR is to construct such methods that support the ethical, philanthropy, economic, and lawful aspects of society(Yasin, Chan, Reidpath&Allotey, 2012).

  • CSR is a comprehensive thought which can be adapted to different companies and organizations in various ways as the CSR business is beneficial for society as it is essential for social aspects.
  • As the CSR progress increases gradually, and the world-famous brand whose name is Gucci is becoming more accountable because of its unethical behavior which it conducted towards its employees.
  • CSR policy is a bit difficult to meet Gucci because it enjoys a secure social value, and the bulk of tags, in this condition difficult for Gucci to fulfill all requirements of CSR.
  • Gucci sub-brands present CSR practices in front of its domestic and international stakeholders.

Gucci was facing the scandal of unethical practices that prove a setback for its reputation after that Gucci assigned some business driving methods by following the rules and regulations of CSR and laid a foundation of its company on true and fair dealing toward its employees in which it promises to provide a legal working environment, by giving promotion resources, protection of human rights mentioned and strictly implemented into the company running affairs through its managers and stakeholders. Gucci also made a promise to provide the facility of promotion, proving working rights to workers, and make a trade union contract by following the safeguard rules of the workers into the administrative system of Gucci. Gucci denies on the conduction of child labor. All employees will get equal career development opportunities and similar treatment facilities. Gucci strictly develops a health and safety standard by preventing epidemics and some industrial disease. Gucci also takes the initiative to promote the growth of craftsmanship and steps for the development of regional, federal, and other global communities. Philanthropic acts are also being introduced in these efforts. Non-profitable initiatives conducted by adopting this policy(Yasin, Chan, Reidpath&Allotey, 2012).

This company also committed to reducing environmental pollution and protecting the ecosystem and made the promise on the prevention of waste materials of the company. The organization introduces a communicative method between workers and managers and other stakeholders. True and transportation dealings with the stakeholders in which any decision conducted on the collaboration of all partners and stakeholders, all dealing with public and other organization’s being enforced by the agreement of the stakeholders(Wymeersch, 2003). Gucci also put steps to monitor economic growth by creating an economically viable supply chain. Gucci legalizes all promotion elements, which are helpful in the growth of the workers and assure the workers every possible cooperative deal for their betterment and development. These above steps prove helpful for economic growth and company progress. Gucci has its contribution to the growth of China’s economy. The basic purpose of CSR is not to create luxury consumers, whereas its priority to increase consumers in the future. CSR policies impact the company’s reputation to obtain the capital. The world’s reputed MNC also follows the CSR policy. To contribute its part to economic growth.

After the ethical scandal, Gucci’s has a fluctuating reputation. It is unethical to behave under discussion in the business world. The company has lost its trust; at this time, the stakeholders and managers were making different variations in the company policy. The company decided to follow the CSR policy to stand its repute against the ethical standard. The CSR protects the workers and provides them rights.

Management is responsible for the enforcement of Corporate Sustainability Responsibilities and has a right to apply on all sub-branches of the parent company. Gucci directly running different stores were also inhuman activities are taking practices after that company enforced different policies under CSR strategy to protect the workers from the salivary behavior of the owner and manager. The managers should enforce these methods in such a manner that they are involved in the internal and external managerial functions and other corporation committees. The managers should integrate this policy into the strategic ambitions of the company. The CSR strategy will be implemented in all sectors of Gucci, whether they belong to leather or jewelry or concern with different other products of the company. Special training conducted to the managers, stakeholders to follow the rules of CSR. In 2007 the implementation responsibility pushed to the HR department, at the start one person is performing all CSR functions and reporting to the HR department, after that when management realize about the comprehensive involvement of CSR into the managerial functions then the company establishes a bench who will perform CSR activities and make decisions according to it. Gucci hired CSR managers; this condition proves a cause of the unwillingness of the stakeholders because they are used to unethical behavior, and that is totally against their habits; after that, they accept it only on this condition that the company establishes its worth around the global environment. Gucci establishes a training program for middle management. This remarkable change causes change to internal managerial functions, employee’s behavior, and external suppliers(Wymeersch, 2003). The CSR policy proved helpful to maintain the Gucci standard; the reputation of the Gucci had become worse due to the unethical Sandal and inhuman behavior to the workers when the company followed the rules of CSR the organization became successful in regaining its level. Now the workers are starting to show their interest, and in purchasing their products, workers are the real asset of any company without workers it is not possible to manufacture the goods and appreciatively run of the company. Initially, the managers and stakeholders go against the CSR strategy, but afterward, when the company meets its priority goals, the trust of stakeholders satisfies the managers.

 

Part Four- Problems/issues Analysis

4.1 Gucci ethical issues toward its employees

Gucci Shenzhen in China is a multicultural organization around the world. This organization serves its customers by contributing to elite products. This company operates 270 stores to whom the company is running directly. This company forms billions of dollars in revenue in a year. Its superior brand created its unbeatable image, which caused a 35.6% increment in its revenue; thus, it takes intent to increase the process of stores opening into the land of China(Rakhmanov, 2019). Currently, this company suffers a loss due to fire mishaps which occurred in its most familiar store. The company has to face too much damage. This incident occurred due to the miss of treating the employees. This company was practicing unethical behave to its workers by implementing some strict instructions(Borodai, 2017). All instructions are performed for the workforce; pregnant women cannot be applied for management. If any product is missing or stolen by anyone who has to pay the employees, even these products are protected by insurance.

Gucci constituted a bill on 8 October 2011 from the top management team(Yasin, Chan, Reidpath&Allotey, 2012). According to this letter, if any employee conducted any epidemic disease, it will not be tolerated during working hours. The lunch timing and in the situation of thirst and toilet timing entirely restricted, working hours, which was usually mentioned incorrectly, and forcefully conducted overtime which is unpaid after that. Gucci introduced a system of working that full day of working and the next day off officially. By the rules, workers can perform the duty of 10 hours in a day, after complaining to the workers, the company manufactured a false electronic record that counts the working hours in a less quantity. These rules are against humanity and called ethical problems.

Gucci specified such persons who mostly spend their time on the internet during working hours and consider all of them a sweatshop for the company besides this, and some MCN, s owners who failed to meet the organizational tasks they all fired. Later, Gucci’s headquarter, situated in China, and stated that Gucci would not tolerate such persons on conducting any negligence and carelessness(Wymeersch, 2003). The company will be carried on inquiry and replacement of store managers and assistant store managers.

Gucci also introduced a labor dispatch system for the newly appointed employees. Different rules and regulations have been represented. In this method, the leasing company made a contract with the workforce, and these leasing organizations send the workers to different other companies to work. According to this system, this contract exits the leasing company and dispatched workers. However, the agreement is conducted between the workers and the companies where they have to perform the work(Setiyaningrum, A. 2015).

Whatever company is hiring this workforce will pay their wages, whereas the social protection allowances and dismissals compensation bill will handle by the leasing company.

  • On account of this policy, the workers will get payments that are mentioned in the agreement, and this employment method is included in China’s cultural system.
  • The Gucci stores assume this method and around three leasing companies established in Shanghai are involved in an unethical issue.
  • According to law, the dispatch method creates a temporary situation for the workers.
  • Gucci arranges this system for longer than two years.
  • Pregnant females will enjoy the labor protections, and the exhaustive physical work not allowed to such ladies under the Labor Contract Law and rest sessions also will be provided(Borodai, 2017).

This ethical issue was entirely based on the destruction of the worker’s rights and constrained work without payment, inhuman confinements, and other unbearable policies that were part of this strategy. Gucci is not the first MNC who occupied workforce rights; Nike is also involved in such practices in Indonesia.

Local employee most involves factors in ethical issues in respect of factory workers.

Unethical problems are mentioned in the Gucci labor abuses policies like excessive work without payment, unlawful organizational methods around the local companies. This trend of working flourishing day by day in China, when other multinational companies and different foreign brands precede to China, this cultural environment emphasizes them to establish a business in such a condition(Christensen, Kent & Stewart, 2010). But these international firms provide some means to cut down this unethical behavior towards the workers and excuse for this abusive behavior. The fundamental reason behind this unethical practice is the abundance of multinational companies is working in China and does not pay attention to the worker’s rights. In an unfair situation, the company only focuses on earning the economic interest; the rights of workers are killed by management to get the organizational goals. Most miscarriages occur in this abusive environment where the pregnant female mistreated along this has to follow long duty hours into the entirely restricted atmosphere. There were unbearable restrictions exist only to make money under the human’s honor. In western economies, human virtues are included at the priority. Marable laws enforced to save the rights of workers. NGO’s are organized for the wellbeing of the workforce.

This unethical behavior affected the Gucci reputation badly. At this time, all stakeholders trying to control this abusive behavior, stakeholders not only managed these practices, but different variations required in often groups of the company because of the inhuman act also proves a hurdle to develop the expansion of Gucci in China. The management included stakeholders who adopted a justifying and apologize for behavior in front of current and resigned workers. The administration agreed to compensate by providing a systematic administrative system that will improve the working environment, and proves the government of China is also responsible for the rights of the workforce.

Mostly abusive behavior is used in MNCs manufacturing sites and almost not reported in developed countries. Gucci labor dispatch system which is against the Chinese characteristics. MCN can manage ethical problems conveniently. Comprehensive explanations are critically viewed as labor rights. China’s culture also prefers labor rights. The Chinese government, and foreign governments, all MNCs and its stakeholders are responsible for securing the rights of its workforce. Soon, different implementations and steps are making progress in the sense of labor abusive practices(Christensen, Kent & Stewart, 2010).

Part Five-Evaluation of company

Gucci is a multinational company and making progress gradually. The essential priority to maximize profit and minimize the cost of labor. In the maximizing process, it establishes a bill which grasps all the basic rules of the workers. According to this bill, the organization introduces a new working trend for the workers. The workers who caught some epidemic disease will not be spared from work, pregnant women will also not spare they have to perform duty like other followers the rest session also not provided to females at the time of delivery along with this the pregnant females cannot apply for managerial positions, no allowances provided to the workforce, and they are enforced to work without payment. In the form of loss conducting the workers have to compensate for this loss. The law allows the workers for 10 hours working in a day, and Gucci introduced a full working day, and the follower day remains off in which no work and time limitations are mentioned. The admin and managers found themselves involved in these unethical issues because they are crushing the employees by underlying those stricken and inhuman rules. In other words, Gucci and its managers introduced a slavery system for the workers.

Workers dispatch system also introduced by Gucci management in which the workers are forcefully pushed to another company to work. A leasing company is performing the role of a middle man. The contract is created between the leasing company and workers. But the hiring company is responsible for paying this workforce. This system provides a low-cost working environment.

Moreover, the managers of this organization and its Human Resources department kill the worker’s rights by using different means and constituting different policies for the followers and in the promotion of profit of the company. When foreign companies and other familiar brands come to China and object to these unethical issues and introduce some human rights laws which are not pushing back human dignity and provide protection to the workers on its rights, in this situation, Gucci feels the standard of reputation is decreasing day by day on account of its unethical practices which it is conducting to its managers. Then the managers and some store holders adopted apologies for behavior to maintain its progress because, without the workforce, they are helpless to manufacture the products.

At this time, all current workers and newly hired make assurance from the managers to save the rights by providing reasonable wages, fixed working hours, medical and different allowances, facilitate the pregnant females by providing them a sustainable working environment and rest period after their delivery. Gucci and its management try hard to get the release from this scandal. They got a bit of success in this matter, but this organization makes its popularity on slavery behave to its workforce. The worldwide workers’ rights and different NGOs are trying to lawsuits different laws to protect the rights of the workforce and taking steps ahead MNC and other brands find in consuming the fundamental rights of workers through its strict and abusive instructions(Christensen, Kent & Stewart, 2010).

When the Gucci reputation decreased due to the ethical scandal, then Gucci and its management established some policies which are enforced in the whole world to save the rights of workers and fulfill the entire requirement of worker’s laws. The administration decides to implement these sets of laws into all branches and stores may it in developed or developing countries. These ethical rules strongly performed in the Gucci industries. Numerous efforts were made to provide the improving standard to the workers(Czerniachowicz, 2017). These rules will be enforced to all branches and stores, and all laws strictly installed into the management systems. If the workforce belongs to any local area or has a concern for foreign labor will enjoy these rules equally. A written employment contract conducted for the workforce and workers dispatches the system prohibited. Unpaid work also discouraged by the managers, working hours mentioned, wages also term not be minimized, which will work against the law. The managers assure the workers to provide a safe and respective working environment that will be free from harassment, discrimination, and abusive practices.

The addition of some codes is not adequate to get freedom from these slavery scandals. Thus Gucci headquarters in Italy also constitutes some necessary methods to protect labor rights. Entire Gucci’s host countries, especially China, emphasize meeting the world’s ethical standards. The Chinese nation has a reliable power of tolerance. That’s why the Chinese workers were bearing this inhuman treated behavior even near to get harm in different ways. The workforce has less awareness of their rights. At this time, the economic power of China is becoming stronger gradually, although the workers’ dispatch system is becoming complicated to run. It is an important task to provide awareness to the Chinese workers on account of their rights.

  • Gucci made some analytical and administrative assumptions; the first is to control all ethical issues which are practicing in China.
  • Second, to implement this ethical culture into China needs to provide institutional strength, legalization, and a network to enforce who has the authority to protect the worker’s rights.
  • Companies that can communicate as a self-governing trade union put some steps in this matter.
  • Gucci and its managers made different practical steps regarding these abusive practices, the managers should provide lawful working hours, and overtime work must be payable, not enforced work conducted from the workers, medical care must be provided to them (Czerniachowicz, 2017).

The national and provincial governments in People Republic China (PRC) should contribute to the implementation of these rules. Foreign brands and companies should support these ethical issues to give more protection to the slavery environment of China.Competition environment should be created from the managers and granted them equal opportunities to be successful, promotions facilities should be provided to the workers, and the effective, cooperative and communicative system should be provided to the workers. Gucci and its managers should implement rules and codes that contain a safeguard environment for the followers. It must be strictly enforced as Gucci applied the salivary trend into China’s nation to make its reputation around the world.

Part Six- Conclusion

Gucci as a luxury brand holds all the necessary managerial practices as well as corporate social responsibility framework that help it acquire obligatory business performance. The association plans of Gucci are to transform into the main brand in the extravagance showcase at the worldwide level. Gucci communicates their organization as dependable and proactive, and imply them on their design and styles. These ideas are inter-related; being capable can likewise be sophisticated to acquire long term growth. For Gucci, social mindfully is a fundamental piece of their global technique. They work with a far reaching, yet reasonable methodology. It is their crucial obligation to keep up their situation of an extravagance brand to advance and pioneer supportability. The report presents a comprehensive structure of leadership and values, yet a need to focus on ethical grounds is clear.

References

Borodai, V. (2017). Brand of the employer as dna of corporate culture of service company. EUROPEAN RESEARCH, 24. doi: 10.20861/2410-2873-2017-24-001

Christensen, J., Kent, P., & Stewart, J. (2010). Corporate Governance and Company Performance in Australia. Australian Accounting Review, 20(4), 372-386. doi: 10.1111/j.1835-2561.2010.00108.x

Czerniachowicz, B. (2017). Strategic Reorientation in Human Capital: A Case Study of the Manufacturing Company. Journal Of Corporate Responsibility And Leadership, 4(1), 7. doi: 10.12775/jcrl.2017.001

Księżak, P. (2017). The Benefits from CSR for a Company and Society. Journal Of Corporate Responsibility And Leadership, 3(4), 53. doi: 10.12775/jcrl.2016.023

O’Kane, C., & Cunningham, J. (2014). Turnaround leadership core tensions during the company turnaround process. European Management Journal, 32(6), 963-980. doi: 10.1016/j.emj.2014.04.004

Rakhmanov, A. (2019). LOGISTICS OF RUSSIAN EXPORT OF AGRICULTURAL PRODUCTS: STATUS AND PROSPECTS. Economy, Labor, Management In Agriculture, (11), 113-123. doi: 10.33938/1911-113

Wymeersch, E. (2003). Company Law in Turmoil and the Way to “Global Company Practice”. Journal Of Corporate Law Studies, 3(2), 283-298. doi: 10.1080/14735970.2003.11419904

Yasin, S., Chan, C., Reidpath, D., &Allotey, P. (2012). Contextualizing chronicity: a perspective from Malaysia. Globalization And Health, 8(1), 4. doi: 10.1186/1744-8603-8-4

Zanda, S. (2016). A methodological contribution to the representation of the function of leadership and its impact on organizational cooperation and company results. Corporate Ownership And Control, 13(4), 658-666. doi: 10.22495/cocv13i4c4p15

Annual Report, M. (2019). Gucci, Autumn/Winter 2001. Gucci, Autumn/Winter 2001, 21–40. doi: 10.5040/9781350945371

Demir, M. A., &Sepli, A. (2017). The Effects Of Protectionist Policies On International Trade. PEOPLE: International Journal of Social Sciences, 3(2), 136–158. doi: 10.20319/pijss.2017.32.136158

Lee, H., Leeminyoung, & Bae, E.-K. (2019). Development of Developmental Leadership Inventory for Corporate Managers: Focused on A Company in IT Industry. The Korean Journal of Human Resource Development Quarterly, 21(2), 1–29. doi: 10.18211/kjhrdq.2019.21.2.001

Mclaughlin, S. (2018). Legal structures of business organisations. Unlocking Company Law, 41–80. doi: 10.4324/9780203702741-2

Parker, J. (2017). Changes in Organizational Learning and Leadership Influenced by Technology. Technology and Its Impact on Educational Leadership, 78–89. doi: 10.4018/978-1-4666-0062-1.ch007

Setiyaningrum, A. (2015). Can The Good Corporate Ethics Statements And Corporate Social Responsibility Createpositive Consumer Responseson The Company And Its Products?an Empirical Finding In The Case Of Controversial Company. Journal of Management and Business, 12(2). doi: 10.24123/jmb.v12i2.16

Managing Corporate Social Responsibility

Debate on Corporate Social Responsibility Summary

Innovative management approach towards improvement of employees’ performance at work

 

Sexual Assault – Harvey Weinstein Case 

Pages:3

Sexual assault is a broad term that includes any sort of sexual violence, sexual actions without consent, or torture of any kind. The sexual cases against the movie hegemon Harvey Weinstein are an essential one to be explored as they triggered a significant change that started with the Me Too movement. The Kantian and Utilitarian schools of thought are helpful in determining the case against Weinstein.

Many celebrated movie stars, including Angelina Jolie, Gwyneth Paltrow, and Salma Hayek, accused the famous American movie producer Harvey Weinstein, who is now convicted of sexual assault and similar heinous acts. These acts may induce terrible side effects such as self-harm, panic attacks, or may even cause unwanted pregnancies, especially if the victim is pressurized into not speaking or voicing out for help or catharsis, as was the case with Weinstein who blackmailed the actresses on multiple occasions.

 

Self-harm is caused by emotional pain and should not be ignored, no matter its scale. It may be challenging to break away from it as the cycle becomes addictive in some cases, and in serious ones may lead to suicide. Likewise, panic attacks are reflective of the internal disturbed state of people that may be episodic and are triggered by no real danger. They can disrupt the present state of the victim and lead to depressive thoughts. In severe cases of sexual assault, such as rape, unwanted pregnancies may take place. Abortion is a solution, but it is considered illegal in many areas. It hence can cause significant life changes for the victim, apart from the emotional trauma the event itself brings.

 

This case can be evaluated using the two great branches of ethics, namely Kantian and Utilitarianism. Utilitarianism argues that one should act in a way that produces the highest good for the most significant number of people. Utilitarianism judges the moral value of an action based on its outcome (or expected outcome, for a hypothetical case).  So, in the case of sexual assault, the consequence of self-harm, panic attacks, or pregnancies may determine the action itself to be considered wrong.

 

On the other hand, Kant’s ethical theory bases all moral judgment on the nature of the action; the consequences are entirely irrelevant. The more modest and plausible of his moral theses is that it is always morally wrong to treat humanity as a mere means to achieve some desired end. To put it more simply, the rule is to respect people, and not to use them. And this includes self-respect as well as respect for others, so it’s also wrong to drug yourself into oblivion. The idea is that an action is morally acceptable if and only if it would be both feasible and acceptable for everyone to act in accordance with the same principles that motivate the original act. In the case of sexual assault, this means that the nature of the act itself comes under question, regardless of its consequences.

 

Based on these two theories, Weinstein’s actions can be deemed to be extremely problematic in numerous ways. They not only lead to intense social issues, but his unethical actions in themselves are heinous in their nature. This sort of behavior ought to be declared strongly punishable as it becomes unacceptable when analyzed using the above theories.  Hence, both these theories help understand the criminality of the action, but the most suitable one appears to be Kantian theory here as it declares the foundation to be problematic and does not wait for the outcomes.

 

On the other hand, societies should encourage women and other oppressed bodies to speak up for themselves and allow more movement like Me Too to surface as they fix the gaps made by heinous villains like Harvey Weinstein to be bridged. Women empowerment ought to be recognized, and timely action should be taken against criminals who indulge in such crimes despite their influential status of personas.

Resources

https://edition.cnn.com/2017/12/13/entertainment/salma-hayek-harvey-weinstein/index.html

https://www.nytimes.com/2017/10/10/us/gwyneth-paltrow-angelina-jolie-harvey-weinstein.html

Comparison of gender roles in Romeo and Juliet and Private Romeo

Problems of Children Being Abused

 

BRL Hardy: Globalizing an Australian Wine Company – An International Business Negotiations Perspective

Pages:12

Introduction

The case study looks at the challenges and issues faced by the managerial leadership at BRL Hardy. It provides certain meaningful insights and information to the reader in order to help them to understand the magnitude of the dilemmas faced by the senior managers of the company as they attempt to analyze the various risks and rewards associated with taking up one potential business project or the other. The case study enables the reader to think and analyze the problem from the perspective of the acting manager and gives them an inside look into the procedures and processes of the corporate business world.

BRL Hardy is of the leading wine companies operating primarily in the Australian wine market. The case study introduces the reader to Christopher Carson, the managing director of the organization’s Europe and UK division. It focuses on the conflict that arises between BRL Hardy’s headquarters team in Australia and the company’s UK team under the leadership of Carson on the determination of potential business ventures and projects that are best suited for the future of the organization. The report attempts to examine and analyze the conflict between the two managerial camps from the perspective of international business negotiations and tries to determine the best course of action that should be followed by the management in order to resolve the issues at hand.

Company Background

BRL Hardy came into existence in June 1992 as a result of the merger of two Australian wine companies, namely Thomas Hardy & Sons and Berri Renmano Limited (BRL). Thomas Hardy & Sons began operations as early as 1857 and exported hogsheads to England. By 1912, the company not only became the largest wine maker in Australia but also the most respected in the business through an excessive focus on the aspect of quality. BRL, on the other hand, was the country’s first cooperative winery and established business operations in as early as 1916. It focused on “fortified, bulk, and value vines” and became the largest grape crusher in the country by the 1990s.

While Thomas Hardy & Sons followed more “traditional and cultural” values and operational practices, BRL’s business operations were centered around a more “aggressive commercial” philosophy. At a time when Thomas Hardy & Sons encountered financial problems as a result of its three European acquisitions, BRL was also on the lookout for new avenues in order to expand and upgrade its business portfolio. The two companies decided to merge their operations in 1992under the name of BRL Hardy in a bid to capitalize on the combined resources and capabilities of both the organizations. The merger was played down by industry experts and analysts at the time and the new company did experience some difficulties during the first year of its operations. However, effective management and leadership from CEO Steve Millar soon established the operating procedures of the new company and guided the organization to sustainable business operations in the following years. (BRL Hardy: Globalizing an Australian Wine Company, 2003)

 

The Strategic Focus

Under the managerial leadership of Steve Millar, who was also the managing director of BRL before the merger with Thomas Hardy & Sons, the operational strategy was to focus on growth though the sale of branded bottled wine, while, at the same time, protect the company’s share of the bulk cask business portfolio. The merged company initially focused its operations and targeted its business activities on the domestic Australian market. It allowed the management to sort out the merger efficiencies from both the companies and capitalize on its combined resources before launching its export operations.

Another area of focus for Steve Millar was the organizational culture and management practices within the merged company. He realized that the senior managers of both the companies had different management styles. Millar wanted to incorporate a more independent and decentralized management structure into the company which gave the senior management enough freedom and decision making capacity to identify, analyze, pursue, and own their individual business projects. Such an approach was particularly difficult for the managers that came from the Hardy’s side of the business as they had worked under a more centralized operational structure.

The decentralized focus incorporated by Millar later led to negotiating problems and difficulties between the Carson, the UK office lead, and the managerial leadership at the Australian head office. Carson, acting on the delegation principles and values that Millar had pushed, identified and pursued his own business ventures that he thought could bring sustained profitability and operational advantage to the company. Millar and his team, on the other hand, wanted to control certain essential aspects of the final product in a bid to keep the products brand centric and in line with the organizational vision and values. (BRL Hardy: Globalizing an Australian Wine Company, 2003)

 

The Challenge

There were two major problems and challenges in regard to business negotiations that can be pointed out from the analysis of the case study. At the outset, Carson wanted to execute his plans for the new line of wines under the brand name of D’istinto developed and worked over extensively by his team for months. He had taken his plans for the new brand to the Australian team in order to launch in the UK market but had run into problems regarding their approval. The Australian management under Millar had raised serious questions regarding the joint venture with Italian farmers as a similar project previously initiated by Carson had not fared well in the market. Millar had also raised questions over Carson’s commitment and dedication to the company’s established products and wine ranges as he feared that excessive focus on new product lines might be detrimental to the performance of the existing products.

The second challenge faced by Carson was a head to head battle between two proposed brands for the United Kingdom market, namely Kelly’s Revenge and the Banrock Station. Kelly’s Revenge was the pet project of Carson’s team developed specifically for the UK market, with a target focus on younger consumers. Carson, acting on the principles of delegation pushed by Millar, had given the creative freedom to his team in order to develop a new entry level product range for the local market and Kelly’s Revenge was their answer. On the other hand, Banrock Station, was a new entry level wine line introduced by Millar’s team in the local Australian market. The sales had exceeded expectations and Millar was convinced of the global brand potential of the product. Hence, the Australian team pushed Carson to launch Banrock Station in the UK and European markets as a new entry level product. Carson, on the other hand, felt that Banrock Station was not ideally suited for the UK and European market and aired his reservations regarding the new range of wines.

The dilemma faced by Carson was of epic proportions; on the one hand, he had a product range specifically developed by own team for the local market, on the other, he had a domestically successful product range from the Australian headquarters for the UK market that he felt was inappropriate for the local European market. Similarly, Millar, the managing director of the company, had his own set of challenges and dilemmas. While he wanted the managers to express freedom and practice decentralized business procedures, he also wanted to keep the new product ranges aligned with the company’s global branding vision. Millar also pondered over his response and the manner in which to negotiate with Carson in the event that Carson decided to push Kelly’s Revenge instead of the product Millar wanted to launch in the UK market, the Banrock Station.

 

Roots of the Conflict

A number of reasons can be identified from the examination of the case study that led to the clash between the Australian team working under the leadership of Millar and the UK team working under the leadership of Carson. Firstly, the merger between the two companies with contrasting management styles and philosophies led to cultural conflicts and autonomy problems. Most of the senior managerial roles were given to former BRL managers which was taken negatively by the former Hardy managers and employees. They felt like outsiders in the merged company and had to prove their worth in order to attain the creative freedom that Millar and his team promoted. Furthermore, the decentralization structures and practices incorporated by Millar created tension between the Australian and the UK offices.

As a result of unclear and imprecise negotiations and discussions, a rift was created between the two teams as Carson believed that he had control over product branding, labeling, pricing, and other essential aspects for the UK and the European market. In contrast, Millar assumed that the Australian team controlled the essential aspects of branding, labeling, and pricing while the distribution, promotion, and sales strategy was decentralized to the UK team working under Carson. Millar was of the opinion that the branding and labeling practices of the product ranges should be controlled by the headquarters as they attempted to keep the new products in line with the global branding effort of the company. Carson, on the contrary, believed that his team should determine the labeling, pricing, and branding aspects of the products in the UK market as they were more equipped with the dynamics and underlying forces of the European wine market.

Secondly, in an attempt to embrace the concept that the BRL Hardy wine ranges had to be global brands, Carson successfully negotiated a business contract with Italian grape farmers in the Sicilian region and partnered up with them in order to develop a new wine range under the brand name of D’istinto. The new product range was targeted at the average wine consumer in the UK market who necessarily did not have the knowledge or the expertise in regard to wine tasting and purchasing. Through the development and pursuit of D’istinto, Carson also acted in accordance with the expectations of delegation and decentralization put forward by Millar. However, when Carson presented the idea of the new product to the Australian team, Millar, along with others, was standoffish and unreceptive about it. This issue highlights yet another aspect of faulty communication and imprecise negotiation between the two parties.

Lastly, another decision that became a source of discord between the UK team and the Australian team was the hiring of Paul Browne. Carson, upon Millar’s suggestion that he needed to reconnect more effectively with the Australian team and delegate responsibility to subordinate managers, appointed Browne from the headquarters to the post of marketing manager in his team. Browne was given the responsibility to identify and develop new product ranges by Carson in order to fill up the gaps created by moving “Stamps” and “Nottage Hill” to a higher price range.Browne and his team came up with Kelly’s Revenge after months of work and finalized the product for launch in the UK market. But the project created tension between the two teams as Millar argued that it did not represent the organization’s collective branding message. Evidently, the lack of clear business negotiation between the two teams had created another problem for both sets of managers. (BRL Hardy: Globalizing an Australian Wine Company, 2003)

 

Business Negotiation Frameworks

Much research has been carried out over the years that attempts to indicate the best and most effective practices and strategies when it comes to the negotiation regarding crucial projects and business ventures either between different teams within the organization or between the company and its suppliers, distributors or other important actors.

Competitive vs Cooperative

Aslani et al. (2016), in their work, highlight the influence that cultural differences can have on business negotiations and conflict resolution attempts between an organizational team and a subsidiary team. They argue that information sharing, insights and a cooperative mindset when negotiating for joint goals and objectives occupy substantial importance in order to resolve the conflict in an effective and efficient manner. The study also suggest that business negotiation processes characterized by influence and competitive aspirations are more likely to result in further disputes between the teams.

Applying the work of Aslani et al. (2016) to the case of Carson and Millar, it can be argued that the most effective and efficient avenue in order to arrive at an acceptable resolution for both parties is to engage in business negotiations in a cooperative manner. Information sharing, openness, trust, and meaningful insights regarding priorities can result in an adequate and appropriate solution of the problem for both Carson’s and Millar’s teams. It will not only help them in resolving the conflict effectively, but also result in higher joint gains for the company in the long run. (Aslani et al., 2013)

 

Business Negotiation Model

One of the fundamental models for international business negotiations was presented by Ghauri (2003). The model for business negotiations can be used in order to simplify the process of negotiation and conflict resolution between companies and its subsidiaries.

 

Ghauri (2003) argues that the business negotiation process is influenced by a number of factors that can primarily be categorized into strategic factors, cultural dynamics, and background factors. The strategic factors comprise of the presentation of arguments and information in an effective manner, the strategy devised by the negotiators in order to attain their desired results, and the circumstances that play a crucial role in the decision making process of the negotiating parties. (Schoop et al., 2010)

Similarly, the cultural factors can be divided into time restraints, individual and collective goals of the negotiator and his team respectively, the presence and usage of emotions and feelings during the process of negotiation, and the relationship between the actors. The background factors can be defined as the objectives that a negotiator has before the process begins, the environment of the process, and expectations that negotiators have from the procedure. All these factors can be applied to the case of Millar and Carson in order to gain a better understanding of the negotiation processes between the two parties.(Fjellstrom, 2005)

Although Millar wanted to demonstrate his principles of delegation within the organization, his team still argued for controlling the essential aspects of the product ranges. This shows that Millar wanted to keep the power dynamic for the Australian team as his team felt that too much decentralization can have detrimental affects for the health of the organization and its global brands in the long run. Carson, alternatively, had many attachments that were bound to influence his decision making during the negotiation process. He had worked extensively on the D’istinto project and felt that it was unfair of Millar to slow down its approval on the basis of the previous Chilean joint venture. Similarly, Browne had emotional attachments to his project as well – Kelly’s Revenge. He even tried to block the launch of Banrock Station in the UK by playing politics. This shows that both the parties clearly wanted to hang on to their objectives and made up for a difficult negotiating journey.

 

The Negotiation Atmosphere

The atmosphere that existed for negotiation between Miller and Carson was a tense one. Both the parties had clashed over previous issues and problems. Carson, being a former Thomas Hardy employee, already felt like an outsider due to the merger. Although he had performed well and had “earned his stripes,” he still felt that crucial aspects such as labeling, branding, and pricing of the product should be the domain of the local team, not the corporate headquarter situated miles away. He had also gone through a difficult negotiation process with Millar and his team before when he wanted to move the Stamps and Nottage Hill to a higher price range. Hence, the feeling of unresolved tension and uneasiness governed the current atmosphere for negotiations.

References

Aslani, S., Ramirez-Marin, J., Brett, J., Yao, J., Semnani-Azad, Z., Zhang, Z.-X., Tinsley, C., Weingart, L., & Adair, W. (2016). Dignity, face, and honor cultures: A study of negotiation strategy and outcomes in three cultures: Dignity, Face, and Honor in Negotiation. Journal of Organizational Behavior, 37(8), 1178–1201. https://doi.org/10.1002/job.2095

Aslani, S., Ramirez-Marin, J., Semnani-Azad, Z., Brett, J. M., & Tinsley, C. (2013). Dignity, face, and honor cultures: Implications for negotiation and conflict management. In Handbook of research on negotiation. Edward Elgar Publishing.

BRL Hardy: Globalizing an Australian Wine Company, (2003).

Fjellstrom, D. (2005). International Business Negotiations. Sodertorn University.

Ghauri, P. N. (2003). A framework for international business negotiations. International Business Negotiations, 2, 3–22.

Schoop, M., Köhne, F., &Ostertag, K. (2010). Communication quality in business negotiations. Group Decision and Negotiation, 19(2), 193–209.

 

 

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