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Analysis

Steve Jobs had an unconventional life and was raised by two working-class parents. Steve Jobs was an entrepreneur that dropped out of college and worked on becoming the owner of Apple. Entrepreneurship is defined to be a key driver for economic growth, job creation, and also competitiveness. (OECD, 1998) There is also a growing understanding that entrepreneurship is best defined as a field of business that works on seeking to understand how opportunities create something new. Through entrepreneurship, new ways to organize existing technologies arise, and individuals use these discoveries to create something new and exploit or develop these opportunities. (Shane and Venkataraman, 2000)

Steve Jobs relied heavily on intuition to make managerial decisions throughout his life. In his statements, he claims that intuition is a great force, and a person’s gut is always telling them something. Steve Jobs believed that to reach success,individuals needed to be able to deploy their talents wisely. (Srinivasan, 2013) Jobs explained that most of the workers on his Mac were poets and musicians. Jobs strategy is not one that comes without historical precedent since the convergence of art and science has created artists like Leonardo da Vinci and Michaelangelo. (Snow, 1960)

Steve Jobs, during his time at reeds, learned how to do calligraphy and also learned to experiment with different fonts and styles. Learning this skill proved to be instrumental for him while designing the Mac, and it was one such situation where intuition worked. (Highhouse, 2008) claims that there is a stubborn reliance on intuition and human decisions are claimed to be more reliable than scientific aids for a study.

This behavior is not uncommon and is even seen in seasoned practitioners who often neglect to seek out new evidence because they trust their research and studies more.(Pfeffer and Sutton, 2020) Evidence-based management has been hard to apply, and there is often too much evidence available, which at the end of the day clouds an individual’s ability to make judgments. Therefore, many people rely heavily on intuition and steve jobs has also signified his reliance on intuition in several situations. In his lecture to recent graduates, he advises them to trust their gut while going for anything because it is impossible to connect the dots looking forward.

Bounded rationality is also in harmony with these theories. Bounded rationality theory claims that decisions individuals make are limited by multiple factors such as the time they have at their disposal, the information they have available, and their mental information processing ability. In certain situations, people are often called out to give numerical predictions on the well being of a stock. If a favorable description is given, it attracts a favorable review, and if a negative description is given, it attracts a negative review regardless of the authenticity of the information. In most situations, individual predictions are insensitive to the accuracy of the information. (Tversky and Kahneman, 1974)

Steve Jobs relied heavily on rationality to make his decisions and also employed the use of emotional intelligence in stressful situations. Situations where he was removed from Apple, and he started from the ground up again and was successful. (Steve Drucker, 1995) claims that innovation is a destabilizer that allows for the creative destruction of the steady-state and therefore allows constant changes to occur.

 Evaluation

Decades of research have concluded that people care deeply about their self-concept and also expend a great deal of effort maintaining a positive image of self often by engaging in motivated reasoning (Steele 1988, Kunda 1990).

Steve Jobs is also no stranger to this. He engaged himself in positive images of self once he was laid off from Apple and motivated himself to start neXt and Pixar. These two initiatives ended up in him gaining back his lost position at Apple and also finding a partner that he could spend his life with.

Finance researchers have developed a Hubris hypothesis theory through studying the effects of over-optimism and overconfidence and have found out that overconfident managers end up overestimating the returns on their investments. CEO hubris is also fanned by the celebrity status that has come to pervade the upper echelons of business culture like steve jobs. In situations where Hubris becomes involved, tragedy can quite easily form. (Sadler-Smith, n.d.)

Steve Jobs has played a central and pivotal role to Apple, and much of Apple’s success is tied to his role. However, in some situations,steve jobs has executed poor managerial and unprofessional decisions as well. In a particular board meeting, Steve jobs was claimed to have barged in hurling profanities to the managers which ended up having the entire agreement going in bad taste.

Steve jobs rejoined apple not to make a profit but to donate to the cause. In his speech, he claimed that he loved what he did, and whatever happened at Apple was not enough to make him give up. Instead, it freed him up to start over, and once he was provided with the chance, he rejoined apple to make the most of his learnings. This version of executive leadership has been developed in the book ‘good to great.’ Level 5 leaders are individuals that are wholly and completely dedicated to the cause and the cause alone.

CNN reported that Jobs, in some cases, was not afraid to get his hands dirty and sometimes attended to customer service requests himself. Leaders who manage firms by taking in inputs from their employees and those who trust their employees more end up making their firm more productive and successful. Steve Jobs was able to bring about good results through walking a calculated balance of Hubris and Humility.

Steve Jobs has been known as an individual having a sharp eye for detail,and he had an autocratic style of leadership where he did not just stop at products. Steve also made a few mistakes in his professional life, but he did not let those mistakes get to his head and always picked himself up. (Economy, 2018)

Traditional economics Postulates that an economic man is also someone rational, and this man is also someone who is assumed to know relevant aspects of his environment which, if not complete, are at least impressively bright and also voluminous. (Simon, 1955)Moreover, Steve Jobs was also someone who possessed similar characteristics as those of a rational leader.

 Conclusion

Managerial Decision making is the act of making decisions about something or about a position or opinion or judgment that has been reached. For effective management, a significant level of prior accumulated knowledge and insight needs to be naturally present to be able to formulate a practical insight that can connect the dots effectively. (Manchester, 1995)

For most of his managerial decisions, steve jobs was an Individual that relied on perfection and an individual that had a preset vision in mind. His vision alone was the sole reason through which he was able to convert a small scale garage company into a billion-dollar company with 4000 employees. Wallas, in his four-stage model of insight, describes a stage between incubation and illumination. The illumination stage is one in which our fringe consciousness is near a rising consciousness that success is coming. There is an intuition that the direction we are following is the right path, and breakthroughs are also just around the corner. (Sadler-Smith, 2012)

From an analysis of steve jobs’ life and the decisions he has made throughout, it can be said that Steve Jobs was operating strikingly similar to the four-stage model of insight as proposed by wallas. Steve was a Level five leader that was not motivated by profit.Instead, he was someone that was motivated by the impact he can create. Level 5 leaders are individuals that love what they do and are motivated towards creating innovative products.

Intuition itself has many stages. Researchers were able to split the findings in dual processes, namely recognition based intuition and intuition-based inquiry. Gerd Gigerenzer’s book ‘Fast and Frugal’ Heuristics also talks about the importance of a harmonic balance between intuition and analysis to be able to make effective managerial decisions. Steve Jobs is a big proponent of following one’s intuition and claims that one should always have the courage to follow his or her gut because they somehow already know what one is going to become.

In the Gestalt psychology view of problem-solving, prior knowledge and expertise can be a barrier to creativity (King and Anderson, 2002). steve jobs also faced this problem and enjoyed his freedom when he started NeXT and Pixar and claimed that it freed him to enter the most creative periods of his life. The technology Steve Jobs was able to develop at NeXT with no pressure was so brilliant that it became the heart of Apple’s current renaissance.

Steve jobs applied a sensible approach to problems where he did not solely rely on his intuition or gut. He also placed in consideration various other factors as well. Achieving a balance on intuition and analysis can be said to be the best possible way to arrive at decisions.

Creative problem solving is at the heart of every successful business, and most creative solutions do not occur in situations of stress or situations of expectation. Steve Jobs uses his intuitive approach and trusts his gut feelings to be able to create innovative solutions. The classical model of decision making is a very dubious one, and most leaders fail to follow simply one model of decision making.Instead, they follow multiple different decision-making models and often end up mixing them up to be able to achieve favorable outcomes.

 

Bibliography

(Drucker, 1995) Managing in a time of great change. London BCA

(Steele, Claude M. 1998) “The Psychology of Self affirmation: Sustaining the integrity of the self.”

Economy, P., 2018. Steve Jobs Used A Remarkably Powerful Decision-Making Strategy That Will Transform Your Business. [online] Inc.com. Available at: <https://www.inc.com/peter-economy/steve-jobs-used-a-remarkably-powerful-decision-making-strategy-that-will-transform-your-business.html> [Accessed 20 May 2020].

Highhouse, S., 2008. Stubborn reliance on intuition and subjectivity in employee selection. Industrial and Organizational Psychology, 1(3): 333-342.

King N Anderson (2002)  Managing Innovation and Change: A critical guide for organizations. London: Thomson

Manchester, K., 1995. Louis Pasteur (1822–1895) — chance and the prepared mind. Trends in Biotechnology, 13(12), pp.511-515.

OECD (Organisation for Economic Co-Operation and Development) (1998). Fostering Entrepreneurship. Paris: OECD.

Pfeffer, J., and Sutton, R., 2020. Evidence-Based Management. [online] Harvard Business Review. Available at: <https://hbr.org/2006/01/evidence-based-management> [Accessed 19 May 2020].

Sadler-Smith, E., 2012. Inside Intuition. Hoboken: Taylor and Francis.

Shane, S., and Venkataraman, S. (2000). ‘The promise of entrepreneurship as a field of research.’ Academy of Management Review, 25, 217–26.

Simon, H., 1955. A Behavioral Model of Rational Choice. The Quarterly Journal of Economics, 69(1), p.99.

Snow, (1960). The two cultures and the scientific revolution (Cambridge: Cambridge University Press), passim

Srinivasan, S., 2013. Steven Jobs (London: Little, Brown). Journal of Education and Vocational Research, 4(10), pp.300-301.

Tversky, A., and Kahneman, D., 1974. Judgment under Uncertainty: Heuristics and Biases. Science, 185(4157), pp.1124-1131.

Tversky, A., and Kahneman, D., 1974. Judgment under Uncertainty: Heuristics and Biases. Science, 185(4157), pp.1124-1131.

 

 

 

 

 

 

 

Appendix

 

Bounded rationality
Based on research, bounded rationality is the decisions individuals make when they are pressed for time. Steve Jobs was a bounded rational who used to make the best possible decisions based on his gut. Time is a scarce resource for many, and in many circumstances, there is simply not enough time to calculate future decisions. He encourages people to be creative and be brave enough to follow their gut.

 

Evidence-Based Management
As discussed above, evidence-based management is a management strategy that requires much time and motivation to execute. Something which is not as easily available, and this management strategy rarely gets practiced because most managers have a stubborn reliance on intuition.
Intuition
Steve Jobs was someone who relied on intuition and relied on his gut more than anything. He simply did not pursue things when they did not feel right, and it is for this very reason that he dropped out of college and eventually ended up starting a business empire.
Heuristic
Shortcuts are everyone’s favorites, and Steve jobs also used mental shortcuts to ease the cognitive load of making critical decisions.
Motivated reasoning

 

Steve jobs employs motivated reasoning by claiming that getting fired from Apple was the best thing to happen to him. His reasoning helped him make use of his skills to start new things that ended up becoming successful as well.

 

 

 

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Introduction

Every individual idealizes some other individual and sees them as a leader. We often need some leadership figures in our lives because they motivate us to become better people and be more productive (Ramanaiah, Balaji, 2012). There are very different types of leaders with various leadership styles and they appeal to us for different reasons based on our personality traits and passions in life. One such leader that inspires me is Bill gates. In this paper, I will be talking about Bill Gates and his leadership style.

Background

Bill Gates is one of the most well-known individuals on this planet and he is known for all the right reasons. He was born in 1955 in Seattle in the United States. His real name is in fact, William Henry Gates III. Today Bill Gates is a business magnate who has to build his empire through his love for software programming. Ever since a little kid, Gates loved computers and had a passion for them. So, at just the young age of thirteen, he learned about computers and started working on programming mainframe computers. While attending college at Harvard, Bill Gates was successful in creating his very own BASIC computer programming language. Soon afterward he began his venture of Microsoft with a friend named Paul Allen. By 1981, this partnership led to Microsoft becoming an incorporated company that sold computer operating systems that today we use in almost every personal computer by the name of Microsoft Windows and Microsoft office (Bellis, 2020).

Amassing this empire and becoming a billionaire wasn’t something that Gates achieved overnight. It took a lot of hard work. He was an amazing leader who led not only himself but his workforce to achieve the level at which they are today. He did not exactly start in a way we would picture a leader in our minds which only makes him more awe-inspiring. Bill Gates dropped out of college to follow his dream and took risks with only his knowledge and creativity to get by. Due to these qualities, I am inspired by him. We are often told to follow a strict path that is not only stereotypical but also not guaranteed to be successful. I applaud him for creating his path, breaking the norms.

Leadership style and strengths

From amongst the different leadership styles, the one most befitting for Bill Gates is that of a transformational leader. A translational leader is one who follows a powerful vision with fervor and passion for his work. The energy he surrounds himself with as a product of his passion is what inspires others to follow him as well. Transformational leaders encourage effort on a personal and individual level. So, motivation is more directly transmitted on an individual level from the leader to those below him. In this way, they reach the result with a clear path in mind (Mauri, 2017).

Transformational leadership came naturally to Bill Gates.He is an exemplary leader. He is very focused on what he is good at and made that into his business. he has clear goals and picture in mind that he works towards. He makes a clear line of action that he follows and preaches others to follow. All the goals he sets are practical and approachable. Progress is achieved one step at a time rather than a leap. He inspires a vision for others and models a unique way for them to follow. He promotes creativity and innovation on an individual level. So, he enables others to act and to face challenges rather than being laid back in comfort zones. At the same time, Gates is also compassionate and caring. This quality of his also one of my favorites. He supports not only his workforce and strengthens them but is also very charitable. He has contributed billions in philanthropic efforts for various worldly causes and yet he has a very down to earth and humble personality (The Lancet, 2005). So, he is not only a good leader when it comes to business but also as a teacher and as the head of a social charitable organization. He is always looking for something new to learn. In his leadership style, learning and acquiring more knowledge does not stop (Sahin, Cubuk, Uslo, 2014).

Weaknesses

On the other hand, it is also important to understand that to err is human and after all Bill Gates is also a human. He has some weaknesses that he can work upon to become an even better leader. Identifying one’s weaknesses and working on them is a leadership quality in itself. For Bill Gates, arrogance is a weakness. Being as passionate as an individual he is, it is difficult for him to consider his ideas wrong or not the best. He should be able to consider other ideas for the betterment of his company. As a transformational leader, he is also very results-driven. He focuses on the end goal only rather than on the process that leads to the goal. This can cause losing track of the steps needed to achieve the result. lastly, Gates wants everyone to be on the same page as a transformational leader but this is not always easy to achieve and may cause conflicts. Gates needs to work on facing these conflicts heads-on rather than ignoring them (Patching, 2011).

Conclusion

All in all, Bill Gates is an extraordinary leader. It is underestimation to say that it is hard to be the kind of leader that he is. If only he could include a little patience in his leadership recipe, he would be nothing less than a perfect leader.

 References

Bill Gates: a 21st century Robin Hood? (2005, March 12). The Lancet365, 911.

Şahin, D. R., Çubuk, D., &Uslu, T. (2014). The effect of organizational support, transformational leadership, personnel empowerment, work engagement, performance, and demographical variables on the factors of psychological capital. EMAJ: Emerging Markets Journal3(3), 1-17.

Mauri, T. (2017). Why leadership styles matter. Strategic Direction.

Patching, K. (2011). Throw away that leadership competency model. Industrial and Commercial Training.

Ramanaiah, G. (2012). Leaders and Managers: A Quality Perspective in the Corporate World. Journal of Entrepreneurship and Management1(2), 41.

Bellis, M. (2020, January 31). Biography of Bill Gates, Co-Founder of Microsoft. Retrieved from https://www.thoughtco.com/bill-gates-biography-and-history-1991861

Pages:15

Introduction

Management performance tends to handle the operational process in organizations through regular feedback. The scope of business management is enhanced when a business model is invigorated. It is vital for a company’s success that several changes should be implemented (Korsgaard, Rask &Lauring, 2007). The process of strategic management is to implement a strategy in an organizational framework that allows the accomplishment of strategic goals. This kind of operation is to get more customers who spend more, so longer retention is made. (Lechehab&Kamassi, 2016) The monitoring and planning analysis in an organization need specific processes to meet the objectives. This report will discuss international strategic business management in IKEA regarding Malaysia. The report will discuss the mission, strategic goals, and SWOT analysis.

Company Overview

IKEA is a global brand that was found in 1943 by Ingvar Kamprad. The company is famous for its famous and modern stores. Its different kinds of products are eco-friendly and cost-effective. IKEA operates in 389 stores worth of 42.9 billion. It also has few branches across the world with such as KungensKurva, in Shen Zhen, and Texas. It has presented an example of trendiest with low-cost furniture. IKEA is considered a recognizable brand at the globe with best practices. The trademark of the company is well designed and functional regarding frugality experience. These practices are related to the principle that offers competitive advantage (Soh, Wong & Chong, 2015). The image, quality, and affordability of products is an asset for the company. The company has the opportunity to be streamlined about its customs, franchising, and popularity.

IKEA is successful in terms of its management operations. Its formulation processing is based on the right demographic framework. IKEA stores are customized to offer a better experience to customers in terms of fluid shopping (Hultman, Johnsen, Johnsen & Hertz, 2012). The living room and domestic style experience for customers are exciting. They need to take a code linked to the selected item when they buy furniture. The functional layout of products is seen as a mass service for a product offering that fulfills the basic needs of consumers.  Some basic features of the firm are high quality, wide variety, the flexibility of products, less disruption, and easy supervision.

Mission

The mission of the company is to build a strong culture that will deploy crucial factors for the continued success of IKEA. The concept of sustainability is inherent because furniture is considered a necessary value for people’s lives (Korsgaard, Rask &Lauring, 2007). The recognizable brand name and concept are linked to low valued price and home furnishing products. The company has a wide range of its products and allow frugality practices for being the first choice of consumers as compared to other brands. The culture of IKEA is to work within everyone, create and develop it further, so people live with this vision. This concept is building a core competency of the company against others. IKEA has established its long going capacity in Malaysia with the science and technology concept and managerial practices. The developing economy of Malaysia is offering huge potential to the company to produce furniture due to newly identified competitive advantages (Garnier&Poncin, 2019).

SWOT Analysis

IKEA is a valuable furniture brand in the world, and in 2019, its worth is estimated at US$45.4 billion. The strengths of the company are its brand image and brand name. The reputation and awareness of the company are its key strengths (Johansson &Thelander, 2009). A most significant strength is its low-cost affordable furniture because it aims to sustain in the lives of people, so it is cost-conscious. The philosophy of IKEA is to keep costs low and incorporate new technologies, advances, and innovation to allow profit margins(Arrigo, 2005). This is associated with the profitability, efficiency solutions, and cost-effectiveness methods in handling products. In Malaysia, IKEA has a competitive advantage in producing products.

The combination of effective packaging and low price furniture startup in Malaysia is a big strength for the company. The products of the company are new, different, and allow extraordinary shopping experience to people, so consumers are engaged in decision making (Soh, Wong & Chong, 2015). It is different from other brands because of the wide variety, selection, and offering a chronological order. Just as its competitors are working in Malaysia, IKEA aims to maintain long term relationships with customers, so optimizing its cost and transport timing.

Its weaknesses are less focused on improvement policies while working in less developed countries like Malaysia. It also has inadequate support policy as well as limited visibility regarding marketing and promotion. The sparsely located few stores in Malaysia can be less responsive to increased demand of the population (Minkes&Minkes, 2005). It has to employ more staff to enhance the buying experience of customers by attracting them. The packaged furniture and its technical nature is different and needs more focus on assemblage. It depends on the third party to assemble and assist in purchasing products that can be a weak point for IKEA. There is an absence of detailed instructions that can accompany products and retain consumers when they go for detailing.

There are some opportunities for IKEA to further develop and boost its concept in Malaysia. It can increase its clientele by educating people more about environmental waste and pollution. If wastes are reduced regarding furniture usage, it can develop a strong concept as an opportunity in corporate social responsibility (Hultman, Johnsen, Johnsen & Hertz, 2012). With Malaysia and other less developed counties like India and Indonesia, IKEA can fully develop its network of furniture supply. It has the advantage of working on broader concepts by developing effective solutions for business. This will provide solutions to reduce environmental pollution, so a sustainable life at home will be easy. In Malaysia, the potential exists regarding natural resources and others like advanced technology and science, so it can promote a technical friendly product (Garnier&Poncin, 2019).

Some external factors can work as threats to the company in Malaysia. There are many low-cost retailers in Malaysia that can share market value and specialty of furniture with IKEA; there is a need to produce more economical and consumer-friendly products to compete with the rivals. The financial conditions of a country are other luring threats for IKEA. Any financial crisis and economic downturn in the economy can cause threats to IKEA (Lechehab&Kamassi, 2016). The size and scale of the company is also a threat because it has to focus on the operating economy where experts believe watering down of innovation due to less targeted consumers in Malaysia. The company is steadily acquiring a household place in masses, so it has to improve quality and standard with its expansion (Fröding& Lawrence, 2017).

IKEA strategies and its associated plans

IKEA’s marketing strategy through which the organization searched out cultural and advanced customers and also searched a sufficient market to sell its products. IKEA sends its designs to concern professional people to its homes and provide them feedback(Arrigo, 2005). This strategy allows the ministers to make the market decisions that are based on people’s life’s experience; this experience might be collected from survey and data collection. IKES Strategies considered all elements that are involving around product and price into mixed marketing. IKES tries to present its best product on the lowest market rate, and it is also called the 7Ps of marketing, in which position, development, methods, characters, and material elements are taking place (Hultman, Johnsen, Johnsen & Hertz, 2012). IKEA was established by Kamprad in 1943; this term developed when the home furnishing stores are used for monetary purposes around the world. All IKEA retailers are running their own franchise business.

IKEA of Sweden concerns all product ranges, which are associated with IKEA; the entire production differentiated with tags, designs, and quality. To start IKEA’s strategies, find the solution to various questions.  IKEA knows about consumer satisfaction and how much it is important. Consumer relations influence the business significantly (Stanciu, Zlati, Antohi&Bichescu, 2019).

Different research objectives also take place in this term, like investigating the consumer demand theory. Establish a referencing and suggestion system for company development. The basic purpose of this theory is to satisfy the consumer at any cost, either the consumer belongs to any category of life. In those days’ customers have awareness about the brand and its worth; at first, the consumer judges the product, and its services afterward estimate his personal experience and, at last, make a decision whether the product is appropriate and meets its exceptional level or not. After using the product, if the product fulfills its requirements, then the customer will purchase it again. Otherwise, he contacts any other commodity. In this fast business establishment affairs, customer relations are critical to managing. Customer satisfaction shows that he will purchase the commodity afterward to satisfy the demand that would be a long-term relationship to company and customer till then the other product may not facilitate its needs. An efficient marketing program consisted of all terms and conditions to evaluate the mix marketing concerning the market objectives which a company has to occupy to compete for the other rivals (Fröding& Lawrence, 2017).

IKEA base the business success on superior marketing strategies that must be the same around the world, which consisted of the description list it must be in written form in 17 languages and color should be blue and yellow, the color of the Swedish flag. This technique applied to the customer that they are free to purchase any commodity. The price also is shorter than other brands because the consumers, first of all, focused on the price (Johansson &Thelander, 2009). To understand the IKEA business strategy, it is necessary to be based on business conception and formulation prepared by IKEA 12th January 2009. It also provides a wide variety of sketches, functional, and other home decorating products at a low price thus can purchase every kind of class. The main objective must be centralized the objectives and purposes of IKEA’s business strategy. It also provides a guideline on work; these rules implement all sectors of the strategy, whether they belong to the country or around the world. IKEA focused that the environmental designs are presented into its home decor items; for this purpose, it launched a plan in 2015(Arrigo, 2005). This plan will combine the cultural, environmental, and financial and commercial crises. IKEA follows SWOT analysis to gain its objectives (Carter, 2009). This is a developmental business tool. It also assists the business to focus on its fundamental issues. SWOT is a planning stage and focuses on strengthening and weakening and also deals with the internal and external aspects of the business, and also face all threats that are affecting the company matter and associated with other business merchants. The SWOT business plan also concerns retailing, production departments. It also can deal with economic situations, social variations, and technological advancements. IKEA also emphasizes that every business holder has to sense its strengthening aspects to overcome its future challenges. IKEA also focuses on attracting the fundamental group of customers to establish a brand in a world community. It also provides different business techniques at a low price (Alänge, Clancy &Marmgren, 2016).

To maximize the profit, the brand has to establish a trustful relation to the supplier, retailer, and customers. It also embraces several strategic techniques to create customer trust and gain worth in a market. Long term relations to customers or retailers also provide a profitable sense to the business. IKEA emphasizes making good relations with customers by fulfilling their expectations and trying to find out how the new customers ties in a long-term relationship (Baxter & Landry, 2017).

Successful Strategic Goals

The world economy is booming, so the furniture market is also going up with rapid development. 70% of the global market is acquired by traditional furniture companies. The scenario is easy to understand due to increased production capacity, technical advancement, and strategic management. IKEA has also managed to enter in China, Indonesia, and Malaysia by focusing on the key significant strengths and its strategic goals. In many less developed countries, it has developed its concept of competitive advantage and working to show greater potential. Its production is increasingly focused on matching quality standards in Malaysia and beat its competitors. The clear mission of the company is to sell a wide range of furniture with reasonable prices that allow people to buy and get involve (Baxter & Landry, 2017). The wide range offering is a keyword in functionality because consumers, in this way find a place where everything is present. The strategic goals that IKEA has considered to enter in Malaysia are creating high efficient sales department, offering best ideas for home furnishing and serving customers with the best shop of furnishing ideas.

The aim of IKEA at Malaysia to offer them successful appearances and a perfect shopping experience for whole family (Carter, 2009). The people and environment is always a concern for IKEA so its management try to manage every day’s life with a better notion of commitment. It has also responded any rising public concern regarding sustainability, choice of the communication and product range. In Malaysia, effective focus on transportation and raw material was easily maintained due to easy access and prevalence of raw material. This situation helped company get its green targets and spread impact. In Malaysia, it is working on the original approach of dealing customers, i.e. self-serving method. The catalog allow people select whatever they want so they choose their products and put and assemble at home.  The centralized strategic direction at IKEA is increased with its expansion (Alänge, Clancy &Marmgren, 2016).

The rapid internationalization has enhanced the challenges for company in a broader scenario so there is also increasing difficulty of managing and responding needs. It is considering cultural and social factors while operating in new premises so emerging demographic trends are easy to tackle with a focused strategy(Arrigo, 2005). IKEA is also focusing on varied level consumer groups by implementing its strategies. The power of strategic management is significant under the organizational structure. It is focusing on maintaining a balance between autonomy and country-level centralized intervention, which will be attributable to franchisee autonomy and subsidiaries. Its suppliers are located in low-cost countries that are an advantage for Malaysia based IKEA (Stanciu, Zlati, Antohi&Bichescu, 2019). They can access raw materials so effectively reach out to distribution channels. The suppliers are selling standard products with broader dealing at the same time.

IKEA’s brand is focusing on innovation mix, advanced, and quality furniture. A combination of low-cost high quality furniture is the business model that is further being tackled with new innovations and techniques to expand and cut costs. Its simple idea of keeping costs low for manufacturers and customers is workable because it doesn’t own its sole manufacturing facilities. The upstream innovation and research & development activities are centralized in Malaysia. The strategic and operational strategies are workable and acquired a steady scope due to global policies.

Challenges

While operating in a global market, an international brand may face some challenges. For instance, while operating in Malaysia, it has to focus on its internal capabilities, ceasing activities, and incorporate key strategies to make its reputation (Carter, 2009). It has to work in an intensely competitive environment because targeting consumers is not easy, and there are multiple brands considering similar operations. It has been facing external and internal challenges in Malaysia regarding raw material, transportation, and availability of the latest technology. Some competitors are focusing on influential corporate decision-making strategies to make effective decisions for the firms. The management team has identified key threats from this business point objective so IKEA has to implement consumer related methods. It is facing diversification issues to boost sales (Alänge, Clancy &Marmgren, 2016). Some internal cultural issues are also prevalent. Due to geographic factors, IKEA is facing different taboos in Malaysia so it has to focus on to improving furniture design.

Conclusion

IKEA in Malaysia is working on competitive strategy with low cost initiatives. It has opened new stores, with an aim to use stability strategy. This will be helpful to monitor performance of the products and allow well operating conditions for business. The stability factor increases productivity of a company so it can take profit based features. Low cost operating methods, effective decision making approach and a business formulating method for its consumers are main pillars of Malaysian market that company is focusing. IKEA is working at global level so a focus on price and differentiation is a key to maintain. The price cost of company is linked to the cost of production, under strategic management framework, this scope is maintained. Globalization is a central aspect of strategic management, so IKEA in global market places, is expanding this view by gaining better competitive advantages and profits. The trend of consumer products at global marketplace is emerging and IKEA is viewing this phenomenon in Malaysia to reap a better growth.

References

Alänge, S., Clancy, G., &Marmgren, M. (2016). Naturalizing sustainability in product development: A comparative analysis of IKEA and SCA. Journal Of Cleaner Production135, 1009-1022. doi: 10.1016/j.jclepro.2016.06.148

Arrigo, E. (2005). Corporate Responsibility and Hypercompetition. The Ikea Case. Symphonya. Emerging Issues In Management, (2). doi: 10.4468/2005.2.04arrigo

Baxter, M., & Landry, A. (2017). IKEA: Product, pricing, and pass-through. Research In Economics71(3), 507-520. doi: 10.1016/j.rie.2017.03.003

Carter, R. (2009). Will consumers pay a premium for ethical information?. Social Responsibility Journal5(4), 464-477. doi: 10.1108/17471110910995339

Fröding, K., & Lawrence, G. (2017). Sustainability at IKEA. Linnaeus Eco-Tech, 67. doi: 10.15626/eco-tech.2010.008

Garnier, M., &Poncin, I. (2019). Do enriched digital catalogues offer compelling experiences, beyond websites? A comparative analysis through the IKEA case. Journal Of Retailing And Consumer Services47, 361-369. doi: 10.1016/j.jretconser.2018.12.011

Hultman, J., Johnsen, T., Johnsen, R., & Hertz, S. (2012). An interaction approach to global sourcing: A case study of IKEA. Journal Of Purchasing And Supply Management18(1), 9-21. doi: 10.1016/j.pursup.2011.11.001

Johansson, U., &Thelander, Å. (2009). A standardised approach to the world? IKEA in China. International Journal Of Quality And Service Sciences1(2), 199-219. doi: 10.1108/17566690910971454

Korsgaard, S., Rask, M., &Lauring, J. (2007). The Diversity Management Paradox in Globalization – The Swedish IKEA Way. SSRN Electronic Journal. doi: 10.2139/ssrn.1135570

Lechehab, S., &Kamassi, A. (2016). The Benefits of Implementing Lean Management System at IKEA Malaysia Company. مجلةالباحث, (16), 55-66. doi: 10.12816/0034358

Minkes, J., &Minkes, A. (2005). Decentralisation, Responsibility and Ethical Dilemmas. Social Responsibility Journal1(1/2), 16-20. doi: 10.1108/eb045790

Soh, K., Wong, W., & Chong, C. (2015). Strategic Choices: A Composite Model for Logistics Service Providers. Journal Of Southeast Asian Research, 1-10. doi: 10.5171/2015.652416

Stanciu, S., Zlati, M., Antohi, V., &Bichescu, C. (2019). The Development Analysis of the Romanian Traditional Product Market Based on the Performance Model for Sustainable Economic Development. Sustainability11(4), 1123. doi: 10.3390/su11041123

 

Pages:10

Section 1

  • The Roman Empire: In what ways did Roman emperors use coinage/art/architecture to communicate their message?

The Roman Empire is famous for its art and architecture. It represented an important part of their society, culture, and intellectual value. The Roman emperors used the art, coinage, and architecture to deliver or send out messages. The whole concept is also known as “persuasion and propaganda.” These messages were to create certain impressions in front of the local public about the emperor such as his power and influence. For example, Augustus, the roman emperor showcased the Ara PacisAugustae. The name of the sculpture itself means “The Alter of Peace” and was dedicated to the roman goddess of peace, Pax. He implied that he has long connection with the Romans and hence, he was the rightful heir to the throne, after three years in Hispania and Gaul, to Julius Caesar. In this way, he told the people that he was rightfully ruling over them and dominating them. The presence of the emperor was felt everywhere. He had begun a new age (Kleiner, pp 202).

Another example of the emperor Trajan can be given here as well. He was a really powerful general and during his time the empire was all over Europe, West Asia and North Africa. To showcase his success in battles, he also used art and architecture. He put the Column of Trajan in Rome to show the defeat of Dacia which we know as Romania today. The 625 feet column documents the battle against the army of Dacia. He personally directed how this column was to be made (Kleiner, pp 213).

 

  • Byzantine Empire: What are the main ways Byzantine art changed if you were to compare a work from the beginning and final years of this empire?

The Byzantine Empire started as the Eastern continuation of the Roman Empire. While West of the Roman Empire was lost, it was ruled by Constantine who made some changes to the otherwise roman culture and values in the empire. While historians later called the empire Byzantine, back then the natives still considered themselves as roman. In the Early Byzantine era, Christian culture was getting more and more portrayed in the art. Architecture was also centered to Christianity with the building of various churches such as the famous Hagia Sophia. The early age shows the integration of the Greek and Christian cultures through the art of that time. As time progressed and the empire had to face a lot of enemies such as the Arabs, changes were seen in the expression of art as well. So, down the lane the art was influenced by Persian and Islamic cultures. The HagiaSophia was built under the rule of Justinian and it was the largest church in the world. Eventually, as the Byzantine era ended and the Ottoman Empire took its place, the Hagia Sophia was converted into a mosque (Kleiner, pp 268).

Icons, and art of manuscripts became popular in the early era such as the Sinai Icons and the manuscript Vienna Genesis. Then in the middle era icons were replaced by mosaic figures Empress Theodora (Kleiner, pp 279). Decorative walls with exquisite carvings and wall paintings became popular. In the late Byzantine Empire mural paintings depicting Christ were the representation of art such as the painting in the Church of Christ in Chora (Kleiner, pp 288).

  • Ancient Greece: What is the Canon of Polykleitos, and how does it shape the representation of the body in classical art?

In literal terms canon here means a rule (of proportion). The ancients Greeks were of the mindset that anything can be made “beautiful” if it was constructed with accurate proportions and size. So, they needed a canon of proportion to make the accurate human figure and for buildings too. The fifth century sculptor then wrote a disquisition (or “treatise”) called the Canon of Polykleitos where he described his formula for the perfectly proportionate human statue. Another ancient philosopher, Pythagoras of Samos, also believed that beauty lied in harmony of numeric ratios. Polykleitos then followed the same reasoning to come up with the perfect statue which was based on mathematical formula (Kleiner, pp 131). Symmetry played a huge role in his philosophy, every body part was in some sort of symmetry to each other. He built a statue on the basis of his formula and called it Canon(Kleiner, pp 131).

Hence, the human body in Greek classical art is viewed as a product of perfection and precision of design and mathematics. After a Polykleitos, Lysippos followed the same footsteps and sculpted the human body which were slightly slender than Polykleitos and also their heads one-eighth the size of the body rather than one-seventh as it was previously. Lysippos work was also very well celebrated so much so that he made the portrait for Alexander the Great. Overall, both sculptors showed athleticism energy in their statues where Lysippos were more about showing different angles (apoxyomenos) rather the Polykleitos (Doryphoros). so, conclusively, the depiction of the human body is one that is athletic and perfectly balanced in terms of physical, mental or spiritual aspects (Kleiner, pp 146).

 

 

Section 2

  • New Media and Technology: With reference to three illustrations from three different periods covered so far in the class, how do media and/or specific technologies make innovations in art/architecture possible?

Media and technology have always played an important role in the betterment of how things are conducted or structured. Technology helps in bringing innovation. It has been doing so since the beginning of time. From cave men till the present day, we all have been influenced by different kinds of technology which have updated the life around us, mostly for the better than not. Similarly, emergence of new technologies had the same effect on art and architecture throughout various historical periods. Technology helped art and architecture evolve.

Neolithic Age

The first example of this can be seen from the new stone age or the Neolithic Age (9000-2300 BC), where people learned the art of making stone temples, like the GobekliTepe in Anatolia, and sculptures. Unlike previously when most of the art from the Paleolithic age wasn’t able to survive because it comprised mostly of small figurines and images on cave walls. In the new stone age, art is seen to be taking a more solidified form large sculptures and life-size skulls. It was the age of tools such as the ax, adz heads, chisels, and gouges which were made up of stones. They even learned how to polish the tools with abrasives. Pottery art emerged as well which brought the technology of metalworking. Eventually metal tools and weapons emerged as well such as copper and bronze. This technology spread fast. Today we still use evolved and modernized versions of these tools in our daily lives and they have contributed a lot, obviously, for art and architecture (Kleiner, pp 24)

The Roman Empire

The second example can be given from the Roman Empire. Amazing buildings and architectural masterpieces that were built during the Roman empire were the product of technological innovation and advancement in concrete technology. Such as the Pompeii Amphitheatre, it is the oldest example of Roman concrete technology (Kleiner, 192). Another is the Hadrian’s Pantheon which is another marvel of concrete technology and also the largest ancient dome (Kleiner, pp 216). France was known to be the center of innovation in these regards. It is said that the architects of the Holy Roman empire have led the way when it comes to extraordinary and exquisite large buildings. Ever since the romans introduced the world to the use of concrete, we have been dependent on it ever since. It has become an integral part of architecture. Not only this but romans used concrete also to build marine structures to safeguard their harbors which withstood erosive salt water for over 2000 years. Even in the present day, it is difficult to recreate such masterpieces or to even land with the type of concrete romans used. Science is trying to explain its resilience. The recipe romans used to make their concrete was such that the product could with stand harsh environmental conditions such as seawater that our present-day concrete cannot. The mixture included volcanic ash, seawater, lime, and volcanic rock. Traces of another mineral called aluminous tobermorite was also found in it. This mineral is very difficult to create in lab settings even today and is thought to be responsible for the resilience in the concrete.

China in 1200s

The emergence and evolution of paints has also of course, been very relevant and important to the world of art. Some of the earliest forms of paintings can be dated back to the 13th century China. Mural paintings were found in caves (Kleiner, pp 485). They used round tapered brush, soot-based ink, and silk or paper to either write or draw. They were very skilled when it came to contouring and interior details. Furthermore, the Chinese also used richly colored minerals as substitutes for pigments, “finelyground and suspendedin a gluey medium, and watery washesof mineral and vegetable dyes.” (Kleiner, pp 489) They used handscrolls, hanging rolls, dry leaves and holding fans to make drawings. The paints made with naturally occurring materials such as minerals, saps et cetera have now been replaced by synthetic paints.

The technology that we are surrounded with today can all be related back to the ancient periods. Ancient people were the ones who came up with the ideas and inventions that we have evolved and bettered for our use today. Technology and media are constantly evolving and with them so has art and architecture.

 

  • Group and Personal Identity: With reference to three illustrations from three different periods covered so far in the class, how have art/architecture aimed to consolidate group and/or personal identity?

Art and architecture play an important role in showcasing the identity of a group or a society. Throughout history we have seen how different eras had distinctive features and characteristics in their way of expression which was in the form of different types of arts whether it be writing, paintings, sculptors or architecture. In fact, it is through their art that we know them today and we are able to make judgements regarding their societal structures and cultures. Some of the identities that can be understood through art are related to gender and religion. Examples of their depictions can be seen through various historical periods such as the Roman Empire and the Islamic world.

The Roman Empire

We will talk about some characteristics of the Roman Empire that can be extracted from particular sculptures. For example, in Republican Rome the noble families (patricians) or more particularly their men, were differentiated from the common roman masses if they had self-sculptures and portraits. Which is why many unique statues can be found dated back to even the first century BC such as the statue of a man wearing a Toga and holding thebusts of his father and grandfather. The toga represents the badge of citizenship in Rome(Kleiners, pp 187).

Another important observation was that most portraits were of men of older ages. This shows that women were not associated with the same levels of nobility as men. They were found only occasionally. This also shows that only elder men had power in the Roman Republic. The sculptures also do not appear to be making those men any handsomer. In fact, they often exaggerated their less attractive features such as baldness and wrinkles, or just their actual distinctive features. For example, the portrait of the head of priest. It is highly detailed with all the unique facial features. Such portraits also show that traits such as seriousness, determination, loyalty were admired virtues in the Roman empire(Kleiners, pp 188).

 

Apart from noble man, sculptures and portraits were commissioned by ordinary people as well especially slaves. This depicts how slavery was common in the roman empire. Rich people owned hundreds of slaves but even the poor people could afford to have one or two as well. The practice was really common in the roman world. Some of the slaves were freed but many died in the service of their owners old or new. Some prominent artworks were those that were commissioned by freedmen or freedwomen. One such relief shows two men and one woman, all called Gessius. In the centre is their owner. The slaves are the property of their owners and even after they were freed, they could not serve in the Roman army despite earning the title of people. The relief portrays their gratitude to their ex-owner for granting them freedom (Kleiners, pp 190).

The Islamic World

The Islamic world also has forms of artistic expressions that portray the image of different aspects of Islamic society and identity of muslims. The rise of Islam brought a whole new world of art and architecture and traditions. So much so that it replaced the old Greece-Roman art in the Middle East and North Africa. While in India, Islamic rule brought Islamic art and architecture in South Asia. One of the most famous buildings of Islamic architecture is in fact the Taj Mahal in Agra, India (Kleiners, pp 293).

 

Moreover, most of Islamic architecture is focused on mosques which entails that the muslim faith and religious practices were very important and celebrated. Mosques were more than just centres for worship. They were also the place where social gatherings and meetings were held. Islam brought about a completely new unique way of life as compared to its predecessors and that reflected in the art and architecture created by Muslim artists. Calligraphy (of Quranic verses often) is a very prominent part of Islamic art. It was seen in paintings, carvings, on walls et cetera. One would not find a lot of human sculptures of paintings in Islamic art as they Would in, for example, Roman art. This is because it was discouraged in Islam to draw or recreate the human form according to the belief that this ability only lies within the hands of God. A lot of copies of the scripture of the Quran were made as a form of art as well. they were made exquisitely with gold and other patterns (Kleiner, pp 305).

 

Section 3

In a reflective paragraph (100 words or less) describe how your position on, or feeling about the history of art has been altered by what you’ve seen and read so far in the class.

We often tend to underestimate the importance of history because we are too concerned about the present or the future. We forget that our presents and our future have been derived from historical events in the first place. History of art allows us to enter the culture and society of those whose history we study. It allows us to join the pieces together regarding the past and its people. Previously I did not see its relevance as I do now after having studied it. It is not only intriguing but mind-opening towards undiscovered perspectives that go unnoticed by the naked eye.

References

kleiner, fred s. Gardner’ s Art Through The Ages: A Global History. Boston : Cengage, 2020.

 

 

Pages:4

Requirements:

1000 word essay- efficient market hypothesis

It is a 1000 word essay regarding the topic: Efficient Market hypothesis. You have to explain the three forms of EMH – The weak form, semi strong form and strong form, and how to test the three forms with academic literature and empirical evidences. The attached PPT is the guideline/ structure for the essay. The information can be taken from the PPT. and use the key academic papers provided in the ppt. Harvard referencing format.


Answer:

Research suggests that most people tend to overreact to unexpected news and dramatic events. Bond and Thaller have initiated a study to find whether such behavior matters in the stock market. People indeed tend to give more weightage to recent information than prior data. One of the earliest observation in stock markets about overreaction was done by J.M. Keynes, who studied the daily variations in the returns of investments have more, and preposterous, effect on the stock mark (Keyens, 1964).  Moreover, a study done by William concluded that prices rely too much on earning capacity of the company, rather than on the long term dividend-paying capacity of the company (Williams, 1956).

Additionally, a study by Kleidon showed that the fluctuations in price are strongly correlated with the changes in earnings in the subsequent year, which depicts a clear pattern of an overreaction (Kleidon, 1981). Another study showed that the stock splits after an increase in volatility of investment returns is also linked to overreaction (Penman., 1983). For their findings, Bond and Thaller collected a portfolio of stocks that experienced extreme losses and extreme gains, for five years. They name it “winner’ and ‘loser.’ However, the portfolio was formed solely on past earnings on the investment. Hence, their study was based on three types of returns market-adjusted excess returns, residuals, and excess returns measured through CAPM. Moreover, the ‘loser’ portfolio is no different than the winner portfolio, in terms of the market value of equity, financial leverage, and dividend yield.

Nonetheless, the result showed that the ‘loser’ portfolio of the 35 stocks outperformed the market indexby more than 19.6%, thirty-six months after the portfolio was created. However, the ‘winner’ portfolio gave poor result than the market index by 5%; the difference of extreme portfolio was 24.6%. Furthermore, the overreaction effect was skewed – that is, it was much larger for ‘loser’ than for ‘winner.’ Most of the surfeit returns were calculated in January of each year. In month 1, 13, and 25, the ‘loser’ portfolio’s returns were 8.1%, 5.6%, and 4.0% respectively. Additionally, Bond and Thaller found that most of the overreaction has happened during the second and third years. Every December, both the portfolios are formed on the basis of previous residuals. Persistently, ‘loser’ portfolios earn higher returns in January, and the ‘winner’ portfolio earn comparatively fewer returns. This January phenomenon may occur because investors may wait years before comprehending dropping returns and the seasonal trends of the market. ‘Loser’ portfolio was less risky as well (THALER, 1985)

 

The Efficient Market Hypothesis (EMH) is an investment theory that elucidates that an investor might get lucky by achieving higher returns in the short run. Still, in the long term, he cannot obtain a return on his investment more significant than the market average. The main idea of the theory is that a stock price always reflects its real value. Moreover, Efficient Market Hypotheses gives no merit to technical analysis. The reason is that technical analysis is solely based on historical data of the stock, which, if Efficient Market Hypotheses holds, is reflected in the current price. Technical analysis is based on the investors’ anticipation of predictable patterns based on past performance. However, Efficient Market Hypotheses that even the investors’ sentiment is reflected in the current price.

Additionally, previous prices and returns have no relation to future returns and price. Therefore, there is no point in adopting technical analysis. According to Efficient Market Hypotheses, the best approach an investor can choose is to invest in a low-price passive portfolio.

Furthermore, fundamental analysis is based on a company’s financial information such as the income statement and balance sheet to evaluate the stock price. Under the assumptions of strong Efficient Market Hypotheses, information is depicted in the stock price. There information known to private and the public are the same, and there is no superiority. In this scenario, fundamental analysis has no use. Because the stock price already reflects the intrinsic value. Under the assumption of semi-strong Efficient Market Hypotheses, the information knows to the public is already reflected in the stock price. The company’s financials are aligned with the stock price. So there is limited merit to fundamental analysis in such cases. However, under the assumption of weak Efficient Market Hypotheses, only the market information is reflected in the stock price. If a company announces a big deal or its annual reports, it is immediately reflected in the stock price. With such a scenario, there is room for fundamental analysis to work when it is based on an information advantage. With the merits of both the techniques discussed, one can formulate that if Efficient Market Hypotheses assumptions hold, then fundamental analysis has more potential as compared to technical analysis.

The strong form version of Efficient Market Hypotheses has little merits. But, The Strong form efficiency is reflected in a study done on active investment funds, by Michael Jensen, who evaluated the performance of 115 investment funds. The study indicated that 58 out of 115 funds gave below the market returns. The deviation of ten years’ back from the line market average was -2.5%. The strong form efficiency holds the belief that no data, whether private or public, can alter the returns for an investor because they are already contemplated in the price. Inside information can help an investor in the semi-strong form of Efficient Market Hypotheses, but in case of strong Efficient Market Hypotheses, holding on to private information will do no good.

Even though under the assumption energetic form efficiency, all the information is displayed, there are still some ways to perform better than the market. For example, analyzing companies with a low P/E ratio produce higher returns. Moreover, the neglected firm effect implies that companies that are analyzed by market analysts are often priced wrongly. The January effect studied by Bond and Thaller showed that portfolios tend to have higher returns in January.

References

Keyens, J. M., 1964. The General Theory of Employment, Interest and Money, London: s.n.

Kleidon, A. W., 1981. “Stock Prices as Rational Forecasters of Future Cash Flows, s.l.: Graduate School of Business, University of Chicago.

Penman., J. A. O. a. S. H., 1983. Variance Increases Subsequent to Stock Splits: An Empirical, s.l.: Graduate School of Business, Columbia University.

THALER, W. F. M. D. B. a. R., 1985. Does the Stock Market Overreact?, s.l.: s.n.

Williams, J. B., 1956. The Theory of Investment Value, s.l.: Amsterdam .

 

 

Pages:7

Situation Description

Google Inc. is a company that reigns supreme across the web and has acquired unprecedented success within the previous decade. The company was nothing more than a research project back in 1996 by Sergey Brin and Larry Page; however, they managed to turn the idea into a multinational high-tech business. (Schmidt, 2017). Throughout the years, one aspect of the company that has remained consistent happens to be its commitment to employee engagement and satisfaction.

In his book, “How Google Works,” the executive Chairman of Google, Eric Schmidt writes that a team of professionals known as “Smart Creatives” bring about business and technical expertise while catering to the needs of their employees. The author states that hiring the right employees is a skill, but retaining these employees is a tough job because of which Google has created a reliable performance management system as well as an inclusive and unique workplace culture (Bock, 2015).

Performance Management System Diagnosis

Annual Performance Review Cycle

The performance review for Google consists of two cycles annually. The first phase is the “preview” phase in which a complete peer review is done that correlates with the 360-degree feedback collection process of the company. Two main aspects are taken into account: the accomplishment of the employee and how the employee obtained the results.

·         Self-Evaluation

Self-evaluation centers around the advent of the annual performance review in which the employee has to evaluate herself/himself based on five criteria ranging from “always demonstrates” to “never demonstrates.”

·         360-degree Feedback

The holistic approach of providing managers with a thorough picture of their performance is done at Google in which the review centers upon the employee and the manager. The employee offers suggestions for improvements which are discussed with the manager in which peers participate as well.

·         Peer Reviews

Performance reviews tend to be customized at Google so that the team of smart creatives can track the performance of the employees. Lazlo Bock, the Vice President of People Operations, at Google, states in the book “Work Rules” that employees are Google first take into account identification of peer reviews. Each employee’s performance is taken into account through peer reviews, which also include reports from employees who might be junior.

The numerical rating system was abolished at Google back in April 2014, which means that employees at Google are now subjected to the new performance management system, which includes a five-point scale that ranges from “superb” to needs improvement.” This five-point scale peer review is carried out semiannually, and the reviewers are asked what improvement or one thing should the reviewee improve or do in a different way. After the peer review cycle is completed, the managers take a look at the peer reviews. The main aim of this process is to eliminate any form of bias, as the reviewers are asked to justify their decisions.

·         Calibration

After collection of the data through numerous channels in the form of peer reviews as well as self-reviews, the results are sorted out as the managers give rating the employee on the following scale:

  • Consistently meets expectations
  • Needs more improvements
  • Constantly exceeding expectations
  • Highly exceeds expectations
  • Excellent

The process of calibration in annual performance reviews is considered a go-to for the top-notch companies such as Goldman Sachs, AB InBev, GE, and Kraft Heinz. After the calibration meetings, each employee’s performance is reviewed, and Feedback is given while taking into account the impression of managers and peer reviews.

Evaluation of Performance Management System at Google

The ultimate goal of any performance management system must be to retain a maximum number of employees, and to enhance their productivity. A vital part of the performance management system is transparency, and the company does this well by keeping the data of each employee visible to ensure that there is credibility. When it comes to 360-degree Feedback, some employees tend to be good at painting a rosy picture of what they contributed towards the company while others do their job without promoting themselves. This often leads to limited impressions and biased impact of reports.

The main strength of Google’s 360-degree feedback review is that it provides a holistic approach to reviewing and a thorough assessment to direct managers. This is because employees crave good Feedback, and 360-degree Feedback provides employees with a chance to obtain more Feedback. The peer reviews are good for establishing the validity of the feedback process and for ensuring that goal-oriented as well as productive Feedback is done.

Business’s need for Change

360-degree Feedback is not utterly perfect despite the raving reviews because it can be used to generate a negative culture within the organization. This is because if the Feedback received comes out negative, it can generate resentment within the teams where the receiver of the Feedback might not be content with it. The managers who apply the 360-degree Feedback might also emphasize the negative aspects of the employee more rather than on the positive aspects (Kuzulu, 2016). A study on The Watson Wyatt Human Capital Index reveals that the 360-degree feedback reviews reduce the shareholder value of the company by 10.6 percent (Hornstein, 2002).

The main issue with 360-degree Feedback is that it takes place annually. However, meaningful Feedback should be given more often (Kuzulu, 2016). For Feedback to be accurate, it is imperative that it is done within six months so that the qualitative behavior, as well as quantifiable behavior, is noted. In 360-degree Feedback, the ratings of the reviewer might be influenced by the most recent interaction with the employee. Thus there are chances that the multi-rater or peer review system can be biased.

Improvement Options

·         Critical Incident

Critical Incident is a performance management tool in which an employer keeps not only track of negative incidents but also positive behavior or milestones achieved as well. The best aspect of this technique is that it is done every six months, which means that the subordinates are able to keep track of their performance, and the employer is able to take into account the qualitative aspects of the employee’s behavior (Fenwick, 1996). Critical incidents provide information regarding the abstract constructs of an employee, such as employee motivation, company culture, etc. which cannot be obtained through other methods.

·         Management by Objectives

The management by objectives method is the most results-oriented technique for performance appraisal. This method examines the performance of the employee through work objectives that have been predetermined. The objectives are established either by the manager or the employees themselves. Once the objective is agreed upon, the employees take it upon themselves to self-evaluate and identify skills that are most suitable for achieving the specific objective.

·         Behaviorally Anchored Rating Scales

BARS, also known as. Behaviorally Anchored Rating Scales is a technique that came out in the advent of 1960s and allowed the employees to measure their performance according to specific behavioral patterns. This technique enables the identification of both qualitative as well as quantitative data. This method combines the benefits of other performance appraisal methods such as quantified ratings, critical incidents, and narratives.

Evaluation Criteria

The alternative that will be chosen for the company will be based on the following evaluation criteria:

  1. The chosen alternative should be similar to the existing method so that the company can switch to the method easily.
  2. The chosen alternative must ensure an unbiased evaluation.
  3. The chosen alternative must take into consideration quantifiable as well as qualitative behavior to ensure thorough Feedback.

Recommendation

The best option for Google is the Critical Incident technique for performance management as it fits all three criteria perfectly. The critical incident method is the closest alternative to 360-degree feedback as it takes it allows self- evaluation by taking the perspective of the employee into account. This method helps to identify any form of events that might be missed in 360-degree Feedback.

The critical Incident method is done semiannually, which means that it will ensure maximum output by keeping track of all the achievements of the employee within the time span. The technique is also cost effective which means that the company will not have to use extra expenditure for this technique. This technique is specifically useful in structuring job description and job specification.

The Critical Incident technique requires first reviewing as well as determining the specific incidents that have taken place within the time span of six months. Then the process of fact finding behind in which the data is collected regarding how much work each individual did and what outcome it brought for the company (Serrat, Knowledge Solutions).

The third step involves analyzing the qualitative behavioral data as well as quantifiable data. The fourth step is a face to face meeting with the manager and the employee. The fifth steps involve appraisal in which either the root cause of the problem is identified or the employee is appraised for good work.

 

Implementation Plan

Steps Timing Resources Needed Stakeholders
Reviewing as well as determining the specific incidents that have taken place. 6th month of the year. Incident Reports

Manager’s report

Self-evaluation report

Employee

Parties involved within the incident, i.e. peers, managers, clients etc.

Evaluate the non-quantifiable behavior of the employee.

Examine what was good or bad regarding the incident

2nd week Self-evaluation report Manager

Employee

Analyzing the qualitative behavioral data as well as quantifiable data. 3rd week-4th week    
Action Plan- what the employee will do if faced with similar situation. 5th week Manager’s report

 

Employee

 

References

Bock, L. (2015). Work Rules!: Insights from Inside Google That Will Transform How You Live and Lead. Twelve.

Fenwick, M. (1996). Building an Integrated Approach to Performance Management Using Critical Incident Technique. Asia Pacific Journal of Human Resources, 20.

Hornstein, H. A. (2002). The Watson Wyatt Human Capital Index and Company Performance: A definite impact on shareholder wealth. International Management Conference, Society for Advancement of Management, 33-45.

Kuzulu, E. (2016). Is 360 Degree Feedback Appraisal an Effective Way of Performance Evaluation? International Journal of Academic Research in Business and Social Sciences, 172-188.

Schmidt, E. (2017). How Google Works. Grand Central Publishing.

Serrat, O. (Knowledge Solutions). The Critical Incident Technique. Knowledge Solutions, 1077-1080.

 

 

Pages:12

Introduction

Developing an entrepreneurial mindset is related to the capability of the mind. It describes a way of thinking that helps individuals accept challenges and be decisive. Overcoming issues and accepting responsibilities is the basic need for improvement. It allows people to learn from mistakes and improve skills (Baron, R.A. and Hmieleski, K.M., 2018). Entrepreneurship is an important factor in modern, economic, and social life. The entrepreneur and owner-manager both are running a short term small business. The business manager can find some role model to make decisions whereas the entrepreneur is a person who is managing a new business without having any approach (Carbery, R., 2015). Thus the nature of business must be profitable and easily sustainable for the customers.

Entrepreneurship as a concept. It grasps the promise of growth and helpful factor in earning profit and enjoyable for long term success. New ventures conducted some mistakes at the start but after some seeking steps, it may give a lot of profit in the form of popularity.

Rules and decisions also have their own values. If the rules are strong to implementation that will give a reward in the form of profit as a return. Training and educational facilities are rare for new entrepreneurs. There is no source that provides the entrepreneur with practice and skills to move on business. Lack of market experience is also a hurdle behind establishing entrepreneurship (Peters, M., 2005).An entrepreneurial mindset can develop, if individuals willingly work and strive for excellence. Working on business startup and identification of path towards entrepreneurial mindset is oriented on three building blocks. These are identification of the opportunity, creation of value and capturing that value. The identification of the opportunity needs solution of problem.

Undervalue creation; need is evaluated to examine the issue. The entrepreneurial skills can be developed when there are some external ways to showcase skills (Blundel, R., Lockett, N. and Wang, C.L., 2018). This critical assignment is significant to understand individual characteristics related to entrepreneurial mindset. The paper will identify social forces that help contribute entrepreneurial success and failure. Current research related to entrepreneurship will be discussed in this paper, in addition some approaches to entrepreneurship will also be elaborated.

Entrepreneurial Traits

Entrepreneurs work to enhance economic development and create opportunities. A successful entrepreneur expands its thinking and vision to implement unique ideas. Implementing innovation is central for entrepreneurs because they accept challenges. To me, an entrepreneur is not only a creative person but capable to communicate effectively because it is a highly motivated element to open new horizons of success. My entrepreneurial traits are strong working ethics, creativity, and passion and open mindedness.

These traits are linked to more traits and skills that enable me work hard and get discipline in my life. I believe some other traits like creativity, self-confidence, preserving, leadership, team spirit, adaptability, self-motivation, agree to take risk, and ability to format a network also exist in my personality. Social forces are directly implemented in an entrepreneur’s business because an individual is a person who analyzes the social problems critically and makes some creative, sustainable and innovative ideas to solve this problem through his vision. Individual characteristics and social forces associated with an entrepreneur’s business.

Everything has two aspects: success and failure. A person canonly know the value of success who has faced failure. Here some characters are mentioned that are contributing to the success and failure of the entrepreneur business.

Features behinds success of Entrepreneur

Some characters behind the successful entrepreneur business are discussed as:

Seriously step forward, the best entrepreneur takes every step of his business very carefully because he knows he is responsible for every kind of deed in the form of profit and loss.

Satisfactory dealing with customers: A customer is a person to whom the business existed. Numerous implementations are adopted to satisfy the customers and to get many consumers to maximize the profit.

Cautious in decision making: Every decision directly affected the business reputation, thus the entrepreneur must be watchful in making the decisions.

 Harness of technology: The best entrepreneur should have awareness about the use of technology. It will help to increase the production and quality of goods would be appreciative.

Personal involvement: Personal attention and investment of personal thoughts bring the business to the top. Because you may not make others better unless you make yourself better in front of others.

Not afraid of risks: The entrepreneur can make business better only when he is willing to face any kind of risk.

Causes of Failure

Some reasons behind the failure of entrepreneur can be:

 Employee excuses: Employee excuses are extremely involved in business failure because if they are not responsible for their duties the compensation has to the businessman in the form of loss or business failure has to face.

 Pause due to business failure condition: If the business-facing continuous loss and the owner take a pause not taking steps for the improvement. This situation also may cause the entrepreneur to fail (Blundel, R., Lockett, N. and Wang, C.L., 2018).

Outside forces involving in business: When a business-facing unusual condition like an uncertain economy, political issues, or the price fluctuation in the market may cause business failure.

Dishonest staff: Dishonest staff is a major reason for the business failing because they do not have a fair feeling for the business.

Unable to handle confrontation: If the owner fails to solve employee issues and confrontations, this reason also affects the business badly.

GET2 Test Score

My critical evaluation is incomplete without including test score. Overall GET2 test score of first attempt is 74% that means I am occasionally enterprising. As an entrepreneur, I am able to work on limited projects and this situation reveals that working as intrapreneur is possible in leisure time by doing voluntary work. I have amedium score in achievement that means I have orientation for future, effective management of time, I rely on my abilities, and I am determined to ensure my objectives through realistic goals. This medium score meansI am good at balancing my life and work.

Gibbs reflective cycle allows understanding of description, feeling, evaluation, analysis, and conclusion and action plan. The description of experience, feeling about it and evaluation that this experience is good or badenhance learning and planning. Whatever is learned, is presented in conclusion. My action plan on the basis of this test will elaborate how much strengths I possessand how could I deal with such situation in my life.

The values of result show that I am capable to build up business knowledge and skills and I can further learn from business, technology platforms.A medium score on achievement means need for achievement is high that can exhibit different qualities such as being optimistic, managing time effectively, result orientation approach, and willingness to do work in long term. My determination to do business is based on high energy levels and persistence is a pursuit in my aims. I can adequately take responsibilities with strong drive. Thesequalities will help me be careful about maintaining work life balance and take care of relationships in my life.

I have medium score in autonomy and creativity, that means I am independent, determined and individualistand can be a valuable member for my organizational team. If I start a business, it would be easy to work with employees. My radical disruptive innovative ideas can be game changer for me. My creativity allow me brainstorming and mind-mapping that allow iterative process of thinking. I have attained highscore for risk taking and medium score for locus of control.High score on risk taking can be helpful for me to seize opportunities and be analytical. Locus of control can be effective for me to be self-confident, proactive and display enterprising skills. This will develop necessary business skills for enterprise. My management of control is based on opportunism, self-confidenceand taking control over my destiny. Opportunism is a key advantage that allow me think positive and navigate problems to get success in all ways of life. Internally strong feeling allow hard work and exert controlover life. I tend to express strong will that is linked to self-belief because it is a point where results are equated with the efforts done. My creative skills develop innovative approach for my thinking.

GET2 test score for attempt two is 80% which shows a high achievement towards enterprising. Remaining scores of creativity, risk taking, determination and locus of control are same as first attempt.

Evaluation of Leadership Potential

Evaluating own leadership potential is linked to the quality of perception and thinking capabilities. My leadership potential as an entrepreneur is positive associated with skills. The perception and attitude to work allows open mindedness and planning.  Capital and finance is the backbone of every kind of business unless you cannot come in true your own business. After the process of investment, you may further step forward in entrepreneurship. The owner of the entrepreneurship must be decision making and adopt visionary methods. The owner of the business ready to respond every time against the market disorder, in case of partnership and at the time of loss.An entrepreneur must know how long his business will exist? How much does he gain profit? Which product will be introduced? How much workforce is required to complete the task? These factors must a businessman have in mind to establish a prolonged business.  Entrepreneurship focused on such business plans which were not introduced before, this loneliness is also issued around entrepreneurship. There is no role model available to follow. The businessman has to make his own strategies to run the business.

The leadership potential can be evaluated while working in an organization and measuring the outcomes. I believe that leadership activities in business can develop positive results if there is motivation for employees. The strategic plan for growth is the major task for leaders and it helps entrepreneurs to take corrective actions. For example, in my view, my leadership potential is linked to opportunities, when I get a streamlined direction, I can effectively respond to customer needs.

Being an entrepreneur, I believe opening up new markets for existing products is the best way to respond to the customer needs. I work for the motivation of employees so that market development procedures can be improved. This process is also beneficial for the modernization of distribution channels. With the implementation of new methods, better skills and management of expertise is possible. This process is also helpful in securing the old finance sources and introduce better and new methods. With this mechanism, flow of work can be organized, and any insecurity in financial system can be eliminated.

I believe on my leadership potential because it can be clearly seen from decision making power. If my implemented system for employee’s recruitment and hiring works better and gives productive results, I would be assured that my leadership potential as an entrepreneur is adequate (Zahra, S.A., 2015). Communication strategies and information within organization is strongly recommended because it serve quality. In the organizational culture, an entrepreneur is responsible to bring innovation and conceptualize channels of communication. In addition, employment, development and empowerment of employees is useful indicator to see if the employees are satisfied. Therefore, leadership tasks are extensive and include reward and appraisal system for employees. It is also a major issue involving entrepreneurship. The honest and liable team makes the business to its superior ways, thus team binding and designations according to abilities also matter to the business growth directly.

Entrepreneurship is an example of fire that looks attractive but when anyone goes it’s nearer it burns the hand who wants to catch it. Entrepreneurship is the same thing only such a person uses this strategy that can bear the loss, face failure, take risks, and have decision making power. These passionate persons are called entrepreneurs and adopt different approaches for entrepreneurship.The personalities and traits approach is to judge the personalities because different personalities conducted different approaches. Researchers believe that there is a correlation between personality type and a successful entrepreneur.

Sociological approaches drive with the social and cultural factors which are directly involved in the growth of the business. It also provides a guideline on how social and cultural structure reacts to business development.

Although, everybody knows that the entrepreneur person is not common. He is a creative-minded, multi-talented, decision-maker, and has a visionary and intellectual spirit. Far away from the fear of loss or failure. He must be competent in any kind of situation and can develop motivational power to achieve the goal. This approach shows a strong and motivational approach of the entrepreneur toward his business (Burns, P., 2016).

The process approach is focused on running the entrepreneurship; personalities do not matter in this approach. The academic institutions follow this approach during the teaching session of entrepreneurship. This approach is also taught as different courses like business management courses.Babson College is the top leading institute for entrepreneur education which introduces the new approach for entrepreneurship. The method approach emphasizes on learning and practicing. This kind of approach calculates the skills and relevant techniques.

Dr. Heidi Neck who is a well-known entrepreneur’s educational expert from Babson College offers key steps to practice to develop entrepreneurship. The practice of play is conducted to open the student’s mind for new and innovative ideas. For example mind mapping, and brainstorming. Empathy practice is conducted to understand the feelings of customers, to meet their expectations.The creation practice pushes the students towards new creations, to improve production and to meet the needs of the followers (Osterwalder, A. and Pigneur, Y., 2010).Experimentation practice leaves the students freely, to gather personal experience and experiments to make some innovative ideas to develop the business in a new shape.The practice of reflection helps the students to take a back step on action practices and find out new directions for entrepreneurship.

To be successful as an entrepreneur, it is necessary to have a mental attitude that can provide a positive outlook. With this mindset, any company can influence the corporate culture. In such an operating framework, there is no room for negative thoughts because they undermine company’s progress and forward development. It is management to motivate employees and lead them in a positive development (Daniel Xh, R., 2019). For all the entrepreneurs, the necessary skills are linked to positivity of attitude because a positive attitude influences all the employees so it enhances efficiency and productivity. A productive environment is associated with high business profits as well as better retention rates for staff.

 

References

Baron, R.A. and Hmieleski, K.M., 2018. Essentials of entrepreneurship: changing the world, one idea at a time. Cheltenham (UK): Edward Elgar.

Blundel, R., Lockett, N. and Wang, C.L., 2018. Exploring entrepreneurship. Los Angeles: Sage.

Burns, P., 2016. Entrepreneurship and small business: start-up, growth and maturity. New York: Palgrave Macmillan.

Carbery, R., 2015. Managing the HRD Function. Human Resource Development, pp.47–62.

Daniel Xh, R., 2019. The Complete Management and Leadership Resource Guide (CMLRG). Management and Leadership Skills that Affect Small Business Survival, pp.105–162.

Osterwalder, A. and Pigneur, Y., 2010. Business model generation: a handbook for visionaries, game changers, and challengers. Hoboken, NJ: Wiley.

Peters, M., 2005. Entrepreneurial skills in leadership and human resource management evaluated by apprentices in small tourism businesses. Education Training, 47(8/9), pp.575–591.

Zahra, S.A., 2015. Corporate entrepreneurship as knowledge creation and conversion: the role of entrepreneurial hubs. Small Business Economics, 44(4), pp.727–735.

Edinburgh, U., 1970. Gibbs’ reflective cycle. [online] The University of Edinburgh. Available at: <https://www.ed.ac.uk/reflection/reflectors-toolkit/reflecting-on-experience/gibbs-reflective-cycle> [Accessed 28 Apr. 2020].

Grugulis, I., 2007. Management and leadership development. Skills, Training and Human Resource Development, pp.133–155.

Hoch, J.E. and Dulebohn, J.H., 2013. Shared leadership in enterprise resource planning and human resource management system implementation. Human Resource Management Review, 23(1), pp.114–125.

Hoch, J.E. and Dulebohn, J.H., 2017. Team personality composition, emergent leadership and shared leadership in virtual teams: A theoretical framework. Human Resource Management Review, 27(4), pp.678–693.

Anon, 2020. Human Resource Development, Diversity, Skills And Training. Case Studies in Work, Employment and Human Resource Management, pp.111–111.

Malebana, M.J., 2014. Entrepreneurial Intentions and Entrepreneurial Motivation of South African Rural University Students. Journal of Economics and Behavioral Studies, 6(9), pp.709–726.

Millikin, J.P., Hom, P.W. and Manz, C.C., 2010. Self-management competencies in self-managing teams: Their impact on multi-team system productivity. The Leadership Quarterly, 21(5), pp.687–702.

Shepherd, D.A. and Patzelt, H., 2018. Motivation and Entrepreneurial Cognition. Entrepreneurial Cognition, pp.51–103.

Shirokova, G., Laskovaia, A. and Beliaeva, T., 2017. Entrepreneurial learning and entrepreneurial intentions: a cross-cultural study of university students. European J. of International Management, 11(5), p.606.

Strubler, D.C. and Redekop, B.W., 2010. Entrepreneurial human resource leadership: A conversation with Dwight Carlson. Human Resource Management, 49(4), pp.793–804.

Turhan, N.S., 2020. Analysis on Entrepreneurial Intentions and Motivation and Learning Strategies of University Students. International Journal of Educational Research Review, pp.159–164.

Ziek, P. and Smulowitz, S., 2014. The impact of emergent virtual leadership competencies on team effectiveness. Leadership & Organization Development Journal, 35(2), pp.106–120.

 

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Chapter 1- Introduction

Information technology infrastructure happens to be the main driver for organizational improvement and technological innovation (Yunis, 2017). Understanding how IT affects the performance of a firm can help the managers know the value of incorporating IT infrastructure within an organization. IT-based HRM practices have become a common practice, particularly in selection as well as training, talent management, employee assessment, etc. Moreover, HR practices such as skill-based pay, promotion-from-within, developmental performance processes, and comprehensive training programs play a significant role in making the organization better equipped in assimilating as well as acquiring new knowledge (Pérez‐López, 2015). This transmission and acquisition of knowledge are known as absorptive capacity.

Furthermore, absorptive capacity depends on the flow of knowledge throughout the organization that is facilitated through the application of IT (Turner, 2016). This study also aims to understand the relationship between corporate entrepreneurship and information technology. Information technology supports corporate entrepreneurship by providing information related to entrepreneurial activities and building the technological environment in the organization.

Information technology is the key factor in many technological improvements and organizational development. This study investigates the relationship between IT and performance of a firm, with the mediating role of human resource management, absorptive capacity, and corporate entrepreneurship. It is the most critical research issue to understand the effect of IT on organizational performance as it helps managers to evaluate their investment in IT. There are many studies done that show the direct impact of IT on firm performance (María Teresa Bolívar-Ramosa, 2013).

IT infrastructure incorporated with HRM practices can provide better services to line managers, help in making strategic decisions, provide essential data, and enable quick acquiring and analysis of data for HR assistants (ARMSTRONG, 2002). Absorptive capacity is a firm’s ability to transform it as well as exploit the experience by integrating it into firms’ operation. Developing, as well as acquiring the firm’s human resources represents a direct link to its ability to understanding, interpret, and absorb new external knowledge (Abedin Piry1, 2013).

Business innovation and alertness depend on the amount of acquisition of new knowledge from the environment and how the market opportunities are being exploited by the organization(Yang Chen, 2015). Absorptive capacity enables the firm to absorb information and knowledge from the customers, competitors, and external environment for building better products and introducing better services, thus enhancing its corporate entrepreneurship. Corporate entrepreneurship enhances innovation and creativity in a firm, making it more competitive and increasing its performance (Zahra &Covin 1995)

1.1 Statement of the Research Problem

Performance is the degree to achieve the objective related to work. According to Cascio (2006), when employees become successful in achieving their goal that is related to jobs, then organizations become successful in achieving higher performance because employees strive to achieve the objectives of the organization. Stannack (1996) also said that many researchers use the term performance to measure output and input.

1.2 Research Aim

The aim of this research is to find out relationship of IT on firm’s performance. IT infrastructure consists of the software, networks, hardware, data centres, as well as the devices used to monitor, support, and operate IT services within a company(Turner, 2016).

Chapter 2- Literature Review

HRM practices include a set of employee management activities. These activities are subdivided into techniques and practices, which are selection, recruitment, interviews, assessment centres, pay systems, performance management systems, team working and collaboration, communication and information sharing, benefits packages, job design, HR planning, diversity, and equal opportunity. HRM is the bundle of mutually supporting practices. These activities are combining for HR systems (Paul Boselie, 2005). Human Resource Management deals with the development as well as management of individuals within the organization and helps the organization to achieve its goals and objectives. Human Resource Management practices deal with the development as well as management of individuals within the organization and help the organization to achieve its goals and objectives.

Corporate Entrepreneurship refers to the pursuit of entrepreneurial initiatives as well as actions for the transformation of the established organization through the strategic renewal of the firm’s scope as well as processes (Yunis, 2017). This includes the development of new product lines, integration in different technological areas, or targeting different market segments. A company’s entrepreneurial orientation is a result of practices, values, and decisions which the top-level management makes to shape the firm. To make sure that the firm takes advantage of the opportunities in the environment, the managers must implement such kind of culture within the organization which supports the technology. Claudio Petti is of the view that for a firm to introduce innovative technology successfully, the top managers must be able to integrate various kinds of competencies and resources such as acquiring technological skills for the development of corporate entrepreneurship (Petti, 2013).

Firm performance measurement means measuring the efficiency as well as the effectiveness of organizations’ activities. The level of profitability, solvability, liquidity, and productivity can be easily measured through the financial ratio indicator. HR practices such as skill-based pay, promotion-from-within, developmental performance processes, comprehensive training programs play a significant role in making the organization better equipped in assimilating as well as acquiring new knowledge also known as absorptive capacity(Cordery, 2017). Developing as well as acquiring the firm’s human resources, represents a direct link to its ability to understanding, interpret, and absorb new external knowledge (Abedin Piry1, 2013).

2.1 Information technology affects Corporate Entrepreneurship

IT infrastructure is related to the ability to mobilize and organize IT-related resources including and co-presences with other resources (Bharadwaj A., 2000). IT supports CE in many ways. IT infrastructure provides information related to entrepreneurial activities and build the technological environment in the organization. IT infrastructure also facilitates communication and interaction and help then to share knowledge outside the firm and improve innovation. (Yang Chen, 2015). Thus IT infrastructure is positively associated with corporate entrepreneurship. An organization’s success depends upon the application and creative use of its IT infrastructure, while Janson &Wrycza (1999) revealed that there is a highly positive relationship between IT usage and CE activities.

2.2 IT affects the Absorptive Capacity

IT infrastructure positively affects absorptive capacity, which in turn enhances organizational performance (Rico and Cohen 2005).IT infrastructure enhances the interaction between the employees through web-based sharing of knowledge, email, cloud computing, etc. which encourage the sharing as well as a collection of knowledge. These technologies help distribution of knowledge across the firm which makes the availability of useful knowledge higher, making networking within the firm faster. This enables the firm to transform, exploit, assimilate, and acquire knowledge easily (Yunis, 2017).

2.3 IT infrastructure affects Human Resource

Advancement in information technologies has led to changes in human resource management specifically in the areas of using data in the decision-making process. The HR managers are now required to know the use of IT infrastructure. IT-based HRM practices have become a common practice particularly in selection as well as training, talent management, employee assessment, etc. Thus if IT infrastructure is incorporated with HRM, it makes HR practices more efficient.

The strategies that a business uses which are linked to HRM practices tend to have a positive impact on the performance of that firm. HRM practices such as job security, recruitment, decentralization, information sharing, and team selection compensation based on performance, extensive training, etc. affect the way a firm operates and competes with its competitors. According to (ARMSTRONG, 2002), if the management at the top of the hierarchy in a firm is made aware of the valuable role of that human resource management on an organization’s business strategy, then the managers can use those HRM practices for increasing the firm performance

Numerous researches have been done regarding the impact of CE or corporate entrepreneurship and firm performance. Naman states that corporate entrepreneurship leads to the promising success of an organization. Thus most of the research done indicates that there is a direct relationship between the profitability as well as the growth of an organization and the numerous operations involved in corporate entrepreneurship. Corporate entrepreneurship can improve the learning of new competencies as well as skills and thus facilitate as well as accelerate the competitiveness of a firm and increase its performance (Zahra &Covin 1995). A firm with valuable IT resources may be able to leverage these resources to build its capability. (Hina Zafar, 2016) stated that there are positive relationships between a firm’s IT infrastructure and firm performance. Tanriverdi (2005) stated in his research that the use of IT infrastructure can build an IT-based synchronization mechanism and improve organizational performance by creating multi-departmental synergy.

IT infrastructure positively affects absorptive capacity, which in turn enhances organizational performance (Rico and Cohen 2005).IT infrastructure enhances the interaction between the employees through web-based sharing of knowledge, email, cloud computing, etc. which encourage the sharing as well as a collection of knowledge. These technologies help distribution of knowledge across the firm which makes the availability of useful knowledge higher, making networking within the firm faster. This enables the firm to transform, exploit, assimilate, and acquire knowledge easily (Yunis, 2017).

2.4 Corporate entrepreneurship and Firm Performance

There are many types of research done to study the relationship between corporate entrepreneurship and firm performance gave the result that corporate entrepreneurship leads to the development of company firm performance (Naman and Salvin 2012; Zahra, 1991, 1993; Zahra and Calvin, 1995; Kaya 2006). Most of the studies on corporate entrepreneurship (Zahra 1991, 1993; Russell & Russell, 1992) inspected the direct impact of activities of corporate entrepreneurship and orientation on the growth and profitability of the company (Antoncic&Hisrich 2014). Corporate entrepreneurship can improve the learning of new competencies as well as skills and thus facilitate as well as accelerate the competitiveness of a firm and increase its performance (Zahra &Covin 1995).

IT infrastructure is related to the ability to mobilize and organize IT-related resources including and co-presences with other resources (Bharadwaj A., 2000). IT supports CE in many ways. IT infrastructure provides information related to entrepreneurial activities and build the technological environment in the organization. IT infrastructure also facilitates communication and interaction and help then to share knowledge outside the firm and improve innovation. (Yang Chen, 2015). Thus IT infrastructure is positively associated with corporate entrepreneurship. An organization’s success depends upon the application and creative use of its IT infrastructure, while Janson &Wrycza (1999) revealed that there is a highly positive relationship between IT usage and CE activities.

2.5 Human Resource Management Practices and Corporate Entrepreneurship

According to the resource-based view, entrepreneurial resources tend to be intangible and rather difficult to understand as well as imitate (Bharadwaj A., 2000). If the entrepreneurial resources are used along with the HRM practices then the outcome of a firm’s performance can be enhanced as asserted by Hayton (2016). If a firm applies human resource management practices effectively, then the employees will feel motivated to be proactive and ill contribute towards creativity as well as innovation within the firm. However, if the effective HRM practices are not applied, the employees will lack the inclination to be innovative or to contribute towards better ideas for corporate entrepreneurship.  The main indicator of the effectiveness of a firm’s human resource management practices happens to be corporate entrepreneurship as HR practices are the source of an innovative and initiative-taking culture within the organization. Thus HRM leads to enhanced corporate entrepreneurship through the increase in the performance of the employees.

2.6 Absorptive capacity and Corporate Entrepreneurship

Entrepreneurial organizations tend to capitalize and value learning because successful entrepreneurship requires organizational learning (Covin& Miles, 2015). Furthermore, business innovation and alertness depend on the amount of acquisition of new knowledge from the environment and how the market opportunities are being exploited by the organization. Absorptive capacity provides a way for the organization to discover as well as exploit the new market opportunities. Corporate entrepreneurship is involved in exploiting and exploring market opportunities. Absorptive capacity enables the firm to absorb information and knowledge from the customers, competitors and external environment for building better products and introducing better services. ‘a firm acquiresrelevant knowledge about its activities under the absorptive capacity as per Wang, firms get benefit from it because it help them getappropriate values of information through external and internal sources (Juanru& Wang, 2017).

This knowledge is then applied by firms to support business activities. According to Sweeney, it is easy to do business decisions by absorptive capacity that can enhance the firm performance (Sweeney, 2015). In technological firms, this force acts as a driver that transforms the IT into business value for the firm. This value is also important to enhance the organization’s effort to get internalize the new knowledge related to information technology. When new product development is carried out,it helpsfirms make timely decisions related to it and significantly commercialize innovative ideas. Additionally, it helps them if they can create new knowledge more efficiently than other competitors (Lin et al., 2015).

Corporate Entrepreneurship refers to the pursuit of entrepreneurial initiatives as well as actions for the transformation of the established organization through the strategic renewal of the firm’s scope as well as processes (Yunis, 2017). This includes the development of a new product line, integration in different technological arenas or targeting different market segments. A company’s entrepreneurial orientation is a result of practices, values, and decisions which the top-level management makes to shape the firm. To make sure that the firm takes advantage of the opportunities in the environment, the managers must implement such kind of culture within the organization which supports the technology. Claudio Petti is of the view that for a firm to introduce innovative technology successfully, the top managers must be able to integrate various kinds of competencies and resources such as acquiring technological skills for the development of corporate entrepreneurship (Petti, 2013).

2.7 Human Resource Management and Absorptive Capacity

HR practices such as skill-based pay, promotion-from-within, developmental performance processes, comprehensive training programs play a significant role in making the organization better equipped in assimilating as well as acquiring new knowledge also known as absorptive capacity(Cordery, 2017). Developing as well as acquiring the firm’s human resources represents a direct link to its ability to understanding, interpret and absorb new external sources.

Absorptive capacity has a positive effect on the performance of a firm

A firm that has high absorptive capacity is more likely to acquire new knowledge, opportunities, information about suppliers, channel partners, external sources, and knowledge about target market (Cordery, 2017). Thus a firm that is high on absorptive capacity is more likely to have more knowledge regarding market opportunities which means it will have higher chances of increasing its firm performance (Iyenga, 2015). The way a firm absorbs the knowledge relevant to its activities is known as absorptive capacity and according to Wang, it is beneficial for the firms because it allows them to identify the main values of information gathering through external as well as internal sources (Juanru Wang, 2017). The firms can in turn apply this knowledge to support the business activities and decisions. According to Sweeney, business decisions can be done more effectively through absorptive capacity which can in turn enhance the firm performance(Sweeney, 2015). In technological firms, absorptive capacity acts as a driver for transforming the information technology into business value for the organizations because it enhances the organizations effort to acquire as well as internalize the new knowledge gained from information technology. Thus in the context of new product development, for example, firms can make timely decisions related to product development and more effectively commercialize innovative ideas into new products if they can create new knowledge more efficiently than other competitors (Lin et al., 2015).

HRM practices have a positive effect on firm performance

The strategies that a business uses which are linked to HRM practices tend to have a positive impact on the performance of that firm. HRM practices such as job security, recruitment, decentralization, information sharing, and team selection compensation based on performance, extensive training etc. affect the way a firm operates and competes with its competitors. According to (ARMSTRONG, 2002), if the management at the top of hierarchy in a firm is made aware of the valuable role of that human resource management on an organization’s business strategy, then the managers can use those HRM practices for increasing the firm performance

Corporate entrepreneurship has a positive effect on firm performance

There are many researches done to study the relationship between corporate entrepreneurship and firm performance given result that corporate entrepreneurship leads to the development of company firm performance (Naman and Salvin 2012; Zahra, 1991, 1993; Zahra and Calvin, 1995; Kaya 2006). Most of the studies on corporate entrepreneurship (Zahra 1991, 1993; Russell & Russell, 1992) inspected the direct impact of activities of corporate entrepreneurship and orientation on the growth and profitability of the company (Antoncic&Hisrich 2014).Corporate entrepreneurship can improve the learning of new competencies as well as skills and thus facilitate as well as accelerate the competitiveness of a firm and increase its performance (Zahra &Covin 1995).

Barney uses resource based view to examine the relationship between performance of an organization and information technology. Resource based view happens to be an economical tool which indicates the strategic resources that a firm has access. These resources can then be used by the organization for achieving its objectives and for attaining competitive advantage. This theory was formalized by Barney (1991) and the idea was first introduced by Werner in 1984. Werner suggested the idea of resource position barrier. Resource based view is the theory that proposed the concept of heterogeneous firms and stated that heterogeneous firms possess heterogeneous resources. The key concept of the resource based view is that all resources should not be given equal importance because only a few resources possess the capability of having sustainable competitive advantage. Barney pointed out that one should strive to understand the relationship between the strategies which will provide success and the sources of obtaining competitive advantage. A lot of administrative effort must be put in resources into recognizing, understanding and arranging centre capabilities.

Moreover, administration must put resources into figuring out how to create an understanding of core competencies for keeping up the key assets and abilities. In the resource based view, strategists select the procedure or aggressive position that best adventures the inside assets and abilities with respect to outer open doors. Given that vital assets speak to an intricate system of between related resources and abilities, associations can embrace numerous conceivable focused positions. The main points of resource based theory include identifying the potential strategic resources of an organization and evaluating whether the strategic resources which have been identified, can fulfil the VIRN criteria. The VIRN criteria stand for valuable, rare, imperfectly limitable and non-substitutable. The resources identified should be valuable for the firm in such a way that they enable the firm to implement various strategies which can improve the effectiveness of the firm. The resource should also be rare and they should not be easily available for the competitors. The resources should be imperfectly limitable to such an extent that they cannot be developed by the competitors and they should also be non-suitable so that they cannot be replaced.

Research studies show that high level of Corporate Entrepreneurship leads to higher organizational performance. the entrepreneurial culture is not emphasized before but this is clear that the organization employees without these has to face many difficulties such as its effects the organization sense of innovation, risk taking and pro activeness with experience.

Research shows that information technological resources such as IT infrastructure, software, assets, and Information technological investment positively influence external and internal capabilities. Managers should cultivate these resources which help them enhancing core business competitive advantages.  Managers should find ways that how investments made on IT projects which leads to increase in organizational abilities.

As Bharadwaj 2000 concluded that firms should find ways to increase its capabilities not simply investment made in IT.The firms should focus on the hierarchical structure which decrease the communication barriers and enables effective technology which helps in taking and distribution of knowledge. To get higher level of organization performance organizations have to focus on their recruitment, selection and information systems that helps the organization in keeping and distributing new knowledge. Organizations should focus on IT to increase the organizational efficiency and productivity. Cordery states that the manager must make collaboration with their employees by using IT in the organization (Cordery, 2017). They showed make the IT infrastructure up to date so the organization can used latest technology in order to use them as competitive advantage because most of the organizations that are leader today is because of their thinking to use IT as an advantage.

Chapter3-Methodology

This research study is qualitative in nature, a pilot study with the random sampling process is carried out to confirm the features of IT industry. Self-administered survey from different companies CEO is conducted to examine the relationship of IT with the absorptive capacity and the firm performance. The number of companies used to analyse questions and variables is confidential. Pilot study results show that data is reliable (higher than 0.70) which is the accepted range, and it is normally distributed. The comparison of different objectives was made to minimize the non-response bias among non-responding and responding businesses. The results are evident that there is no significant difference between respondents and non-respondents that is based on different questions like standard data identification, involvement of employees and approach to third party. Beside this, the Harman test is applied to remove any bias from the data. This pilot study is significant to get the results.

3.1Hypothesis of study

There are different hypothesis of study such as:

H0= Effect of Information Technology (IT) on Firm Performance

H1= relation between Absorptive Capacity and Corporate Entrepreneurship

H2= relationship between Corporate entrepreneurship and human resource management practices

H3= relationship between Corporate Entrepreneurship and firm performance

H4= relationship between HRM and absorptive capacity

H5= relation between Absorptive Capacity and firm performance

H6= relationship between HRM and Firm performance

H7= relationship between IT and Absorptive Capacity

3.2 Research Instrument

The survey instrument that is going to be used in the process of collecting data includes using questionnaire regarding Information Technology factors that will be adapted from the work of Liang 2010 and Bolivar-Ramosa 2013 (Sweeney, 2015). There will approximately be 24 items within the questionnaire in which IT infrastructure will have five items. For human resource (HR) we will use Youndt and Snells (2004) 5 item scale which includes the entire process of hiring as item 1, numerous sources of recruitment as option 2, development of employees as item 3, development of employees while using technology effectively will be item 4, and how employees recognize as well as use the infrastructure of information technology will be 5.

3.3 Sample and procedure

The population for this study is CEOs and managers from different IT units in the industry that focus on improvement of firm performance by technology adoption and absorptive capacity. The research focuses on informational technology sector to get idea about improvement in firm’s performance. On the basis of 5 item scale discussed above, IT units are selected for the research and 150 managers and CEO are considered for this study, but not all of them responded. Managerial personnel is considered for this study due to their significance in any firm. The factual assessment of variables is carried out by considering them reliable by getting information from relevant sources. CEOs and managers are provided with questionnaires to collect data. To get high and authentic response rate, 200 questionnaires are emailed, presentedand distributed. All of the personnel involved were assured of their confidentiality.

Out of 50 distributedquestionnaires, 20 were received by emails and 30 by self-administered. In these received questionnaires, 30 found incomplete and 5were abandoned due to fake response. Remaining15questionnaires were considered for final data analysis. Cluster sampling is an appropriate technique to conduct data analysis for sampling.The information gained from ITindustry sectors provided help to get insights about working conditions, firm performance and the improvement in HR. the selected industries units are involved in implementing latest technical solutions to improve employee’s management and firm performance. In addition, these industries are also reported maximum benefits in terms of employment and technical management issues. Different industry’s technical units considered comprised of, textile, sports, food, leather, and furniture technology. Among respondents, 18% were female and 82% were male.

3.4 Measure

The constructs are used in the study to measure empirical performance, which is pre-tested in prior studies. This is useful to test significance and authenticity of variables and measurable items. The prior studies confirmed use of Likert scale to analyse the variables. The seven point Likert scale started from strongly disagree (point 7) to strongly agree (point 1). This was followed by the meta-analysiswith the use of same measures, as conducted in past studies. In the next process, random sample of some relevant studies is confirmed to find out value of constructs, in relation to IT. The main aim to analyse prior studies was to find out standard methodology they used to code the variables.

The flexibility in the IT industry is based on flexible scale. Respondents were inquired about the connectivity, compatibility and modularity of IT firms. The constructs in this regard were measured on the multi item scale, on the basis of past literature. Reliability value is found out to be 0.879 which is larger than accepted value of 0.70.On the venturing scale, five items mentioned above were diversified to know the value of operation in the IT industry. This result validated the scaleperformanceunder entrepreneurial activities.

3.5 Common Method Bias

All measures and their collection was carried out from same source. Harman’s one factor test was used to find out the variance through common method. Common method variance is a key to get covariance of the constructs. Harman’s one factor test is helpful to find out potential bias in the data set. Factor analysis method in dependent and independent variable is not considered in variance.

3.6 Data collection

Prior to data collection, the questionnaire was sent to IT industry experts to find out a feedbackabout project management and IT. After the receiving of feedback, firm performance and constructs’ change in questionnaire was analysed.The question list in thequestionnaire was 13. The raw data was exported to Microsoft Excel file. Cleansed data was used to determine the composite value of get descriptive statistics. In addition, Pearson correlation coefficient was conducted to find out significance of results.

3.7 Research Action Plan

To analyse the questionnaire, frequency distribution was carried out,i.e. byseparating the response related to each category, i.e. research questions. These categories are relationship between IT and Absorptive Capacity, corporate entrepreneurship, firm performance, human resource management, and effect of IT on performance of firm. Most of thesevariables are interrelated and have causative relationship. This property of variables has make it easy to analyse all the variables and suggest direction of effect.

3.8 Ethics and Potential Problems

There are diverse sets of issues that the data collected might face, such as an issue with fluctuations in-laws, natural conditions, economy, etc. This kind of aspects might vary and influence the generalizability. Time constraints might also influence the research conducted.Organizations must be aware of the significance of this phenomenon, which is associated with the increasing importance of using information technology to develop interdependent tasks to foster interaction among organizational associates. HR practices are the source of an innovative and initiative-taking culture within the organization. Thus HRM leads to enhanced corporate entrepreneurship through the increase in the performance of the employees. Information and communications technologies, when accurately used, offer firms significant opportunities, which are why the organizations must consider information technology as a factor that supports competitiveness and increases organizational performance.

The other aspects of IT, such as IT skills, IT leadership styles, and other IT resources, should be examined, and their impact can be observed on firm performance. Moreover, researchers should examine the consequences of absorptive capacity within organizations such as staff satisfaction and improvement of quality. More studies may be needed for investigating the relationships with are insignificant and whether there are other measures that can reveal a better understanding of the rile of information technology infrastructure in increasing firm performance.

 

Chapter 4- Data findings & Results

4.1 Instrument Validation

Current research study has used nine main variables. The research process was validated in two steps, first was construct reliability and second was the variance of these constructs. There are 24 items in the questionnaire that were aligned on the five-item scale basis. Youndt and Snells (2004) described the 5 item scale which includes the entire process of hiring as item 1, numerous sources of recruitment as option 2, development of employees as item 3, development of employees while using technology effectively was item 4, and how employees recognize as well as use the infrastructure of information technology was 5. Construct validity was calculated on its basis by using convergent validity and discriminant validity basis(Juanru& Wang, 2017). These estimates were necessary to figure to know the consistency of data and understand the operationalization of these constructs.

Eight constructs of this research study are as follows:

H0= Effect of Information Technology (IT) on Firm Performance

H1= relation between Absorptive Capacity and Corporate Entrepreneurship

H2= relationship between Corporate entrepreneurship and human resource management practices

H3= relationship between Corporate Entrepreneurship and firm performance

H4= relationship between HRM and absorptive capacity

H5= relation between Absorptive Capacity and firm performance

H6= relationship between HRM and firm performance

H7= relationship between IT and Absorptive Capacity

Among 50 distributed questionnaire, only 15 were complete, and rest were abandoned due to incomplete information. Data analysis based on these fifteen completed questionnaires were done. To get most out of data, the hypothesis was considered as constructs and coding was assigned to the variables.

4.2 Constructs of this research

Key constructs as variables are discussed and coded as,

FP= Firm Performance

ACCP= Absorptive Capacity and Corporate Entrepreneurship

CEHRM= Corporate entrepreneurship and human resource management practices

CEFP= Corporate Entrepreneurship and firm performance

HRAC= HRM and absorptive capacity

ACFP= Absorptive Capacity and firm performance

HRFP= HRM and Firm performance

ITAC= IT and Absorptive Capacity

All values t statistics show satisfactory convergent validity. At the start, correlation in the constructs was calculated, i.e. standardized deviation and mean values of the model. The mean value and standardization calculated for the model is acceptable in range. Reliability values, composite reliability and loading standardization, is also calculated and shown the table. Composite and indicator reliability is measured and shown in table 2. Indictor reliability has a threshold value of 0.50 while composite reliability 0.70.

Table 1Standardized Loadings and Reliability Table

Constructs/Variables Cronbach’s Alpha AVE Composite Reliability Standardized Loading
FP 0.912 0.752 0.935 0.81-0.84
ACCP 0.87 0.701 0.921 0.76-0.81
CEHRM 0.88 0.760 0.92 0.76-0.86
CEFP 0.90 0.671 0.931 0.75-0.82
HRAC 0.88 0.712 0.920 0.71-0.79
ACFP 0.89 0.671 0.923 0.60-0.80
ITAC 0.879 0.656 0.913 0.70-0.81

 

Composite Reliability and Cronbach’s Alpha values are more than the threshold value, which is 0.7 in the constructs for the model, highlighting a measurement range is acceptable to know the reliability of any item. A complete variance of indicators is calculated by the average difference extracted (AVE), which is devised by the latent construct. Its values in this study are more than 0.50, which is above the threshold. Besides, the factor loadings are under significance level, i.e. p<0.001 so fall within the range. Holding value is significant means they are presenting convergent validity.

Standardized deviation, correlation matrix and Mean values are calculated for the constructs in the following table,

4.3 Descriptive Statistics

Table 2 Table of Descriptive Statistics

  SD Mean FP ACCP CEHRM CEFP HRAC ACFP ITAC
FP 0.86 6.01 0.866
ACCP 0.85 5.96 0.583 0.832
CEHRM 0.90 5.85 0.543 0.370 0.831
CEFP 0.92 5.94 0.561 0.442 0.543 0.851
HRAC 0.96 5.87 0.546 0.380 0.540 0.572 0.843
ACFP 0.89 5.95 0.564 0.381 0.563 0.520 0.542 0.821
ITAC 0.88 5.94 0.562 0.386 0.512 0.532 0.534 0.543 0.815

 

AVE is helpful to show the discriminant validity, and it should be higher in all constructs than the squared correlation, under the degree by which all construct deviate. The table shows all constructs are under the acceptable range, so fulfilling criteria of discriminant and convergent validity. The chart is also showing inter-construct relationship under correlation when there is a significant value.

4.4 Hypothesis Test Result

Table 3 Hypothesis Results

Relationship Coefficient Value Significance level  
ACCP → FP 0.233 *** H1:Accepted
CEHRM → FP 0.238 *** H2:Accepted
CEFP → ACCP 0.343 *** H3:Accepted
CEFP →  CEHRM 0.577 *** H4:Accepted
HRAC → CEFP 0.444 *** H5:Accepted
ACFP →  HRAC 0.153 ** H6: Accepted
ITAC → FP 0.038 * H7: Rejected

Note: *<0.05; and **<0.01

The table shows hypothesis results, according to the results, H1 is strongly supported meaning that absorptive capacity and corporate entrepreneurship are related and IT is strongly affected by these factors while the coefficient for this variable is 0.233, which is significant. H2 is also strongly supported by the results, that means corporate entrepreneurship and human resource management practices are key to affect firm performance; its coefficient value is 0.238. H3 is also accepted that means corporate entrepreneurship and firm performance are linked to absorptive capacity and corporate entrepreneurship, and the coefficient is 0.343, that supports the results. H4 and H5 are also accepted, showing that HRM and absorptive capacity & absorptive capacity and firm performance are playing a key role for an organization regarding improvement in organizational culture and performance, with the coefficient values of 0.577 & 0.444. Statistically significant means the value range is acceptable. H6 is accepted, which is HRM and firm performance, with a coefficient of 0.153. H7 is rejected that describe the relationship between IT and absorptive capacity with coefficient 0.038.

All the hypothesis were positive and accepted, except H7, which was insignificant. The values of data collected from the questionnaire have shown the common perception of the CEO and managerial personnel responded. Efforts related to improving an organization are related to investing in IT while many organizations do not support IT in terms of absorptive capacity and involvement in different matters. Key components of human resource management and IT are discussed in the paper. For instance, part of software and hardware understanding for employees and stakeholders play an essential role for management and to improve the firm performance. Based on collected data results, a detailed discussion is made.

Chapter 5- Discussion and Analysis

In past years, researchers have focused on exploring the impact of organizational development on the performance of firms with the help of many variables. The theory and numeric approaches are found as support for this study because evidence-based findings help describe performance outcomes. Research evidence suggested that firms’ key variables impact overall organizational performance. Drawing on literature, the current research is conducted to identify the key role of variables on the firm’s capabilities regarding IT. It has been discussed that IT capabilities and dimensions are positively influenced by integration and infrastructure. They play a positive role to enhance the performance of the firm(Yunis, 2017).

Findings of the current research study provided substantial support to literary evidence regarding firm performance. Results have shown that IT has a significant influence in the field of building organizational capacity and bringing improvement. Firm based HRM practices are increasingly influenced by IT approaches, to offer information to employees and bring compatibility(Covin& Miles, 2015). Current research has built seven constructs/hypothesis to identify the impact of IT on the performance of firms(María Teresa Bolívar-Ramosa, 2013). Results have revealed that IT-based strategies have a direct impact on the organizational atmosphere. The flexibility and IT-based integration are playing a certain role to manage business ventures as well as the firm’s performance.

Among all the variables (that show positive results/supported by research and data), one variable was found as insignificant. Results did not support it, it is likely that in some organizations, the required structure of the firm’s operations was not followed to build the absorptive capacity. It is also likely that the data collected was insufficient to support this hypothesis. According to this finding, absorptive capacity is not related to IT that can have an insignificant impact on flexibility, integration and transforming knowledge in a firm (Abedin Piry1, 2013). To that extent, the collected data from different companies CEO and managers can be linked to this result. The findings suggest that the firm should focus on key performing frames before engaging in IT-based activities.

The notion that HRM is related to firm performance, no matter whichever business company is operating is true. The insignificant relationship can highlight the worldwide business operations in companies that are not focusing on performance management but do not understand the role of IT in acquiring absorptive capacity (Zahra &Covin 1995). Reason for insignificance can be the variable nature of the industry, for instance, for this research, different units of industry like textile, sports, leather, food and furniture are considered. IT sector operating in all these industrial units has to focus on absorptive capacity, but it is not likely to be prevalent in all the organizations.

The study inferred that business innovation and alertness depend on the amount of acquisition of new knowledge from the environment and how firms use market opportunities. As in collected responses, it can be seen that not all the respondents are satisfied with prevailed practices in their firms about data sharing systems, business units and compatibility. The study investigated the concept of corporate entrepreneurship and its impact on firms’ performance. It is truly identified that the pursuit of entrepreneurial initiatives is essential for the transformation of the established organization. Corporate entrepreneurship performance is significant for organizational learning as it accelerates the firm’s competitiveness, hence performance (Bharadwaj A., 2000).

Current research has provided a dimension to understand the IT firm’s performance factors, with a specific focus on corporate learning and human resource practices. It is seen from past literature that IT infrastructure helps the company acquire innovation and learning since it identifies business practices integral to the firm’s performance. IT resources for a company are positively related to show the impact on products, services, and decision-making process. IT firms also need to establish corporate rules and standards that enhance corporate entrepreneurship and its impact on company standards (Rico and Cohen 2005). They also believe in providing a compatibility platform, which can effectively help business units. The corporate framework allows managers to do a sharable system and manage documents under audit. Training and development framework is also necessary for IT firms, to deploy new techniques, hardware and software functioning (Zafar, 2016). Most of the corporate entrepreneurship segments view learning and training a critical part for the firm’s performance (Janson &Wrycza1999).

The study allowed the understanding of the possibility that human resource practices are fundamental to consider when it comes to improving the performance of a firm. The human resource practices and management aspects are critical to understanding since they offer native support to the mechanism of growth as well as innovation. The managers target innovatory aspects under training and learning regarding new products. HRM also plays a crucial role to serve company, regarding recruiting and talent acquisition strategies. The current research study also offered evidence for HRM significance and its role to improve the IT firm’s performance. HRM practices are key to consider, when it comes to recruitment, decentralization, job security and information sharing aspects. Hierarchy of a firm is necessary to get influenced by the business strategies adopted by HR (Naman and Salvin 2012).

Results of the study show that superior IT practices are involved with better management, and absorptive capacity related to corporate performance. It is truly found out that IT firm work with HRM practices and this support is substantial when viewed in terms of perceived benefits (Bharadwaj A., 2000). The scope of understanding operates within positive influence acquired from the entrepreneurship. Literature supports this concept by illustrating the role of new competencies required to boost a firm and enhance learning. The resource-based approach is also used by authors to know the relationship between the firm’s performance and IT. This tool has been proved significant to understand the strategies that companies adopt, to manage competitive advantage (Antoncic&Hisrich 2014).

The study attempts to describe the positive impact of IT on the performance of the firm under many dimensions that fulfil the criteria. Most of the variables used for this measurement proved their relationship, and only one variable, i.e. absorptive capacity, did not fulfil the criteria of measurement. The result based evidence can conclude the role of IT in managing the firm’s performance under sophisticated technology and elements. This study has shown a unique impact of IT that performs well when it is utilized with other variables. The scope of understanding is extensive due to involvement of multi-reach variables.

Chapter 6- Conclusion

Current study investigated the effect of information technology on firm performance. To accomplish this objective, the qualitative framework for the study was devised. With the help of questionnaires, CEOs and managerial personnel from multiple industrial units were selected. Performance is the measure of any organization that helps companies get substantial support to manage efficiency. The research study identified the main hypothesis related to absorptive capacity, corporate entrepreneurship, HRM practices, IT and firm performance. To know the key relationship and impact of these variables on the firm’s performance, a comprehensive investigation was carried out.

The empirical study provided substantial support to the existing literature, i.e. current results are in accordance with past findings of researchers; only one result found insignificant. The finding predicted that information technology is a substantial driver for the performance of any firm. The scope of organizational structure is associated with key prevailed practices because these practices are determined by human resource management. For example, recruitment, training, learning, talent acquisition and different work-related activities for employees are conducted by HR personnel, so it is imperative to consider the role of information technology.

In previous studies, it was confirmed that IT is the main predictor of making the structure of the organization. The performance of the organization is likely to be affected by the implementation of current IT practices, the involvement of employees. For these companies, it is also investigated, how absorptive capacity can influence the work practices in IT firms. The main role of absorptive capacity allows employees to absorb relevant knowledge for activities, and it is beneficial for employees in terms of identification of main values, whether they are from internal or external sources. Firms truly implement this knowledge on business activities and decisions, so make an effective contribution, when viewed in terms of necessary equipment. Technological firms understand the role of absorptive capacity as it works significantly for the transformation of technology for product development.

Findings suggest that if a company identifies the role of infrastructure and investment for effective functioning, it can make significant contributions to the performance. There is a negative impact observed for companies, where required investment or infrastructure is not considered, for instance, research indicated if absorptive capacity is not fully implemented in the framework of business, IT expertise and functioning do not perform at a significant level. The HRM practices and corporate entrepreneurship have a direct impact on the firm’s performance. Yet, there should be other factors that can support it, for instance, sharing of values, product diversification and business units.

The findings of other studies conform to current research findings in terms of implementing research practices, better employment screening, talent acquisition and adoption of technical software. The evidence suggests that the use of relevant software and hardware not only enhance the efficiency of existing work practices but also set standards for business values. IT productivity allows the transformation of the existing business culture by incorporating better values and significance. If necessary software and hardware are provided to employees, to enhance their efficiency and cope up in the modern work environment, it will work on financial profitability grounds. The improved profitability ratios can be market share, growth, market value, and key operational dimensions.

To acquire the full scope of workplace expertise, human resource management is responsible for identifying core values for performance. It works with improved functionality and business aspects if employees are measured with the necessary expertise. Due to the implementation of required software and business units, IT firms experience flexibility in most uncertain environments that help bring openness to the best learning atmosphere. Mostly such firms also offer proper control to effective communication practices. IT functions empower firms to acquire the required responsibility and authority that facilitates learning. More adaptive capacity is sophisticated as it gets higher terms because it works with organizational empowerment.

Research evidence reported that IT had been one of the main antecedents to increased market share and stable sales(Naman and Salvin 2012; Zahra, 1991, 1993; Zahra and Calvin, 1995; Kaya 2006). Most importantly, with the implementation of IT software and skills, customer satisfaction is attained, when indirectly measured from HRM practices. Application of IT processing allows the organization to spread the increased flow of information among employees. This process helps organizations acquire competencies and competitive advantage. With the influence of organizational expertise, the flexible strategic report is attained when its productivity is measured. The study contributed to present some solid evidence-based results that are compatible with past research and provided a threshold for further research.

The established relationship between key variables of study like HRM practices, corporate entrepreneurship, and IT activities discussed that an IT firm could improve its performance if the necessary focus in maintained about performance outcomes. The study highlighted significant paths for IT firms, under capability dimensions and IT expertise. The current study has contributed to the existing literature by providing a perspective on IT capabilities, requirements and contributory factors for the performance of a firm. IT industry experiences a positive relationship between HRM and operations. The support of IT is inherent in all aspects of HRM practices since it works in multifaceted ways. New and existing IT practices must be ensured by firms, to boost the necessary expertise and maintain skill level in the workplace.  Results discuss that IT investment should be focused in future for all the IT firms and departments since they enhance the scope of work and broaden employees’ horizons. Research has also mentioned future orientations for research related to IT firms’ performance.

6.1 Recommendations and Limitations

Research study has some limitations. The selected participants of the study are only CEOs and managers. Small sample size make results’ insights limited so deep insights are not observed. Although this sample size is considered right for such kind of survey but possible to reduce the true insights. All the participants were well informed about the nature and purpose of this study, so it is possible that some of the opinions are biased. In this study, while estimating the impact of business ventures, some of the aspects can be underestimated due to diverse IT-based activities. Another possible limitation can one-dimensional nature of the measures taken for performance.

Results of the study call for certain recommendations, for example, firms’ performance is likely to be improved by making efficient use of human resource management practices. It is also recommended that IT practices in companies should be incorporated in accordance with the absorptive capacity. This will not only improve the performance of the firm but will also manage the demand for information processing. Organizational management should make correct and appropriate decisions regarding employee recruitment and acquisition of talent. IT firms should focus on all the aspects of product development and its diversification regarding software, hardware, human resources and telecommunication.

HR practices and adaptive capacity concerning IT firms are necessary to develop human resources skills. It should be prevailed and developed in all IT firms since it will acquire new knowledge, supplier’s information, external sources and market opportunities. These activities will outperform the organizational learning and development of expertise in employees. For the current study, absorptive capacity is insignificant that highlights the necessity to work with capabilities are inherent in all the IT firms used for this study and management should focus implementing versatile techniques and involve all the employees’ sources in better assimilation of activities.

 

References

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Pages:13

Abstract

 

Manufacturing industries contribute to the Gross Domestic Product of an economy, so it has to keep up with the latest trends and key emerging societal factors that are aligned with the cultural factors. The construction and manufacturing industry is helpful for a much-skilled labour force because it integrates high-value parts, design, research and development, and marketing. In Hungary, there are several global chains of multiple industries that are further comprised of millions of medium, small, and large manufacturers that are facing intense demand from consumers, and manufacturing innovating products. Today, global economies are ignited by macro-environmental trends. The report discusses a comprehensive scenario of the economy of Hungary as an emerging market. Key conditions in the local business environment, socio-economic and political factors and key entry strategies to enter in a new market are a part of this report. The research report elaborates the involvement of business in the economic growth of a country and key role played by industries to involve people under economies of scale.

Introduction

 

Hungary is a part of central Europe that has transitioned from a planned economy to a market-based economy (Lane, 1995). Emerging technology is changing the direction of business and overall industry and further involving new strengths, capabilities, merchandisers, and professionals (Bae, S. Y., 2018). Aerospace, agriculture, and healthcare sectors are now specializing in better development aspects and have gained a strong position worldwide. This research report is going to discuss Hungary as an emerging market, in future it will be changing the economic patterns. The report will examine Hungary economy as an emerging market, and it will analyze the local, cultural, legal, and political factors that are shaping this overall economy.  In addition the following will also be discussed  key market entering strategies, the overall performance of the economy, trends, risks and challenges, entry and long term strategies to minimize risk as well as recommendations to businesses looking to enter this market.

The Local Business Environment

 

Under global strategy, Hungary’s economy has gained significant importance due to the marketing mix and segmenting the local market. It has been seen that this economy is an attractive destination for international business now, and it is going to be in the future. Business and service industries are considered a powerful segment of the economy that cannot only change the future of the labor market but also create more opportunities for business (Eszes, L., & Muhlemann, A. 1993).With the rapid expansion in transport, trade patterns, and communications, the international market has provided easy access to all businesses(Szent-Iványi, B., Végh, Z., & Lightfoot, S. 2018).

To fulfill consumer requirements, world is getting harmony in all its processes, such as technology, lifestyle, transportation, capital, and travel. Resurgence in global standardization at international level provides many motives to global firm’s decisions about trade. International marketers focus on right standard balance in global businesses so that performance can be optimized (Chan, E., 2019). Integration level is viewed at a global level due to global marketing strategy and role of marketing tactics. Technological advances have a significant role in the economy.

Global expansion caused the industry to push its product launch regarding automation, knowledge-based products, and biotechnology (Eszes, L., & Muhlemann, A. 1993). Economy can better explain the consumption perspectives of an industry when it comes to its specific features and products (Chaudhry, H. and Hodge, G., 2016). Value, when produced in commodities, undertake cultural and political-economic approaches to fulfill the historical trends. Marxist economists focused on linear commodity trends to discuss the concept of production and consumption. Individual production network tends to acquire vertical structure systems for the provision of consumer goods.

Approach of economy regarding the interaction of horizontal factors undertakes all political, socio-economical, and cultural factors, about consumables that move from one country to another. In Hungary, the automotive industry is advanced, and leading edge technology is implemented in biotechnology sector (Lane, S. 1995). A regulatory environment for the development of pharmaceutical products and biotech products is implemented. Through low cost and quick method of manufacturing, consumers engage in the ever-changing collection of affordable commodities; for instance, capital sources are involved in corporate development and spin-off activity. The rapid changes in trends and evolving lifestyle perspectives have shaped the industrial products (Cox, H. and Mowatt, S., 2012). On a broader culture, tremendous stress is placed on the system of production that can be labor-intensive. Hungary has a broader scope regarding fashion and footwear due to potentiality of factors; for instance, high-end fashion, products for the younger generation, and luxury brands are an important part of Hungary’s economy (Eszes, L., & Muhlemann, A. 1993).

Hungary’s economy focuses on broader business initiatives; for instance, construction industry is facing local regulation and strong price competition. The economic position of Hungary is based on GDP, and it’s per capita income is two-third of the average of EU-28, while in 2018, its GDP was $155.7 billion (Szent-Iványi, B., Végh, Z., & Lightfoot, S. 2018).Current markets are performing good and high competition is see in main global brands, their high quality of products, and performance is causing difficulty for new firms to enter(Lane, 1995).Opening of a fashion company in a new place is based on certain factors, some of which are difficult. In Hungary, supply of raw material and transportation is advanced level and moving towards sustainability and therefore making the competition intense (Eike, R. J., 2018). Hungary economy is performing a competitive role in the education and ICT segment of the industry. Socioeconomic and demographic factors and trends are likely to shape its future potential as an emerging market (Lengyel, B. and Cadil, V., 2009). For global trade supplier finance, capital is made available to the suppliers, who are engaged at the global level, to practice better policies. To open a business in Hungary, its cultural and social factors are important to consider; for example, if fashion textile industry decides to open its brand in Hungary, it will have to focus on its market, economy, and social aspects (Jarmuzek, M., Orlowski, L.T. and Radziwill, A., 2004). Consumer values, socio-cultural patterns, ethnicity, and perceptions of consumers are some key factors that will change the future market and its potential (Gardetti and Muthu, S., 2020).

PESTLE analysis

 

Industrial development is competitive in terms of the provision of quality and sustainability of products in Hungary. Segmentation, targeting, and promotion policies of different companies are conducive to increase sales and consumer spending (Lengyel, B. and Cadil, V., 2009). PESTLE analysis deals with all political, economic, technical, social, legal, and economic factors at a place. For instance, if Apple is planning to open in Hungary, it has to consider all the factors in the IT industry in Hungary regarding segmentation.New entrants in Hungary will face intense competition because stable socio-economicsystem.Political system is stable, yet some after-effects are due to the international worsening of global issues that will cause new incumbents to focus on their cost structure. Before 2019, Hungary’s fashion market has faced good performance, and its recorded revenue reached $75 billion, according to the National Fashion Chamber Hungary (Jacobs, and E., 2016).

Healthcare in Hungary is facing some global uncertainties, yet it is providing opportunities to British companies such as investment projects, management consultancies, supply of medical equipment, and hospital management services (szikinger, 1999). Economic situation in Hungary is much better due to the presence of many luxuries, lifestyles, and consumer goods in the Lombardy region (Kim, E.-D., 2000). A multi-party democracy of Hungary is divided into conservative right and opposition.

Legal system in Hungary is strict and composed of many regulations and rules. Fundamental law in Hungry is considered a parliamentary republic. For sustainability in the environment, the rule of law is established. Many implementations are faced with business networking (Mcgrath, P., 2013). The commercial communication system is established to know about products’ sustainability. Legal factors are persistent in following the rules and product’s life cycle as well as to reduce any impact on the environment. Specific manufacturing elements have to undertake to license regarding product’s packaging or supply chain and transportation (Lee, J. K., 2018). Legal system also provides confidence about state laws, product features, and fashion-based networking. Property laws and intellectual property elements prevail in the economy that is helpful for whole industry brands.

Economic factors such as inflation, employment level, and per capita income in Hungary are stable for businesses to make companies more productive, and industry can gain its sustainability. Social atmosphere and socio-cultural aspects undertake values and norms, societal characteristics, customs, ethics, and other peculiarities that work significantly for fashion as an emerging market. These factors are important to consider when a business company tries to launch a new product or bring innovation in existing products. For instance, in 2018, US merchandise exports to Hungary were $1.75 billion, and the main exporting items were automotive components, IT equipment, vehicles, electric machinery, electronics, and other manufacturing supplies. It is also working on the economies of scale rule to target consumer’s standards and fulfill their expectations (Mitterfellner, O., 2019).

The socio-cultural factors in Hungary are traditions, values, and norms that people love to see in their favorite brands. In Hungary, despite sustainable implementation, an adequate legal framework about environmental rules is implemented. Activities of involvement with rules & regulations customers will be fruitful to enter into the market. Difference in attitude and culture is a key factor that multiple brands have to focus on while entering in an emerging segment of society. Sustainability of products in Hungary is maintained under specific guidelines of commercial communication to make sure that traders are focusing on green claims (Mcgrath, P., 2013).  In Hungary, rapid industrialization has raised environmental concerns; therefore, product sustainability needs environmental protection policies.

Entry Strategy and General Business Strategy

 

Main driver of growth in Hungary is domestic demand; it was estimated in 2019 when rise in wages and high consumer confidence was observed. In same year, the foreign investment acted as a strong performing vehicle, and the electronic sector captured interest of global investors (Lengyel, B. and Cadil, V., 2009). Long term strategiesthat new business could adapt to mitigate risksarising from challengesare to be more competitive and revolutionized due to digital market ideas.In Hungary, there is a high wage rate, high profit margins and increased tax collection that can be an attractive entry point for new firms, so they can enhance a general balance of the economy. Due to business and industry growth, Hungary’s economy faced public debt going down, and International Monetary Fund anticipates that in 2020 this debt will be 65.1% and further will reduce to 62.9% in 2021 (Szent-Iványi, B., Végh, Z., & Lightfoot, S. 2018). There is a need for fiscal consolidation for the economy because its supply-side reforms need to maintain growth momentum so that global resilience can be built.

The economy of Hungary undertakes entry and long-term strategies that could mitigate risks arising from the challenges. The entry mode in international business segments adopts various policies such as product export, involvement in joint ventures, participation in the franchise sector, and making operational alliances or subsidiaries (Szent-Iványi, Végh & Lightfoot, 2018). IT, automotive, and construction sectors in Hungary can become more competitive by adopting growth features to get short and long terms success. Due to high competition at a global level, Hungary’s economy will focus on a continuum by nagging in low control to high control practice with resource commitment. Low control model needs more limited commitment of resources, so investment risk is reduced. However, in economy, some firms have little power in global operations that can result in declined financial outcomes (Sadachar and Manchiraju, 2016).

In this case, competitive business brands can enter in Hungary market by focusing on key cultural practices, norms, and involvement of values in the society. Foreign market expansion by any brand also has to focus on the skills and managerial expertise while entering into a new market (Mcgrath, P., 2013). Retail environment in the industry has to establish a competitive brand under specific format, assortment, and product offering. Retailer needs a specific kind of entry mode that matches with the global expertise and its international experience (Lane, 1995). This aspect is closely related to tackling foreign market challenges. The industry undertakes key cultural and market-related factors as competition because these factors are integral to understand economic and political stability. The company has to focus on supply chain management and distribution practices (Szent-Iványi, Végh & Lightfoot, 2018).

In Hungary, the government does not restrict foreign investment. Foreign direct investment is not limited and convenient to organize a large scale for specialized firms (Lengyel, B. and Cadil, V., 2009). Hungary’s industry is specialized in terms of multinational investment to cater to consumer demand. foreign firms win market share from incumbents by adopting different strategies like price wars, raising specific barriers, and making intense competition (Sweney, M., 2019). Competitive advantage in Hungary is considered complex due to the degree of internationalization. According to specialization of segments, the market diversifies and modify different areas of products to shift the market trends. Economy of Hungary is lucrative for global business firms because they can reap the benefits by acquiring a larger market share (Lengyel, B. and Cadil, V., 2009). New businesses can enter by analyzing their competitors’ profiles as well as researching the potential of the Hungary market (Eszes & Muhlemann, 1993). The pricing, product value, and advantages are important to consider. Consumer market has been focused on existing brands, division categorization, and product diversification is necessary to enter in the market because these aspects are inherently related to the economy.

Conclusions and recommendations

 

Economy of Hungary is set up on a competitive framework that incorporates the latest trends, expertise, and skilled labor force into the product portfolio. Countries engage cultural and social factors in their products because it is helpful for targeting better customers. Country-specific socio-economic & business factors must be considered by new businesses to gain a competitive advantage in Hungary’s market. Working in a foreign country requires a firm to consider its specific economic, political, legal, and environmental policies. New businesses have to focus on specific norms and values operating in Hungary regarding competition in industry because already present firms are operating in tough competition.

Some fashion and business brands have to undertake country risk uncertainty to survive in atmosphere and to ensure the profitability of the firm. In a foreign market, uncertainties like economic health, inflation, disposable income, and political stability and unemployment rates have a considerable impact on the company’s performance.

Key recommendations for new business, who want to enter in this market are research and development, flexibility, and a focus on high control models. They should be avoided to limit resource commitment. To be successful in the global market of Hungary, companies should select low control, entry models, because there will be a high country risk. New businesses have to consider government restrictions. It is recommended to maintain control in emerging market by complying with local rules.

Many competitive business attempt to start operations in Hungary, so they have to focus on political, economic, legal, and environmental factors in the Hungary market. IT, automotive, and fashion being sophisticated industries have to work on a diverse set of occupations. This research has highlighted the significance of certain institutional and cultural factors that play a significant role in the development of an economy and help elevate a firm’s business performance.

 

References

 

Bae, S. Y., 2018. Smart Fashion and Wearable Technology: Opportunities and Challenges for Future Growth. Journal of Textile Science & Fashion Technology, 1 (3).

Bobek, V., Maček, A., and Kros, J., 2019. International franchising in the fashion industry from the franchisor perspective. J. for International Business and Entrepreneurship Development, 12 (1), 49.

Chan, E., 2019. Condé Nast is launching a new sustainability strategy – here’s why [online]. Vogue Australia. Available from: https://www.vogue.com.au/fashion/news/cond-nast-is-launching-a-new-sustainability-strategy-heres-why/news-story/939e6e7a83c8d83b481800e143e3177b [Accessed 19 Mar 2020].

Chaudhry, H. and Hodge, G., 2016. Vendor-managed inventory systems in the apparel industry. Information Systems for the Fashion and Apparel Industry, 221–234.

Cox, H. and Mowatt, S., 2012. Voguein Britain: Authenticity and the creation of competitive advantage in the UK magazine industry. Business History, 54 (1), 67–87.

Eike, R. J., 2018. Review of Fashion, Technology and Health: Future Directions for the Apparel Industry. Trends in Textile Engineering & Fashion Technology, 4 (3).

Gardetti Miguel Ángel and Muthu, S. S., 2020. The UN sustainable development goals for the textile and fashion industry. Singapore: Springer.

Jacobs, B., Simpson, L., Nelson, S., and Karpova, E., 2016. Matching Sourcing Destination with Fashion Brands Business Model: Comparative Advantages of Bangladesh and Vietnam Apparel Industries. Fashion, Industry and Education, 14 (2), 11–23.

Kim, E.-D., 2000. A Study on the Global FDI Flow and Choice of Commercial Policies. International Business Review, 4 (1), 1.

Lee, J. K., 2018. Adoption of the “See Now Buy Now” Business Model in the Fashion Industry. Bloomsbury Fashion Business Cases.

Mitterfellner, O., 2019. Fashion marketing from a historical perspective. Fashion Marketing and Communication, 1–16.

Sadachar, A., Feng, F., Karpova, E. E., and Manchiraju, S., 2016. Predicting environmentally responsible apparel consumption behavior of future apparel industry professionals: The role of environmental apparel knowledge, environmentalism and materialism. Journal of Global Fashion Marketing, 7 (2), 76–88.

Sweney, M., 2019. Vogue publisher Condé Nast reports annual loss of £14m [online]. The Guardian. Available from: https://www.theguardian.com/media/2019/jan/03/vogue-publisher-conde-nast-annual-loss [Accessed 19 Mar 2020].

Eszes, L., & Muhlemann, A. (1993). MANUFACTURING MANAGEMENT IN HUNGARY: A PERSPECTIVE. European Business Review93(5). doi: 10.1108/eum0000000001923

Lane, S. (1995). Business starts during the transition in Hungary. Journal Of Business Venturing10(3), 181-194. doi: 10.1016/0883-9026(94)00038-v

Szent-Iványi, B., Végh, Z., & Lightfoot, S. (2018). Branding for business? Hungary and the sustainable development goals. Journal Of International Relations And Development23(1), 190-209. doi: 10.1057/s41268-017-0127-8

Jarmuzek, M., Orlowski, L.T. and Radziwill, A., 2004. Monetary Policy Transparency in Inflation Targeting Countries: The Czech Republic, Hungary and Poland. SSRN Electronic Journal.

Legvold, R. and Tucker, J.A., 2006. Regional Economic Voting: Russia, Poland, Hungary, Slovakia, and the Czech Republic, 1990-1999. Foreign Affairs, 85(5), p.173.

Lengyel, B. and Cadil, V., 2009. Innovation Policy Challenges in Transition Countries: Foreign Business R&D in the Czech Republic and Hungary. Transition Studies Review, 16(1), pp.174–188.

Mcgrath, P., 2013. Impact of Financial Deregulation on Monetary and Economic Policy in the Czech Republic, Hungary and Poland: 1990-2003. SSRN Electronic Journal.

Szikinger, I., 1999. A Letter from Hungary: Law Enforcement in Hungary During Transition to Democracy. Crime Prevention and Community Safety, 1(1), pp.71–77.

 

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Pages:8

Introduction

Behavioural finance is considered as a secondary field of behavioural economics that investigates the irrational behavior and cognitive psychology of investors and financial practitioners,which affects the investment returns and explains many empirical patterns (Ritter, 2003).This essay discusses how the recent worldwide outbreak of the Corona Virus affects the confirmation bias among investors throughout the world, thus opening the scope for potential equity stock mispricing.The predominance of confirmation bias among investors results in their overreaction, which negatively affects the stock prices listed on the stock market. Some ways to counter the confirmation bias while investors make investments in the equities listed on the stock market will be discussed, as well as the trading strategy which can be exploited amid the Corona Virus outbreak to create a better opportunity of investment and maximize the returns of investors.

Confirmation Bias and FearAffecting Public Equity Prices

First, a brief description of Confirmation bias will be demonstrated.Confirmation Bias is defined as the interpretation of thecontent in a way to support the investor’s own beliefs or arguments(Nickerson, 1998). Confirmation bias is perhaps the most well-known behavioral finance bias, which “acts like a compulsive yes-man who echoes whatever he wants to believe”(Zweig, 2009). The significant existence of the confirmation bias is recently proved quantitatively by Hart in the meta-analysis(William Hart, 2009). It is based on the assumption that agents will tend to accept the information that will be in line with their arguments, ignoring othercontradicting signals and, hence, validatingpredictions already drawn.The existence of investorswho are prone to confirmation bias causes significant price anomaliesfor holdings in financial markets(Pouget, 2011).

When uncertainty hits the market, the previously held complacencyamong investors is shattered and market individuals start thinking that the worst is yet to come. This is amplified by rumors and “scary” news, causing multiple waves of fear in the market.In the fear of the unknown,market participants start paying more attention to the negative signs,henceshiftingtheir moods into panic mode. According to confirmation bias, when new information arrives non-Bayesian agents will update their economic expectations in a manner to support their initial negative or positiveimpressions(Charness G., 2015). In the case of coronavirus, investorsoverweight the prospect of future negative shocks, as it is an event with huge emotional impact, fueled by a plethora of dramatic news about its consequences. Overreaction of investors due to their confirmed fear is supported also by Jeremy Warner in the Telegraph, who states that “Globalization in combination with social media amplifies wider economic consequences. There is nothing more contagious than fear”(Ameinfo, 2020).

In the past two months, the threat of coronavirus spreading across the globe reverberates across the market, amplified by the media hysteria, leading to fear-based overreactions among investors.The recent closure of the car plant manufacturer and quarantine of 10 towns in Italy in the middle of the Corona Virus outbreak have further increased the concerns of the investors. These events have made many traders around the globe believe that the massive selling of stocks is knocking at the door. Most investors are overreacting to the news and selling stocks at a rapid pace due to widespread uncertainty which is fueled by the news.On the 28th of February 2020, the US stock market drop to its worst record since the 2008 recession(Amber, 2020). S&P 500 declined around 13% on and  FTSE 100 slumped by 3.5%and VIX index reacheda one-year pick at 25, making the last week of February the worst record of wealth shrinkage in the stock market(Wigglesworth R., 2020).This sentiment of investors will further decrease the value of stocks due to their confirmation bias as they extrapolate the consequences of Coronavirus more unfavorably than they are.However, the value of stocks is forward-looking, meaning that their value is determined by the value of economic activity in the long run and such a decline in major stock indexes should be verified by huge persistent losses in the long-term stream of corporate earnings.

The following chart reflects the equities slump on major worldwide indices.

Figure 1: S&P500 and MSCI Asia pacific presented in US dollars; Stoxx 600 in euros (Financial Times, 2020)

 

The recent outbreak of the Corona Virus has stumbled the worldwide stock markets amid its growing phase mainly driven by the rise in the tech stocks. Some of the investors have created a mindset that the outbreak will leave a long-lasting effect on the stock prices listed on the stock market. Investors lookout for the information that confirms their bias that the stock prices will decrease as the result of the worldwide outbreak of the Corona Virus.Furthermore, the regular media coverage of the disease and various reports add to the already created misconception of panic of the investors said, President Donald J. Trump.All this fear increases the panic of the general public and investors, who look out for further information that solidifies their already created belief of drowning global equity markets due to the impact of the newest type of Coronavirus. The constant increase in the panic and the easily available information through the media creates confirmation bias, which leads to an overreaction by investors in the markets, which have observed a massive dip in the recent two weeks. This will further decrease the prices of stocks due to the investor’s belief in the Corona Virus and its worldwide impact(NY Times, 2020).

On the other hand, several factors prove that the investor’s overblow corona Virus impacts. Historically, recent similar epidemics like SARS (813 deaths), MERS (36 deaths), Ebola(11.3K deaths), Swine flu (293K deaths) and Spanish Flu (50.0M deaths) had a temporary effect on markets, which were recovered soon after the breakout(Ameinfo, 2020).SARS outbreak in 2003 had a short term impact and markets had a 20.76% gain at the year-end, but still, many investors try to prove their point that Corona Virus will impact markets in more important terms which lead to thefrantic selling of stocks at lower prices(MarketWatch, 2020).Investors tend to overreact to the health threats due to which many of the investors leave the market, and the massive number of sellers decreases the share price of stocks. The experts believe that the impact of the Corona Virus will primarily affect worldwide traveling and spending patterns in Asia. Still, overall, the economic model will be short-lived, and markets will bounce back(Brush, 2020).

Massive Dip in Equity Stock Prices
Coronavirus Spread

Figure 2…………………….

Meanwhile, constraints to arbitrage prevent rational traders and arbitrageurs to exploit the current market anomaly. Although there are behavioral traders, who trade on investor sentiment, it is controversial if they can force equity prices to their correct value(Dimitri Vayanos, 2010). Also, even if rational traders are aware of the undervalued stocks, they stay on the sidelines to “time the market” rather than correct them to their fundamentals, as a poor short-term performance leads to an outflow of funds(Schleifer Andrei, 1997). Mispricing in assets may persist for many months as arbitrageurs incur holding costs, “fundamental risk” and “synchronization risk” (Abreu Dilip, 2002). All the above factors cause rational traders to delay acting on the current information.

 

Trading Strategy

Investors need to look for all the favorable and unfavorable information for the particularclass of assets to make an impartial decision. Investors should double-check the data supporting their arguments to nullify the effect of confirmation bias. Detailed investment research helps investors make their position regarding the particular class of assets clear, and this process reduces the risk of confirmation bias to a significant level.The third-party suggestion could help investors to get confidence regarding their statements on their investments in equities(Mind Tools, 2018). Furthermore, investors can use the six thinking hats strategy while investing in the equities to minimize the risk of losing the money in investments due to the confirmation bias. Six thinking strategy involves analyzing and interpreting the situation from multiple perspectives to deal with the information regarding the equities in which the client has invested the money(Bono, 1985).

While majority of the investors are overreacting to the Corona Virus outbreak, leaving the stock markets by selling the stocks at significantly low prices, on the other hand, some investors can seize the opportunity available to them by purchasing the shares at the stock market at low prices and earn huge capital appreciations and dividends on the shares once the Corona Virus’s treatment is discovered and the disease is contained(Yahoo Finance, 2020). In a time of panic, a rational investor can devise an excellent trading strategy to earn huge profits by “buying the dip”. Investors need to think carefully regarding portfolio construction, which should be diversified rather than focusing on a single sector or single economy. A well-diversified, well researched and off course well-constructed portfolio by screening every stock carefully and then buying amid of Corona Virus outbreak when investors are leaving the markets by selling the shares at the rapid pace, can provide an enormous profit-making opportunity for any rationale investor to enter the market and earn huge returns in the long-term.

Conclusion

Incrux, it is generally believed that confirmation bias is very common among the investors which results in overreaction by the investors causing the major dip in the markets worldwide. As explained above, Corona Virus just like the previous diseases for example SARS has caused panic among investors. Media Hysteria has also contributed to the massive surge in the investor’s panic. Investors need to impartially confirm the news before taking investment decision and this uncertainty can act as the right time for new buyers to buy at a low price as the majority of the investors are selling stocks at below intrinsic prices.

References

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