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Corporate Social Responsibility & Organizational Performance

Pages:7

Social corporate responsibility (CSR) is a long term framework that companies adopt to enhance the welfare of society. In the past decade, the initiatives companies took for their stakeholders offered them several benefits regarding reduced costs, maintaining legitimacy and gaining competitive advantages. Different companies like Coca-Cola and Walt Disney, through their business, built reputational capital and achieved a win-win position through the value creation process. The term CSR is rapidly influenced by legitimacy and engaging modern concepts like business ethics, managing stakeholder’s value and social performance. The expression of these terms is related to multiple investment options, practices and corporate citizenship acts(Gong Ke, Z. Z. 2011).

Business management scholars always investigate the significance of CSR as under organizational objectives, yet the influence of profitability is linked to these goals. The economists Milton Friedman believed that companies should focus on economic interests as the stakeholder’s value. The variety of stakeholders, such as suppliers, employees, and customers’ community, feel value creation is a significant process because business gets to benefit from CSR programs.  The stakeholder’s relationship can be neutralized when business cases are more pragmatic(Jingwen Mi, S. J. 2018).  Socially responsible investment movement allows a positive relationship between corporate financial performance and corporate social performance. A research study has found a relationship between financial performance and social initiatives of companies that were aligned on their organizational goals. Considering CSR a strong business case, it is likely to consider that improvement of its bottom line. This viable choice of business is used to risk management and implement low-cost practices. Due to CSR implementation, a competitive advantage is achieved, which related to synergistic value creation. A business case under empirical research work for the potential structure of the economy that is built on the syncretic stewardship model ((Flávia Cavazotte, N. C. 2016).

CSRs or Corporate Social Responsibility have developed into a very integral element of today’s business setting. CSRs are mainly an ever progressing business process that initiates sustainable business development into any organization. Actually, these practices are the procedures that support a company to be socially responsible to not only its stakeholders but also towards the general public. The existence of a good CSR develops a positive image on the economic, social and environmental factors attached to the business.

Katie Schmidt is a creator of a famous clothing brand ‘Passion Lilie’, she is a proud business entrepreneur for starting an ‘ethical apparel brand’, that means an ethical business, with a fine CSR, can impact positively on a business by developing an organizations image, creating the group and motivating the employees as an entrepreneur. The reason behind in most of the times public opinion is very important for the success of the company. When a typical company has a positive picture in its customers’ eye, it surely can support the business to develop a reputation and name with their consumers that can be very valuable for all the long and short term success (Gong Ke, Z. Z. 2011).

The organizations in the developed countries may react to civil society and shareholders pressure to have social responsibility with extra seriousness by implementing strong CSR structure, except only to settle their opponents and exclusive of any awareness to real changes in their procedures. That means deliberate CSR obligations can just be the tool for organizations in the progress to anticipate actual regulation.

For example, Coca-Cola has started a new product Coca-Cola Life in many countries recently. It is sold in a recyclable bottle or in a green can, many critics state that with as much as 17 grams of sugar and 68 calories in one serving of soft drink is a tactic to trick the customer by the healthy product appearance. Nutritionists say that Coca-Cola Life must not be taken as a healthy option (Low, M. P. 2016).Displaying valuable Corporate Social Responsibility is a significant part of a company’s bigger goals. It is moreover an integral part of developing a more engaged company (DISNEY, W. 2019).

The question for organizations to adopt social responsibility is a never-ending issue. There apply two major factors of opposing Corporate Social Responsibility. Number one, it is thought that a company is a profit-based operation and production unit, and profit escalation is the basic goal of its administration. It has no obligation and responsibility to fulfil the government as well as society’s responsibilities towards the goodwill of the world. Secondly, the corporate social responsibility will change the way of the utilization of capital of the company that will be resulted in cost increase and fewer profits. It also can weaken the cooperativeness of the company; decrease the main targets of the company, therefore affecting the interests of financiers, workers and consumers. Thus, the company cannot afford this much social responsibilities. But, on the other side, many critics think that it is important for companies to take CSR for the betterment of society and its people (Guido Berens, C. B. 2005).

The significance of a strong CSR can be observed by the different research levels and examinations made over time by the time either in the shape of examining a company’s achievement or just by finding out by questionnaires and surveys the significance that these CSRs are kept at. One such study that supports this conducted by Cone Communications, they in research concluded that 60% or more Americans think that businesses should work for environmental and social change where government rules are absent. Other than this, a massive 90% of customers expressed their opinion that they like to buy a product of such company who worked for any issue people care about and around 75% of people surveyed rejected to purchase from such company who come to know that the company supports any contrary issue(Flávia Cavazotte, N. C. 2016).

In the present day, a company’s status is very important as customers, shareholders and employees are starting to priorities the Corporate Social Responsibility when selecting a product or brand as well as any organization for support or investment. Ahead of it, the same persons have started to think that the investment companies are liable for the change in their business approach, profits and practices. Failure to work at a suitable level will surely direct to some type of negative consequences for the company in question. Walt Disney is a globally famous animation entertainment company. To pass happiness to people around the world is their prime objective. Walt Disney produces goods with an ethical approach by minimizing its environmental effects. In March 2019 Walt Disney expanded social charity services and promised to spend 100 million USD in the coming five years to support and encourage patients of children hospital and families all over the world (Jingwen Mi, S. J. 2018).

In China, Alibaba group has worked to develop the quality of life of people of rural areas. Farmers in China are speeding up their integration into the era of internet, captivating young people from around China for the development of rural areas, promoting people of rural areas, and changing the global perception about China (Soo, Z. 2019). Alibaba has worked for the international market, created different electronic stages to support economic development, helped underdeveloped and developed countries, above all supported young people incorporated into world’s trade, and benefited the small business groups around the world.

Companies can get capabilities, social capital and resources during the course of accepting social responsibility. It brings several advantages to the companies, like, customer loyalty, retention and absorption of good employees, development of the commercial image, social trust and network, and progress in innovation potential (Low, M. P. 2016).

Business firms acquire transparency and sustainability due to CSR implementation because it is ubiquitous. Due to the structural framework, economic behaviour describes the relationship between society and organization, yet the organizational goals are necessary to be followed. In some research frameworks, this relationship is linked with aims and objectives. Certain values in organizations emphasize that sustainable development is oriented to organizational goals. CSR under multinational enterprise is implied on business strategy with an inherent focus on global supply chains. The globalization under environment protection and human resource management is prevailed in the CSR framework to organize sustainable development goals (Flávia Cavazotte, N. C. 2016). Inter-governmental bodies under cooperation and UN-based conventions have viewed CSR impact inherently.

The political, social and environmental factors are key to consider in small, medium enterprises because global supply chains are working on effective communication and technology-based interventions. According to research evidence, social values led models to allow organizations to adopt CSR initiatives because it works positively for economic and non-economic reasons. The syncretic business model allows narrow and broad bases that show how financial performance can directly impact corporate social responsibility model of organizations. It is found from research studies that organizational goals are positively related to financial performance that impacts CSR. In different frameworks, firms need to identify and exploit the opportunities that can serve business productively (Worldwide, F. 2015).  It is true that stakeholders’ eyes’ should not be blurred under the act of corporate social responsibility but accurate picture should be given.

References

Worldwide, F. (2015, November). Financier. Retrieved from The importance of corporate social responsibility: https://www.financierworldwide.com/the-importance-of-corporate-social-responsibility

Flávia Cavazotte, N. C. (2016). A Study of Publicly Traded Companies. Internal Corporate Social Responsibility and Performance.

Guido Berens, C. B. (2005). Corporate Associations andConsumer Product Responses. TheModerating Role of Corporate BrandDominance, 35-48

Soo, Z. (2019, November 11). South China Morning Post . Retrieved from Consumers from China’s smaller cities lift Alibaba to new Singles’ Day record as buyers shrug off trade war: https://www.scmp.com/tech/e-commerce/article/3037137/chinese-consumers-spend-us1-billion-first-minute-alibabas-singles

Jingwen Mi, S. J. (2018). Journal of Management and Sustainability. The Relevance of Social Responsibility and Financial Performance of Listed Companies , 41.

DISNEY, W. (2019). 2019 CORPORATE SOCIAL RESPONSIBILITY UPDATE. The Walt Disney Company.

Gong Ke, Z. Z. (2011). Engineering Education and Management. In C. Z. Liangchi Zhang, In JiLin Province Native Brand Design Thinking (pp. 437-439). Berlin: Springer.

Low, M. P. (2016). Asian Journal of Social Sciences and Management Studies. Corporate Social Responsibility and the Evolution of Internal Corporate Social Responsibility in 21st Century.

Debate on Corporate Social Responsibility Summary(Opens in a new browser tab)

Managing Corporate Social Responsibility(Opens in a new browser tab)

 

Time Value of Money

Pages:5

Sequence and Series Questions

Geometric Series.

We use the following formula

Sn=a1(1−rn)/1- r   where r ≠ 1

Example. Let’s suppose we have a chess board. A chess board has total of 64 squares (8 * 8). IF we add rice grains on first square, two rice grains on the second square, four grains on the third square and eight grains on the fourth, the sequence continues until all the squares are filled with certain amount of grains. Now find the total number of grains required to fill the chess board squares with the given sequence.

Solution. To find the sum of grains we use Geometric progression formula given above. In the given scenario, a1= 1, r = 2 (double the amount when we move to next square), n = 64 (total number of squares).

Putting values in the formula = 1 (1 – 264)/1 – 2

= 264 – 1

=  18,446,744,073,709,551,615

 

A geometric series is a series of numbers in such a manner that the numbers after the first is obtained by multiplying the previous number by a constant number. To find the sum of a finite geometric series the above formula is used.

In this scenario, the number of grains increases by 50%, that is we have to multiple the next number with a constant number i.e 2 until the whole 64th square.We do not multiply 54 by two because there is no next number and we multiply 2 until 63 only.

1.1. Series Question

Formula.  Un = U1 Un-1

Example. With the given sequence 12,6,3,1.5,0.75… Find the 10th number in sequence and the general Un term.

Solution. By using the formula above.

Un = 10. (½) n-1

Or, Un = 23*2-1(n-1)

Un = 23 * 2n + 1

Un = 23+1-n

Un = 24-n

To find the 10th number in sequence.

U10 = 24-10

= 0.015

 

  1. Future value of Compound Interest

Formula. FV = PV (1 + r/n) tn

Example. If you deposit an amount of $5000 into a saving account that has 7% annual interest, compounded monthly. You keep your money in the bank for 10 years and then withdraw it. And, your friend deposit the same amount at the same bank but withdraw the amount after 8 years.

Calculate the total amount you will and your friend will have after you both withdraw.

Solution.

Using the above formula, here PV is $5000, r = 7% or 0.07, n = 12 (months in a year), t = 10(yours) and 8 (for your friend).

If we put the values

FV = 5000 (1 + 0.07/12) 12 * 10

= 10,044.31

After 10 years, you will have $10,044.31 in your bank account.

FV = 5000(1 + 0.07/12) 12*8

= 8,736.2524

While your friend will have $8,736.25.

The thing is, compound interest unleashes its power with time. The more time passes, the stronger it becomes. “Compound interest is a magic”

Even tough, you and your friend has save the same amount, given the same interest rate, but your friend withdrew the amount just 2 years before you and look at the difference of amount he has lost.

  1. Future Value of Annuity

Formula.  FV = A ((1 + r)n– 1)/ r

Where; r is interest rate

A is the annuity amount and n is the number of periods

Example.  You are paying a student loan of $1000 each month, for the next 12 months. The monthly interest rate in 13%. What is the future value of the payments that you are making?

Solution. To know the future value of your payments, use the above formula.

FV = 1000((1 + 0.13)12 – 1) / 0.13

$11,1000

After 12 months, you’d have paid total amount of $11,100 in your student loan. Because each month the amount of interest passes an incremental increase. First month you pay 1,130, the next month you pay 1,130*1.13 = 1276.9. The month after that 1442.89 (1276.9 * 1.13).

Formula.  A = P ((r (1 + r)n – 1 ) / ((1 + r)n – 1) )

P = loan payment

A = Periodic repayment amount.

n = number of repayments.

i = interest rate.

Example. You borrowed $10,000 at a rate of 6%. You want to repay it in five equal instalments over five years, with the first repayment one year after you out the loan. How much should each repayment be?

Solution.  With equal amount of payments each year, you will have to

A = 10,000 * 0.06(1.06)5 / ((1.06)5 – 1)

= 2373.96

You will pay $2373.96 each year for five years.

Even though you pay the same amount each year. But, with each year you pay less interest because the total amount of loan decreases. In the first year you pay an interest of $600. In the second year, you pay interest of $493.56 because the interest is charged on $8226.04 (10,000 – 2373.96). For the third year you pay an interest of 380.74.

 

Company Assessment and New Market Analysis of Urban Outfitters

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The company that is to have a new business venture is the Urban Outfitters which is headquartered in Pennsylvania, United States. It is a clothing and lifestyle retail brand. The stores have been active ever since the 1970s. The target market for the brand is young adults of the ages of 18 till 30. They have unique western style clothing which is up-beat, casual, and trendy relating to what young adults are looking to wear presently. The company attracts customers by catchy stores, and online platforms such as apps ands websites. They also, of course, have social media platforms and a lot of following there as well. The overall theme of the clothes allows the customers to be expressive and bold with their sense of style while also looking sophisticated and classy (Annual report, 2019).

Their demographics include both males and females and they are not just limited to clothes. The brand also has accessories, footwear, beauty products and other lifestyle, or home-related products that are aesthetically pleasing in their designs and hence quite appealing to the audiences as well. Stores of Urban Outfitters are huge in terms of the physical space they offer, the average is approximated to be 9000 square feet. Location of the stores are also at high-end areas that are commercial, popular, and metropolitan. Majority of the stores are located in the United States, then Europe and then Canada. The total number has reached to a whooping 245 in these three regions alone. The brand does hope to expand further around the globe by entering new markets and introducing new products that would increase our target market in other countries as well (Annual report, 2019).

It was realised that Urban Outfitters do not have a lot of presence in Asia. A country in particular that we thing would prove to be a good business venture for the company is Pakistan. There are several reasons behind that choice. First of all, the major chunk of the Pakistani population is the youth comprising of both males and females. And the country is also going through rapid changes with respect to culture and conservatism. More people than ever are now looking for “western style” clothes in Pakistan and there is still a lack of brands that provide good quality, unique, trendy, and affordable western clothing. The Pakistani population, specifically the ones living in the major cities such as Karachi, Lahore, Islamabad, Faisalabad, Hyderabad et cetera, are becoming more spent thrift towards luxury items such as branded clothes which a decade back, perhaps, was not a common phenomenon. Now a days, the brand culture is quite dominant in these cities. The price ranges of Urban Outfitters are pretty reasonable to what an average middle-class to upper-class would spend on casual branded clothing. So, there is a huge untapped market for Urban Outfitters in Pakistan (Zafar, n.d).

The millennials are taking over the world in the present times. The era is of social media and trends pick up and get viral quickly. This is a cheap and yet effective marketing method that Urban Outfitters could utilise in Pakistan. There are so many bloggers and celebrities on Instagram and Facebook that would to showcase the brand’s products because most of them are looking for clothes and lifestyle products that are smart and chic or “vogue”. There are many huge malls in the cities as well now where the brand can have their stores and attract an even larger number of customer base (Foster, 2018).

Another advantage of expanding in Pakistan apart from the general demand for western clothing, is the lack of competitors. In a developing economy, the brand will not have a problem in acquiring cheap labour, or land. Neither would they face any of their regular competitors such as the Gap and H&M which are equally as popular, if not more, as Urban Outfitters in the United States or Europe. So, the brand has the opportunity to have a fresh start in a new country. Since, textiles and the cotton industries are two of the most prominent industries in the country, the business also won’t have problems with acquiring raw material, or other resources and that too for lower prices. Adjusting in the market would be easy as well since it is well-established and not so different to what Urban Outfitters is used to. It could offer discounts as well which would increase the sales (Nasir, 2020).

Urban Outfitters would have to change their product line in order to expand in Pakistan entirely. Since, cultural values and religious obligations do still dictate dress codes for a lot of people so some pieces of clothing would be less popular than the others such as miniskirts, shorts et cetera but there will still be people buying them too. If the brand can launch a “modest” line side by side by a tapping into a new market for the brand but one which is well established in the country then it could earn double profit. A lot of the women youth that wears “hijab” looks for clothing articles that have a western look and yet are still modest. Such products could increase the customer base for Urban Outfitters considerably (Lodi, 2020).

References

Nasir, J. (2020, April). Textile Industrialists Want to Invest $5 Billion in The Industry. Retrieved from https://propakistani.pk/2019/12/28/textile-industrialists-want-to-invest-5-billion-in-the-industry/

Zafar, H. (n.d.). Changing Trends in the Lifestyle of Pakistani Urban Youth: Glimpses from Lahore. Retrieved from http://cppg.fccollege.edu.pk/changing-trends-in-the-lifestyle-of-pakistani-urban-youth-glimpses-from-lahore/

Lodi, H. (2020, February). Modest Fashion: What Does it Mean for a South Asian Girl. Retrieved from https://www.masala.com/modest-fashion-what-does-it-mean-for-a-south-asian-girl-319035.html

Annual Report. (2019). http://www.annualreports.com/HostedData/AnnualReports/PDF/NASDAQ_URBN_2018.pdf

Foster, B. (2018, September). How Urban Outfitters is Capturing the Millennial Market. Retrieved from https://blog.smile.io/urban-outfitters-is-capturing-the-millennial-market

Facial Door Lock

Pages:10

1.    Summary/Purpose

Samsung is a Korean company and one of the world’s largest manufacturers of electronic equipment. It was established in 1938. Samsung’s goal is to use its talents and technologies to create the latest and improved products and services, and to contribute to global development. With the development of the smart home industry, smart door locks are alsobecoming common. However, as an emerging industry, smart door locks have some shortcomings that need to be improved, such asthreat of system hacking and information theft. Samsung’s new generation of facial recognition smart door locks will effectively solve these problems and provide a more flexible and convenient unlocking solution.

The potential targeted customer base of this industry is the working class that works long shifts and have been working for quite some time. To understand the profile of the said product better it is vital to know the features of the smart lock. Samsung’s door lock offers three features simultaneously. They are facial recognition feature, a pressure sensor, and a quick alarm system. This mechanism of triple checks can maximize the safety of the family. In addition, the said product also has very reasonable pricingso that mostof the working classcan afford it.In order to promote the products, online advertising options will be availed,whereas the products will also be displayed at flagship stores for experiencing first hand. The advantages that this next generation of smart door lock has to offer can make it earn a considerable place in the relative market.

 

 

 

2.    The Function of the Company

The Samsung Group is the largest multinational enterprise in South Korea. The Samsung Group includes many international affiliated companies with businesses in electronics, finance, machinery, insurance, chemistry, artificial intelligence, and many other fields. Regarding smart door locks, Samsung’s current products are SHD, SHP, SHS, DP, and P series. The price range is between 596CAD and 1380CAD. The unlocking methods include fingerprint, key, password, swipe card, mobile phone, and APP. The system can be supported through IOS as well as android, and is powered by batteries. Keeping this setup in mind, an attempt will be made by our company to innovate the smart door locks system even more than that of Samsung.The name of our product is Facial Recognition Door Lock, which will be commonly known as FDL1. The launching of our product has the potential to revolutionize the smart door locks industry. The utmost priority of our company and the major goal of our product is to ensure the personal as well as economic safety of our customers. In addition to that, our company has also been looking into ways by employing which our customers on long distances from their homes can be completely assured of the safety of their properties.This feature will help us attract the working class, particularly the workers in the flying industry who are almost always away from their homes. Secondly, our company has also taken into proper consideration the purchasing power of the targeted customer base,and we can state with full confidence that the said customer base amply possess the resources to spend on this necessity, and it will not be a burden for them.

As far as the functioning of the pressure-sensing and one-button alarm feature in our product is concerned, it will allow the customers to be aware of any sort of intrusion. This feature will operate through sensing excessive pressure, and the owner of the property will be notified of this either through an alarm system or through a mobile application. Many other previous shortcomings have also been solved through this smart system.

Moreover, not only have we paid attention only to the quality of our product, its advertising and marketing have been our primary focus as well. We have also allocated massive resources to after-sale services i.e., maintenance services for our valued customers. For the advertising purpose, to promote our product,its ads will be given on all popular social networking sites, such as Instagram, Facebook, Twitter, etc. In addition, we will provide customers with an opportunity to experience samples before buying, and with the option to adjust the products according to customers custom recommendations and requirements. When the product is released, we will provide customers with an unconditional 15-day return and three-year warranty option. Therefore, not only will we provide our customers with high-quality products but complete services regarding the product will also be present. Hence, we have enough competitive edge to occupy a considerable place in the market.

 

3.    Research Plan & Potential Competitors

It is a well-known fact that many households have already set up smart door locks to make their lives more convenient and safe. However, many of our competitors only provide a touch screen panel to enter code and or biometric options, but if the electricity ever fails or its mechanism jams, the lock needs to be destroyed to get in or out. On the other hand, our Samsung smart door locks allow entrance not only through entering a password and biometric scanner, but it also provides key way to deal with some emergencies. One can also access the house by using Bluetooth. This technology makes door locks safer because residents can track the history of access. So, this idea offers more ways to enter by using smart door locks. Besides, our product will be easier to use for all age groups particularly, for senior citizens. They will have options to choose from. We are also aware that many competitive products have set up build-in alarm technology to protect households against robberies. To overcome this highly competitive feature, we have coupled a type of pinhole camera in the base of that technology, which means people can completely know what is going on outside the door. This method can make the household safer and record evidence in certain situations. Besides, many products in the market have also connected the smart door locks with Wi-Fi technology besides providing the master control panel controlled through Wi-Fifor major household appliances and lighting systems. It can determine the need for turning on/OFF household appliances based on the presence of human beings (Park et al., 2009). We have to admit that this type of function helps achieve home automation. However, in the past decade, we have proved that firewalls, IDSs, IPSs, and air-gap isolation can’t provide complete protection, as attackers can evade all types of separation and infect an organization’s network by using malware (Guri&Bykhovsky, 2019). If the smart home locks are connected with other devices closely, hackers have more opportunities to attack electronic devices and get one’s private information. Furthermore, through this technique, they can also breach the smart door locks and put one’s house into a dangerous situation. Using SDS technology can perfectly solve this problem because any access would need Bluetooth,which uses a double encryption system to prevent privacy leakage.

Moreover, our product has two more very important features. Fist of them is automatic locking. We will add a motion sensor and voice sensor in the rooms. If there is no motion and voice in a certain period of time, the door will be locked automatically, which can prevent the situation that someone forgetful goes through or accidentally forgetting to lock the door. This is a recheck system that can make the house mare safe. We also recognize the weakness of the smart door lock, which is high power consumption. So, we prepare to solve this problem by using a more durable battery and a low volume warning. It can remind one of recharging in case of lock doesn’t work, and residents can’t get in.

 

4.    Objectives Key Issues

Samsung’s smart home is already widely known. Nowadays, many people use smart things. SmartThings has become an important line of Samsung products. The line includes many products that have made people’s life more convenient. According to a survey, the value of digital door locks increased to USD 2.13 billion in 2017. Researchers have estimated that the growth rate of smart door locks will be 27.2% from 2018 to 2026. On the downside, due to the popularity of smart door locks and the loopholes associated with them, the rate of burglary rose to 66%. The security problems of smart door locks are becoming more and more dangerous (Goodin, 2016).

The first key issue in this field is a software security issue. Each smart door lock allows everyone to download an application that can control any digital door lock, so people can use this software to check the situation of the home or the digital door lock. In addition to it, there are some other vulnerabilities; for example, one can steal or even guess the PIN code to open the smart lock. PIN code is the important information for the digital door lock. There are also some other applications that can affect the work of this application, such as disabling the holiday mode or setting off a false fire alarm. These malicious applications which appear in the SmartThings application store use bugs to enable thieves to permanently and secretly access customers houses.

The second key issue is about OAuth. Researchers have found that some people use the defective parts of SmartThings to cause OAuth. OAuth refers to allowing users to allow third-party applications to access private resources stored by the user on a website, such as photos, videos, and passwords. The researchers found that these people would use this flaw to open smart door locks. First, they will send a link to the users who have the smart door lock, asking the victim to click this link. This link apparently takes the victim to the actual SmartThings HTTPS website, and there seems nothing wrong while logging in (Greenberg, 2016). Finally, when the victim logs in, a message is sent to the thief, and he can utilize the victims login information about the door lock application to steal the PIN code.

5.      Way Forward

Based on these critical issues, the researchers have concluded that the new generation of smart door locks needs to strengthen the security management of the application. The researchers have recommended installing a facial recognition system on the door lock, which is also an essential feature of our product. First of all, it can eliminate the danger of stealing the pin code. Because it is not easy to copy someone’s facial features. For example, recently, in biometric door locks, many thieves use tape to steal the victim’s fingerprints and access the victim’s home to steal. Secondly, this feature also strengthens the safety factor of the door. First of all, the new generation of smart door locks can be installed with gravity sensors on the door locks. When someone maliciously destroys the door lock, an alarm sound can be issued to alert the users. Thirdly, the identification application is also installed on this system. This system can help users identify visitors separately. For example, when a user’s friend visits more than 5 times, the application software will ask the user to choose whether to record this person as a familiar person. At the same time, when a stranger stays at the user’s door for more than 10 minutes, the application software of the door lock will automatically send a message to the user to alert the user to pay attention to safety. This can significantly enhance the safety factor. The fourth is to prevent other malicious programs from stealing important user information. For the new generation of smart door lock applications, researchers suggest adding a security layer and strong anti-virus software to protect the users’ privacy and information, such as PIN codes. The security layer can prevent users from clickingOAuth, which can protect the users’ important data(Lodderstedt, 2018). Also, a strong anti-virus option will stop the application from scanning unnecessarily hence defending against malware. At the same time, researchers can configure it to meet the specific needs of users on any device and the entire network. It provides real-time protection (Rubenking, 2018). These ways solutions can curb the limitations that came with the previous smart door locks.

 

 

6.    Promotion Plan

The purpose of our advertising is to let people know that our products have excellent quality. We will put our advertisements on our own website and some apps which are really popular, such as Instagram and Facebook. These apps will give more people know-how and information about our company and our products. At the beginning of the career, in order to attract customers to buy our products, we will give them more rights. They can return within ten days even without any reason, and they will have three years warranty. If they want to try it first, they will also be able to try our products in our company. It will be exactly the same door that we will sell to our customers. They can buy it if they are satisfied with the product. In addition, when we will launch the newer products, our customers will have a great opportunity to trade in the old one and get the new one at a discounted price. For our marketing plan, first, we choose to establish and operate our company in London, Ontario. Because all the natives live in this city, and they know this city very well. If the locals of this area seem interested in our products and find them useful, we will continue to expand our company to other provinces and countries. What we really want to achieve is that customers can get through our smart doors to have a safer life. Secondly, we will encourage our customers to try our products. We will find some local distributors and offer each of them 3 to 5 products to let them have a try at our products. In addition, we will have a company membership. The membership will be divided into different levels. When one buys more products, onewill be ata higher level in the membership and will have more privilege. Thirdly, when the customers who have already purchased the door introduce our products to more people, they will have a 10% discount.

7.    Conclusion

Overall, there are many different types of smart door locks in the market because of the booming industry. Samsung’s original smart door locks have some major security issues, which cannot guarantee users’ safety and privacy.However, the facial recognition door locks are designed to ensure the safety of families and property and improve the flaws in the original digital door locks. For the Facial door lock, there are some new features, such as the alarm system, and options to prevent the invasion of malware. Our main agenda is not profiteering, but the citizens’ safety. Our company offers the customers a lot of rights, such as that they can try the product first, can return within ten days without any reason and can have three years warranty as well. We will read the customers’ feedback carefully and give the customers safer environments to live in.

 

 

8.    References

  1. Greenberg, A. (2016, May 2). Flaws in Samsung’s ‘Smart’ Home Let Hackers Unlock
  2. Doors and Set Off Fire Alarms. Retrieved from https://www.wired.com/2016/05/flaws-samsungs-smart-home-let-hackers-unlock-doors-set-off-fire-alarms/
  3. Goodin, D. (2016, May 2). Samsung Smart Home flaws let hackers make keys to
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Strategic Management Costco

Pages:4

Strategic management is a critical component that decided how a company should compete in the industry. It explains the basic framework of the company’s perception and core competencies. Through strategic management, practical strategies that help to generate revenue and sales of the company are implemented (Boström & Karlsson, 2013). The consumer trends are variable, and this transition is attributable to prevailed strategies and preferences. Costco cooperation is an expanded business, founded in 1983, has many warehouses, and has core fame due to this concept. This paper is about the strategic management of Costco, and it will focus on the Vertical Integration strategy. The innovative approach is suitable for any management firm when it comes to performing smart.

Verticalization and its Significance

Due to the changed social atmosphere, the key to growth is alternating managerial approaches. A strategy for a firm is mere like a centric approach that helps determine the successive path. All the companies need sustainability, and they implement a plan that can help them thrive in the competitive industry. The role of sustainability is different for value-based companies. To follow and focus on consumer trends, vertical integration is quite significant. The way to innovation and adoption of digital tools is strengthened by implementing new and better strategies. The world of hyper-competitiveness need structures that help them stay ahead of the competition (Edmonds, 2017). Vertical integration is about two or more production of stages that are opted by two companies. It tended to focus on the quality control format with better economies of scales and a declined level of cost. This strategy works for the high competition to acquire a high market share, even in the situation when barriers to entry are high. Costco Company is experiencing a fast-growing culture and progress. The working of the company as a big retail corporation is aligned with consumer purchasing power. The perception of consumers is beneficial to stay in the competitive market.

Due to the maintenance of competitive advantage, Costco is ensuring long term viability. Currently, the company is working on expanding its growth on the basis of the quality of affordable goods and services. The mission of the company is to bring forth quality products with a specific selling point — the integral component of quality matters due to the presence of many firms. Offering a low price is specific for the company, and it acts as a significant selling point. The Costco warehouses are always available for the consumers because its strategic objective is to follow growth on the basis of its competitive strength. Due to the intent of sustenance and long term market positioning, it is bringing customers’ value. The financial objectives of Costco are to attain high profitability in the market that can help a company survive through its revenues.

The vertical integration strategy by Costco is adopted to achieve market excellence. The company is operating at low margins to provide ease of access to its consumers. The company, as a retail store, tends to face many problems, such as supply chain management. Its focus is to provide goods worldwide customers with mastery to manage supply chain practices. Any main attributes for a large supply chain company are time and costs (Gudlaugsson, 2018). Time is all about effective delivery to shelves from the store. Late delivery creates issues for customers so that shortages can affect the business process. Cost is maintained by not passing it to consumer goods always.

There are infinite possibilities in vertical integration that can help manage the supply chain effectively. Costco can apply vertical integration strategy as an innovation to run its business model without any difficulty or disruption. The vertically integrated model of business provides the basis of taking control of the supply chain full or partial. Costco is a wholesale multinational firm that needs an effective supply chain to manage small businesses and to fulfill significant family needs. The vertical integration model will control supply chain practices with active participation. It involves suppliers’ investment and any form of business. Through vertical integration, Costco can set up a separate production facility. Its annual revenue is US138.4 bn with card holder of all category 94.3 million.

The vertical integration as a new business model in Costco will not necessarily be successful, but some factors can increase the success ratio. In the US, three companies, i.e., Pilgrim’s Pride, Tyson, and Perdue, are famous for poultry. Costco is operating at low margins, so it is not able to offer Rotisserie chicken at $5 due to competition, so the vertical integration model will allow the company to set up its processing center for poultry. It will open a chicken farming operation in Nebraska that will offer the company to engage customers with 100 million chickens (Yang, 2017).

The vertically integrated business model can be successful for Costco because its financials are very strong, i.e., annual membership fees $3.14 billion and 2.27% made net sales in 2018. It is also a lean company on overheads, so pallets are filled up with products followed by bulk packaging. It is found out that annual sales of Rotisserie chicken are the US $300 million, with the estimated project cost the US $275 million. This estimate provides a fundamental tendency to get market share, and this model can be a game-changer for the industry.

Engaging in different joint ventures is not new for Costco. It is operating with enterprises since after its establishment. It has maintained hot dog and soda deal priced at the US $1.50 since the company is engaged in hot dog products at a meat plant in California. In addition to this, the Nebraska poultry plant will manage supply chain disruption by creating economies of scale. Costco, with the help of vertical integration, can affectively build up business conditions and make farmer unions. It will also jack up project outlay as well as operational costs. The partial vertical integration strategy in Costco will help develop their business further with the incorporated distribution system. It also has cross-docking distribution centers. This kind of system allows for the stability in value chains (Zhou & Wan, 2016). The cross-docking system undertakes pre-assigned inventory to the destination. The center activities are only shipping and sorting. Costco is using the sophisticated infrastructure of IT, and it has eliminated expensive functions.

Moreover, Costco has also used a backward integration method with the Kirkland brand. The strategy of Costco about vertical integration is likely to be successful because it is working to protect the famous product line by highlighting the risk of exposure. The company is strongly performing in the retail climate, with an inherent focus on in-housing sourcing, enhancing member value, and driving costs down.

References

Boström, M., & Karlsson, M. (2013). Responsible Procurement, Complex Product Chains and the Integration of Vertical and Horizontal Governance. Environmental Policy And Governance, 23(6), 381-394. doi: 10.1002/eet.1626

Edmonds, C. (2017). Can Costco Reign in Spain?. SSRN Electronic Journal. doi: 10.2139/ssrn.2934940

Gudlaugsson, T. (2018). THE IMAGE OF COSTCO IN ICELAND AND ITS IMPACT ON THE GROCERY STORE MARKET. Journal Of Academy Of Business And Economics, 18(3), 93-103. doi: 10.18374/jabe-18-3.10

Yang, C. (2017). Could Vertical Integration Increase Innovation?. SSRN Electronic Journal. doi: 10.2139/ssrn.2930780

Zhou, Y., & Wan, X. (2016). Product variety and vertical integration. Strategic Management Journal, 38(5), 1134-1150. doi: 10.1002/smj.2540

 

[Merger & acquisition Essay] Acquisition of XYZ Company

Pages:10

Related Keywords: merger essay, mergers and acquisitions, acquisition, rules of acquisition, merger of public sector banks essay

To make the most of the available growth opportunities in the region, the management of X Corporation is analyzing different options to access more capital.

X Corporation is a well-established IT firm in Norfolk that provides IT support and solutions such as Cloud computing, Disaster recovery, and Voice and Data networks to SME businesses. Being in operations for the last 30 years, X Corporation has demonstrated a history of tremendous growth, customers satisfaction, and solid financials.

Having been managed by an experienced and committed board, constant and stable cash flows from operations, and a low level of debts make X Corporation an enticing target for acquisition or a “Leveraged Buyout”.

Customer Composition and Concentration:

X Corporation has exhibited great customer retention capability over the years. Due to its experienced and knowledgeable team and high level of customer service provision, X Corporation enjoys a large array of loyal customers. 

X Corporation serves customers ranging from small to mid-sized private businesses and non-profit organizations. The customer base is not limited to any particular industry; X Corporation has a much-diversified clientele that includes clients from a variety of industries such as engineering, construction, professional services, and motor retail.

With more than 51% of the total revenue coming from the clients who are not among the top 10, X Corporation enjoys a low concentration among its clients; hence lesser reliance on any of the clients.

Future Perspective:

Future brings several avenues of growth for X Corporation in existing and synergistic markets. Increasing dependency on IT systems and the opportunity of cross-selling of products and services in the future promise good expanding potential.

 

Financial Strength:

A strong balance sheet:

X Corporation possesses a very strong balance sheet with almost no long-term liability. Its asset base has been increasing steadily and is expected to continue the pace as much of the profit stays in the business because of the low capital requirements. The fixed assets of the company include a plant and vehicles which don’t require any capital expenditure in near future. The stocks held with the company only include computer hardware for clients which might be required on an urgent basis; otherwise, hardware is ordered as per the demand.  Due to the increasing turnover, trade creditors and debtors have been on a rise since FY14. Debtor days have gone from 26 t o31 days while creditor days have gone from 40 to 59 days in the period of the last five years.

In order to support growing turnover, never staff members have been hired which has resulted in an increase in social security. X Corporation partially financed its purchases of vehicles through “Hire purchase contracts” for which there is no longer a liability as all the payments have been paid and the vehicles are now completely owned by the company.

Growing turnover and stable gross profit margins:

Due to the satisfactory customer services and the increasing reliance of companies on IT products, X Corporation has succeeded in growing its turnover by an impressive CAGR of 10.4% from the fiscal year of 2014 to 2018. During the tenure of the last five years, X Corporation has maintained its cost of goods sold and demonstrated a healthy gross profit margin, averaging at 45.8%. However, because of the pension contributions to Mr. Robert Taylor, an employee in the operations department, gross profit margin declined slightly to 45.74% in 2017 and 44.54% in 2018.

Constant operating profit margins

The company has done well in managing its administrative expenses and kept the operating profit margins slightly above 30% during the last five years. Operating profit margin suppressed little in 2017 and 2018 due to the Director’s pension contributions which is a nonrecurring expense. Even with the increasing turnover, X Corporation has successfully maintained its administrative cost base.

X Corporation as an acquisition target:

Private equity firms lookout for companies that promise stable growth rates in the future with minimum risk. X corporation is operating in the IT industry which is poised to grow at a phenomenal rate in the future due to the growing influence of tech on businesses. Furthermore, X Corporation also has a very experienced and knowledgeable management leadership which has been leading this company for 30 years now and is willing to be a part of this company after the transaction to ensure a smooth transition to an incoming purchaser.

X Corporation also enjoys a strong competitive advantage over its competitor as it has been in business for so long and has built a strong brand name due to its satisfactory customers’ services.

Moreover, X Corporation requires a very low capital expenditure in the future and very little working capital in order to operate effectively.

All of these factors plus the strong financial past record which is mentioned above, makes X Corporation a very lucrative target for an acquisition.

 

 

Projected Financials:

X Corporation has grown its turnover by an annual average of 10.9%; keeping in mind the sound growth prospects in future for the company, we have taken the assumption that X Corporation will continue its growth momentum and will increase its yearly turnover by 10.9% annually. Gross Profit Margin will also remain constant and will follow the past average annual rate of 46%. Administration expenses will remain constant and won’t be including director’s pension contributions as in recent years directors have been paying themselves exceptional pension contributions which will not continue going forward after this transaction has been taken place.

According to our forecast, X Corporation will post a healthy net income of £386,000, £434000, and £510,000 in the following three years FY19, FY20, and FY21, respectively.

Discount rate:

In order to value any company, analysts are required to calculate a discount rate through which they can bring the future cash flows of the company at a present value. Usually, two kinds of discount rates are used for discounting purposes, WACC and Cost of Equity. As X Corporation doesn’t have any debt, we have preferred to use Cost of Equity as a discount rate. The cost of Equity can be calculated through a formula of CAPM which requires a risk-free rate, company’s beta, and market risk premium. As X Corporation is not a listed entity, we can’t find its trading Beta, that is why we are using an average of Cost of Equity rates of similar companies like X Corporation which are publically listed and regularly traded on the stock market. For the valuation of X Corporation, we will be using 9% as a relevant Cost of Equity.

Terminal Value:

While evaluating a company, analysts can only forecast cash flows to some foreseeable future. However, to know the overall value of any company, analysts also need to take into account the cash flows and value generated by the company after the forecasted future and for this purpose, analysts use the concept of “Terminal Value”. Terminal Value tends to tell the value of a company considering that the company will generate cash flows even after the projected period. To calculate the terminal value of X Corporation, we have used the FCFE of FY20 and divided it by the required rate of return, which is the cost of equity in this case, after subtracting the sustainable growth rate of 2%.

Valuation:

To value X Corporation, we have preferred Discounted Cash Flow methodology and have used “Free Cash Flow to Equity” as the company doesn’t have any debt. FCFE has been calculated by using Net income and then adding to it all the non-cash charges like depreciation and amortization. After that, we subtracted all the essential and necessary expenses like investments in working capital and capital expenditure.

After deriving the free cash flow for FY19, FY20, and FY21, we calculated the terminal value by using a sustainable growth rate of 2% and a required rate of return of 9%.

Conclusion:

X Corporation presents a very lucrative opportunity for acquirers. X Corporation’s senior and committed management, low capital and working capital reinvestment requirements, negligible amount of debt on the balance sheet, and established and loyal customers make X Corporation an enticing target for a leveraged buyout.

The total value of X Corporation is £5,728,000.

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