Emergence of management accounting

Emergence of management accounting Introduction Management Accounting deals with providing information for internal users, mainly the managers. Since they are the section of people who directs and controls the operations of the firm, the information that Management Accounting provides is very useful. Some of the basic management activities are: Planning: Considering various alternatives and choosing the best among them. Control: Ensure that the chosen plan is being followed and whether there are in line with the objectives of the firm. Directing and Motivating: Activities need to be monitored and employees need to be motivated and encouraged to ensure smooth and effective functioning of the organization (Seal, W et al., 2006). Emergence of Management Accounting The concept of Management Accounting evolved during the Industrial revolution of the 19th century. During that period, most of the companies were controlled and owned by a few managers. Elaborate financial reports were not demanded as there were no external shareholders. The 20th century saw a lot of changes in the economy; companies were required to submit detailed financial reports in order to satisfy the capital markets, taxation purposes and creditors (Seal, W et al., 2006). Earlier, production technology was simple, with products passing through a series of distinct phases of production. So, it was easier to identify the associated material and labor costs, thus direct labor was used as the basis for assigning indirect costs to products (Ashton, D et al., 1995). Role of Modern Management Accounting Organizations are under pressure to not only make decisions on a day to day basis but also to chalk out a plan that will help them to survive and grow in the ever changing market place, considering the fact that they will be faced with uncertain circumstances. The main role of modern management accounting is to provide the various levels of management with information that is relevant to make sound decisions and to add value to the company. It is slightly different from traditional accounting because they provide managers with essential information in time to set targets, minimize the cost, develop standards, monitor performances and compute variances, thereby improving the quality of the products with reduced wastage. Apart from these, Management accounting aids in improving the flexibility and innovative capacity of the organization, thus making continuous changes to improve its financial and non financial performance to stay on track with the rapidly changing economy (Atkinson, An thony A et al., 1997) (Prit, 2009). Shaping an organization Management Accounting can help shape an organization in the following ways: Provides accurate and timely information to help cut costs, measure and improve the productivity. Information on product costs helps in the introduction of new products in the market, pricing decisions and, if required, abandonment of obsolete products. For large and decentralized organizations, it is essential to motivate employees using appropriate incentives and benefits. This decision is based on the results provided by the management accounting system. Acts as a communication tool which the upper management uses to communicate with the middle and lower management and vice versa. Information about the organizational goals and strategy is passed on to the operational divisions and feedback is communicated back to the upper management (Kaplan, Robert S., 1987). Binds the operational and strategic goals together in order to ensure that the performances of the operational divisions are aligned with the organizational goals (Ashton, D et al., 1995). Management Accounting shaped by organization An organization can also have an impact on this accounting system in the following ways: In order to successfully grow in the rapidly advancing market, customer satisfaction has become the prime focus. This affects the kind of information required by the organization and demands sophisticated form of management accounting system. Since organizations are divided into sub units, the interdependence among them would be very high. As a result the dynamics of the information needed has changed. Due to increased coordination among organizations, the gap between suppliers and employees are getting narrow. This has led to changes in the way that organizations collect and use management accounting information (Atkinson, Anthony A et al., 1997). A major computer revolution has brought about a significant reduction in the information collection and processing costs and has eased the work of accountants (Kaplan, Robert S., 1987). Management Accounting a Global phenomenon The challenge faced by companies today is; the alignment of local business processes with the global objectives and strategies. Since the organizations are widely dispersed and decentralized, integration of the sub units and its operations has become vital in order to compete in the global market. This requires management of various organizational relationships, internal, external, vertical, hierarchical, horizontal and lateral ties. In the growing global economy, management accounting is required to: Manage the flow of vertical and lateral information within organizations. Integrate and coordinate activities of units located in various locations (Scapens, R et al., 2007) (Ashton, D et al., 1995). Reduction in tariffs, ease in worldwide transportation and removal of other trade barriers has increased competition as more and more companies are entering the market, thus, the need for management accounting is increasing too. For example: Since business is expanding widely, outsourcing has become a great deal and countries like India and China are leading the way in this area and have a competitive edge over other firms (Seal, W et al., 2006). Impact of globalization Management accounting is shaped by various changes in the global environment, such as: Rapidly changing business climate has increased the research opportunities in the area of management accounting. Many of the countries in the world are re-structuring themselves. Countries like Taiwan, India and parts of Eastern Europe are slowly moving into large scale privatization. This has the altered the global competition scene. Shaping global organization Management Accounting plays a major role in shaping the global: Aids in stabilizing transfer of currency and the transfer of goods and knowledge between companies located in different countries. Manages the fluctuations in currency by the purchase of financial instruments like futures and options. Enables coordination and integration among the various activities of a globally dispersed organization. Helps to monitor and evaluate the performance of its subsidiaries (Ashton, D et al., 1995). Helps in building stronger political relationships between the firm and the government of the country where it has its operations. These ties can have positive impact in the form of tax breaks, subsidies etc. 3 Recent developments in Management Accounting Techniques a) Balanced Score card This technique consists of an integrated set of performance measures that are derived from and also helps the companys strategy. It develops a strategy for the company to further it objectives successfully (Seal, W et al., 2006). The characteristics of this technique: Helps the management to clearly state the vision and strategy in a tangible form. Helps in communicating the objectives and strategy to the employees and encourages them to set individual goals and align them to the organizational objectives. Develops measures to evaluate the performance. Four perspectives of a Balanced score card: Financial- concerned with profitability. Customer- concerned with customer satisfaction, retention of previous customers and acquiring new ones. Internal Business process- concerned with the internal processes that will help in attracting and retaining customers. Learning and growth- concerned with the long term growth and development of the organization. The balanced score card is used in both the manufacturing and service sectors. An example of a company in a service sector that uses this technique is the National Insurance Company. It is the property division of one of the major US insurance companies. In the year 1993 they launched the score card technique with revenue of $4 billion dollars. Unfortunately this never worked for the company and ended up making huge losses, until a management team was brought in to make repairs. They moved the company from a generalist strategy to a specialized one, thus, helping National Insurance to regain the profitable position in the economy. The balanced score card technique has its advantages and disadvantages. Advantages: Helps in providing periodic and systematic feedback. Helps in quantifying the vision and objectives of the organization. Helps to set individual goals and aligns them with the organizational objectives, thus, uplifting the morale of the workforce. It focuses on both, financial and non financial factors (Kaplan, R.S Norton, D. P,1996) (â€Å"Balanced Scorecard for Corus Group PLC†). Disadvantages Balanced score card is all about developing a strategy and if the management devises an ill-defined and unclear one, it will lead to a futile and confusing score card. Sometimes looked upon as a purely top down approach, where the strategy is created at the top and imposed upon the employees (â€Å"Balanced Scorecard: Panacea or poisoned chalice?†). The implementation of this technique can be time consuming and difficult and may not include the interests of the shareholders, suppliers and employees (â€Å"Balanced Scorecard for Corus Group PLC†) (Kaplan, R.S Norton, D. P, 1996). b) Just in time This management technique was first developed in Japan by Taiichi Ohno in the 1970s. Toyota Motors Corporation was the first one to adopt Just in Time technique as part of its production system. In this technique raw materials go into production as soon as they are received, the manufactured parts are completed just in time to go into the assembling process and they are shipped to the customers as soon as they are completed. The main features are, materials would be purchased only for the day to day requirement and there would be no goods in process at the end of the day as they are all delivered to the customers immediately (Seal, W et al., 2006). The Just in Time technique is most commonly used by the manufacturing and merchandising sectors. An example of a manufacturing firm using this technique: In the year 1992, the sales of one of the leading car manufacturers, Porsche declined to less than 15,000 and had a loss of about $133 million. The timely appointment of two Japanese experts identified the problem as wasteful inventory in the shelves. A quality control program was introduced to reduce the number of defective parts. Ever since, their earnings have jumped to about $55 million and huge sales of about 34,000. It would be appropriate to mention about a service sector using the Just in Time technique. McDonalds adopted this technique to compete with their competitor Burger King and Wendys. They had to carefully study the system and spend approximately $25,000 in each of its outlets. This was implemented to ensure that the customers would be served with the freshest food within 90 seconds of ordering and also to cut stock costs, which would ultimately lead to staff savings (Garrison and Noreen, 2003). The benefits and disadvantages of Just in Time technique are: Advantages: Reduction in warehousing and ordering cost. Can make use of the extra floor space which would otherwise be occupied by inventory, thus, avoiding any planned expansion that could result in extra expense (Kaplan, Robert S., 1987). Throughput time is reduced; as a result, the companies can give quicker responses to customers. The rates of defective units are reduced, therefore, less wastage and cost effective production. Disadvantages: If any parts are found defective, the whole production process would be held up. Companies are fully dependant on their suppliers, since they have to be able to provide defect free goods. Implementation can be slightly difficult as the workers required to operate under this system needs to be multi skilled and flexible (Garrison and Noreen, 2003). c) Activity Based Costing Towards the end of 1980, Activity Based Costing became a popular form of costing among the organizations. This provides managers with cost information to make strategic decisions. Under this system, overhead cost pools are allocated to the products and other costing objects using a measure of activity. The indirect costs are also allocated to different cost pools, based on the activity. The costs are all attached to each product on the basis of the cost drivers associated (Garrison and Noreen, 2003) (Ashton, D et al., 1995). A large number of organizations have adopted Activity Based Costing. One example of a company in the service sector, in a developing nation, that is successfully using this technique is Tata Consultancy Services; one of Indias largest consulting organization. They used this method to identify issues in their software business. With the help of Activity Based Costing, Tata Consultancy was able to find out that the quality assurance, testing and correction costs were having a negative impact on their profitability. This costing technique provided the required cost information to help the managers set appropriate priorities and monitor the detection costs (Garrison and Noreen, 2003). Activity Based Costing has its own advantages and disadvantages. Advantages: Simple to operate and can be easily understood. Focus is mainly on what causes the costs to increase. Absorption rates are closely linked to causes of overheads. Disadvantages: Implementation and maintenance is expensive. The changes may not be accepted easily by the employees, they may resist. Managers sometimes insist on including sustenance costs and idle capacity costs, this may result in overstated costs. Activity Based costing reports does not conform to the Generally Accepted Accounting Principles. This may require the companies to have two cost systems which can be an expensive affair (Garrison and Noreen, 2003). Bibliography Seal, W., Garrison, Ray H. Noreen, Eric W., 2006. Management Accounting. 2nd ed. Berkshire: McGraw Hill Education, 1:2-12, 17: 763-765, 19: 840-844. Garrison, Ray H. Noreen, Eric W., 2003. Management Accounting. 10th ed. New York: McGraw Hill/ Irwin, 1:13-17, 8:316-320, 338-339, 10:445-454. Ashton, D., Hopper T. Scapens, Robert W., 1995. Issues in Management Accounting. 2nd ed. England: Pearson Education Limited, 1:3-5, 3:46-47, 6:115-116, 14:300. Hopper T., Scapens, Robert W. Northcott, D., 2007, Issues in Management Accounting. [e-book] England: Pearson Education Limited, 4:65-69. Available at: Google e-books http://books.google.co.uk/books?id=k3La7WnBBGICprintsec=frontcoverdq=issues+in+management+accountingcd=1#v=onepageq=f=false. [Accessed 16 January 2010]. Johnson, H. T. Kaplan, R. S., 1987, Relevance lost: The Rise and Fall of Management Accounting. [e-book] USA: Harvard Business School Press, 1:4-6, 9:215. Available at: Google e-books http://books.google.co.uk/books?hl=enlr=id=yUgXuMBxAx4Coi=fndpg=PR11dq=Importance+of+Modern+Management+Accounting+Practices+in+Modern+Business+Organizationsots=eSpMcqbPoDsig=uHxwYxFfTyR-Sw5iT-dB6v1Y45U#v=onepageq=f=false. [Accessed 16 January 2010]. Atkinson, A. A et al., 1997. New Directions in Management Accounting Research. Journal of Management Accounting Research, [pdf] 9 Available at: http://miha.ef.uni-lj.si/_dokumenti3plus2/196128/Atkinsonetal.-1997-NewdirectionsinMAresearch.pdf. [Accessed 17 January 2010]. Kaplan, R. S. Norton, D. P., 1996. The Balanced Scorecard: Translating Strategy into Action. [e-book] USA: Harvard Business school Press. Available at: Google e-books http://books.google.co.uk/books?hl=enlr=id=mRHC5kHXczECoi=fndpg=PR7dq=balanced+scorecard+in+manufacturing+industryots=wv4Ut7B5Lasig=ryw-8YdLQig50o9bzJAnPXPUQto#v=onepageq=balanced%20scorecard%20in%20manufacturing%20industryf=false. [Accessed 16 January 2010]. Bizcovering, 2009. Importance of Modern Management Accounting Practices in Modern Business organizations. [online]. Available at: http://bizcovering.com/management/importance-of-modern-management-accounting-practices-in-modern-business-organizations/. [Accessed 16 January 2010]. â€Å"Balanced Scorecard for Corus Group PLC†. [online]. 123HelpMe.com. Available at: http://www.123HelpMe.com/view.asp?id=149201. [Accessed 17 January 2010]. Davies, R. W. (Dr.), 2009. Balanced Scorecard: Panacea or Poisoned Chalice? [online]. Available at: http://www.drrobertdavies.com/balancedscorecardsuccess.php. [Accessed 16 January 2010].

Is College Worth the Cost

Is College Worth The Cost? College is getting more and more expensive as the years go on. The question is; is it worth the cost? In three different articles, authors will tell you their opinion and give evidence behind their reasoning. Derek Thompson writes â€Å"What’s More Expensive than College? Not Going to College,’ Amy Phillips writes â€Å"Is college worth the money? † and Justin Pope writes â€Å"College Costs: New Research Weighs the True Value of a College Education. † First, author Derek Thompson’s main claim is there is still something more expensive than going to school, very often that is not going to school.Thompson uses data and charts as evidence to prove his theory of the cost of college. This makes it very affective to his article because there are detailed charts helping to prove his opinion essay writer fast. His purpose for writing his article is to make sure the people who don’t know that not attending college can make you suffer in the real world with your job. The intended audience for his article is the people who don’t plan on going to college because they need to see what mistake they are making. In the chart in the article it shows us the unemployment rates from people with a Doctoral degree to people who only had less than a high school diploma.Obviously the rates for people who had less than a high school diploma were over 12 times the amount of a Doctoral degree. He also states within the article that college grads earn more than 80% than people who don’t go to school period. That’s a staggering amount of money that’s could be earned but people don’t chose to take it. I believe his evidence definitely supports Thompson’s main claim. Next, Amy Phillip’s main claim is that education is not worth the cost because to many people have a degree. Phillips uses sources to give her evidence behind her main claim.She claims that the saying â€Å"sp end more money to achieve a better standard of living† is wrong. She states that yes going to college does earn you more money but you also have student loans to pay for. And also the extra money is not promised because due to a released report by the Bureau of Labor and Statistics shows that one in five porters and bellhops have college degrees. Phillip’s goes on to talk about how if we really do know what we want our career’s to be, instead of forking out loads of money at a four or more year college we can attend vocational schools.To get our degrees faster and only learn that particular study. I believe her evidence is not very affective because the evidence she gives does not give a reinsurance to do the things that she is writing about. She is intending her audience to be to the people who are wasting their money in four or more year colleges. Her purpose for writing this was to stop the lying to a whole generation by telling them that obtaining a college d egree will make life better. Finally, Justin Pope took a different direction then his fellow writers.His first claim is that the middle-class is getting particularly squeezed with student loans in the pursuit of one. And his second claim is that students from middle income families rack up more in student loan debt on an average than other. With his first claim he gives data to support his evidence. The unemployment rate for all four-year graduates is 4. 5%. For recent graduates, it’s 6. 8%. For recent graduates trying to work with only a high school diploma, it’s nearly 24%. These statistics show that not going to school gives you a higher unemployment rate than most graduates.With his second claim the evidence is that federal grant aid targets the low-income families. Meaning that the high-income families have no problem with paying their tuition fees and with low-income the government is helping them but for the middle class families they don’t have enough mo ney to pay their whole tuition but they also don’t get assistance. So by time graduation middle class families have more student loan debt than anyone. The purpose for Pope writing this is to let the middle class know that he understands where they are coming from.I believe his examples are very affective because his evidence shows who is doing more of the suffering. And finally his intended audience is to the middle-income families. In conclusion, my opinion on college be worth the cost is, that yes I believe college is definitely worth the cost. The author that I think had the strongest argument was Derek Thompson. His way of explaining his evidence made me understand more of his main claim. Going to college not only means a lot to my mom but it does to me too.Yes, Amy Phillips does have a point with her main claim; with what I want to do when I am older I could easily go to vocational school and earn my degree a lot faster than going to a four-year college. But I think job s would hire people who have the extra education than the people with little education. Becoming a nurse is my main priority, since it is in the medical field there is more competition for jobs. So having that higher degree and longer time in college shows that I am more dedicated to becoming a nurse and it also gets me paid more than the people who just went to vocational school.

Interrupt Science Essay - 802 Words

interrupt science classes; it would provide the option, without violating students’ rights to practice their beliefs, religious or not. 2.) It is discouraged by the AAR to use guest speakers unless they have training or background in religious studies (Moore, 2010 p.23). Although this guide is written for the study of religious traditions, it could apply to the creation, evolution, and intelligent designs debate because if the wrong speaker is chosen, the students may only see a small representation of likely one side of the argument. It is suggested in this case to have them watch a debate, where they could see two or mare perspectives at one time interacting with one another. 3.) Another alternative is to take students on field trips†¦show more content†¦Constitutional tests can be applied to the above suggestions for teaching evolution, creationism, and intelligent design in public schools. For the Lemon test, it could pass for the secular purpose if done not to p romote any particular religion but as an opportunity for students’ autonomy and it must be optional. Allowing it in the schools as an elective covering multiple viewpoints does not advance religion(s) by forcing it on anyone nor does it hinder religion(s) by keeping it from anyone. Keeping out of the science classroom can help to prevent excessive entanglement. Including the teaching of evolution, creationism, and intelligent design with the latter two as an elective could pass the Sherbert test because as an elective the course does not interfere with the practice of religion(s), the compelling interest could be met because keeping it separate avoids excessive entanglement and uses science time for science instead of debates that distract from class time, also avoiding a possible altercation or mob scene. Even though the teaching of evolution, creationism, and intelligent design could in some cases be seen to promote religion just by allowing it in there, if communicated cle arly, it could pass because it is promoting the optional study of religion(s) and without favoring one over another, or encouraging not discouraging any religion. Teaching evolution, creationism, and intelligent design in public schools withShow MoreRelatedAnalysis Of Stephanie Hanes Effect : The Disney Princess Effect1216 Words   |  5 Pageshad very little influence on this reality. Stephanie Hanes, the author of â€Å"Little Girls or Little Women? The Disney Princess Effect,† discusses how little girls feel they must grow up too soon. There are several other women introduced throughout her essay whom share similar thoughts. 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How Much Are Your Books Worth

If you’re an avid reader, you may at one point find yourself with quite a collection of books. Many people like collecting older books from flea markets and antique shops but it can be hard to tell which books in your collection really have value. A rare book can sell for a substantial amount of money — but few novice collators know how to tell the difference between a nice old book and a valuable one. How to Find the Value of Books The best thing to do if you’re serious about finding out the value of your books to have a professional book appraiser or bookseller evaluate your collection. The value of  your  book depends on many things, so a professional appraisal is important — whether you are planning to sell the book or to continue collecting books of the same type. If you prefer to try to price your collection on your own, a number of notable books will give you an idea about the worth or value of your  book collection. You can find a few of the most popular books (still in print) listed in  pricing guides.   What Affects the Value of a Book? There are many factors which go into the evaluation of books or manuscripts, such as physical condition. A book that has no water damage or torn pages will be worth more than a book that was improperly stored for years. A hardcover book that still has a dust jacket will be valued  higher than one without it. Market trends will also affect the book value. If a particular author has come back in vogue, their books may be worth more suddenly. A book that had a short printing run or a particular printing error can also affect its value. A book may also be valued higher if the author has signed it.   How to Tell If a Book Is a First Edition First editions of certain books tend to be the most valuable. First edition means the book was made during the books first print run. You can usually find the print number of a book by looking at the copyright page. Sometimes, the words first edition or first print run will be listed. You can also look for a line of numbers which indicated the print run. If there is only a 1, it signifies the first printing. If this line is missing, this can also indicate its the first printing. Artists often become more popular after theyve passed on. This means that a first edition of a book which became more popular years later may have a higher value because of its originally small printing run.

Prescription Drug User Act ( Pdufa ) - 844 Words

Before getting marketing approval for any drug in United States it has to pass through FDA review process. Under prescription Drug User Act (PDUFA) came in effect in 1992, FDA has set up specific goals to improve drug review process time and created two tiered system of review times. The standard review and The Priority Review. A drug can get priority Review designation if offer major advances in treatment, or provide a treatment where no adequate therapy exists. A priority Review means that the time it takes FDA to review a New Drug application (NDA) is reduced. The goal for completing priority review is six months whereas Standard review process takes ten months. The priority review status can apply both to drugs that are used to treat serious disease and drugs for less serious illness. The FDA is giving additional attention and resources towards the drug approval process which have potential significant advances in a treatment. In the period 1999–2011, 100 FDA-priority review pharmaceuticals were approved by both the FDA and the EMA. The majority of the products were ï ¬ rst submitted to and approved by the FDA. The FDA has a signiï ¬ cantly shorter drug application review time than the EMA. Pros of Priority Review Speeding therapy to patients - The most prominent possible upside would be speed in the form of getting new therapies into patients more quickly. Helping American competitiveness -A second positive, depending on one’s perspective, would be possibly increasingShow MoreRelatedThe Black Market Of Illegal Drugs And Pharmaceuticals1592 Words   |  7 PagesStates is the drug and medical market. It is a multi-billion dollar market that serves countless people but is Americans abusing this market? There are definitely many sides to this enormous market but the part that greatly deals with the abuse is the black market that is built are the illegal sales and use of illegal drugs and pharmaceuticals. 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Vestas in Russia Free Essays

string(155) " is especially to prefer, because of its already existing hydropower stations, which could be used to compensate for the possible intermittent wind power\." Vestas in Russia Introduction For my exam project in International Business Environment I have chosen to write about the Danish cooperate Vestas Wind Systems A/S (referred to as Vestas throughout the paper). Vestas is the world’s largest producer of wind turbines and in addition to this it is also the leading company when it comes to green technology regarding wind energy . Vestas not only serves the Danish domestic market, but the company is also present on several foreign markets in other parts of Europe, Africa, Asia, Australia and North and South America. We will write a custom essay sample on Vestas in Russia or any similar topic only for you Order Now With over 22. 00 employees spread over 35 countries Vestas is categorized as being a multinational cooperation. As for the market of entry I have chosen The Russian Federation (referred to as Russia throughout the paper). Vestas has not yet entered the Russian market so my exam project will be a hypothetical one. One could question why a global actor like Vestas not already has entered a market with so big opportunities as Russia, but along with visions for great profit comes the reality of great risks and challenges as well. Russia is a vast market for windmills taking the size of the country and the climate debate into perspective. The country is the fourth largest consumer of electricity in the world , but lack of technology hinder Russia to produce it in a climate friendly way. The relevance of a successor to the Kyoto Protocol is at its highest and Russia has expressed great will to find sustainable solutions for its large electricity consumption. Companies capable of exploiting such market are in position for massive gains. This is however easier said than done. Denmark and Russia differ on several aspects of their countries’ structures and Danish companies planning on doing business in Russia hence carefully have to consider these differences. In this paper I will first describe and motivate the entry strategy of Vestas by using John Dunning’s OLI-framework . In this context I will argue why more advanced forms of FDI (Foreign Direct Investment) are appropriate for Vestas when entering Russia. Furthermore I will analyze the differences between Vestas’ home market conditions in Denmark, and the conditions of the target market, Russia, regarding adjustments in the marketing mix. To illuminate this section I will use E. Jerome McCarthy’s principle of the four P’s . Lastly I will summarize the above mentioned and discuss the best internationalization strategy for Vestas. Vestas’ competitiveness In order to describe and motivate the entry strategy of Vestas I will outline the advantages based on John H. Dunning’s OLI-framework. Although Vestas already has expanded into many different countries with regards to different culture, political systems and business systems it is not always suitable to use the same entry strategy although the firm is the same in every case. O – Ownership advantage: Vestas’ competitive advantage The O in Dunning’s OLI-framework of specific advantages deals with the Ownership advantage. To expand into new markets Vestas has to be in possession of something that gives the company an advantage compared to its competitors. Vestas has a clear ownership advantage first and foremost in form of its technology and know-how. Denmark has exploited wind energy since 1850s with the purpose of making agriculture more efficient. In the beginning of the 1970s the oil crisis influenced Denmark as well, and to avoid another economic breakdown the Danish government searched for an alternative energy industry. Vestas had already done RD (Research and development) and tried out the construction of windmills since 1971. However they first entered the market in 1979 with a licensed windmill. In the development of the required technology, subsidy from the government and research on RISO (The National Laboratory for Sustainable Energy) has had a vast significance for Vestas, enabling it to play the leading role it does today. Besides the support from the government, Denmark has a highly skilled labor force, which of course also adds to Vests’ ownership advantage. Nevertheless as Lars Andersen (Managing Director of Vestas’ Sales) mentions, it is not only the technology and the skilled employees that give Vestas an ownership advantage: â€Å"However, it also has to do with our ability to deliver on time, the fact that things work from day one, and, in particular, the fact that we fulfill customers’ expectations for a good, reliable return on their investment. In other words, we are not simply selling a wind turbine†¦Ã¢â‚¬  Vestas does not only manufacture and sell the wind turbines, it also provides installation and subsequent after-sales-service, which not many Russian competitors can match. Vestas is, in addition to the above mentioned, a multinational company with more than 30 years of experience and is therefore in a greater position than later emerged firms. Vestas is on top of this a world-known and respected brand with focus on quality and is represented in 35 countries spread out all over the world. The company has the largest market share, 24,8% , of the global market, which again places Vestas in a favorable situation when it comes to taking advantage of for instance the experience curve. L – Location advantage The L in Dunning’s OLI-framework deals with the location advantage. Saying there should be an advantage for Vestas for doing business in Russia as a location for export or more advanced forms of FDI. Russia is geographically an enormous country (covers over 17 million square miles) and includes areas with a very low population density. These areas have great potential for windmill parks and the coastal areas of the Pacific and Arctic Oceans, the vast steppes and the mountains are the areas of highest potential. On the other hand it would also be favorable to place the wind energy system in regions where there is an existing power infrastructure and major industrial consumers. Areas, which fulfill these requirements, are the steppes along the Volga River, the northern Caucasus Mountains and various locations in Siberia including the Chukotka Peninsula in the Magadan region . Chukotka Peninsula is especially to prefer, because of its already existing hydropower stations, which could be used to compensate for the possible intermittent wind power. You read "Vestas in Russia" in category "Papers" Another location advantage for Vestas is the fact that the Russian population is the fourth largest consumer of electricity in the world. Hence there is a demand for Vestas’ products and in particular when taking the Russian will to reduce greenhouse emission into consideration. Russia is willing to play an active role regarding the improvement of the global heating problem. The country has already reached its commitment stated in the Kyoto-protocol, but the Russian president Dmitri Medvedev declares that Russia â€Å"would try to reduce greenhouse emissions by 25% by 2020. † The quotation signals a will from the government o find more sustainable solutions for production in Russia, and because Vestas does â€Å"business to business† and â€Å"business to government† commerce, it is of great importance with prospect for government interest and support. In this setting it is worth mentioning that The Ministry of The Russian Federation has published â€Å"T he 2020 Energy Strategy†, which describes how to reach the new goal by prioritizing, among other things, ecological energy security through energy policy. In addition to the above-mentioned advantages of Russia as a location for Vestas’ expansion come the possibilities of reducing the overall production costs. As it is with most emerging markets, like Russia, wages are lower than in more developed markets like Denmark. Hence by moving production to Russia Vestas would be able to compete on both quality and price, although their main focus most likely would be on quality . The location advantage is even greater when taking into consideration that there are no real national or international competitive competitors settled in the market yet, hence there is a possibility of a first mover advantage for Vestas as well. Notable is nevertheless also the risk for a first-mover disadvantage in terms of costs and risks when preparing the market for the ‘new’ product. I – Internationalization advantage If Vestas expanded into Russia it would strengthen its position of being â€Å"No. 1 in Modern Energy†, which was Vestas’ slogan before the recent switch to: †Wind. It means the world to us†. Furthermore if Vestas gained the first mover advantage it would give the company control over one of the worlds biggest markets. The internationalization advantage is gained in form of a proper entry mode. The chosen entry mode is of great advantage if it is selected in accordance to Vestas’ now described ownership advantage and Russia’s location advantages. Vestas’ main ownership advantage is their know-how and technology while the location advantage of Russia primarily are the huge market possibilities and the government’s positive attitude towards renewable energy sources. What remains is, which type of entry mode that exploits both Vestas’ ownership advantage and Russia’s location advantage? Would licensing or exporting be the best-suited entry mode or should Vestas take greater risks and do more advanced FDI? Vestas wants to keep their know-how, but by pursuing a licensing entry mode, spillovers will occur. Vestas would have little control over production, giving possibilities for competitors to emerge and quickly become as efficient as Vestas. Exporting is neither a favorable entry for Vestas. The transportation costs are extremely high, when it comes to the final products. Each piece of the windmill weights approximately 250 tons and thus not suited for export. Other obstacles for the export as an entry mode are the protectionist policies and Russian trade barriers as for instance high tariffs. Vestas would have to pay up to 20% tariff + an additional charge (Value Added Tax) of another 18%, making a total of 38% for exporting its products into Russia. Russia ranks 162 out of 183 countries on the list of ease to do cross border trading with. To compare, Denmark ranks 6 which means that the products produced expensively in Denmark becomes more expensive by being exported to Russia. This situation will of course change if Russia gets its membership in the WTO, but this is not yet achieved. To sum up Vestas needs to move in with plants in Russia and with more advanced FDI to protect its know-how asset and to stay competitive. There are two options for this being either a joint venture or a wholly owned subsidiary. The most obvious solution would be the wholly owned subsidiary, where Vestas could protect its know-how by owning 100 % of the stocks. On the other hand there is a time perspective to consider as well. Siemens, one of Vestas German competitors, have recently announced plans on moving into the Russian market on a large scale . Setting up a wholly owned subsidiary as a green field venture takes a lot of time and the alternative of an acquisition is not an option since Vestas has core values and does not want to take over existing operating routines and enterprise culture. Another aspect, which is important to these considerations, is the fact that corruption and bureaucracy, which makes connections and personal relations very important for success, mark Russian business. Setting up a joint venture with a local firm solves this problem for Vestas, since Vestas would benefit from the partner’s country specific knowledge of culture, language, political systems, business systems and local connections. A joint venture is at the same time a less risky (capital vise) and less time-demanding entry mode, than a wholly owned entry mode, which Vestas needs to take into considerations in order to prevent falling behind Siemens. The major disadvantage of choosing a joint venture is of course the risk of spillover, eading to future competitors. On the other hand it is possible to construct the joint venture to minimize this risk. Vestas needs to engage in a joint venture where it owns the majority of the cooperation and thus is able to remain control. One might argue that it would be difficult to find a company, which would accept to own minority of the joint venture, but taken the undeveloped market into consideration, it should not be a huge problem. Ther e are only a few local firms in the windmill industry in Russia. All of these would most likely be interested in boosting their profit (value creation) and it is not an unattractive offer to join the world leading windmill cooperate in a first mover attempt with prospect of a significant future market share in the Russian market. The joint venture and expansion of Vestas would also have to be on a large scale to be able to capture demand, establish a strong brand name and realize economies of scale. This would no matter what be an ideal opportunity for any local producer in Russia, although they would have to accept Vestas owning the majority of the joint venture. Differences and adjustments There are several aspects where the Russian market conditions differ from the Danish market conditions. These are necessary to look at in order to outline the needed adjustments for Vestas’ marketing mix. Differences in market conditions When comparing Russia and Denmark regarding the ease to do business in, it is very clear that there is a vast gap between the two. According to a survey by The World Bank, Denmark ranks 6 whereas Russia ranks 120 out of 183 countries (1 being the easiest country to do business in). I could therefore point at several diverging market conditions, but because of limitations of this paper I have chosen to focus on the following four: Infrastructure, climate, GDP per capita and the level of corruption. One might argue that ‘climate’ is not of great importance when speaking of market conditions, but in my opinion it is a very significance factor in this case concerning the marketing mix, which I will elaborate on in the following section. Infrastructure is important for Vestas when it comes to distribution of the company’s products. When looking at infrastructure in Russia and Denmark the most noteworthy factor is distances and terrain. Russia is the largest country in the world covering 11 time zones and it does not entail deep analysis to conclude that it requires great coordinated logistic to create a well functional infrastructure. This has for several of reasons not yet succeeded for Russia and the country’s infrastructure is hence very fragmented. An uneven terrain with low population density and nature impediments as rivers and mountains has hindered buildings of proper roads and connections, which have a great influence on Vestas’ ease of doing business. Because of the enormous extent of Russia, the climate varies a lot from the coasts to the mid-country and from the west (Europe side) to the east (Asian side). The temperature fluctuates between the extremes of -65  °C in the winters and +40 °C in the summers. The wind is an important factor to look at in this case as well, because Russia possesses areas with all degrees (categorized as: Low, medium and high) of wind power. The climate differences is thus of great importance regarding Vestas’ product differentiation. Moving focus to the more economic orientated difference in market conditions is the GDP per capita (PPP). Russia’s GDP per capita is low compared to Denmark’s. According to the ranking done by International Monetary Fond, Russia ranks 51 in contrast to Denmark’s ranking as 17th . This means that Russian consumers, including the government and large enterprises, have less purchasing power compared to the Danish consumers. Little purchasing power could be an obstacle for Vestas. If consumers don’t have much money to spend, they would most likely not have the mental surplus to think of the environmental dimension by burning fossil fuels. If generating electricity the cheapest and easiest means exploiting fossil fuels, this is what they will do. However higher purchasing power (higher GDP per capita) results in the means to be able to prioritize such things as future global environment. Looking at the energy produced in Russia, over 60% of the electricity generated is based on gas- and coal power whereas less than 1% of the electricity generated is based on renewable energy production . In contrast stands Denmark, where wind power alone in 2008 generated 18,9% of the Danish electricity demand . The growth in GDP per capita in Russia was before the economic crisis, around 7-8% . This is promising for Vestas as a continuous high growth in GDP per capita means a more developed economy, higher purchasing power and therefore increased interest in products like the ones Vestas offers. The fourth difference I have chosen to outline is the high level of corruption in Russia. Russia ranks number 146, whereas Denmark ranks number 2 (1 being the less corrupt) in the Corruption Perceptions Index (2009) made by Transparency International. Vestas has no power to end corruption by itself, so instead it should focus on how to deal with it in business situations. Adjustments in marketing mix: The four P’s I will use E. Jerome McCarthy’s principle of the four P’s: Place, Product, Price and Promotion to analyze the needed adjustments for Vestas’ marketing mix. The four differences (infrastructure, climate, energy production and level of corruption) described in the previous section are all differences that affect these adjustments. The †p† concerning the place (distribution) deals with how to get the product to the consumer. It would be obvious to discuss adjustments to retail concentration, channel length, channel exclusivity and channel quality, but selling Vestas’ products is not like selling jeans or other regular consumer goods. There is no distribution channel, or at least it is very short, because Vestas sells directly to the customer, being government or large enterprises. However the undeveloped infrastructure, as outlined as a big difference between the Danish market conditions and the Russian market conditions, is of great importance for Vestas’ delivery to its customers. Vestas’ products require stable roads (due to heavy weight and size) and connections to the best set-up areas. The infrastructure is best around Moscow and St. Petersburg, due to big business, but this is not necessarily the best location for Vestas’ production. As mentioned before the best set-up areas are the vast steppes along the Volga River, the Caucasus Mountains and locations in Siberia. In Denmark Vestas can easily get around to all parts of the country, but Russia’s huge distances and the uneven terrain in many areas do acquire adjustments. Vestas carefully have to reconsider where to place the facilities of production to minimize transportation costs, and not to forget, maximize availability. This might require compromises in form of set-ups in optimal and less optimal wind areas. To do this Vestas has to deliver wind turbines that also are able to exploit the low winds and Vestas thus has to adjust its products to the Russian climate conditions. Other adjustments are necessary for the turbines to manage the before mentioned freezing winters with temperatures down to -65  °C and the hot summers with temperatures up to +40 °C. The turbines should be able to function all year round to be attractive to customers. Vestas has to differentiate the turbines to match these standards compared to the standards in Denmark, where weather conditions don’t differ as much. In other words, Vestas’ product differentiation is necessary to encounter pressure for local responsiveness and thus reach its customers. The customer segment that Vestas tries to reach is a narrow segment consisting of the government and maybe a few other large enterprises, which would be interested in promoting a green profile. The government and the large businesses would, as most customers, be concerned about price. To match Russia’s rank regarding the low GDP per capita, Vestas would have to make an adjustment in form of lower prices. Price is however not the main focus for Vestas . Quality and safety is their top priority, but of course they would be able to take advantage of the lower labor costs in Russia and thus lower the overall production costs. Vestas could however use strategic pricing in form of experience curve pricing to gain market share and relations to the large customers before competitors emerge. This could be rewarding because of the promising growth in Russia’s GDP per capita, which presents better future market conditions for Vestas’ products. Vestas should at the same time stress that setting up windmills is an investment that might require lots of capital as a starting point, but in the long-term perspective it would be worth it. Today Russia is self-sufficient in terms of energy . However the supply of fossil fuels is diminishing and the demand for it is increasing. Investing in wind power would be a possible way for Russia to stay self-sufficient in the future. Left remains the question of how to communicate all this to Vestas’ customers? When choosing a promotion strategy Vestas has to adjust its approach to the above described high level of corruption. One way of doing this is by having the right connections; knowing the right people. As previous mentioned I would suggest Vestas to pursue an entry mode of a joint venture and thereby gain the advantage of local relationships, which could help Vestas to get around the bureaucracy. On the other hand it is of paramount importance that Vestas ‘stay clean’. If Vestas in any way gets associated with any form for corruption, it will have tremendous consequences not only for the domestic market, but also for the global market that Vestas operates in. In accordance to the entry mode I would suggest Vestas to practice a push strategy. It would be a waste of resources to communicate through mass media to vast private consumer segments, to which Vestas’ products have no interest. Vestas’ communication should be directly orientated at the small customer segment, previous outlined. Personal selling, exploiting the local partner’s ability to speak the local language, perhaps supported by additional informative products to be handed out and an enlightening webpage is the best way for Vestas to reach its potential customers. Vestas’ internationalization strategy In the last part of this paper I will sum up and describe the best internationalization strategy for Vestas when entering the Russian market. Throughout the paper I have concluded that now is a good time for Vestas to enter the Russian market, because of prospects for government interest and support and no real competitors settled in the market yet. Hence Vestas has an opportunity for a first-mover advantage, but only if they enter the market on a large scale. Entering on a large scale is associated with greater risks and costs, but taken the growth in GDP per capita and the decreasing amount of fossil fuels into considerations, it is most likely that Vestas in the long-term perspective will secure massive gains from having established the contacts and its own brand in an early phase. I have already argued that I find a joint venture the most appropriate form of entry mode for Vestas. Forming a joint venture with the right partner, a partner that has agreed to Vestas’ way of doing business e. g. no corruption, is the best way to remain in control, but still benefit from local knowledge, which is of great value because of the different market conditions compared to Denmark. Due to these different market conditions, Vestas also has to adjust its marketing mix. The most important adjustments would be: Reconsideration of production locations concerning infrastructure impediments, product differentiation and the use of a push communication strategy with help from the chosen partner’s local advantages. There is no doubt about the difficulties a global actor faces. A company like Vestas carefully needs to consider every aspect of a business opportunity to prepare for an expansion into a new market. Vestas operates all over the world where it has to respond to pressures for local responsiveness and pressures for cost reductions. There is a pressure for local responsiveness in Russia due to the geography and the political system. The question is, if this pressure is low or high? I would categorize it as being in between. The pressure is not low since the expansion requires considerable adjustments in the marketing mix, but the pressure is on the other hand neither as high as pressure for local responsiveness for e. g. lothes or cars. Concerning the pressure for cost reduction it is necessary to take a look at Vestas competitors in the Russian market. At the time being, there are not many, but as mentioned before Siemens is planning on moving in. In addition to this, many Asian competitors have emerged in China as well and might constitute future competition. I would therefore say that pressure for cost reduction in Russia at the time being is low, but in the near future this pres sure will definitely increase due to the above explained. Vestas could enter with a location strategy or an international strategy, in accordance to the low pressure for local responsiveness, but if the company wants to prepare itself to face upcoming aggressive competitors it might be strategic wise to enter with a transnational strategy already at this point. Pursuing such strategy will as well benefit the information flow between Vestas subsidiaries and between the subsidiaries and the home country, which is necessary for sharing one of Vestas’ core competences: know-how. If Vestas not only is able to take advantage of the outlined possibilities but at the same time adjust and respond to the described impediments, it has great opportunities to grasp large profits and at the same time remain competitive in perspective of the Russian market as well as the global market. References The paper is based on classes in International Business Environment plus the beneath listed Book: Hill Charles WL, International Business: Competing in the Global Marketplace, 8th edition How to cite Vestas in Russia, Papers

Bellamy free essay sample

When Julian West wakes up in the year 2000, he discovers that the capitalist society in which he had previously lived has been eradicated and transformed into a socialist society where the problems of his era no longer exist . Throughout the novel, Edward Bellary addresses the hardships of a society stricken by economic turmoil and social injustice by introducing a utopian society that eliminates unequal distributions of wealth, war, greed, titration and malevolence.This utopian society features an economic structure that has consolidated multiple corporations into a single conglomerate controlled by the government, in which citizens are positioned in jobs based on their interest and skill set. Each person contributes to, and shares in the spoils of, a collective industrial system. Instead of money, citizens are given equal amounts of credit, which they can use on any purchase of their choosing however if an individual is unable to handle the credit that is allocated to them, the ind ividual will be given less credit. We will write a custom essay sample on Bellamy or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page In the kook, Bellarys vision for economic equality and individual freedom comes from enforcing universal education while providing everyone with the same opportunities. He describes a system that uses incentives such as adjustments to labor hours and forms of rewards through medals and honors to motivate individuals to work hard however find that Bellary does not consider individual differences and nature. Edward Bellarys idea that if incentives and The equal distribution of property leads to what Bellary sees as a vastly morally improved society without money and without private enterprises.In his society, people work for pride rather than for money. In addition, the patriotic desire to serve the government and the common good has replaced the profit motive. Whereas the 19th century emphasized individualism and private business, the 20th century now emphasizes cooperation and the contribution by all to the common good and the general improvement of society. Bellary based his good so ciety on a system of cooperative equality. Assuming the natural goodness of man, he contends that, given the right system, rational people would respond with cooperation.