The 15th and 16th century saw the birth of some great artists across Europe. This paper compares and contrasts two regional variations and artists that is; Spanish (Velasquez) and the Italian (Bernini) by looking at what they stood for, their similarities and differences and it concludes by giving a personal opinion on who stood out between the two.
Comparing and contrasting Velasquez and Bernini:Spanish (Velasquez)
In Spain, Velazquez an accomplished portrait artist was famous for his paintings on historical and cultural themes during the European baroque period of art. He was fondly associated with some great works such as the Las Meninas (1656) which was an all-time favorite amongst art lovers (Goldberg, 1992). He was a Christian, and he schooled in the special fields of languages as well as philosophy.
He was an adherent of long-bristled brushes for his works. Besides artwork he also taught at times. His realism-based paintings were inspired by his religious back ground of Christianity. His outstanding works contributed to the rise of the Velazquez style which was especially common because of his closeness to the royal family under Phillip IV who was at the reign in Spain at that time.
Want help to write your Essay or Assignments? Click here
Actually he continued with religious paintings with his most famous being the Christ Crucified (1632). He was famous beyond borders and served as the chief artist for King Philip IV and for a long period acted as the King’s painter. His main differences from the Italy’s Bernini artist are that: He liked and painted on historical and cultural contexts as well as portraits. He unlike Bernini painted not for monetary gains. Unlike Bernini he really expressed and upheld realism in his works.
Comparing and contrasting Velasquez and Bernini:Italian (Bernini)
Unlike Velazquez who was a painter, Bernini was more involved in sculpture. However both were masters in their fields. For both Velazquez and Bernini, they were good in multitasking as Bernini was also an architect of high standing. While Velazquez used bristled brush and canvas to paint, Bernini used chisel and marble to come up with sculptures. Both Bernini and Velazquez were religious at least at one time in their lives.
Both were attached and close to royalties for Velazquez he was close to Philip IV and committed his later years to painting for the royal palace. As for Bernini he became close to Urban VIII who commissioned him to work for him. Bernini produced works related or attached to his faith as demonstrated by one of his works, ‘the remodeled Church of Santa Bibiana in Rome’ (Mormando, 2011).
Want help to write your Essay or Assignments? Click here
Another striking similarity is how both were leading artists in their ages; for Bernini as a leading sculptor while for Velazquez he was a leading painter. Both artists traveled widely, while Velazquez made numerous trips to Italy, Bernini was a visitor to France at the invitation of the authorities. His visit to Paris projects his personality as that of a stubborn man especially because of assertions which offended the citizens when he alleged that Italy’s art was superior to that of France. We do not hear of such controversies from Velazquez.
Personal Preference
I prefer Velazquez over Bernini, because he employed naturalism and the way he could present situations as they are in reality especially the “Pope Innocent X painted in 1650 which he painted in such a real way it almost risked hurting his relations with the authorities.
Want help to write your Essay or Assignments? Click here
Images of Women
From the middle of the 19th century to the 20th century, women were among the subjects depicted most frequently by modern, experimental artists such as Picasso and Matisse. Choose at least 2 innovative works that represent women in any media, dating from 1900-1950s, to analyze in terms of form, content, and the artist’s attitude/approach to his or her chosen subject. Be sure to include analysis of your own reaction to and interpretation of the images you chose, and illustrations of the works discussed. Analyze the use of colors, lines, medium, subjects, symbols, etc
Images of Women
Women during the 19th and 20th century (and even before these periods) were the subject of depiction by most experimental artist. Picasso who was amongst these artists did experiment with women as his subject of paintings a lot of times. The reason as to why the sudden thought to have women as painting subjects cannot be originally traced but can be found in the attitude that a certain painter had towards a particular painting. This essay therefore is going to look at two works that show how women influenced art during this period and why the chosen painters used them as subjects in their paintings.
Want help to write your Essay or Assignments? Click here
Picasso’s famous painting Les Demoiselles d’Avignon (whose subject matter was five women prostitutes and a brothel) caused much uproar from the public from the depiction it created. Picasso used it to contrast between femininity and sexuality on one hand and “African masks” on the other hand. The depiction created by the picture was so shocking even to Picasso’s friends who also happened to be avant-garde artist.
Picasso always regarded African art to represent exorcism and masculinity. Therefore the painting can be regarded as a mix of stylistic and sexual extremism. The painting reflected the Picasso’s bohemia way of life and his association with person of convoluted sexuality.
Augustus Leopold’s Past and Present (1) is another piece of work that used women as its core subject. The painting was painted in the Victorian age which was obsessed with sexual promiscuity and virginity (Betsy, 1989). The painting illustrates the image of a fallen female. During the Victorian period, women were considered susceptible to social evils and they had to be protected at the comfort of their homes to avoid the danger of the world. Women were considered to be open to sexual seduction and the repercussions were unforgivable.
The paintings of fallen women were therefore celebrated because they had in them moral lessons. The painting by Augustus depicts this notion because it shows a husband who has found out the promiscuity of her wife. It has got an oil painting on the wall which symbolises expulsion from paradise and on the floor there is an apple which symbolises the unforgivable sin.
The woman has fallen on the floor asking to be forgiven and her arms are stretched out pointing at the door and the image is reflected by a mirror behind her husband and shows that she will be cast out by her husband. The picture has also got a box house made by her children but it is collapsing which shows that the home is collapsing because of the mother’s actions. The picture shoes Augustus detest of adultery and how he thinks it affects the family; furthermore it shows his feelings of what should happen to a wayward woman.
Want help to write your Essay or Assignments? Click here
Use of lines, colour and shapeson Images of Women
Both painters have used lines in their drawing to express individuality and feelings. They have been able to capture a three dimensional object and represented it into a two dimensional surface and therefore captured art’s important factors. The use of three dimensional objects by both artists has helped the viewer able to look at the objects properly and therefore get a better understanding of the painting.
Both artists are expressing some form of evil in their paintings; the colours that they used bring out this theme clearly. They have both used dull colours which symbolises the gravity of the predicament that society faces as a result of the messages contained in the paintings.
Want help to write your Essay or Assignments? Click here
INTERNATIONAL RETAIL MARKETING
International Retail Marketing
Critically evaluate different concepts and theories relating to the marketing mix. Explain the role that the marketing mix plays in the formation of a marketing strategy for a retail organisation today. Discuss key factors that may cause the international retail marketing mix to differ from the retailer’s domestic marketing mix, and how these might be implemented.
And
Critically examine the retail marketing mix of your chosen retailer for their current domestic market, and, in the context of the issues discussed above, justify what modifications you consider may be necessary in order to internationalise their mix for a specific foreign destination country
INTRODUCTION
The aim of any company that is in business is to grow and expand in terms of market share and product range. Many companies usually employ various optimal techniques towards these objectives and the choice of the concepts and theories to use is very important. There are various ways in which the company can achieve these desired results and one of them is through the use of the marketing mix strategies that target the key elements involved in market analysis. These key elements are the product itself, the price of that product, its placement and also the promotion modes employed to ensure the customer accesses the product.
PART (A)
In this part we are going to explore the various theories and concepts that pertain to marketing mix and the role they play in the designing of a marketing strategy for a retail organization. We shall also look at the main differences between an international retailer marketing mix and a domestic retail marketing mix.
MARKETING MIX THEORIES AND CONCEPTS
In seeking to understand the optimal utilization of a company’s resources to enhance product penetration and affordability there is the 4Ps concept (Luan, 2010). It focuses on the product, price, place and promotion.
Product
This refers to a good or service that is the end result of a process initiated either by the company, subsidiary or trading partner. It is what the company offers to its customers.
The producer must ensure that the product will satisfy the customers need adequately. It must be of the required quality standards and before production starts the company must carry out surveys on the exact requirements by the consumers. The company should be able to offer assurances on the safety of use of the product through warranties and safe packaging. This will ensure brand loyalty from the consumers which will lead to higher sales volumes and it will increase the market share of the product.
Want help to write your Essay or Assignments? Click here
Price
This is the value attached to a product or service and it must be paid in monetary terms to the producer.
The company must know how much the target customers are willing to pay and also their ability to pay for the product (Pitsaki, 2011). This will have a direct effect on their demand for the product. Therefore the product must be priced competitively to ensure affordability and also profitability on the part of the producer or company.
Place
This is the venue where the buyer of the product expects to find it and all relevant information that pertain to the product.
The consumer should know where to find the product easily at any time and at the right quantities. This will call on the sellers to devise clear places where the information on the product can be accessed easily. They can use the internet and even mobile phones because majority of the people have access to them.
Promotion
This is the process of reaching out to current and prospective customers to ensure the product has a wide customer base.
This calls for the stakeholders to come up with ways to inform the consumers of the presence of the organization and also its products. They must advertise their products through aggressive techniques (Peter, 2007) like sales promotions and also conduct public relations campaigns to make sure the company’s presence in the market is known by many.
PRICE
PRODUCT PLACE
PROMOTION
The 4Ps model clearly indicates that the marketing mix is surrounded by the four elements which must be carefully determined to enhance success in the market.
Growth strategy mix
This concept focuses on the use of the internet to ensure product penetration in the market (Yanan , 2000).
Market Development Strategies
The company can adopt the use of the internet to penetrate international markets. They can start advertising their products early in the potential market to make sure when they finally enter that particular region there products will already be known in various segments of the markets.
Market Penetration
The marketing team will be required to devise the strategies to be used to increase the market share of the products. They must increase their presence online to target new customers. This will also improve the loyalty of the existing customers because they will be able to engage more with the company.
Want help to write your Essay or Assignments? Click here
Diversification
The internet will be used to ensure that the company engages fully with its suppliers and intermediaries. This will make them identify potential target areas and also whether they can develop other products to compete with those that are already in the market.
Development of the product
Through the use of the internet the firm will know the strategies to use in the development of their products. They will be able to know how to add value to existing products, how to improve efficiency in the subscription procedures and also how to increase the product range so that to bring on board more e-retailers as possible. They must seek good service providers who are reliable in the market and who will offer competitive prices.
The 4 C’s Model
The customers being the target of many marketing initiatives take the centre stage in this model. The model focuses mainly on the pull marketing strategy as opposed to the push strategy adopted by the other models.
Customers: Their needs must be fully satisfied by the products in the market.
Cost: The cost of the product to the consumer should be analyzed to enhance affordability.
Convenience: The product should be readily available to the consumer anytime and anywhere.
Communication: There should be more interaction between the sellers of the product and the customers. This will ensure customer satisfaction
CUSTOMERWhat do they need? How do they need it?
COSTHow affordable is the product?
CONVINIENCEWhere are they getting the product and how much is it costing them to reach the venue?
COMMUNICATIONAre they aware the product is available?
ROLE OF THE MARKETING MIX
The role the marketing mix plays in the formation of a marketing strategy for a retail business will determine the suitability of the strategy and definitely the success of the business (Albers, 2010).
Want help to write your Essay or Assignments? Click here
The marketing mix will ensure the product chosen for sale by the retailer is suitable and fit for the particular market. This is because the success of the business will be determined by how good or bad the product is. The suitability of the product in the market will be determined by several factors which will revolve around the geographical area, the income levels of the consumers since it will affect their purchasing power and also their consumption and buying habits. The retailer will decide the units or packages of the product that best suit that market to ensure there are sales volumes and also customer satisfaction.
The marketing mix will also help the retailer in knowing the pricing modes he is going to adopt for his products. If he prices his commodities very highly they will not get customers and again if he prices them low he won’t meet set revenue targets. The retailer will therefore be required to analyze all the factors that will influence his product prices such as supplier prices, price of substitutes, competing retailers’ prices and transportation costs. This will ensure the retailer does not lose customers and he gets the expected profits from his business. The company will also be able to meet its obligations like payment of taxes, rents and rates.
Also the marketing mix will make the retailer know how his product will have wider reach to its customers. This can be done through opening more retail stores in different localities to enhance wide coverage. He will also be able to evaluate the additional costs that will result from such expansion such as increased rental bills, more wages because of the additional employees hired and even more utility bills.
The retailer will decide whether he will advertise his business. This may not be feasible because majority of the commodities he could be dealing with are normally advertised by the producer. The only advertising he can do is to inform the prospective customers of the location of his business.
There are various factors that may cause the international retail marketing mix to differ from the domestic retailer’s marketing mix. These include;
The international retailer will be expected to heavily advertise his products in the new market as opposed to the domestic retailer who expects the advertisements for the products to be done by the producer. This means the international retailer will incur heavy advertisement costs which in the initial stages may eat into his profits. This implies that profits may not be realized in the short run for the international retailer as opposed to the domestic retailer. The product may therefore take long to penetrate the international market due to these initial costs. The domestic retailer is already established in the market and his product enjoys loyalty from his customers and is already in profitability.
The international retailer will have no control of the prices that are in the market. The prices will already have been set by the local operators in that market (Rossi, 2000).The international retailer will be forced to take the prices as they are in that market to ensure that there are sales volumes. This is despite the many expenses he has incurred at the set up stage which if taken to account will mean his product price should be higher, but because the international retailer wants to enhance competitiveness he will take the market prices so that he can compete adequately with the rival products.
The international retailer will be supposed to carry out very intense promotional campaigns for his products. This is as opposed to the domestic retailer whose promotions are minimal since his goods which are mostly locally produced are mainly advertised by the producers. The domestic retailers can devise to block the international retailer by adopting low price strategies (Harald, 2008). This will mean the international retailer will take a long time to attain a considerable market share in the foreign market for his products. The international retailer will be forced to seek favorable distribution channels for his products to ensure they reach the target consumer.
The domestic retailers will be on the look out to dominate the places the international retailer may choose to advertise his products. They will adopt defensive techniques to guard against their market share which is under threat from the international retailer. The international retailer will therefore be expected to identify areas where those in the domestic market have no full control over. Such areas may include the internet and other social sites frequented by many people.
PART (B)
Inthis part we are going to review the retail marketing mix for Superdrug Company and what they are supposed to do so as to internationalize their marketing mix when they venture in Australasia.
The Superdrug Company will have to study the marketing mix in the foreign market carefully to enable it come up with a good strategy to enter that market.
Product
The market mix for Superdrug is very strong in the UK which is their home market (Meyer, n.d). They are major players in the beauty and cosmetics industry and their products enjoy wide appeal. The products are of high quality and the company enjoys sizable market share. This is because the products have fully penetrated the market. However the beauty and cosmetic industry in Australasia is saturated with many players.
The company must maintain the same quality for the products to ensure customer satisfaction. Product quality as seen in the 4Ps model is very important as it will determine the customer satisfaction levels. The satisfaction derived from the product will guarantee the sales volumes the company will achieve and the market penetration levels.
Want help to write your Essay or Assignments? Click here
Price
Superdrug will be forced to adopt a price reduction strategy for their products to realize sales volumes. There are many substitutes for their products in that foreign market and each of the domestic players will be seeking to guard their market share. Reducing prices will increase the preference of their products to many consumers and this will enhance market penetration (Edwin, 2007).
However this can only be done in the short run when the products are still in the initial introduction stages. The company after securing a sizable market share should revert to applicable prices in order to realize profits.
Promotion
The company being a foreign entrant will be expected to heavily promote its products among the consumers. This will make the majority to be aware of their presence. They will conduct sales promotions in the key areas they will identify. They should convince the consumers why they should stop using their current products and adopt theirs. This means the advertising budget will be huge because the local companies will also be guarding against their market share.
Place
Superdrug on evaluating the market will be required to identify the most convenient places to place their advertisements to ensure wide accessibility. They should consult with the major advertising consultants in the new market and seek their advice. Interaction with the consumer will be very crucial (John, n.d) because this is what will determine the demand for their products.
The company should also adopt the use of the internet to alert customers of their entrance to this new market. Loyal customers like the tourists will be happy to know their favorite products from the company are also available.
Want help to write your Essay or Assignments? Click here
CONCLUSION
The role played by the marketing mix in the formulation of marketing strategy to be adopted by companies is very important. It is used to identify key variables that determine the suitability of a particular product being in the market. This is because many industries today are dominated by players who will not give in easily to their market share. The local players want to maintain their profit margins and when any foreign entrant attempts to venture in to their market they will employ defensive tactics to ensure they preserve their market share.
To overcome all these obstacles a company should fully understand the market in which they are operating because the information gathered in local markets may also be important in the foreign markets. Failure to do this will place firms at a disadvantage whenever they seek expansion and it will be very harming to the business and to the industry as a whole.
Want help to write your Essay or Assignments? Click here
References
Albers, M (2010) Marketing Demand. London. Penguin Books, P. 9
Edwin, S (2007) Product Management. Bristol. Ace Publishers Ltd, P.23
Want help to write your Essay or Assignments? Click here
PERFORMANCE ANALYSIS OF INDITEX GROUP
EXECUTIVE SUMMARY
The analytical and critical review of a company’s performance is a very important managerial responsibility. Most of the decisions are based on the figures generated by the finance and accounting departments and this calls for strict observance of the financial reporting standards in the preparation of the financial statements. They must capture all the relevant information so that the inferences drawn from them can be realistic and effective. These figures must reflect the true and fair view of the company.
INTRODUCTION
Inditex Group is a Spanish company and one of the major players in the textile industry. It is composed of more than 100 companies all engaged in the manufacturing, designing and distribution of textiles all over the world.
Question 1.ANALYSIS OF FINANCIAL PERFORMANCE
Comparison of latest year with previous year reports.
The financial year for the Group ends at 31st January of the proceeding year.
The following are extracts from the Group’s financial statements;
Year ending 31stJan.2011
Year ending 31st Jan. 2012
Sales
12,527
13,793
Operating Income
2,966
3,258
Operating Profit
2,290
2,522
Pre-tax Profit
2,322
2,559
Net Income
1,732
1,932
Earnings per share (Euros)
2.78
3.10
.
There was growth in each of the above variables, an indication of the company’s good performance.
Question 2
Ratio analysis of both latest and previous years:
(A)LIQUIDITY
Current ratioThis ratio indicates the company’s ability to meet its current liabilities obligations using current assets;
Therefore for the year ended 31st January 2012 the current ratio for the company
The current ratio for the year ended 31st January 2011 was
Quick ratio
The second liquidity ratio is the Quick ratio. This ratio shows the ability of a company to satisfy its current liabilities using its most liquid assets ( Deverrel, 1999).
Current liabilities
Therefore the quick ratio for the year ended 31st January 2012= 5437- 1277 = 1.54
2702
For the year ended 31st January 2011 the quick ratio was =5203- 121
2675
Networking capital to sales ratio
This ratio indicates the liquid assets of a company based on its need for that liquidity (as indicated by sales) after the company meets its short term obligations.
Therefore for Inditex Group, the networking capital to sales ratio for the year ended 31st Jan 2012 was = 5437- 2702 =0.19
13793
The ratio for the previous year was = 5203- 2675 = 0.2
12527
The larger these liquidity ratios are, the greater is the company’s ability to meet and finance its short term obligations. If for instance one considers the current ratio, huge amounts of current assets and less amount of current liabilities will imply that the company can successfully meet its short term obligations.
The Inditex group is performing very well because the liquidity ratios analyzed increase in the present year as compared to the previous. This shows that chances of the company lacking liquid capital for its immediate requirements are minimal (Keegan, 2005).
(B)SOLVENCY RATIOS
These ratios show the ability of a company to service its long term debts and also any interest earnings that will accrue on those debts. The larger these ratios are the more solvent a company is and hence its ability to service any of its long term debt commitments (Caroline, 1997). These ratios include:
Solvency ratio.
This is expressed as a ratio of the total assets to liabilities. Therefore;
For Inditex company the solvency ratio for the year ending 31st January 2012 is =10959 =3.09
3544
For the year ending 31st January 2011=9826 =2.85
3440
For the year ending 31st January 2010= 8335 =3.62
2304
Debt ratio
This ratio shows the degree of reliance on debt by a company to finance its assets. The lower the debt ratio the stronger is the company.
Debt ratio= Total debt
Total assets
The debt ratio for the company for the year ending 31st January 2012= 1.54 = 0.00014
10959
The debt ratio for the year ended 31ST January 2011= 4.17 = 0.00042
9826
These figures are very low and this indicates that the company is very strong and can fully service its debts which are very low.
Indebtedness ratio
This ratio is used as an indicator of what makes up the debt liability of a company. This is because a company’s total debt can be in other areas like payables, salaries and not only in form of bank loans.
Indebtedness ratio= Total debts
Total liabilities
For Inditex Company, the indebtedness ratio for the year ending 31st Jan 2012=1.54 =0.0004
3544
For the year ending 31st January 2011 = 4.17 =0.001
3440
(C)WORKING CAPITAL MANAGEMENT RATIOS
The working capital enables a company take advantage of opportunities as they arise. The working capital is normally the difference between current assets and current liabilities.
Working capital ratio = current assets
Current liabilities
This ratio indicates the ability of the company to finance its long term obligations. It is the same as the current ratio.
Collection ratio
This ratio gives the average number of days it takes a company to transform receivables into cash.
Collection ratio= accounts receivable
Average daily sales
The collection ratio for this company for the year ending 31st Jan 2012=548.28 =14.5
13793/365
For the year ending 31st Jan 2011 = 498 =14.5
12527/365
Inventory turn over ratio
This ratio indicates how efficient a business is in the selling and management of its inventory.
Inventory turn over ratio= Net sales
Inventory
The inventory turn over ratio for Inditex group for the year ended 31st Jan.2012=13793 =10.8
1277
For the year ended 31st Jan.2011= 12527/1214=10.3
Want help to write your Essay or Assignments? Click here
(D) PROFITABILITY RATIOS
These ratios are an indicator of how well a firm is performing. The net profit margin ratio shows how much profit a company is making for every unit currency of sales (Fred, 2000).
Net profit margin ratio = Net profit after tax
Sales
The net profit margin ratio for the company as at 31st January 2012 was 14.2% and for the previous year was 12.1%
Return on assets ratio (ROA)
This shows the level of profitability as a comparison to investment in new capital.
Return on assets = Net income
Total assets
The return on investments for the company as at 31St January 2012 was 18.4% and for the previous year it was 14.9%.
This ratio tells how efficient the management is in using the company’s assets to generate earnings.
Return on equity
This rate indicates how mush the shareholders earned for their investment in a company.
Return on equity= Net income
Total shareholders equity
The rate for the Inditex group was 24.8% for the year ended 31st January 2012 and 21.7% for the previous year.
Want help to write your Essay or Assignments? Click here
(E) ASSET EFFICIENCY RATIOS
Inventory turn over ratio
This ratio indicates the number of times inventory is sold and stocked every year. If it is high the company could be in danger of having stock outs and if it is very low the company could be having some obsolete inventory that does not sell in the market.
Inventory turn over ratio= Net sales
Inventory
Inditex Group had an inventory turn over ratio of 13793/1277=10.8 for the year ended 31st January 2012 and the ratio for the previous year was 12527/1214=10.3
Days’ sales in inventory
This ratio measures the performance of the company for the management and the owners of the company.
Days’ sales in inventory = 365 days / inventory turn over
For this company the ratio will be 365/10.8=33.8 for the year ended 31st January 2012 and 365/10.3=35.4 for the previous year.
Fixed assets turn over ratio
This ratio gives a picture of how the fixed assets like plant and equipment are being used to generate sales.
Fixed assets turn over ratio= sales/ net fixed assets.
For the company, the ratio is 13793/4082= 3.4 times for the year ended 31st January 2012 and 12527/3414=3.7 times for the previous year. This means the fixed assets were used more to generate sales in the year ended 31st January 2011 than the proceeding year.
Want help to write your Essay or Assignments? Click here
Question 3
Most of the industry operators experienced moderate sales. On average majority had net profit margin ratios of between 4 to 9 %. This was mainly due to the effects of the global financial crisis of 2008 and the majority have not fully recovered.
Question 4 Key performance indicators (KPIs)
Current ratio
2.01
Solvency ratio
3.09
Collection ratio
14.5
Net profit margin ratio
14.2%
Inventory turn over ratio
10.8
Question 5
Key performance indicators denote the level of success of an activity and the achievement of a company’s goals and objectives. KPI’s are used in various departments of the organization and therefore those choosing the indicators to be used in a particular section must have a good understanding of the organization. There should also be good management frameworks in companies to enable better understanding of the procedures and hence the selection of the correct KPI for use.
Question 6
The level of liquidity and solvency for Inditex is healthy. The liquidity levels have also been rising meaning that the ability of the company to meet its current liabilities obligations using current assets has been improving. The company has also been able to continuously give dividends to its shareholders due to the impressive performances in the management of its assets and equity.
Want help to write your Essay or Assignments? Click here
Question 7
Advantages of using KPI’s
Provides vital information necessary for making business decisions
Alerts managers on the direction the business is taking and need for precautionary and intervention measures.
Provide information that enables the optimal allocation of resources and achievement of set goals and objectives.
Disadvantages
Requires a lot of resources in form of qualified personnel for monitoring and managing the processes involved.
Any biases in the data collection, computation and analysis can have negative implications to the business.
The compilation of this data helps in making key decisions concerning the business. Decisions to acquire other businesses, increasing the product range, marketing strategies to be adopted usually rely on this data (John, 2010).
Want help to write your Essay or Assignments? Click here
References
Caroline, H (1997). Financial Analysis Techniques. London. Prentice Hall, P.28
Deverrel, W (1999). Performance Indicators. Sydney. Lakers Publishers, P.4
Fred, D (2000) “The need for Financial Analysis” (Online) Available from http://www.fin.edu.au/ (Accessed on 19th May 2012)
John, V (2010). Basic Business Decisions. Dublin. Ace Books, P.19
Keegan, B (2005). Analysing Business Environments. Freiburgh. Hewmann Books, P.81
Appendix 1
Annual Interim
2012
2011
2010
2009
2008
Period End Date
01/31/2012
01/31/2011
01/31/2010
01/31/2009
01/31/2008
Stmt Source
ARS
ARS
ARS
ARS
ARS
Stmt Source Date
04/02/2012
03/30/2011
03/30/2010
04/01/2009
06/11/2008
Stmt Update Type
Updated
Updated
Updated
Updated
Updated
Assets
Cash and Short Term Investments
3,517.44
3,433.53
2,420.11
1,466.29
1,465.84
Total Receivables, Net
548.28
498.8
437.44
600.65
465.44
Total Inventory
1,277.01
1,214.62
992.57
1,054.84
1,007.21
Prepaid Expenses
0.0
0.0
0.0
0.0
0.0
Other Current Assets, Total
94.56
55.55
93.67
142.26
43.11
Total Current Assets
5,437.29
5,202.51
3,943.8
3,264.04
2,981.6
Property/Plant/Equipment, Total – Net
4,082.87
3,414.44
3,306.81
3,450.78
3,191.59
Goodwill, Net
218.09
131.69
131.69
131.69
125.58
Intangibles, Net
614.11
555.75
533.28
547.94
517.95
Long Term Investments
9.5
8.92
15.39
14.42
36.17
Note Receivable – Long Term
0.0
0.0
0.0
0.0
0.0
Other Long Term Assets, Total
597.31
512.78
404.48
367.78
252.72
Other Assets, Total
0.0
0.0
0.0
0.0
0.0
Total Assets
10,959.18
9,826.08
8,335.44
7,776.65
7,105.6
Liabilities and Shareholders’ Equity
Accounts Payable
1,838.09
1,886.67
1,557.75
1,540.77
1,577.94
Payable/Accrued
0.0
0.0
0.0
0.0
0.0
Accrued Expenses
178.46
145.57
133.92
0.0
0.0
Notes Payable/Short Term Debt
0.0
0.0
0.0
220.47
333.49
Current Port. of LT Debt/Capital Leases
0.69
2.68
35.06
13.57
37.78
Other Current Liabilities, Total
685.54
639.98
578.23
616.05
508.86
Total Current Liabilities
2,702.77
2,674.91
2,304.96
2,390.85
2,458.07
Total Long Term Debt
1.54
4.17
5.0
13.24
42.36
Deferred Income Tax
182.53
172.65
172.89
213.85
110.96
Minority Interest
40.77
36.98
41.38
26.89
23.92
Other Liabilities, Total
616.75
551.19
482.04
410.11
277.17
Total Liabilities
3,544.37
3,439.9
3,006.27
3,054.93
2,912.47
Redeemable Preferred Stock
0.0
0.0
0.0
0.0
0.0
Preferred Stock – Non Redeemable, Net
0.0
0.0
0.0
0.0
0.0
Common Stock
93.5
93.5
93.5
93.5
93.5
Additional Paid-In Capital
20.38
20.38
20.38
20.38
20.38
Retained Earnings (Accumulated Deficit)
7,312.64
6,359.81
5,343.42
4,722.56
4,181.55
Treasury Stock – Common
0.0
-0.62
-0.62
-0.62
-6.93
ESOP Debt Guarantee
0.0
0.0
0.0
0.0
0.0
Unrealized Gain (Loss)
0.0
0.0
0.0
0.0
0.0
Other Equity, Total
-11.72
-86.89
-127.51
-114.11
-95.37
Total Equity
7,414.81
6,386.18
5,329.17
4,721.71
4,193.13
Total Liabilities & Shareholders’ Equity
10,959.18
9,826.08
8,335.44
7,776.65
7,105.61
Total Common Shares Outstanding
623.33
623.11
623.11
623.11
620.96
Total Preferred Shares Outstanding
0.0
0.0
0.0
0.0
0.0
Financial data in EUR
Appendix 2
Annual Income Statement Data
Actuals in M €Estimates in M €Fiscal Period January2010,2011, 2012201320142015 Sales11 08412 52713 79315 63617 14618 858 Operating income (EBITDA)2 3742 9663 2583 7334 1414 556 Operating profit (EBIT)1 7292 2902 5222 8913 2263 553Pre-Tax Profit (EBT)1 7322 3222 5592 9183 2433 618 Net income1 3141 7321 9322 2192 4572 689EPS ( €)2,112,783,103,553,954,32 Dividend per Share ( €)1,201,601,802,112,402,67 Yield1,79%2,38%2,68%3,14%3,58%3,98% Annoucement Date 03/17/2010 06:18am03/23/2011 06:02am03/21/2012 06:40am—
Want help to write your Essay or Assignments? Click here
Want help to write your Essay or Assignments? Click here
Continental Airlines Case Study
Question One
The manager is expected to carry out the following steps to turn an organization around:
Establish all the facts.
In this Continental Airlines Case Study,the manager must establish the short term viability of the business. He has to carry out rapid internal exercises focused on existing contracts, commitments and also cash flow analysis. The contracts that may not be viable must be terminated. The manager can then assess the one year and two year viability of the business. This may require additional liquidity in form of debt or equity to finance the activities of the company.
Know what went wrong
The major cause of the problem should be known. If the company performed poorly due to sudden market changes or due to minor internal issues that took long to rectify, it should be known. The management must then come up with a remedy.
Budget
The manager must prepare budget which must be stuck to. This will control costs and spending in the organization. The company will be able to maintain its solvency.
Changing the team
The manager should reconstitute the senior management team. Those brought on board must have positive attitude towards changing the performance of the company.
Continental Airlines Case Study
Question Two
The change in the morale of the employees is due to the recognition and appreciation of their performance. The implementation of several award schemes has created internal competition among the staff in delivering services to customers. The adoption of new appraisal practices by the management has also motivated the employees.
Want help to write your Essay or Assignments? Click here
Question Three
In order for Continental Airlines to continue with its good performance the management should do the following:
They should form teams with specific goals to achieve. Each team should have its policies, procedures and standards that are in line with the overall company strategies. The head of each team should monitor and communicate performance to the top management of the company.
Each of the teams must have an annual business plan covering revenue and costs forecasts, product development and set performance targets. All these must fit into company business plan.
Each team must hold a monthly review to assess their performance against the plan. They will be able to determine how the planned targets will be achieved and also identify any difficulties in the process. They will be able to share knowledge and also develop tactics to achieve set targets. They will also be able to reallocate resources to more competitive market ventures and redesign any strategies that are in non conformity with the plan.
The top management should attend these meetings so that they have detailed knowledge of the plans. It will be easy to measure and maintain growth in the long run for the company.
Question Four
The use of different employee techniques like job enrichment will improve the performance of Continental Airlines since the staff morale will be very high. The members of staff will own the management decisions made (Gregory, 2010). They will be enthusiastic to go out of their way and, ensure set targets are met. The recognition creates a sense of commitment among the staff to deliver fully.
They will feel their efforts are being recognized and, appreciated. The targets which are set are attainable and within their reach. This creates internal competition amongst the staff to deliver on these targets. This working environment will ensure the company will continuously improve on their performance.
Want help to write your Essay or Assignments? Click here
God, Glory, Gold
Europeans began their modern exploration of the world in the period around the fourteenth and sixteenth century. Portugal, Spain, Netherlands, and England are the European states that were the foremost in this enterprise. The explorations increased their knowledge of the wider world. They were in most cases linked to missionary work, trade, and conquests as the European states sought to increase their religious, economic and political influence throughout the world. God, glory and gold were the motivation behind Europeans exploration.
In regard to god, Edgar et al argue that Europeans were motivated by the desire to spread Christianity through numerous missionary works especially in most parts of Americas. Edgar et al. argue that during the Middle Ages and the period around 1500 and 1750, Christianity was dominant in Europe but had died in most part of Americas.
Want help to write your Essay or Assignments? Click here
The belief held by majority of the Europeans who were on the mission to spread Christianity was that salvation through Christ Jesus was the only justifiable one and there was need to spread it throughout the world. They were aware of the fact that most parts of Americas had not embraced Christianity and that is why they ventured into those regions. God made Europeans to explore as they traveled the seas to almost every part of the globe in a bid to spread Christianity.
Glory
Most European states wanted recognition and therefore had to search for it. Most of them were ruled by monarchies and there was need for glory for the king. Edgar et al further argue that the power of a given state is directly related to its wealth.
The argument is informed by the Mercantilism and Zero- sum Gain thinking that was prevalent around 1300 to 1750 that, if a state does not get the wealth another state would. Therefore, these states and its citizens sought to seek more wealth hence more power in war which eventually translates to glory and recognition.
Different European states explored various regions of the world, and in reference to this discussion Americas, with an intention to obtain resources from them in addition to conquering some of them and gain glory for their immense strength; more territories a European state occupied compared to other states, the more glory and recognition it gained.
Want help to write your Essay or Assignments? Click here
Gold
Gold was a major motivation to Europeans’ exploration. As has been noted in the glory’s motivation, European states wanted wealth of their own because wealth was linked to power. In order to accumulate more wealth for their states and make their states and people prosperous, Europeans started to look for resources in Americas.
It is worth noting that, resources in Europe were not sufficient for the states and for meeting their citizens’ needs at that time and foreseeable future and it was necessary to venture in other regions. For instance, Spain ventured into South America for gold and silver, England ventured into North America for manual labor and natural resources, and France ventured in some parts of Americas for natural resources, with no particular region exactly.
These explorations were meant to bolster the economic and political strengths of European states. The exploration resulted to settlement of some of Europeans in Americas; for instance, there is majority of people of Spanish origin living in Americas presently. Finally, it is important to point out that god, glory, and gold were linked to each other in regard to Europeans’ exploration.
Want help to write your Essay or Assignments? Click here
Want help to write your Essay or Assignments? Click here
1959 Tobacco Campaign
Literature and Critique on the 1959 Tobacco Campaign in the United States
Introduction
Tobacco advertising campaign used the Marlboro man as a figure to represent the Marlboro cigarettes. This icon figure was used in the United States from 1954 to 1999. In 1954 Leo Burnett Worldwide was the first advertising firm to conceive the Marlboro man. The Marlboro man was an image which comprised of rugged cowboys with a cigarette. Such advertisements were initially introduced to make the filtered cigarettes more popular which were originally considered to be feminine in nature (Amos and Haglund, 2000).
This advert was considered to be one of the most successful and brilliant promotional campaigns of all times. The feminine campaign was transformed using the slogan “Mild as May” in a very short time into a masculine advert. The cowboys proved to be more popular when used as Marlboro men despite there being a variety of other men who could be used as Marlboro men. The popularity of the advert led into the origin of ‘Marlboro country’ and ‘Marlboro cowboy’. This essay will offer a critique of the Marlboro advertisement campaign; both the positive and negative effects of the promotion in United States.
Want help to write your Essay or Assignments? Click here
1959 Tobacco Campaign
Origin of the Campaign
The Marlboro brand was first initiated as cigarettes for women in 1924 by Philip Morris & Co. owing to the harmful effects of smoking established by scientific in 1950 the cigarette industry shifted their attention to filtered cigarettes. Nevertheless, Marlboro filtered cigarettes was presumed to be women’s brands and therefore Leo Burnett the advertising executive had to look for a different image have an appeal to a larger market.
Consequentially, the firm noticed that there were some emerging trends among the teenagers who wanted to declare their autonomy from their parents through smoking. As a result of this discovery the firm had had to focus their attention to this group of consumers.
Though scientific questions were posed concerning the contents of the filters the advertising executive reasoned that it was meant to reduce the harmful effects. With this stand he completely refused to respond to health claims of smoking Marlboro brand of cigarettes. Burnett continued to be inspired into creating an icon figure of Marlboro man and as a result the icon came in 1949 to represent masculine icon (Buckley, 1982).
The Texas cowboy- Clarence Hailey Long story came to his attention in an issue of life magazine where the new Marlboro now represented images of other masculine occupations such as gunsmiths, sea captains and athletes tough more attention was placed on the cowboy image as the Marlboro man (Thomas, 1991).
1959 Tobacco Campaign
Want help to write your Essay or Assignments? Click here
Marlboro man icon
Owing to the failure of the paid models of Marlboro men who lacked authenticity, Burnett came across a cowboy actor Darrell Winfield working as a cowboy on a ranch. Darrell Winfield represented Marlboro man for a period of 20 years until 1980 when he retired (Sanz and Johnson, 1990). So much was spent looking for another icon of Marlboro where another figure came up by the name Brad Johnson in 1987 (Marken and Anzeigen, 1975).
Success or Failure of the advert
Quite a substantial amount of sales were recorded due to the immediate effect of the Marlboro man Campaign (Moellinger and Craig, 1972). The sales skyrocketed from $5 billion in 1955 when the Marlboro man campaign was conceived to $ 20 billion by 1957 which was quite significant representing 300% increase in a span of two years only!
The rising health concerns were overcome through the Marlboro Man campaign as the advertising campaign focused more on the success (Barry, 1997). Eventually heavy imitation was observed with use of Marlboro Man where other executives invented new taglines such as “independent thinkers”, “Men of America” in relation to smoking Marlboro brands (Schudson, 1984).
It is however discerning to notice that all the three men who made appearances in the Marlboro promotions succumbed to lung cancer. These were; David McLean, Wayne McLaren, and Dick Hammer. The Marlboro Brands of cigarettes were branded as ‘cowboy Killers’. As a matter of fact McLaren had to testify in support of anti-smoking legislation, nevertheless, Philip Morris refuted the claims that McLaren ever appeared in the Marlboro Man campaign. Before his 52nd birthday in 1992 McLaren succumbed to lung cancer.
1959 Tobacco Campaign
Want help to write your Essay or Assignments? Click here
Various concerns raised in America on Marlboro Man campaign
Various activists came up to oppose the use of Marlboro Man campaign and launched anti-smoking. The World Health organization claims if unchecked there will be a death rise due to cigarette smoking to 10 million people per year from 4 million reported yearly cases. Though the consumers were fully aware of the harmful effects of cigarette smoking they continue to smoke owing to the effects of the Marlboro Man campaign (Rollin, 1997)).
It was and it is still quite alarming that the number of lawsuits and damages claimed are in billions of dollars including numerous files opened of Philip Morris owing to the advertisement especially in Florida and Minnesota’s States (Henry, 2007).
Eventually, the sales in Marlboro brands recorded a huge drop due to imposition of government restrictions on cigarette advertisement. The marketing approach for the brands had to shift their strategies. Hence Philip Morris changed to negotiations strategies with the relevant authorities into reducing the smoking habits (Michael, 2000)
1959 Tobacco Campaign
Want help to write your Essay or Assignments? Click here
Conclusion
Despite the change of tactics for the Marlboro Man campaign, much is needed to be done concerning tobacco adverts by Marlboro brands. The campaigns have changed into making smokers to have a lifelong of smoking. In spite of the growing health concerns in relation to smoking, many people have continued to use the Marlboro brands because they want to be seen like real men. The ladies want to feel a sense of independence; the teenagers want to show a sign of rebellion to their parents by smoking Marlboro brands.
The menace of smoking cannot be put to a stop if the anti-smoking campaign does not begin at the grassroots level through sensitizing of youth and other smoking against smoking. The government has a big role to play as observed through exercising of strict anti-smoking campaigns in the United States and completely banning any form of promotion for Marlboro brands and other brands as they have proved to more influential.
Buckley, K. W. (1982). The selling of a psychologist: John Broadus Watson and the application Of behavioral techniques to advertising, Journal of the History of the Behavioral Sciences, 18(3), 207-221
Cynthia Sanz, Kristina Johnson, (1990), an Ex-Marlboro Man Who Can Really Ride, Brad Johnson Adds Sigh Appeal to Always, People’s Magazine, vol. 33 no 7
Heiße Marken, Coole Anzeigen, (1975), Come to Marlboro Country”1975 US ad campaign, Brand Hot
Kevin Thomas, (1991), MOVIE REVIEW: ‘Harley Davidson, Marlboro’ . . . Lively butLudicrous, Los Angeles Times
Michael Schudson (1984), Advertising, the Uneasy Persuasion: It’s Dubious Impact on American Society, New York: Basic Books, p. xiii and p 45.
Moellinger, T., & Craig, S. (n.d.). (1972) “So Rich, So Mild, So Fresh“: A Critical Look at TV Cigarette Commercials: 1948-1971.
Neil Henry, (2007) American Carnival: Journalism under Siege in an Age of New Media University of California Press
Schudson, Michael. (2000). Advertising as capitalist realism. Advertising & Society Review 1(1),
Want help to write your Essay or Assignments? Click here
Want help to write your Essay or Assignments? Click here
Fortis Bank SA/NV v Indian Overseas Bank
Outline: Analysis of the judgment in the case of Fortis Bank SA/NV v Indian Overseas Bank.
Introduction: gives a history of the case and the judgment.
Body:
The reasoning applied by the judge to arrive at the ruling.
Analysis of the law applied.
Examples of case studies where the same law was applied.
Conclusion: a summary of the issues discussed above.
Bibliography: a list of the references cited.
An analysis of the judgment in the Fortis Bank SA/NV v Indian Overseas Bank case
Letters of credit have been in use for many years. There are two types of letters of credit: commercial letters of credit and stand by letters of credit. The purpose of commercial letters of credit is to ensure payment of goods in international trade.[1] Standby letters of credit are used to provide third party credit support.[2]Article 5 of the Uniform Commercial Code, applies to all types of letters of credit. UCP set of rules have undergone several revisions to meet the demands that arise from transactions.[3]
Following revision, UCP 600 was drawn up under the International Chamber of Commerce in 2006 and took effect in July 1, 2007.[4] It replaced UCP 500.[5] Its full name is 2007 Revision of Uniform Customs & Practice for Documentary Credits, UCP 600.[6]A letter of credit contains the independence principle. By the independence principle, payment is only done when all documents are received by the issuer.[7]
Fortis Bank SA/NV v Indian Overseas Bank
This principle is found in article 4(a) and 5 of UCP 600. UCP 600 is only applicable where the both parties have agreed that is applicable.[8] A number of issues have arisen from the interpretation and implementation of the set of rules.[9] However, with continued application and interpretation of UCP 600, the set of rules become clearer and clearer. One good example of a case that has contributed to the interpretation of UCP 600 is the Fortis Bank/Stemcor v Indian Overseas Bank.[10]
Fortis Bank SA/NV v Indian Overseas Bank
Want help to write your Essay or Assignments? Click here
In August 2008, Stemcor signed five contracts for the sale of steel scrap to SESA in India.[11] Payment was to be by sight letter of credit (L/C) opened by a first class bank. This was advised by the first claimant bank in this case, Fortis. The applicant of the L/C was MSTC, a company that assisted SESA in doing the purchase. Indian Overseas Bank opened five letters of credit. These were subject to UCP600.
Thereafter, IOB notified Fortis. Stemcor presented the relevant documents to Fortis including the bills of lading as was required. Fortis went ahead to make payments of letters of credit 1-3. Fortis forwarded the remaining two L/Cs to IOB. Market prices had fallen sharply by the time the shipment was done.
For this reason, SESA declined to pay for the cargo. It then notified MSTC of discrepancies in the documents. As a result, IOB went ahead to reject the documents presented to it by Fortis. Thus, it refused to pay Fortis under letters of credit 1-3 or Stemcor under letters of credit 4-5. This forced Fortis and Stemcor to move to the Commercial Courts.[12]
Want help to write your Essay or Assignments? Click here
Fortis Bank SA/NV v Indian Overseas Bank
Hamblen J held that IOB did not have any valid defense except for one point of discrepancy in the beneficiary’s consolidated certificate. The judge also decided that IOB had the responsibility to act in accordance with its statement on the notice with reasonable promptness. Failure to do this would trigger the preclusion rule that would require IOB to honor the letters of credit. IOB went ahead to appeal. The Court of Appeal gave the judgment ([2011] EWCA Civ 58)[13]that dismissed IOB’s claim.
The court decision stood by the fact that sub-article 16 (c) of the UCP 600 gave a provision for what a bank ought to do, if it decides to reject the documents.[14] The provision states that the issuing bank must give a notice to the presenter. The notice should indicate that the bank is refusing to honor or negotiate, the discrepancy in respect to which the bank is refusing to honor or negotiate.
The bank is holding the documents pending further instructions from the presenter, that the issuing bank is holding the documents until it receives a waiver from the presenter and accepts it or receives instructions from the presenter prior to agreeing to accept a waiver; or that the bank is returning the documents or that the bank is acting in accordance with the instructions previously received from the presenter.
Fortis Bank SA/NV v Indian Overseas Bank
Want help to write your Essay or Assignments? Click here
Based on this, the judge confirmed that IOB was in breach of the contract to Stemcor as it failed to return the documents to Stemcor. The limit of reasonable promptness was also defined. The period ought to be shorter than five banking days, i.e. the time taken to decide as to whether or not to return the documents. With reference to this case, the need for a quick return of documents is emphasized in Legal Matters.[15] The court determined that IOB returned the documents weeks later after having said that they had done so.[16]
Fortis Bank SA/NV v Indian Overseas Bank
With regard to L/Cs 1-3, the judge held that IOB acted in breach of the agreement between them and Fortis. Thus, it was obligated to reimburse Fortis. However, this did not extend to Stemcor. From article 7 (a) (ii) of UCP600, the issuing bank had the duty to honour the credit if there was a failure by the nominated bank to pay. Hence, once Fortis discharged its obligations to Stemcor, Indian Overseas Bank was not obligated to Stemcor.
Two causation issues were raised in the case. The first one dealt with Stemcor’s failure to establish on the balance of probabilities that had Indian Overseas Bank honoured the five letters of credit, SESA or MSTC would have paid for or taken the cargo. Thus, port and detention charges would not have been incurred. Secondly, Stemcor was seeking payment not on wrongful detention of the documents. Rather, their claim was based on failure to make payment. For this reason, the judge expressed doubts regarding an effective cause of the loss.
Fortis Bank SA/NV v Indian Overseas Bank
Want help to write your Essay or Assignments? Click here
Further judgment saw the judge reject arguments brought forth by Indian Overseas Bank. The judge held that Stemcor did not have the documents of title in its possession and it could not assert any control over the goods. By asserting control over the goods, Stemcor would have lost its claim against IOB or SESA. The judge asserted the validity and fairness of the deals between Stemcor and the carrier. Indian Overseas Bank also argued that Stemcor was arguing repudiation. However, the judge pointed out that it would be commercially unwise for Stemcor to adopt this proposal in light of the risks involved in the law. Based on this, Indian Overseas Bank failed to prove that Stemcor had breached its contract.
Want help to write your Essay or Assignments? Click here
Fortis Bank SA/NV v Indian Overseas Bank
The judge’s conclusion didn’t express clearly whether Stemcor was expected to mitigate the loss. However, this aspect was implied in the judgment. This may be deemed to be contrary to the suggestion in by Gutterage and Megrah.[17] They suggest that the beneficiary isn’t obligated to mitigate the losses incurred in a transaction.
Further analysis of this case shows that Stemcor could have taken a different approach with regards to the letters of credit. Stemcor would have argued that there was wrongful detention of the documents by IOB. Moreover, Stemcor also has a basis to seek damages from SESA in relation to letters of credit 1-3. This may be based on the CFR sale contract.[18]
As mentioned earlier, the UCP 600 is subject to different interpretations. Nevertheless, the ruling made in this case acts as a precedent especially with regards to obligation of an issuing bank to return documents if there are any discrepancies within them.[19]
Fortis Bank SA/NV v Indian Overseas Bank
Want help to write your Essay or Assignments? Click here
L/C Consultancy Services highlights some of the risks involved in a letter of credit transaction.[20] The applicants risk non delivery, exchange rate risk or goods delivered being of inferior quality. In this particular case, SESA declined to take the goods due to poor market prices following the delay by the banks.
In conclusion, this case highlights the importance of a timely response. Due to failure by Indian Overseas Bank to notify and send back the documents to Fortis in time, it was forced to reimburse the claiming bank. Also, payment is only done upon receipt of the letter of credit. In addition to this, the letters of credit carry much weight in determining whether one of the parties is paid or not.
BIBLIOGRAPHY
Book sources:
Andrle .P, ‘Ambiguities in the new UCP’, DC Insight, Vol 13, pp.17-18
Commentary on UCP 600, International Chamber of Commerce. Paris, France: ICC Services, 2007.
Dolan, F. John, Letters of credit A.S.Pratt, 4th Ed., 2007, pp 1-31.
DPP Fortis Bank/Stemcor v Indian Overseas Bank, [2011] EWCA, Civ 58.
Gutteridge & Mgrah, Law of Bankers’ Commercial Credits, 8th edn, 2001
Xiang Gao and Buckley Ross C., The Unique Jurisprudence of Letters of Credit: Its Origin and Sources, 4 SAN DIEGO INT’L L. J. 91 (2003).
Journals and other publications:
‘Current legal developments at IMO’, “Shipping & Trade Law”, Informal Law & Finance, 1-2 Bolt Court, London Vol.11 no. 5 June 2011, p.6
Gallagher,Jr.P. Daniel ; Brown, Michael J.; Parson, Robert; “Fortis Bank/Stemcor v Indian
Overseas Bank: Article 16 under scrutiny” March 03, 2011.
Goode Roy, Guide to the ICC uniform rules for demand guarantees, International Chamber of Commerce, Publication No. 510, 1992
ICC, “International Standard Banking Practice for the Examination of Documents under Documentary Credits,” No. 681, 2007.
ICC, The Uniform Customs and Practice for Documentary Credits, 2007 Revision,
ICC Publication no. 600 (“UCP”)
Nielsen Dr. Jens; Nielsen, Nicolai, Standby Letters of Credit and the ISP 98:
A European Perspective¸ 23 Banking & finance L. REV 163 (2001),
WoodJeffrey S., “Drafting letters of credit: Basic issues under article 5 of the uniform commercial code, UCP 600, and ISP98”.The Banking Law Journal, Alexesolutions,inc. Feb 2008, p.2
Web sources:Fortis Bank SA/NV v Indian Overseas Bank
[1] Jeffrey S. Wood, “Drafting letters of credit: Basic issues under article 5 of the uniform commercial code, UCP 600, and ISP98”.The Banking Law Journal, ALEXeSOLUTIONS,INC. Feb 2008, p.2
[2]Dr. Jens Nielsen and Nicolai Nielsen, Standby Letters of Credit and the ISP 98:
A European Perspective¸ 23 Banking & finance L. REV 163 (2001),
[3]Roy Goode, Guide to the ICC uniform rules for demand guarantees,International Chamber of Commerce, Publication No. 510, 1992
[4] Commentary on UCP 600, International Chamber of Commerce. Paris, France: ICC Services, 2007
[5]Gao Xiang and Ross C. Buckley, The Unique Jurisprudence of Letters ofCredit: Its Origin and Sources, 4 SAN DIEGO INT’L L. J. 91 (2003).
Want help to write your Essay or Assignments? Click here
Foreign direct liability
Critically analyse what you understand by foreign direct liability
And
Critically evaluate the legal obstacles in regulating the activities of multinational companies.
An analysis of Multinational corporation operations and foreign direct liability.
Foreign direct liability
Introduction
Over time, parent companies mostly in developed countries have set their sights on foreign markets. This has led to an increased number of multinational companies. Multinational companies (MNCs) are defined as enterprises that have production and delivery services in more than one country.[1] Thus, the location of the company’s headquarters is referred to as the home country while the host countries are the other countries that it has invested in.
This has been facilitated by increased competition and globalization. Driven by the motivation to maximize profits, these companies have extended their boundaries all over the world. Most of them have even penetrated what would be termed as high risk areas. These are mostly war torn countries or those that have poor governance relating to dictatorial leadership.
In their quest to set base in foreign markets, these companies have to interact with the locals. Foreign direct Investment has experienced exponential growth in developing countries. World trade has exceeded $15 trillion over the last three decades. In the 1990s, a large portion of external finance in developing countries was attributed to foreign direct investment.[2]Their presence in these markets has led to great benefits.
Not only do the people benefit from employment, but impartation of new skills. Moreover, the multinational companies introduce new technology and knowledge[3]. In addition to this, the entry of multinational companies into these markets has put the developing nations on the trade map. Their entry has also contributed to the utilization of a country’s resources.[4]
Want help to write your Essay or Assignments? Click here
In order for these companies to establish themselves, they consider certain factors. These are known as the push and pull factors. The push factors force the companies from their home countries whereas pull factors lure them to new locations. Market based factors consider labor costs, information skills, investment incentives and management prowess. Efficiency based factors include common governance, economy of scope, production incentives and product specialization.
Strategic based factors on the other hand consider market access, distribution of the product, customer access and performance and input quality protection. Lastly, resource based factors are another key consideration. These include availability of capital and natural resources, supply stability and market controls.
In choosing to establish themselves in host countries, the MNCs are forced to adapt to the standards set by the jurisdiction they’ve chosen to operate in. Hence they align their production processes to the demands of the host country. With regards to labor costs, MNCs trend over the years is to pay the workers in the developing countries low wages.
It should be noted that once MNCs establish enter foreign markets, they become vulnerable to arbitrary government actions such as sudden contract renegotiations, being forced to but licenses or arbitrary withdrawal of the same or in some instances, expropriation.
Want help to write your Essay or Assignments? Click here
Nevertheless, MNCs play a major role in any market they enter. They impact government policy significantly. They influence how the government formulates policies regarding the country’s economy. Where the policy does not favor the multinational corporations, they threaten to withdraw from the market.[5] This is especially common with MNCs that have monopoly in a particular sector. Countries like the United States however, have managed to curb this through the presence of domestic market competitors.
Another avenue provided for MNCs to influence government decision is through lobbying. In the United States, an individual or group’s ability to lobby is enshrined in the right of petition contained in the Amendment to the United States Constitution.[6] Lobbying in the United Kingdom is considered as a way of promoting democracy. A statutory register for lobbying and lobbyists was recommended by the House of Commons Public Administration Select Committee.[7]
In the European Union, lobbying is done with the aim of influencing the European Parliament, the Council and the Commission.[8] Multinational corporations lobbying is directed at a range of issues such as the tariff structures and environmental regulations. Their purpose for lobbying on some of these issues is to filter out competitors. For instance, if a multinational company pushes for stringent standards on environmental safety, any other competitor that is unable to meet the requirements is automatically locked out.
Wal-Mart, a multinational corporation in the USA benefited from the zoning laws that created barrier to entry for other companies.[9] The zoning laws spelled out the areas that could be developed and for what purpose, regulating building heights, lot coverage and other aspects pertaining to land use.[10]
Want help to write your Essay or Assignments? Click here
In maintaining monopoly in a given sector, these corporations acquire patents. For instance, Adidas, renowned shoe manufactures, holds a patent to protect its shoe designs whereas Microsoft holds a software patent.[11]
International law and treaties.
Besides the individual national laws that govern sovereign states, the public international law was instituted to govern the relationship among sovereign states.[12] Hence, multinational corporations are affected by the international law. Increased global trade, environmental degradation and human rights violations have increased the importance of international law which is used to govern these issues.
In addition to this, international law is used to solve disputes that arise from the interpretation of and implantation of national laws.[13] The sources of international law are customs and treaties. Treaties result from consent to follow them by a number of countries while customary international law emerge from practices carried out by nations that believe they ought to be part of international law.[14]
Customary law has been used by environmentalists to affirm the need for countries and corporations to take care of the environment. This is clearly outlined in Principle 21 of the Stockholm Declaration and Principle 2 of the Rio Declaration.[15] These principles give the countries the right to exploit their resources but not to the extent of damaging the environment of areas beyond their jurisdiction.
Several treaties have also been established in relation to environmental protection. For instance, 2001 Stockholm Convention on Persistent Organic Pollutants prohibits the use of certain chemicals while putting restrictions on the use of others.[16] Nuclear and air pollution is also regulated by the International Convention on Oil Pollution Preparedness. Voluntary Corporate Codes of Conduct have also been established. The ISO 14000 established by the International Organization for Standardization is a set of environmental management standards that corporations voluntarily adopt to prevent pollution.[17]
Want help to write your Essay or Assignments? Click here
Foreign Direct Liability.
The negative impacts of multinational companies have led to the emergence of the foreign direct liability concept. The negative impacts have driven the locals to seek legal action against the multinational companies in their home countries.[18] The claims often relate to negative environmental and health impacts on the locals caused by a company’s operations in the area. For instance, in the US, cases have been brought forth against Union Carbide, Texaco, Unocal and Freeport McMoRan.
Union Carbide, a US based corporation invested in India. On December 3, 1984, the plant experienced a gas leak that killed 3,787 people and another 8000 that died from gas related diseases. [19] Immediately after the catastrophe, the company, Indian and U.S governments embarked on legal proceedings. The CEO of Union Carbide, Warren Anderson was summoned to the US Congress.
Not satisfied, in March 1985, the Indian government formulated the Bhopal Gas Leak Act that mandated it to be the legal representative of the victims.[20] The case was later transferred to India for hearing. This was challenged by Union Carbide management but was not supported by the US courts. In June 2010, 7 of the former UCC employees were convicted for negligence that caused the deaths.
Want help to write your Essay or Assignments? Click here
This is just one of the cases where foreign citizens have sought litigation in the home countries. As seen in the Bhopal case, due to failure to determine under which law the case was to be heard, there was a lot of back and forth between the Indian and the US government. Consequently, those responsible for the 1984 disaster were convicted sixteen years later. This clearly outlines the need to harmonize the legal systems between the home and host countries. Whenever a multinational company invests in another country, there should be clear guidelines on how cases involving the locals will be handled.
Foreign direct liability may have an impact on corporate performance.[21] Since the litigation process is an expensive course and in the event that the corporation losses against the plaintiffs and are forced to compensate them, then this is a factor that would cause the corporations to rethink their actions in the host country. Therefore, foreign direct liability may push them towards implementing risk management strategies.
In addition to this, the home countries can however play a role in regulating the influence of multinational corporations in the host countries in terms of the foreign direct investment.[22] The home country governments can limit the amount of investments an MNC can have. This will help to reduce their monopoly in foreign markets.
However, the MNCs have devised other means of avoiding foreign direct liability.[23] Among the measures they use is contracting what they view as the risky parts of their activities to subcontractors. Secondly, they insulate the parent company from any claims by separating the day to day management of the parent company from those of its subsidiaries.
Want help to write your Essay or Assignments? Click here
Another factor to be considered is the involvement of the local government in the corporations’ activities. They take part as business partners or beneficiaries. Hence, the host governments are likely to turn a blind eye on the MNCs activities.[24] This makes the victims’ quest for justice a big challenge. Worse yet is that even if the victims win and are to be compensated, the local subsidiaries may not be in a position financially to fulfill their obligations.
When analyzed from a corporate social responsibility (CSR) point of view, it ought to be the responsibility of these corporations to ensure that their workers have favorable working conditions.[25] By this, they should apply the same standards they apply at home in the host country. The issue of different standards at home and abroad should not arise. Hence, the best environmental and health standards should be applied wherever they choose to invest.
On the other hand, foreign direct liability opens up the host country to impositions by the home country.[26] The home country courts are likely to demand to have their way with regards to the host government’s choices. They may demand very high standards that the host government may not be in a position to meet based on the developing countries’ status. In the event that a disaster occurs, then the company together with the home government absolve themselves from any responsibility laying the blame on the host government for failure to implement their recommendations.
Want help to write your Essay or Assignments? Click here
Political, legal and social risks.
Besides this, multinational corporations face a lot of risks in their foreign operations. They are forced to deal with additional costs arising from their unfamiliarity with the foreign market, discrimination from the customers, suppliers or government entities[27]. Moreover, other costs are associated with international operations.
Multinationals also stand the risk posed by political decisions arrived at by a country’s governance.[28] Political changes that alter the expected outcome of a given economic action determine the probability of a company’s prosperity in the given country. These risks may be classified as micro-level political risks and macro-level political risks.
Macro-level political risks do not only refer to country level political risks, rather it is a coupling of local, national and regional political events. These risks may result in confiscation or seizure of a businesses’ property. Micro-level political risks on the other hand may be termed as project-specific risks. These risks tend to favor the local industries compared to multinational companies.
Micro risks arise from prejudicial actions or corruption. A good example of how companies can suffer from political risks is illustrated by Cuba. Following Fidel Castro’s takeover of Cuba in 1959, American owned assets and companies were expropriated as explained by Simon.[29] These companies incurred losses to the tune of hundreds of millions of dollars.
Macro level risks can be mitigated by the company understanding the political uncertainties of the host country. At the micro level, political risks can be mitigated through political risk insurance and hedges. Institutions such as Multilateral Investment Guarantee Agency (MIGA) and Overseas Private investment Corporation (OPIC) are just but a few of the public sector insurers that provide project specific political risk insurance.
Through insuring investors, MIGA promotes foreign direct investment in developing countries[30]. OPIC is an American based agency that mobilizes the private sector to invest in new and emerging markets. Portfolio of investments can be covered by private market insurers. Political risk insurance covers a variety of risks that the investor may face. These are currency inconvertibility, expropriation; loss of an investment due to confiscation by the host government; and political violence.
Want help to write your Essay or Assignments? Click here
In addition to this, legal risks are another challenge for MNCs. This results from a lack of clear guideline on the law applicable when a legal matter arises. For instance, the foreign direct liability cases prove to be a challenge as to which law to apply in determining the cases. The difference in the legal cultures of the host and home countries become barriers to the resolving of such cases.
Social risks on the other hand arise from crimes, violence and racial discrimination.[31] Multinational companies tend to be victims of crimes. This may be attributed to lack of confidence by the locals in their operations.[32] To add to this, people’s perception about a company influences the decisions they make. Multinational companies fall prey to this menace especially from customers who may view a company in a particular way. Wrong perception may also arise from lack of information about a company’s operations.[33]
Wal-Mart Company has faced a series of criticism from labor organizations, human rights activists and other entities.[34] This has given their consumers a negative perception about the company. Apart from this, multinational companies face racial discrimination from locals in the host countries. The domestic markets have a higher tendency of favoring the local industries compared to the foreign companies.
One of the ways of mitigating social risks is through corporate social responsibility.[35] Creating programs that help the MNCs keep in touch with the locals serves a good strategy to deal with the perceptions the locals may have about it. Some of these programs include creating social events where both parties can interact such as fun days for the employees. In addition, some MNCs have gone ahead to engage in programs that meet the needs of the locals such as establishing schools, providing water and other social amenities. Moreover, transparency about the companies’ operations also contributes to mitigating social risks.
Want help to write your Essay or Assignments? Click here
Conclusion.
In conclusion, multinational corporations are companies that have extended their operations from the home countries to foreign markets that are referred to as the host countries. These companies take into consideration the viability of the foreign markets before they establish themselves. Their entry into the host country implies involvement of the locals in the company’s operations. In addition to these, international laws have been put in place to govern the management of resources with respect to health and environmental safety.
Multinational countries tend to have different standards in the home and host countries. This gives rise to foreign direct liability. Access to justice is the underlying issue in foreign direct liability. The victims in most instances seek justice in the home country. However, this is still a foreign concept to many countries. As seen, multinational companies face several risks including legal, political and social. All in all, there is a need to develop a strategy where foreign direct liability is handled amicably and justice is served. Moreover, multinational companies need to not only be driven by the desire to make profits but work towards corporate social responsibility.
Want help to write your Essay or Assignments? Click here
BIBLIOGRAPHY
Book sources:
Aitken J.Brian and Harrison E. Anne, “Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela,”, p.1, June 1999.
Barber, Jeffrey, “Responsible Action or Public Relations? NGO Perspectives on Voluntary Initiatives,” Industry and Environment, 1998.
Barnett, Richard, Global Reach: The Power of the Multinational Corporations, 1975.
Enneking , F.H. Liesbeth, “Crossing the Atlantic? The political and legal feasibility of European Foreign Direct Liability Cases,” The George Washington International Law Review, p 903, 2009.
Handl Gunther and Lutz, E. Robert Transferring Hazardous Technologies and substances: The International Legal Challenge, 1989.
Helleiner, K. Gerald, “Transnational Corporations and Direct Foreign Investment Handbook of development economics. Amsterdam: North-Holland, 1989.
How managing political risk improves global business performance,” PwC Advisory and Eurasia Group, 2006.
Hymer, S, The International Operations of National Firms: A Study of Direct Investment,
MIT Press, Cambridge, MA. 1976.
Jenkins, Beth; Kutle Beth and Bekefi, Tamara, ‘Social Risk as Strategic Risk’, Corporate Social Responsibilty Initiative, December 2006
Lefcoe, George, “The Regulation of Superstores: The Legality of Zoning Ordinances Emerging from the Skirmishes between Wal-Mart and the United Food and Commercial Workers Union,” April 2005.
Luo, O. Shenkar, and Nyaw,M., “Mitigating liabilities of foreignness: defensive versus offensive approaches”, Journal of International Management, Vol. 8 No. 3, pp. 283-300. 2002.
Luo, Y., “Market-seeking MNEs in an emerging market: how parent-subsidiary links shape overseas success”, Journal of International Business Studies, Vol. 34 No. 3, pp. 290-309, 2003.
Mezias, J.M., “Identifying liability of foreignness and strategies to minimize their effects: the case of labor lawsuit judgments in the United States”, Strategic Management Journal, Vol. 23, pp. 229-44, 2002.
Magraw, Barstow Daniel International Law and Pollution, 1991.
Santoro, M., Should LDCs love MNCs? Foreign Policy, 128, 94-96, 2002.
Sethi,D and S. Guisinger,S., “Liability of foreignness to competitive advantage: how multinational enterprises cope with the international business environment”, Journal of International Management, 2002
Weiss, Brown Edith; Barstow Daniel and Szasz, C.Paul, International Environmental Law: Basic Instruments and References, 1992.
Journal and other publications:
Kierkegaard, Sylvia, How the Cookie (almost crumbled). Computer Law and Security Report Vol.21 Issue 4, 2005.
Kyle, Beth and Ruggie, G. John, “Corporate Social Responsibility as Risk Management” Corporate Social Responsibility Initiatice Working Paper, Cambridge MA: John F. Kennedy School of Government, Harvard University, 2005.
Simon, D.J., “A Theoretical Perspective on Political Risk”,), Journal of International Business Studies, Vol. 15, No. 3,Winter, 1984.
[7]Public Administration Select Committee < http://www.parliament.uk/business/committees/committees-a-z/commons-select/public-administration-select-committee/> (accessed on 30Nov 2011)
[8] Kierkegaard, Sylvia, How the Cookie (almost crumbled). Computer Law and Security Report Vol.21 Issue 4, 2005.
[9] Lefcoe, George, “The Regulation of Superstores: The Legality of Zoning Ordinances Emerging from the Skirmishes between Wal-Mart and the United Food and Commercial Workers Union,” April 2005.
[20]“Chronology”. Bhopal Information Center, UCC. November 2006.
[21] D. Sethi, and S. Guisinger, “Liability of foreignness to competitive advantage: how
multinational enterprises cope with the international business environment”, Journal of
International Management, 2002.
[22] Santoro, M., Should LDCs love MNCs? Foreign Policy, 128, 94-96, 2002.
[23] J.M. Mezias, “Identifying liability of foreignness and strategies to minimize their effects:
the case of labor lawsuit judgments in the United States”, Strategic Management Journal,
Vol. 23, pp. 229-44, 2002.
[24] Liesbeth F.H. Enneking , “Crossing the Atlantic? The political and legal feasibility of European Foreign Direct Liability Cases,” The George Washington International Law Review, 2009, p 903.
[25]Y. Luo, O. Shenkar, and M. Nyaw, “Mitigating liabilities of foreignness: defensive versus
offensive approaches”, Journal of International Management, Vol. 8 No. 3, pp. 283-300. 2002.
[26] Y. Luo,,“Market-seeking MNEs in an emerging market: how parent-subsidiary links
shape overseas success”, Journal of International Business Studies, Vol. 34 No. 3,
pp. 290-309, 2003.
[27] S. Hymer, , The International Operations of National Firms: A Study of Direct Investment,
MIT Press, Cambridge, MA. 1976.
[28] How managing political risk improves global business performance,” PwC Advisory and Eurasia Group, 2006.
[29] D.J.,Simon, “A Theoretical Perspective on Political Risk”, (Winter, 1984), Journal of International Business Studies, Vol. 15, No. 3. (pp. 123–143).
[35] Beth Kyle and John G. Ruggie, “Corporate Social Responsibility as Risk Management” Corporate Social Responsibility Initiatice Working Paper, Cambridge MA: John F. Kennedy School of Government, Harvard University, 2005.
