Saturday, August 31, 2019

Emerging Markets: Brazil Case Study Essay

I. Summary Brazil’s agricultural advantage stems from its extensive natural resources. The country’s competitors either utilize more supplies or more time in order to yield an amount that can rival Brazil’s production. Although every other country desires the agricultural production capable of Brazil, Brazil‘s government is determined to invest in industrialization in order to modernize its economy. While Brazil has a large amount of natural resources available for use, its government must provide the funding of the growing industrialization, to include: energy, materials, and increased employee earnings. II. Problem Brazil’s success in agriculture is attributed to vast lands, diverse climates, and a large population pool for labor (Brazil Agribusiness Report – Q4 2013, 2013). Without regard to its solid base in agriculture, the Brazilian government is attempting to modernize the economy through industrialization. Alongside this movement comes the â€Å"Brazil† cost: the increased operating cost of energy, raw materials, and wages. Also, in addition to paying more to industrialize, the government compensates domestic, uncompetitive industries enabling the theory of protectionism. III. Effective Solutions/Strategies In response to Brazilian President Dilma Rousseff’s desires to become a world-class manufacturing base, the country can reassess its comparative advantage in agriculture and redirect resources solely to those businesses. According to Brazil Agribusiness Report – Q4 2013, its agricultural production is yielding lower than expected numbers with respect to international standards and, therefore, still has potential for growth. Alternatively, Brazil can strategize by addressing agricultural weaknesses via industrialization. First, seize the opportunity to grow and re-attack infrastructure to promote expansion and competition. Then, allow for raised incomes, as they will decrease farmers’ debts and allow for reinvestment in the economy. Finally, although the â€Å"Brazil cost† will hurt in the short-term, a higher-paid population will result in a hygienic environment  producing greater quality of products. Therefore, previously instated non-tariff barriers due to health concerns will decrease allowing for a greater degree of expansion. IV. Questions for Discussion Why is Brazil’s agriculture so competitive? Why do its manufacturing industries lack competitiveness? Brazil’s agriculture is competitive because its environment contains natural and inexpensive resources that other nations would have to spend extra time and money to produce or acquire. Furthermore, Brazil gained a distinctive comparative advantage in agriculture and livestock by doing away with nontariff barriers and reducing import tariffs on similar products other countries were trying to bring into the country (Brazil: Economic background, 2006). With regard to underdeveloped manufacturing industries, Brazil lacks competitiveness for the same reason its agricultural competitors fall short. The â€Å"Brazil cost† of energy, raw materials, and wages is exponential compared to another nation primed to capitalize on manufacturing. As a result, domestic industrial products are costly compared to international competitors so consumers will frequent the competitor. Why have Brazil’s governments in both the 20th and 21st century been eager to develop world-class manufacturing? According to the closing case, the Brazilian government seeks to modernize its economy through world-class manufacturing. I would argue that the core reason is to achieve globalization through a combination of manufacturing and agriculture. Employing globalization means greater economic growth and standards of living, as well as attracting numerous low-end manufacturing jobs. Therefore, by modernizing its economy, Brazil fortifies its potential as a developed economy, which could launch it onto the global platform for competition in industry. How can Brazil shift some of its resources from uncompetitive industries to competitive industries? Via resource mobility, Brazil can shift resources used in uncompetitive industries to competitive industries in order to bolster the competitive industries’ potential. Furthermore, the government can shift strategic intervention and subsidies from uncompetitive industries to competitive industries. ON ETHICS: While President Rousseff’s critics accuse her of ignoring Brazil’s lack of comparative advantage in manufacturing, her supporters argue that her policies force Brazil to reduce its dependence on  foreign-made manufacturing goods. If you were to participate in this debate, which side would you be on? I would be on the side of her supporters. Through research, I have found that Brazil has extraordinary potential to grow its agricultural sectors through industrialization. By reducing manufacturing imports and producing and employing its own industrial products, Brazil not only increases domestic income and the standard of living, but also solidifies the nation’s comparative advantage in agriculture. Although, I will say that finding the balance between directing resources towards industry versus agriculture will be a delicate quest. References Brazil: Economic background. (2006). (). New York: The Economist Intelligence Unit. Retrieved from http://search.proquest.com.ezproxy.libproxy.db.erau.edu/docview/466598073?accountid=27203 Brazil Agribusiness Report – Q4 2013. (2013). (). London: Business Monitor International. Retrieved from http://search.proquest.com.ezproxy.libproxy.db.erau.edu/docview/1436333107?accountid=27203

Friday, August 30, 2019

Brand Failures

Companies don't blame the product, (but) they blame the brand. Brands also transformed the process of marketing into a process of perception-building. Image is now everything: consumers consider more important the perception of the brand than the real product. Why branding is everything? Because companies live or die on the strength of the brand: one mistake and the customer can break the loyalty bond RULES why brands fail l. Brand Amnesia. For old brands, memory becomes a problem. When a brand forgets its identity and try to create a new identity, like Coca-Cola with New Coke. Brand Ego. Brand overestimates its importance, believe to dominate the market alone (like Polaroid in the photography market) or enter new markets that don't fit (like Harley Davidson selling perfume) 3. Brand deception. Companies sometimes lie when branding, and today consumers are really connected via Internet and can't be cheated. 4. Brand paranoia. When the brand feels an inferiority complex, imitating the competitors and reinventing the brand every six months. 5. Brand Relevance. When a market evolves, the brands risk to become obsolete.There are some myths associated with branding: I If a product is good, it will have success. This is not always true, Because good products can fail exactly like bad products. For example, Bateman was better than VS., but failed. 2. Brands are more likely to succeed than fail. Wrong. Brands fail every single day, the 80 per cent dies when introduced, and 10 per cent within five years. 3. Big companies Will always have brand success. This is false, because famous brands are also weaker. For example â€Å"New Coke†. 4. Strong brands are built on advertising.Advertising can support brands, but not build them. There are many types of failures, one of them is Classic failures Reasons why brands fail: marketing errors: like setting the wrong price or name or getting paranoid about the competition or consumers can boycott the brand because of a scand al via internet or simply because they are bad ideas New Coke case In the case of New Coke, the brand forgot its identity.

Thursday, August 29, 2019

Anti-doping Measures and Technology Advancement

Many athletes and sportsmen and women in the world have at one time or another toyed with the idea of using performance enhancing drugs in order to maximize their chances of winning in the competitions (Houlihan, 2002).The use of these drugs is often referred to as doping. It is unethical as it gives users advantages over other athletes who are not using the drugs thus lack of equality in the competition. Apart from this, they pose a serious threat to the health of the users.Examples include steroids, testosterone, strychnine, Benzedrine, erythropoietin among others. Adding to the list of doping are technology techniques such as gene modification and ionized shirts, tough these shirts have not yet been classified in the doping list. Performance enhancing drugs have for a long time been a major concern to sports organizers who have constantly tried to stop the habit. Doping has existed in the sports world for as long as possible.According to Dimeo (2007), the first performance enhanci ng substances were used as early as 1807. However most were herbs and liquids that were eaten or drunk. The first real use of performance enhancers were seen in 1904 in the Olympics.However formal doping tests only started in the late 1960s when sports organizations saw the need to place an equal platform for all athletes to ensure fair competition. Performance enhancers were banned from the Olympics in 1968 by the International Olympic committee (IOC).The World Anti-Doping Agency (WADA) was formed in November 1991 led by IOC to promote the fight against use of drugs in sports. It aimed at promoting the fight through coordination from other stakeholders in the world. In 2004, the World Anti-Doping Code was implemented by various sports organizations making rules and regulations governing sports to be unified in many countries just before the Olympic game in Athens, Greece.Currently, over two hundred countries are signatories of the WADA Code. WADA communicates its rules about perfor mance enhancing drugs and penalties using the prohibited list which is updated every year to cater for any changes and new discoveries (David, 2008).DiscussionThe progress in technology and pharmacology has always caused a threat to these organizations' ability to cope with drugs in sports. Manufacturers have been so crafty when making performance enhancing drugs that methods and apparatus used to test for drugs among athletes seem to miss out on some drugs in the sportsmen.According to Tansey (2008) of the San Francisco Chronicle, sports doping detection is an ever ending science which has to keep on being updated. Traditionally, urine samples were used to detect illegal samples in sportsmen.Steroid dopers have always remained ahead of the anti-doping organizations as they keep inventing new designer steroids that are more difficult to detect using the current technologies available in WADA and other organizations. Use of synthetic growth hormones which are hard to differentiate fr om natural growth hormones has not helped in the anti-doping campaigns.The most recent technology in performance enhancing is the ionized shirts known as ionX developed in New Zealand. These shirts are made of fabrics containing negative ions which are believed to improve performance when ionization takes place after contact with the body. Ionized shirts have not been classified as doping and investigations are still being carried out to determine the chemistry behind them.The Speedo LZR racer swimsuits are said to be a form of technological doping. It came as a surprise when thirty eight world records were set within months of Speedo's introduction of their swimsuits. It was also said that remarkably average swimmers displayed higher speeds than would be expected.Gene doping is another technology where athletes and other sportsmen and women use genetic modification in order to enhance their performance.Also known as genetic engineering, this is a technique where genes are inserted into cells to produce certain defects such as correction of genetic errors. In athletics genes are modified to alter the functioning of the cells such that the genes inserted help the athlete perform better (Tamburrini and Tannsjo, 2005).This usually happens in terms of enhanced muscle developments. Gene modification was added to the list of prohibited methods and substances by the International Olympic Committee. However, technology required to perform tests of determining genetic modification in athletes are quite complex. WADA is still doing more research to fight this advanced doping method.

Wednesday, August 28, 2019

Soviet Bloc Essay Example | Topics and Well Written Essays - 2500 words

Soviet Bloc - Essay Example From World War II (WWII), there arise an imposed domestic revolution in Yugoslavia which emerged as a new socialist order that promised something profoundly new to those who lived under it in the form of social equality. However, the Eastern Europe side after emerging from WWII could have the opportunity to represent a greater break with the past than the promise that the elite class or the powerful would be considered low, that those who had been nothing. Even in member states that were economically developed and followed democracy like Czechoslovakia, this embodied a thrust toward egalitarianism and in response Hungary and Poland, given their traditional elitist social orders and yawning gaps between gentry and mass, it meant no less than transformation of the very bases and premises of society. The Soviet elite was a ruling group that could be clearly defined in context with the Western society where there were competing hierarchies based on wealth, political power, professional status, and religious authority. Mawdsley & White (2000) points out that in a society of the Soviet block, it was the regime itself that chose through the appointments system for the people who occupied the highest-ranking positions in government, in the economy, and in public life (Mawdsley & White, 2000: vi). It was clear that those who were chosen as the elite class were also members of the party bodies through which this form of domination was exercised. The main point that arises here is that to what extent according to Soviet block societies were seen as pyramids to answer a question that even for the Soviet case about how far from the vertex the defining line of the elite should be drawn. In looking at the Soviet elite we should consider all members of the Communist Party. Communist Rule and Policies As a world's first socialist state, the Constitution of Soviet Union only allowed a communist rule which was later by some member countries like Hungary, Poland and Yugoslavia introduced elements of market-based reforms before the collapse of the Soviet Union (WB, 2002). As a communist state, it was only possible through Soviet's permission to allow Hungary and the German Democratic Republic (GDR) to find their own future and it was Soviet pressure that encouraged Vietnam to do the same (Segal et al, 1992: 10). However, in many cases Soviet's example was not perceived as it was supposed to be accepted like in the Chinese and North Korea, it was dealt with pessimism but it is fair to say that no matter what happened to reform in the Soviet Union, the fate of the Soviet's revolution was important to all. Economic Performance The former member states never fulfilled revolutionary promises, particularly when they promised equality. Parliamentary democracy was neglected and remained involutorial in the region except in Czechoslovakia, yet subordination to the Communist regimes left less personal or

Least Preferred Coworker(LPC)Measure Personal Statement

Least Preferred Coworker(LPC)Measure - Personal Statement Example I do agree with the results of this test. I am task-motivated and better at organizing people and getting the job done. However, I also agree with Fiedler’s other postulation concerning LPC model. According to him, LPC model helps in indicating the leadership style of a person however the effectiveness of this style is also dependent on situation’s favorableness. It is a universal fact that there is no ideal leadership style and a particular leadership style can not be suitable for contingent situations. A combination of personal traits and given situational contingency determines the leadership style’s effectiveness. Leader-member relationship, task structure and leader-position power are the factors which determine if the situation in hand is favorable and matches the leadership style (Bar-Tal, 1989). On theoretical grounds, Fielder’s model does helps in identifying one’s leadership style but its accuracy is still doubtful due to various factors. Firstly, Fiedler based this model on an assumption that leadership styles remain fixed and ignored the possible flexibility in personal traits or chances of betterment through learning over time (Bass, 1990). Secondly, the model assumes that a person can either be task-oriented or relationship motivated which are two extremes (Peter, Hartke & Pohlman, 1985; Vecchio, 1983). If a person’s LPC scores give an average total, then the leadership style is uncertain and difficult to determine. Lastly, there is a possibility that a person is actually effective as a leader irrespective of leadership style and works well with rest of the team except one who is confused, incompetent or a genuinely unpleasant person to work with. In such case, the LPC model will simple declare the person taking test a low-LPC leader whereas the a ctual picture can simply be the opposite (Mind Tools, 2012). Peters, L.H.,Hartke, D.D. & Pohlmann, J.T. (1985), Fiedlers Contingency Theory of Leadership: An application

Tuesday, August 27, 2019

Men and Women Essay Example | Topics and Well Written Essays - 500 words

Men and Women - Essay Example Moreover, they also have similarities and differences in terms of emotional and psychological needs which will be dealt with in detail. Firstly, men and women have similar physical needs such as food, clothing and shelter. Both genders need food and water in order to live. They also need clothing not only to beautify themselves but especially to keep them away from the dangers of the environment such as the dangerous effects of the heat of the sun or from the cold during winter. Shelter is also necessary for both men and women to keep them secure. Secondly, they have similar emotional needs such as the need to be loved. Since love is said to be the universal language, it is evident that people around the world regardless of race, age and gender need this emotional value that seems to be naturally a part of every individual. In addition, men and women experience pain, discouragements and other negative emotional stressors that affect the way they live. Thus, they also need emotions that soothe the pains such as joy, assurance and encouragements to lift their spirits and enable them to overcome the difficulties life b rings. Thirdly, men and women also have similar psychological needs. Since they have similar fears and concerns, men and women need similar psychological interferences. For instance both men and women worry about how they look so they both need to be assured that they look good. When they have achieved something, both men and women need to be praised for their success or they will feel like they are failures. On the other hand, there are also differences between men and women that make them distinctly different from each other. First among these differences would be their physical needs. For instance, women are known to be more concerned about how they look therefore, they spend more time and money on their clothing, accessories and make up. They spend a lot of time thinking about how they would appear so that women often end up spending

Monday, August 26, 2019

Operations Management of Bell Helicopter Company Essay

Operations Management of Bell Helicopter Company - Essay Example Bell aircraft can be found flying in over 120 nations accumulating fleet time at a rate in excess of ten flight hours every minute of the day (Bell helicopter, 2005). 1. Bell helicopter company offers a team of product support engineers and customer service representatives, fluent in many languages, who are available for the whole day and whole week to assist customers around the world, thus allowing timely diagnosis of a problem and appropriate solution. 2. Bell Helicopter Company warrants each overhauled or exchanged component to be free from defect in material or workmanship under normal use and service. Sellers' sole obligation under this warranty is limited to replacement or repair of parts which are determined to sellers' reasonable satisfaction to have been defective within 1500 hours or operation or two calendar years after installation whichever comes first and reimbursement of reasonable freight charges (bellhelicopter.com). 3. Although the company is equipped with impressive manufacturing facilities, it depends on many North American and foreign suppliers who provide more than 500 million dollars worth of components or services annually. 4. 4. The material team is composed of seasoned aerospace industry professionals who, by closely working with suppliers, ensure constant availability of quality supplies, to benefit both company's operations and its clients, while minimizing the inventory cost and the total purchase cost of these parts. 5. Aeronautical accessories Inc. provides aeronautical accessories designs, certifies, manufactures and markets a wide selection of quality helicopter parts and accessories for manufacturers including Bell, Eurocopter, Sikorsky, and others. The company supplies products directly to helicopter manufacturers for installation on new aircraft and to helicopter operators worldwide. Rotor Blade Inc. supports bell operators with quality blade repairs. RBI offers a 3-year, 2000 hour prorated warranty on every blade repair. 6. Bell Helicopter Company uses state-of-the-art equipment such as computerized and personalized systems for flight tests (CAFTA) or for new product design (CATIA) to meet its stringent requirements. The BHTCL Engineering Department possesses a unique helicopter-technology expertise. 7. The purpose of Quality Assurance in Bell is to provide total confidence that the finished product meets or exceeds given Federal Aviation or ISO 9001 regulations and that the product has been manufactured in conformity with Bell Helicopter Quality Standards. 8. The functions of Quality Assurance consist in quality-system evaluation of suppliers to ensure they fulfil company's requirements, receiving inspection, aircraft certification, non-destructive testing, gauge calibrating and corrective and preventive action programs. Quality Assurance is responsible for maintaining manufacturer approval on behalf of Transport Canada and is also responsible for the Aircraft Maintenance Organization. 9. Bell Helicopter is committed to airborne law enforcement, corporate, EMS, and Energy/Utility markets. Bell provides a specialist to ensure that customers have someone to rely on for their specific needs (2006). 10. For cost effectiveness in manufacturing, the company uses Business Objects to improve assembly operation

Sunday, August 25, 2019

A persuasive paper Essay Example | Topics and Well Written Essays - 500 words

A persuasive paper - Essay Example This being the normal tradition consequently, the less men are attached with emotions, the less prone they are towards vulnerability at expressing weakness or sentiments openly by crying. As opposed to the chief attribute of the submissive female counterparts whose role is well identified with nurturing and other delicate tasks that are domestic by nature, they behave in a fashion more accustomed to put mind setting on 'doing' rather than 'feeling' in this order so that men tend to build on a dominating character. In the society, set conventions or norms reflect this issue all the more and with a regular emphasis placed upon the bold distinction between gender roles, men generally respond in favor of such expectations and press themselves to act accordingly. Men are expected to show anger and stubbornness, women to express happiness, sadness, and fear (Kallen, 1998). Through time and course of history, people have learned to classify men under those images that embody the world of sp orts, action themes in the film industry, and prominent figures in warfare.

Saturday, August 24, 2019

Case study- psychosocial paper Essay Example | Topics and Well Written Essays - 4000 words

Case study- psychosocial paper - Essay Example Mobile communication has turned out to be an indispensable part of contemporary life, a need, and a way of life. Mobile media, especially, is the up-and-coming digital interconnected media form that focuses on cellular mobile networks and meets with other technologies such as the Internet and portable music and video devices. Amongst the number of mobile phone designs that have been developed in mobile media market, none of the handset manufacturers have been able to reproduce the user experience of the iPhone. Thus, it will not be wrong in saying that other smartphone possess similar features, but they do not equal the sleekness, pinching, and other features of the Apple iPhone (Faber, 2008). The present study seeks to study the different aspects of social theory, cultural history and psychoanalysis to explore the historical significance of consumption of the currently highly popular iPhone and its role in contemporary psychosocial life. These new types of mobile media and the relat ed psychosocial meanings are such recent and dynamic phenomena that their influences on society and human behavior are yet to be observed. However, what remains for sure is the fact that the new smartphones, and especially the iPhone, have given users unparalleled connectivity, greatly enlarging their social reach and power to change remote physical circumstances. Some of the effects of mobile technology on people include empowerment and liberatiion, evading the limitations of a certain ordering in regards to blurring of the boundaries between public and private areas and domestication of the outer world (Katz, 2006). It is in light of this that the present study seeks to explore different aspects of social theory, cultural history and psychoanalysis to explore the historical significance of consumption of Apple iPhone and its role in contemporary psychosocial life of the youth. The study further aims to provide an analysis of satisfaction, fears and desires that motivate consumer b ehavior and the processes of individual consumption of Apple iPhone. The study aims to cover the consumption behaviors of the young adults who have bought and are using iPhone. Young adults are frequently linked with innovation (Rubicon, 2008), particularly for cell phones, and can, therefore, offer an understanding regarding the young adult’s behavior towards buying and using iPhone. Apple Inc. has surfaced from the market with its iPhone as simply the most publicized new mobile device in recent memory. Most publicized meaning, here, more than just most promoted, but also most fashionable and most talked about. This is illustrated, for example, in statistical reports, which assert that smartphones comprise of 56% of the UK mobile phone market, of which a surprising 80% is comprises of Apple’s iPhone (Admob, 2010). The iPhone is a remarkable thing to study. The reason behind this is not only its popularity, but its status as a new cultural artifact and the newest mediu m of contemporary culture. iPhone is has accomplished this status due to its links with a certain social behaviors such as accessing email through phone, which are particular to today’s culture or ways of living. It is cultural because it is linked with certain types of individuals such as young people who are technologically confident, with certain places such

Friday, August 23, 2019

Open Source and Open Standards in Ecommerce Assignment

Open Source and Open Standards in Ecommerce - Assignment Example These types of services are offered to cover against system problem, help, mitigation and training. The revenue generation is offered through presenting some contractual aspects (GBdirect Ltd, n.d). 8 Saint-Andre (2009) has answered the question and stated that open source technology and products often rely on open protocols standards, for example Mozilla with HTML/JavaScript/CSS, Apache with HTTP, Sendmail with SMTP. In this scenario we can assess that the proprietary products and systems are also doing the similar job. In this regard the open source technology developers need to confirm the platforms efficiency to offer the user a better and enhanced experience. Therefore open source developer need to fulfill all the quality standards of the open standards. However small development firms and software houses are restricted to construct a closed implementations as well as consequently they are not fixed to limitations of licenses for example GPL (Saint-Andre, 2009). Saint-Andre (2009) has stated that a number of people thought that, the W3C or IETF supports a format or protocol; it consequently turned out to be a standard. However standardization is not an issue of authorization ; however it is a concern of recognition in the marketplace. Not the entire of standards are open (for instance, PowerPoint or MS Word). Despite the fact that, when formats as well as protocols are coming under the open standards, then open standards applications are technically strong typically be liable to be established through the marketplace like a standard. Certainly, a certain application or protocol turns out to be not simply a standard however the leading marketplace maker. For instance, Apache is the leading web server. It new protocol HTTPng was unsuccessful to grab sufficient market because it was not fully supporting Apache community. A powerful open source "anchor" facilitates to guarantee the openness of

Thursday, August 22, 2019

Project on McDonald’s Corporation Essay Example for Free

Project on McDonald’s Corporation Essay Introduction and Background In 1940 two brothers Dick and Mack Macdonald opened their own restaurant. Eight years ago the first concepts and rules of fast food production and sales were formulated by them. Initially the business was created in a such way that everything should be very fast and effective. Brothers spent much time elaborating the layout of the kitchen in their first restaurant, so  they achieved the goal. Inspire of the fact that later they sold their business and their family no longer the owners of it, nowadays mcdonalds have the same efficient system of production and sales that it is able to introduce and maintain all over the world using different strategies and methods. External Environment External environment is a bunch of various outward forces that may have a great impact on the company’s performance. The external environment of every company comprises of three levels: the general, industry and competitor environments. The integration of information received from these environments helps to identify and shape the company’s strategies. Thereby, in order to understand what hindrances company faces or may encounter in the future, it is essential to analyze all the levels of its external environment. It was mentioned earlier that the headquarters of McDonald’s locates in the U.S. so we will analyze general and industry environments in this region. General Environment The general environment is usually examined by the analysis of 7 segments: demographic, economic, political/legal, sociocultural, technological, global and physical environment segments. First of all, the demographic segment is concerned with the population structure and Ã' omposition. The USA’s population is estimated at 313 286 000 people in 2012. By analyzing population composition, it can be said that there is very high level of immigration. Moreover, it can be said that the birth rate is sufficient: 13.68 births/1,000 population in 2012, according to CIA World Factbook. Thereby, these statistics help to understand that the region is quite profitable and comfortable to operate in due to the large population size and excessive number of potential employees. Last but no least, according to U.S. Census Bureau, the median household income during period of 2006 to 2010 is $51914 which is quite high. Secondly, the political/legal segment is quite important for the analysis because the industry is highly contingent on the different kind of taxes imposed by the governments. McDonald’s  Corporation is obliges to pay business taxes, payroll taxes, Food Product Association taxes (19% of the total profit and 19% in the price of each product) and health and social insurance for the employees. The changes in government’s tax policy may utterly affect the company’s revenue. As regards the economic segment, one of the major challenge for fast food industry is that to keep the price is low for the customer. However, it is quite hard because nowadays the USA is still suffering from the financial crisis which can be a possible reason to decrease in outside food consumption in a whole. The dimension influencing the fast food industry the most is the sociocultural. The reason is that the industry is dependent on people’s preferences and opinions that’s why even tiny changes are crucial. From 2000 to 2002 McDonald’s profits dropped from $1.977 million to $893 million. It was caused by the increase of customer’s health-consciousness and fears of obesity, as a consequence, some customers prefer more healthier options which offer a greater variety of food for health conscious customers. Furthermore, it is quite important to devote attention to technological segment because the technologies always mean faster operation and cost minimization. McDonald’s uses different modern appliances to prepare its food without many dangers and in a quick way. Moreover, the majority of McDonald’s restaurants provides free Wi-Fi. In addition, McDonald’s improved the technology of its supply chain management. Regarding the global segment, it should be highlighted that most U.S. companies are focused globally which means that they operate in many different countries. McDonald’s is not an exception. It is located in 119 countries and is known as one of the most spread fast food restaurants’ chain. Last but not least, nowadays more and more companies are concerned with social responsibility and environmentally friendly policies. Industry Environment The industry environment is usually analyzed by Porter’s five forces model. Firstly, it is the Threat of New Entrants. The threat of new entrants in the fast food industry is high because there are no legal barriers which would keep them from entering the industry. The major barriers in which a firm faces in the industry are the economies of scale and the access of the distribution. In order for a firm to enjoy success in the industry, they must spend a large amount of capital on advertising and marketing. The industry is very competitive because firms are always attempting to steal customers from each other. Access for distribution is crucial in the restaurant industry because if the customer can’t see you or access you easily it’s possible that they won’t go out of there way to eat there. Franchise options also make is easier to enter the market, for example Subway has built their strategic plan around franchise options. Therefore, initially the only cost to enter the market is the starting capital required to open a restaurant. However, it can cost upwards of millions of dollars for all the equipment, licensing, and the property. This costly barrier is the most probable reason that people do not enter this business. The food-service industry doesn’t have any exit barriers, which allow firms to easily leave the industry if they’re not successful, at virtually only the cost incurred. The second force is Bargaining Power of Buyers. McDonald’s, and the industry, has attempted to gain market capitalization, by keeping the customer satisfied, due to the fact there are relatively no switching costs. For this reason, they have adopted the slogan, â€Å"the customer is always right.† The industry must try to maintain a hold on the market by conforming to a changing society as well as maintaining high quality. One of the industry’s most recent concerns is that of creating a healthier society and prevention of obesity. McDonald’s corporation has faced previous law suits on being held accountable for obesity, similarly following the litigation process of cigarettes and tobacco companies. The courts ruled against this issue in McDonald’s favor, making this a remote future risk factor. McDonald’s has had to paid legal fees in order to defend itself in this type of litigation;  however, even with this incremental cost they are still achieving a significant rate of earnings growth. In addition, McDonald’s, in it’s effort to be a more socially responsible corporate citizen by supporting a healthier society, has developed â€Å"light† and healthy menu items in order to give customers additional eating options and in doing so, broadening the array of its customer base while offering it’s existing customer base with healthier menu options. Thirdly, it is Bargaining Power of Suppliers. It can be said that McDonald’s has a large bargaining power because of the fact that they spend 4.852 billion dollars in food and paper in 2004. This can be argued that the companies that McDonald’s buys from could be largely dependent on McDonald’s business. Although in recent years the industry has had a small problem with beef, because of the outbreak of the mad cow disease. This problem raised the cost of beef in Europe tremendously but the cost actually went up around the world because of the beef shortage in Europe. In this case it can be argued that the suppliers of beef have a strong voice as well. The suppliers that sell to McDonald’s have a strong voice also because of the fact that the switching cost for McDonald’s as a whole would be so tremendous that they would not want to make that change, so any problems or disputes would be worked out with there suppliers. Also, with the competition and the number of buyers in the market place, losing a large company like McDonald’s could destroy any supplier but there are other prospects out there to buy that product like Wendy’s, Jack in the Box, Burger King and a few others that they may be able to salvage there losses. As for the paper goods that McDonald’s buy from the manufacturers, if McDonald’s were to change manufacturers the supplier could easily change there manufacturing to note book paper by just readjusting the machines but it would come at a great cost. The fourth force is Threat of Substitute Products. McDonald’s is known for their famous French Fries, Big Macs, and Happy Meals. Competitors of the industry also try to compete with similar products; therefore, leading to price wars. McDonald’s created a Dollar Value Menu, in response to competitors such as Wendy’s 99 cent menu. Overall, the industry has tried various product differentiations in order to accumulate greater market share, but most consumers are drawn to the classics for which the establishment is known for. However, growing concern  to achieve a healthier society has led McDonald’s, as well as other competitors, to make extensive menu changes, in order to conform to a more concerned society. McDonald’s is doing more and more to compete with health focused restaurants like Subway. Nutritionist and other leading experts have been hired to join the McDonald’s team in order to ensure that the correct items are added to the menu, while still keeping and improving the classics that they are famous for. For example, the chicken nuggets that we all grew up on are now 100% white meat. McDonald’s is flexible in their menu to conform to the changing tastes of society, but they always serve with a smile! The fifth and final force is Competitive Rivalry within an Industry. Currently in the fast food industry, there is intense competition for growth in the market. The market growth is rising because of the convenience factor and busy consumers not having enough time to cook a meal. The restaurant industry is also growing rapidly due to opportunities in other global markets. In McDonald’s case, they actually have a competitive advantage because they have already entered many different countries and are succeeding in these countries. Each firm within the food-service industry is susceptible to losing customers because there are relatively no switching costs for consumers, therefore the industry has to rely heavily on their brand image and quality of products. McDonald’s has a number of competitors; however they are currently the leader of the industry in market capitalization with a cap of $39.31 billion. Competitor Analysis It is almost vital to know the competitors in your industry in order to be able to overtake and surpass them. The top competitors of McDonald’s are Burger King, Wendy’s, KFC and Subway. Burger King Burger King is the second largest hamburger fast-food chain in the world and is the number one competitor for McDonald’s. Burger King has 11,400 locations in 58 countries and derives 55 percent of its revenue from the drive-through window. Burger King reported 1.72 billion in 2002 in revenue which is a 17 percent increase compared to a 4 percent increase reported by  McDonald’s over the same period. Burger King’s distinct assets include the unique Whopper with its one of kind charbroiled taste and the company policy of preparing the hamburger any way that the customer wants it. Burger King has distinguished itself over the years in many ways including being the first in the fast-food industry to enclose its patio seating in 1957 thereby offering customer indoor dining experience. Burger King also differentiated itself when it installed the drive-through window in its restaurants in 1975. In addition to the Whopper Burger King also offers a few set items on its breakfast menu that differs it from it competitors including the Croissan’wiches and french toast sticks. The rest of the menu also offered the unique veggie burger and chicken Caesar salad. Wendy’s Wendy’s is the third largest fast-food chain with 9,000 stores in 33 countries world wide. In 2002 they reported 2.73 billion in revenue which is up 14.2 percent from the previous year. Wendy’s offers several unique items including the Frostys and Spicy Chicken Sandwiches as well as healthier items such as salads, baked potatoes and chili. Wendy’s has also distinguished itself through the creation of the special value menu with all items on it under a one dollar. Wendy’s also owns several small companies including Tim Horton’s and Baja Fresh Mexican Grill. It plans on increasingly using acquisitions of smaller brands to further growth. In next decade Wendy’s plans to add between 2 and 4 thousand new stores worldwide. One important weakness of Wendy’s is the lack of easily recognizable product compared to McDonald’s Big Mac of the Burger King Whopper. KFC Strategic Objectives: KFC has the strategic objectives of expansion along with profits and sales growth. KFC has also been applying its strategies at improving services and making them more and more customer friendly. It has not only been customizing its menu according to the countries that it has been operating in, it has also been trying to cater to different ethnic groups like African Americans and Hispanics. Such types of strategies are focused on increasing the customer base by better customization of products. Other than the  traditional eat-in restaurants, KFC has also been expanding into non-traditional facilities like shopping malls, hospitals, universities, stadiums; office buildings etc and a number of strategies have been formulated to aid this kind of expansion. Competitive Advantage: A very strong financial background is one of KFC’s competitive advantages. KFC has been functioning as a multinational corporation for several decades. As a result, the company is familiar with the logistical and quality problems which accompany operating an international food operation, and has demonstrated that it can work with host countries and businesses within the host country to develop a strategy which works in the most cost effective way. With the passage of time, KFC has developed another very important competitive advantage for itself — Environmental Friendliness. In March 2009, the first eco-friendly green KFC was opened in Northampton USA. The restaurant is designed according to environmental goals that include cutting energy and water consumption by 30 percent and reducing CO2 emissions. Operations at the new site are also expected to reduce waste and the amount of rubbish sent to landfills; the restaurant composts and recycles other waste, grease and used cooking oil. Other than this, in an effort to reduce its packaging by 1,400 tons, KFC is now switching from cardboard to recyclable and biodegradable paper wrapping for some of its products. Subway Strategic Objectives: The strategic objectives of Subway focus on creating a global strategic plan to enable Subway restaurants to succeed internationally. Other than this subway is intent upon introducing the concept of ‘healthy fast food’. Sandwiches of Subway have been included in diet plans by experts. Subway’s stand regarding obesity in children is not new to its customers. Strategies at Subway are not only about a really ambitious increase in franchises all over the world but they are also about making the food more and more appealing to the health conscious customers because health conscious attitudes, according to the experts, are here to stay now. Competitive Advantage: One of the greatest competitive advantages that Subway was born with is its healthy menu. The salads and sandwiches appeal much more to the people as compared to fried chicken, burgers, fries and pizzas. With its advertising and promotion, Subway has long been highlighting its healthy food in advertising and promotions and with the passage of time, it has established itself as a healthy brand. Another competitive advantage that subway enjoys is the fact that along with traditional locations, Subway restaurants can be found in more than 4,000 non traditional locations such as food courts, health clubs, hospitals, universities, amusement parks or just about anywhere. In fact, Subway restaurants can even be found in automobile showrooms and Laundromats! This global presence is indeed a sustainable advantage for Subway and needs to be managed properly. Subway’s fresh food is also a competitive advantage because unlike its competitors like McDonald’s it allows its franchisees to choose their own food suppliers, to ensure they can access the freshest ingredients. Resources, Capabilities and Core Competences Resources †¢ Human resources McDonald’s is does its best to reward outstanding employees for exception work. It is also putting more emphasis on its hospitality training to ensure a friendlier and customer focused support staff. †¢ Brand loyalty The long queues to McDonald’s in food courts is the best illustration of high level of brand loyalty, that company continues to develop. In advertising campaigns McDonald’s uses the slogan â€Å"I’m lovin’ it† which it there attempt to make McDonald’s an easy choice for families. They have also started using popular music to appeal to youth population. †¢ Real estate It may be surprising, but real estate ownership is one of the significant Mcdonalds resources. It is estimated that McDonald’s generates more money from its rent than from its franchise fees. One of the ways in which  McDonald’s receives funds from its franchises is in rent money. McDonald’s owns all property in which a McDonald’s outlet was built regardless if the location is a franchise or company owned. Capabilities McDonalds used to have several capabilities, among them hiring process and employees training and product innovation.  Ã¢â‚¬ ¢ Hiring process  It is complicated and systematic. It comprises of 3 main stages. 1. Initial interview and psychometric evaluation. On this step the candidates undergoing simple interview and tests evaluating their verbal and critical reasoning 2. Job evaluation. On this step candidates have 2 days practice in a restaurant that allows them to look at McDonalds as a future employees and HR team to assess candidates performance 3. Final interview. The last stage of hiring process includes overall interview and decision about the candidates is made. Taking into consideration staff training, McDonalds has many training programs on every level of restaurant. Training forums are made for basic workers and they start from the very beginning of working in the restaurant. They are designed to help employees with their communicational skills and encourage growth in the company. Other programs are created for managers of the restaurants, such as Basic Shift Management, Advanced Shift Management, and Systems Management Course . Their main objectives are: providing information about internal standards and procedures, teaching data analyses and strategies of identifying and solving different problems. For higher levels employees McDonalds has internship programs for students and recent graduates. Programs let them practice in different spheres of companies performance such as Information technologies, Marketing, Finance and others. Other McDonald’s project Leadership Development program is based career planning, Individual Development plans, career maps, succession planning, learning activities and others. †¢ Product innovation The main resource developing product innovation strategy are full-time chief working in studios in Munich, Hong-Kong and Chicago. Moreover, localization of products also plays important role in development of innovative products. For example, in India Beef and pork products are not offered due to Indian religious beliefs. What is more, meat and vegetarian meals are prepared in separate areas of the restaurant again as a result of religious laws about preparation of food for vegetarians and meat-eaters. There is an Indian version of the Big Mac in India is called the Maharaja Mac and made with two grilled chicken slices, onions, tomatoes, cheese and a spicy mayonnaise. In Taiwan company introduced kao fan (literally baked rice), that resembles a burger with rice patties in place of buns. Finally, in Philippines McDonalds serves even spaghetti with in sweet tomato sauce, topped with cheese. Core Competences †¢ Produce quick cheap food to large number of customers With this concept, they are able to expand into many countries be the largest fast-food chain in the world. The process of production is the company core competence. Initially it was designed in such way as to be fast and very effective. There is precise guidance of how to do every activity. Mcdonalds pioneered in the systematization of its processes. Efficiency of operations and synchronization is the basis for success of the company. Also, it may be said, that burgers and fries are themselves McDonalds core competences. McDonald’s classic burgers has always taste the same in any outlet in the world. This consistent quality assures customer’s trust and loyalty to the product. It also provides an assuring brand experience. †¢ Structure Some specialists consider the unique organizational structure of McDonalds as its core competence. McDonalds never used rigid hierarchical organizational structure, that company managed to sustain over the years. It uses â€Å"freedom with framework† mantra, keeping structure decentralized. It allows local managers to make decisions by themselves. It also plays significant role in localization of menu due to local needs. Business-Level Strategy The business level strategy McDonalds uses integrated cost leadership and differentiation. It means the products of mcdonalds is the cheapest on the market and more over McDonalds does its best to make them absolutely different from what others produce, using localization and launching new products almost every year. So the target of its strategy is to meet the needs of buyers whose preferences are distinctively different from others. So MD deals with the costumers who want very fast service with good quality. And it is different from the visitors of not fast food restaurants. The product line is customized to meet their needs. The marketing emphasis is put on communication and market analysis again to satisfy their needs. Finally the way to sustain strategy is remaining dedicated to serving one niche and be better than competitors in everything and do not dilute the brand image entering other niches. Corporate-Level Strategy Corporate-level strategy is a strategy which is aimed at the long term position of a business. A corporation or business can use plenty of methods to develop a corporate level strategy, however, basically, there are four main strategies that almost all businesses use which are: †¢ Concentrate on a single business, other words, business stays on the same industry on purpose to create a strong competitive position within the industry. †¢ Diversification; which is to move to a new business to provide a new good or service. There are two kinds of diversification, related diversification which is to compete in similar area/industry of activities to build a  synergy and unrelated diversification which is to enter a new industry to compete and build a portfolio strategy. †¢ International Expansion. This means some competition in more than one market to serve the needs of the other markets/countries.  Ã¢â‚¬ ¢ Vertical Integration. This is a way to cut costs by providing your own ways of inputs, backward vertical integration and your own channels of distribution and selling outputs by forward integration. Therefore, now let’s move directly to McDonald’s corporate-level strategy. Nevertheless, before we start to consider all the main points of this particular type of strategy, some overview details will be given. Mc Donald’s is a fast food restaurant operating on a global basis. It is operating on 119countries world wide. Mc Donald’s was opened for the first time in Cyprus in June 1997 and by now there are 16 Mc Donald’s restaurants in Cyprus. So, Mc Donald’s uses corporate level strategies like all other global basis corporations in order to reach corporate goals to be cost effective. MC Donald’s is a business which only concentrates on a single task which is the fast food business industry as stated by Dr. Weber, (2000). This special issue someday will help a lot the business to concentrate directly on one single task and get not only more power and market share, but consumer loyalty also in result. This happens because of the fact that they will run many strategies to find the best solutions of the consumer needs and preferences. However this can be very risky if the business fails to meet the right needs of consumers and therefore will not be profitable and as a result will close down due to the possible bankruptcy. Firstly, as it was stated in Washington post (2005) MC Donald’s diversifies its operations in many ways. Thus, the company uses related diversification in order to produce the same products which are burgers and salads basically, but they provide just an enormous number of choices, such as: Big Mac or Mac chicken, different kinds of salads. Moreover, McDonald’s operates in more than one geographical area but still performing the same task. Also it has opened MC cafes all around the world. McDonald’s gets many advantages by doing related diversification, firstly, if there are two Mc Donald’s restaurants in a city, then the two firms can build a synergy by co-operating with the right to use some special facilities such as the advertisements, suppliers and sometimes events, for instance, charity events. Secondly, as stated by Ricky, W (2003), the firm depends less on a single product, so it’s less vulnerable to competitive or economic threats. Other words, Mc Donald’s having variety of products like burgers, salads, ice creams and drinks is not being threaten of competition because this particular company has diversity in its products, for instance, Mc Donald’s Greek Mac makes it more stable and steady than such rivals as Burger King because the rivals do not have such product. Thirdly, it allows the firm to use technology or expertise developed in one market, for example, fast food to enter a second market more cheaply and easily e.g. MC Cafà ©. However, the only disadvantage that Mc Donald’s faces, is the cost of coordinating the operations of the related divisions. In 2001, McDonalds launched a new venture by opening two hotels in Switzerland (Zurich and Lully) under the name â€Å"Golden Arch Hotel† Stefan, M (2005). This is a good example of an unrelated diversification because of the fact that Mc Donald’s is taking risks of its business from a single activity to many others like taking part in the Hotel industry. Unrelated diversification provides a portfolio for Mc Donald’s because it is operating on two absolutely different industries and the risk is reduced because if one of the two markets that the business has activity in fails to grow successfully, then the growth of the other market will cover the costs of it. Secondly, such strategy is less vulnerable to competitive threats because any given threat from a competitor is likely to affect only a portion of its total operations. However, unrelated diversification is very difficult to manage since the company has to deal with two markets and their strategies, plans and organization and coordination of each specific market which it is  dealing with. McDonald’s has introduced the American concept of fast food to many foreign Markets as stated by, Francine L, (2005). Moreover, the firm has by now, expanded throughout most of the world by operating on 119 countries. †¢ Thus, Mc Donald’s is known globally today because it is expanded internationally. †¢ Mc Donald’s is using multi-domestic strategy to serve each nations needs. It is customizing the fast food menus for each specific country/nation to suit the people’s wants. For instance there is Greek Mac in Cyprus and Greece. †¢ The advantage of this strategy is that the company is targeting a nation very effectively and gains market share by attracting the customers whereas, the cost of production will increase in order to add a new feature to the firm and the prices will rise to cover the costs. As stated in â€Å"Getting the Facts Straight† leaflet of Mc Donald’s, the firm is working with top suppliers and independent experts on health and safety. The Cyprus Mc Donald’s restaurants’ inputs such as meat, is ordered regularly from Italy with the highest quality and when they enter the island,  it is supplied to all the franchise branches on the island by Mc Donald’s vans and trucks. This shows that Mc Donald’s owns its inputs and has its farms to breed cattle and grow vegetable and potatoes. Therefore, this allows the company to diminish costs by doing vertical backward integration. Moreover, it maintains a guaranteed time, quality and amount of supply to the restaurants when required. The drawback of vertical integration is that, at the beginning of the integration huge amounts of capital should be invested in to the backward integration. Mc Donald’s business has been working since 1956 till now successfully and still operates under these corporate level strategies. Cooperative Strategy A cooperative strategy means interaction between two or group of companies which work together to achieve a shared objective. By measures which are  included in cooperation, companies can create value for the customer at a lower cost or with more benefits than it is able to do by itself. The primary type of cooperative strategy used is strategic alliances. Such kind of cooperations means that companies partly share their resources and capabilities between each others to produce new resources and capabilities, e.g. gain shared objectives. Such corporations as McDonalds, Coca-Cola and Disney are the biggest multinational corporation with outstanding profits.But how can they enlarge their profits with the same amount of resources? The answer to this question is cooperation. Lets look through some strategic alliances formed by McDonalds. Alliance with Coca-Cola McDonald’s alliance with Coca-Cola has  «no piece of paper to fall back on—just  «a common vision and a lot of trust », according to Mr Ivester (Coke’s chairman) ». On setting up in the burger business in the 1950s, one of Ray Kroc’s first successes was persuading a Coke executive Waddy Pratt to provide him with their drink. Cokes relationship with McDonald’s goes far beyond than just a supplier It has helped McDonalds to go to the new markets all over the world, because Coke is sold in almost twice as many countries as McDonald’s. Michael Quinlan, McDonald’s chairman,  «runs off a long list of areas of cooperation, from banking relationships to equipment design ». There is also very close relations between the members of this alliance at board level. When Coke’s chairman Robert Goizueta died, flags flew at half-mast at McDonald’s around the world. Alliance with Disney The alliance between McDonalds and Disney has moved way beyond doing only movie promotions with Happy Meal toys. Nowadays this alliance has made enormous amounts of progress, for example McDonalds being a sponsor of Dinoland, one of Disney’s attraction in Animal Kingdom, has built its restaurant outside this attractions park. This new smart McDonald’s is decorated in DisneyWorld style. The staff wear uniforms which is approved by  Disney, which demonstrates McDonald’s characters. Alliance with Master Card and Visa McDonalds has announced an alliance with MasterCard and another alliance with Visa USA to bring cashless payment options to McDonalds restaurants in the US. By this cooperation with MC and Visa, a company has provided more comfortable system of payment in McDonalds which attracts customers. Alliance with Malls and Gas Stations McDonalds latest expansion targets call for approximately 3,000 new restaurants world-wide both 2008 and 2009. Two-thirds of new restaurants will be built outside the USA. On the other hand, in the US approximately 600 new restaurants will be so-called satellite units mini-McDonalds found in malls and especially in nationwide retailer. McDonalds has formed alliances with Amoco Oil Co. and Chevron Corp. in the US to built restaurants in tandem with gas stations to cover more and more destinations all over the country. Global Strategy McDonalds has initially expanded to international markets in the conditions of strong regulations and overcrowded market in the USA. In the very beginning they offered a standardized products and attracted new clients with clean environment policy and brand equity. Recently the company adapt to new conditions by providing new product line and redesigning retail space in order to meet local needs and tastes. This strategy has allowed McDonalds to adapt quickly to new countries, but at the same time it created a long-term threat of diluting the brand and loosing its association with American culture. For instance, in Europe McDonalds becomes going beyond fast-food conception. In order to compete with coffee shops, McDonalds started offering more comfortable conditions, such as WI-FI and iPods for rent. Moreover, they created new healthier and locally adopted foods. Some specialists suggest, that if the company continue to expand with this strategy, it will be quite difficult to remain recognizable and meaningful brand.  Now it is time to consider McDonalds global strategy in more detail, taking China, South Africa, Brazil and Saudi Arabia as examples of strategy realization. But firstly, it is worth mentioning a few background facts. There is an incredible opportunity to expand in the world. McDonalds annual growth rate is about 1000-1500 restaurants and by 5-10 countries. According to the statistics, the company employed about 2 million people worldwide in 2000. The company adapts easily to new customers preferences by incorporating in the menu pommefrite sauce in Belgium and Holland and special mayonnaise based sauce in Iceland. China The McDonalds strategy in China is vary specific and it is aimed for adaptation to local culture. In comparison with the US, it was important for Chinese clients to focus not only on the food, but also on the restaurants’ atmosphere. That is why in China McDonalds restaurants are very similar to the American coffee houses with comfortable conditions for conversation and meetings. An other part of McDonalds strategy is introducing national tastes in its menu, such as the teriyaki burger. South Africa In South Africa McDonalds decided to focus on high populated cites. The point is to serve people where they eat, shop or play. The companies survey figured out that drive thru facilities are much effective then restaurants themselves, that is why there was made a decision on improving retail spaces. Moreover, McDonalds marketing strategy was concentrated on potential customers with different income level. In South Africa McDonalds has 90 branches spanning all nine provinces. It has 3 000 staff in just 39 restaurants, most working for franchisees. Each new restaurant opening creates as many as 80 new jobs, which is really important in current conditions. Brazil The eighth largest McDonalds market is concentrated in Brazil. Management team here is mostly focused on quality improvement and customer satisfaction and it was awarded for these efforts with Franchising Hallmark of Quality. Furthermore, McDonalds Brazil is one of the best employers and fifth among most admired companies in the country. Saudi Arabia and India The most characteristic feature of McDonalds in Saudi Arabia is that it closes five times a day for muslim prayers. McDonalds India offers aloo tikki and paneer. And it doesnt serve beef or pork at all. The Big Mac becomes Maharaja Mac in India. The company created special conditions for vegetarians with separate kitchen, cook and utensils. Moreover, in Ahmedabad the company decided to open an all-vegetarian outlet. Holding in respect Muslim tenets of belief, the company does not serve pork in all Islamic countries. There are two absolutely unique restaurants in the Holy City of Makkah, where Moslem customers are exclusively served by the staff, fully consists of Moslem employees, from the Service Crew to the Restaurant Manager level . And finally, McDonalds efforts have improved the local industries and national economy due to the fact that more than 50% of the products used are manufactured locally and in the gulf regions. Recommendations For Business-Level Strategy The main recommendation in terms of business-level strategy is to remain in the same niche. McDonald’s pioneered the whole concept of the fast food restaurant, that is why it should go to some other businesses, such as higher-level restaurant, because it can dilute their image of best fast food restaurant. For Corporate-Level Strategy Due to the fact that not every family has a direct access to McDonald’s cafes or just their place is too far from the restaurants, the idea to provide fast food to supermarkets. The products will be sold in the special vacuum package, so that it would have their original taste. This way the restaurant will loose nothing because there are only advantages which consist of making extra profit and gaining customer loyalty through spreading their production into the farplaced (far located) regions. For Cooperative Strategy As we have seen in the examples of McDonalds alliances – cooperation is very efficient way of development. In my opinion, McDonalds can cooperate with greater amount of companies. However, it should be very selective in choosing partner not to dilute its image. For example McDonalds can cooperate with Apple: McDs can provide free rechargers to Apple gadgets in its restaurants, while apple spread some apps by the AppStore. I think that McDonalds also should create alliance with some attraction park companies, as theyve made with Disney. Of course it would be more profitable for McDonalds because of the amount of clients concentrated in one place. On the other hand, ones park logo and symbolic in MacDonalds is worth it. For Global Strategy In spite of the fact, that McDonalds has great expansion opportunities, it is essential for the company to remember about its strength and to prevent brand dilution by means of concentrating on traditional American fast-food menu and including no more then 30% of specific dishes. Talking about the company’s pros, it is essential to continue developing and improving marketing campaign towards children and adults in foreign countries. In addition, such fresh ideas as creating vegetarian restaurants should be adopted in more countries in order to give customers alternative choice. Moreover. It would be a great idea to install Internet access terminals in each restaurants in order to reduce the amount of lag time between a customer’s orders and pick up of the order. This will show the innovative company level and improve its brand image for customers. Conclusion In the conclusion it is worth mentioning that the best prove of fantastic effectiveness of McDonalds strategy is the fact that its competitors trying to copy its standards and processes to become more competitive at the market where McDonald’s still remains the leader. View as multi-pages

Wednesday, August 21, 2019

War And Peace Essay Example for Free

War And Peace Essay This paper will talk about war and will examine whether war is a natural condition and is inevitable or whether war is just an invention of mankind and can be avoided if so desired. The paper will also discuss the consequences of war and some of the factors which trigger and initiate confrontation. Margaret Meade defines war or warfare as a â€Å"recognized conflict between two groups as groups, in which each group puts an army (even if the army is only fifteen pygmies) into the field to fight and kill, if possible, some of the members of the army of the other group. † (Meade, Margaret) Man has been addicted to war for centuries. In ancient times, man did not even need a very strong reason to go to war. He was used to hunting tribes, killing men and women and looting villages. Strength was perceived to be equivalent to the number of lands one could conquer or the number of people one could kill. Men killed in cold blood and considered this way of living to be exciting and glorious. (James, William) This attitude has changed to a large extent in the modern world. One can’t just go out and kill. At least in principle man cannot kill or loot or damage another human being. According to William James, war is permissible â€Å"only when forced upon one, only when an enemys injustice leaves us no alternative. † Nevertheless, the senseless wars and destruction we see all around us today indicates that man’s thirst and fascination for war and bloodshed has not decreased but is simply manifested differently. In other words, â€Å"modern man inherits all the innate pugnacity and all the love of glory of its ancestors. No wonder man has engaged in so many senseless and irrational wars bringing pain and horror to hundreds and thousands of people. (James, William) Man has been a constant supporter of war. This is evident from the numerous conflicts prevalent all around the world. From World War I and II to the Korean War, Vietnam, Guatemala, Nicaragua, Columbia, West Bank and Gaza, Sudan, Yemen, Algeria, Gulf, Turkey, Bosnia, Kosovo, Sarajevo and so on, thousands of people are engaged in combat all across the globe and millions are being killed and injured. If one only looks at the fatalities during the 1990s, one would see that there are nearly â€Å"2 million people dead in Afghanistan, 1. 5 million dead in Sudan, around 800,000 dead in Rwanda, half a million dead in Angola, quarter of a million dead in Bosnia, 200,000 dead in Guatemala; 150,000 dead in Liberia; a quarter of a million dead in Burundi and 75,000 dead in Algeria. † There are hundreds and thousands of people dying in conflicts between Israel and Palestine, Ethiopia and Eritrea, Columbia, Chechnya, Sri Lanka, Kosovo, Ireland, Turkey and not to forget the Persian Gulf. According to statistics, nearly 62 million civilians have died in the wars of the twentieth century. This is nearly 20 million more than the number of military personnel that have been killed during the same time period. According to Will Durant, a historian, â€Å"there have been only twenty nine years in all of human history during which a war was not underway somewhere. † (Hedges, Chris). Since September 11, a new type of war has begun triggered by attacks on America when New York’s World Trade Center was destroyed by two passenger planes being flown into them. Pentagon was also attacked and it is believed that a similar attack had been planned for the White House but did not materialize. This started the War against Terrorism with the United States taking the Taliban head-on and attacking Afghanistan in search of Osama Bin Laden. A similar war was initiated against Iraq accused of carrying weapons of mass destruction. Saddam Hussein was removed as the head of the state, put on trial and executed for his various crimes against humanity. However, the war against terror appears to be never ending. Although many would agree with the cause of this war, the immense destruction and death that has been observed depicts the senselessness of taking on such a conflict. There are extremists at both ends – Islamic fundamentalists on one side and aggressive leaders on the other. There is no hope for any resolution if both parties refuse to listen to each other and refuse to make any efforts to attain peace. It becomes apparent from the never ending bloodshed in Afghanistan and Iraq that man is indeed thirsty for bloodshed otherwise there is simply no reason why such a battle would last this long. No one is winning and there seems to be no conclusion in sight. The theory that because man is a war animal and has been so for centuries is no excuse for the destruction of so many countries and the death of so many soldiers and innocent civilians. In fact there are many societies and people who have never undertaken any conflicts in their lives. These include the Eskimos and the Lepchas of Sikkim. None of these people understand the concept of warfare. Lepchas are gentle and un-quarrelsome people while Eskimos, though not mild, see no necessity of going to war for any reason whatsoever. It may be argued that Eskimos do not possess any land or any assets to have any reason to wage war. That may be true but the fact still remains that the theory than man is biologically designed to wage war appears to be untrue if one looks at certain groups of people that have survived for centuries without waging any war. Thus, war is actually an invention by mankind and even civilized or mild people may go to war if they are aware of this invention. However, those who do not know of war will simply not go to war because they are not yet aware of the invention. They may be violent or civilized; war will never be an option for them. According to Margaret Meade, â€Å"people who do not know of dueling will not fight duels, even though their wives are seduced and their daughters ravished; they may on occasion commit murder but they will not fight duels. Cultures which lack the idea of the vendetta will not meet every quarrel in this way. † (Meade, Margaret) Thus, war is not a necessity but an invention. War can be avoided if human beings see the absolute absurdity of the whole exercise. There is never any positive outcome of war. One party always ends up losing and there is no one to judge whether the side which emerges victorious is the one in the right. War is the worst possible activity mankind can engage in and human beings should collectively work towards outlining alternatives other than war to resolve conflicts. Works Cited James, Williams. The Moral Equivalent of War. From The Best American Essays of the Century, Joyce Carol Gates, ed. , and Robert Atwan, coed. 2000, 45-49, 52-55. Meade, Margaret. Warfare: An Invention—Not a Biological Necessity. Asia. 1940. Hedges, Chris. War Is a Force That Gives Us Meaning. Anchor, 2005.

Regulation of Financial Services Post Credit Crunch

Regulation of Financial Services Post Credit Crunch INTRODUCTION The financial system is the system that allows the transfer of money between savers and borrowers, and comprises a set of complex and closely interconnected financial institutions, markets, banks, instruments, services, practices, and transactions (Steven M Sheffrin, 2003). All Financial institutions in any country follow certain regulations which are placed by the central monetary authority (e.g. financial service authority) in order to provide improved service to the public and work in the best interest of the nations. Regulationis controlling human or societal behaviour by rules or restrictions (Bert Jaap Koops 2006). The purpose for regulating the institutions is to reduce the risk of failure and to attain social goals. For example banks are regulated, as they by their very nature are prone failure, and the costs paid by the public for failure is extremely high compared to the financial costs to regulate the banking system. Regulations should be fair and limited so that they as sist banks to develop new services in accordance with the customers demand, make sure competitions in financial services is strong, maintain the quantity and quality of the service provided to public and better utilisation of resources. Over the last five years, the financial system in the world has gone through its greatest crisis. The financial problems have appeared at the same time in many different countries which makes it unique from the crisis in past. The overall economic impact is felt all through the world, which is resulted from the interconnectedness of the global economy. This does not mean that the economic recession which many countries in the world now face will be anything like as bad as that of 1929-33(turner 2009). The crisis in 1930s was made worse by the policy in response. But it is clear that effective the policy response cannot prevent the large economic cost of the financial crisis. If we are to prevent or minimise the scale of future crisis there is an increased need of policy framework that can bring different factors and the corresponding powers to act positively when risks are recognized. Currently Britains existing framework is confused and the powers and capabilities split awkwardly between competing institutions, which results in nobody identifying the fundamental problems when these institutions are building up and none of the institutions can act in response to crisis as they do not have the authority to do so. In order to avoid future crisis changes in regulation and supervisory approach is needed in order to create a more robust financial system for the future. Our focus in the research is on banking institutions, and not on other areas of the financial services industry. In 2007, Britain experienced its first bank run of any significance since the reign of Queen Victoria (Reid. m, 2003). The run was on a bank called Northern Rock. Britain was free of such event not by misfortune, but because in early third quarter of nineteenth century the Bank of England developed techniques to avoid them. These techniques were used, in Britain and had worked, and appeared to be trusted. The run of northern rock was triggered by the decision to provide support for troubled institution. That run was brought to a standstill, when the Chancellor of the Exchequer (Alistair Darling2) declared that he would use taxpayers funds to guarantee deposits at Northern Rock. Unlike runs in banking history, it was a run only on that one institution as funds withdrawn from it went only to a small amount into cash, and were mostly redeposit in other banks or in building societies. The research has three major objectives: Describes the role of financial regulations and reviews the literature on role played by the regulations in financial system. To describe and evaluate the banking crisis in United Kingdom in last 5 years and the reasons of the crisis which affected the banking system. To analysis and evaluate the role and benefits of living wills in context of changes in regulation. This leads to the research question: â€Å"Can living wills address the perceived failures in the regulation of financial services highlighted by the current credit crisis?† LITERATURE REVIEW A literature review is a summary of a subject field that supports the identification of specific research questions (Rowley J Slack F, 2004). Literature review explains the role of financial regulations, discuses the banking crisis in UK in last 5 years (2005-2010), and proposed new regulations which are to counter such failures in the future and at what cost these failures can be averted. The main focus of literatures review is the Banking Industry, proposed new regulations in order to minimise the effect of such crisis. The functions of financial services industry The existence of money is taken as for granted in all advanced societies today so much so that most people are unaware of the huge contribution that the concept of money, and the industry to manage it, have made to the development of our present way of life. Moneyis anything that is generally accepted aspaymentforgoods and servicesand repayment ofdebts (Mishkin Frederic S, 2007). In earlier civilisations the process of bartering was sufficient for the exchanging goods and services. Barteringis a medium in whichgoodsorservicesare directly exchanged for other goods or services without a common unit of exchange (without the use ofmoney) (OSullivan, Arthur Steven M. Sheffrin, 2003). In modern society, people still produce goods or provide services that they could, in theory, trade with others for exchanging for things they need. Due to complexity of life and the size of some transactions make it impossible for people today to match what they have to offer against what others can supply to them. What is needed is a commodity that individuals will accept in exchange for any product, which forms a common denominator against which the value of all products can be measured. Money carries out these two important functions. In order to be acceptable as a medium of exchange, money must have certain properties. In particular it must be * Sufficient in quantity * Generally acceptable to all the parties in all transactions * Divisible into small units * Portable Money also perform as a store of value, which means it can be saved because it can be used to divide transactions in time received today as payment for work done or for goods sold can be stored in the knowledge that it can be exchanged for goods or services later when required. In order to fulfil these functions, money has to retain its exchange value or purchasing power and the effect of inflations can, of course, affect this function. The financial services industry exists largely to facilitate and to deal with the management of money. It helps commerce and government by channelling money from those who have surplus, and wish to lend it to make profit, to those who wish to borrow it, and are willing to pay for the benefit they acquire of having it. The financial organisations want to make profit from providing such services and, by doing so, they provide the public with products and services that offer, convenience ( e.g. current accounts), means of achieving otherwise difficult objectives (e.g. mortgages) and protection from risk (e.g. insurance). Prior to the 1980s, there were clear and distinct boundaries between different kinds of financial institutions; some were retails banks, some wholesale banks, others were life assurance companies or general insurance companies, and some offered both types of insurance and were called composite insurers. Today many of the distinctions have become unclear, if they have not vanished altogether, increasing numbers of mergers and takeovers have taken place across the boundaries and now even the term banc assurance, which was coined to describe banks that owned insurance companies, is inadequate to describe the complex nature of modern financial management groups. For example one major UK bank offers following range of services * Retail banking services * Mortgage services through a subsidiary that is a building society * Credit cards services * Wealth management services * Financial asset management for institutional customers * Investment banking * Insurance services Regulations Bank failures around the world have been common, large and expensive in recent years. It is common to think of banking failure as something that happens in emerging economies and countries with advanced banking system, but there have been some shocking failures of banks and banking system within the developed economies in recent decades. The scale and frequency of the bank failures and banking crises have raised doubts about the efficiency of bank regulation and raised questions as to whether the regulation itself has created an iatrogenic reaction. Regulations for banks and other financial institutions hinge on the coase (1988) argument that unregulated private actions create outcomes whereby social marginal costs greater then private marginal cost. The social marginal costs occur because bank failures has a far greater effect then throughout the economy than, say, failure of a manufacturing concern because of the wide spread use of banks. Nevertheless it should be borne in mind that regulation involves real resource costs. These costs arise from two sources (a) direct regulatory cost, (b) compliance costs bear by the firms regulated. In IMF global financial stability report (2009), it estimates that the eventual cost to British taxpayers of support for the banking sector will be 9.1% of GDP, or more than  £130 billion, that is more than five times the equivalent of 1.8% of GDP in France and three times the estimated 3.1% of GDP in Germany. The main reason for regulating the banks is firstly consumers lack market power and are prone to exploitation from the monopolistic behavior of banks. Secondly depositors are uniformed and unable to monitor banks and, therefore, require protection. Finally, governments need regulations to estimate the safety and stability of the banking system. Basel accord Basel committee for banking supervision a committee for BIS (Bank for International Settlement) was first established in 1974. This committee operates at international level and the main focus of the committee is to strengthen the capital of banks. The principle reasons for the establishment of the committee were to safeguard the financial stability of the banking system worldwide and to create a level playing field. The first major achievement of the committee was in the form of Basel I. Basel I aimed at: 1. Promote the co-ordination in the regulatory and capital adequacy standards of the member countries. 2. Guard against risk in credit worthiness 3. Finally, it suggests for the minimum capital requirements for the international banking. Since 1988 when the Basel committee introduced the first capital accord Basel I the risk management practices, the banking business and the whole financial market has changed. The New York Fed President argued that â€Å"it also has not kept pace with innovations in the way that banks measure, manage and mitigate risk.†(EBSCO, 2002) Although the accord covered fairly relevant issues but it wasnt helpful enough to make a major impact in the industry. Therefore in 1999 the initial steps were taken which led to the amended of Basel I. There were several different reasons for the amendments. One of the misunderstandings about Basel I was that it was the only way to the financial stability of a country. The positive results of implementation of Basel I were seen in the G-10 countries, as these countries were previously operating their financial industry on mostly the same rules, but still there were many new product introduced and reforms took place which remained unexplained by the accord and resulted in the financial industry either fully collapsed or got taken over by other giants. For example Grupo Financiero Bancomer, a Mexican banking giant was reported as â€Å"US- based Citibank has agreed to acquire Mexican banking giant Grupo Financiero Bancomer-Accival (Banacci) for US$12.5 billion† (All Business.co m, 2001). The initial results blinded the G-10 in the aspects of emerging markets as they got pressurized by the larger financial institutions to follow the same accord. Another failed aspect of Basel I which led to the new accord was that the old accord only focused around the credit risk. Basel I did not focused on operational risk which also supported the downfall of many financial institutions. As explained by Mohan Bhatia â€Å"Weather it is a fee-based business, emerging practices or income-based business. A bank is exposed to operational risk.†(Bhatia, 2002). Even though Basel I was not written to be applicable for the emerging markets, its functions created distortions in the banking sectors of the industrialized economies. â€Å"In countries subject to high currency inflation and sovereign default risks, the Basel I accord actually made loan books riskier by encouraging the movement of both bank and sovereign debt holdings from OECD sources to higher-yielding domestic sources† (Balin, 2008). Another problem with the 1988 accord was that it focused more on the type of loan rather than the credit status of the borrower. As the bank and large financial institutes saved just 8% for the unseen risks they had more capital left. That was used in form of loan and subprime lending which was later proved to be a real disaster for the financial institutions. Basel I created a gap between the regulatory capital and the economic capital as bank would choose to hold. The commonly know regulatory capital is different to the economic capital. The economic capital aims to enhance the value of the investor and is based on the internal risk assessment of the organization. Whereas on the other hand the regulatory capital secures the banking stability and the regulator decides it for the protection of the depositor. Considering the drastic effects of the Basel I accord the committee published the reforms in 2003 namely Basel II. â€Å"Basel II is a response to the need for the regulatory system governing the global banking industry.†(Garside, Bech, 2003) Basel II brought many reforms to the old accord and was based on three pillars. The first pillar was minimum capital requirement which explained explicit treatment for operational risk in the financial industry. However the market risk remained with the same explanation as from Basel I. The Basel II brought some new methods of measuring the credit risk by introducing the public and internal ratings which provided good risk mitigation techniques. Furthermore the second pillar explained the supervisory review of capital adequacy. The basic purpose of this pillar was to keep a check on the financial institution that they hold excess of minimum level of capital required. The regulator can intervene at the initial stage if this requirement was not fulfilled. Finally the third pillar was brought into place to bring a much better market discipline. The market is considered to be the role played by the shareholders, government or employees whether proper capital is maintained or not. With this improvement Basel II was considered to help both the lender and the borrower. Basel II spots the weakness in Basel I and proposed effective risk measurement, mitigation techniques and elaborates valuables for market discipline for good banking system and good financial stability as explained â€Å"we at the Federal Reserve had even more reasons for the most finely tuned Basel II framework: Not only are we the umbrella supervisor over all financial stability companies but, as the nations central bank, we are responsible for maintaining nations financial stability.† (Poole, 2005) The fines of Basel II are basically explained by the three pillars of it as the very dexterously explain how and where the accord will be effective. The first pillar of minimum capital requirement was extremely advantageous in providing enhanced risk measurement by helping the large financial institutions and big banks to measure the risk involved in their functions and operations more sophisticatedly. Risk management proposals were useful for the capital they require to hold in case of unexpected losses. The new accord proposed different approaches for the measurement of credit risk. The standardised approached being the more or less the same as the old accord was more risk sensitive for the creditworthiness of the customers and improved the requirement which was previously based on type of loan instead of the credit status of the customer. This approach explained the birth of credit rating of individuals but the problem with this approach was that the culture of rating is not popular in every European country and other countries with strong and effective economies. Whereas the internal ratings-based approach was based on the internal key risk drivers and therefore the potential for more risk sensitive capital was substantial in a way to mitigate the risk. But the internal ratings-based approach is not enough to calculate the capital required for the risks. â€Å"The approaches for calculating the risk-weighted assets are intended to provide improved bank assessments of risk and thu s to make the resulting capital ratios more meaningful† (Pitschke Bone-Winkel, 2006). Operational risk which the Basel I failed to examine is a crucial element and was elucidated by Basel II in three operational risk alleviation approaches. The first method called the Basic indicator approach advice the banks to hold capital equal to 15% of average gross income earned by banks in the past three years. The second method named the standardized approach separates every business to hold capital to shield itself against the operational risk. Finally the third method of advance method approach allows the banks to calculate their own capital requirement to protect themselves against the operational risk. A disadvantage of the first pillar was that it allowed the banks to set their own risk assessment techniques. This gave over sanguine reports to reduce the capital required. Furthermore it even maximized the return on equity. For a much better market discipline regulators must approve the requirement. As explained by (Lind, 2006) â€Å"banks must have methods and systems fo r risk management which are subject to adequate corporate governance processes throughout the banks.† The pillar II of The Basel Accord is based on Supervisory Review. It certifies that the banks should have enough capital to sustain all the unexpected risk in an organization and also provides with much more better techniques to monitor and mitigate those risks. It advises the banks to calculate their risks internally. It requires the regulators to assess the banks risk management processes and capital position to maintain a target level of solvency. â€Å"Pillar II recognises that national supervisors may have different ways of entering into such discussions and provides flexibility to accommodate those differences† (Caruana, 2003). It was helpful in a way to evaluate funding strategies and also gave an insight to the risk mitigation policies to the banks. In total the second pillar had two positive proposals. Firstly, it gave more power to the regulators to keep a check of the minimum capital requirement by banks as calculated in pillar 1. And secondly it alarms the repetiti on of the financial crises such as in countries like Korea and China by taking early actions and offering rapid remedial actions. â€Å"Some of the data submitted by individual institutions was not complete; in some cases banks did not have estimates of loss in stress periodsor used estimates that we thought were not sophisticatewhich caused minimum regulatory capital to be underestimated† (Bies, 2006). At the same time while the corporate governance is in place the accord gave absolutely no information regarding the liquidity. Banks remained unaware of the true financial conditions of each other which forced them to stop lending and the State Bank of England was highlighted as the last resort to rescue. Pillar III based on the market discipline helped maintain discipline in the market place by greater disclosure of the banks risk profiles. The pillar III is connected to pillar I and pillar II as it complements the minimum capital requirement and the supervisory review process. â€Å"Market discipline can contribute to a safe and sound banking environment and supervisors require firms to operate in a safe and sound manner† (BIS, 2005). The disclosure is important for the benefit of the stakeholders. Therefore a disclosure of market risk, operational risk, interest rate risk and the disclosure of capital structure is required. The information should be disclosed timely. â€Å"It will fundamentally transform financial reporting for banks by demanding increased depth and breadth of disclosure† (Garside, Bech, 2003). One of the other disadvantages of Basel II is the complexity and potential cost of the framework. It is a defected draft of 450 pages and the cost of implementing it is too high for the banks. Banks were also afraid to lend because of the fear of Basel II as they would operate against the rules of Basel II on certain occasions. According to the Basel book the banks have to meet a certain level of capital reserves and in todays scenario of credit crunch it is difficult. As Peter Spencer explains â€Å"the Basel system of banking regulations, which determine how much capital banks must raise to keep their books in order, are the root cause of the crunch and were serving to worsen the Citys plight† (Conway, 2007). The Basel committee produced the old and new accords which to an extent were successful for the strengthening of the capital of banks and also took into account the risk throughout the procedures. But the new accord did not changed with new reforms in the system which made it just a box to be ticked in a form and had no connection with the reality or implementation. Most of the organizations ticked the boxes and yet carried on with the risky decision which seemed profitable but yet proved out to be wrong such as Northern Rock. These decisions were not even against any of the accords as the Basel committee never updated to the new market. Financial Services Authority (FSA) Regulations of the financial services industry in the UK is a 5 tier process: * First level: European legislation that impacts on the UK financial industry * Second level: the acts of the parliament that set out what can and cannot be done. * Third level: the regulatory bodies that monitor the regulations and issue rules about how the requirements of the legislation are to be met in practice. The main regulatory body is now the Financial Services Authority (FSA), which has taken over the regulatory responsibilities of the number of other bodies, including the bank of England. * Fourth level: the policies and practices of the financial institutions themselves and the internal departments that ensure they operate legally and competently. * Fifth level: the arbitration schemes to which consumers complaints can be referred. For most cases, this will now be the financial ombudsman service, which takeover the responsibilities of a number of earlier ombudsman bureaux and arbitration schemes Before the arrival of the financial services act 1986, the UK financial services industry was self regulating. Standards were maintained by a promise that those in the financial industry had a common set of values and were able, and willing, to exclude those who violated them. The 1986 act moved the UK to a system which became known as self regulation within a statutory framework. Once authorised, firms and individuals would be regulated by self regulating organisations (SROs), such as IMRO, SFA or PIA. The financial services act 1986 covered investment activities only. Retail banking, general insurance, Lloyds of London and mortgages were all covered by different acts and codes. When labour party came in power in 1997 it wanted to amend the regulation of financial services. The late 1990s saw more fundamental development of the financial services system with the fusion of most aspects of financial services regulation over a single statutory regulator, the financial services authorit y (FSA) process took place in two phases. First the bank of Englands responsibilities for banking supervision was shifted to the financial services authority (FSA) as part of the bank of England act 1998. The second phase of development consisted of a new act covering financial services which would revoke key provisions of the financial services act 1986 and little other legislation. All the earlier work on regulation would be swept away and the FSA would regulate investment business, insurance business, banking, building societies, friendly societies, mortgages and Lloyds. On 30 November 2001 the act, the financial services and market act 2000 (FSMA 2000) came to form a system of statutory regulation. The creation of the FSA as the UKs single statutory regulator for the industry brought together regulation of investment, insurance and banking. The FSA took over the responsibilities for prudential supervision of all firms, which involves monitoring the adequacy of their management, financial resources and internal systems and controls, and Conducting of business regulations of those firms doing investment business. This involves overseeing firms dealing with investors to ensure for example information provided is clear and not misleading. Adair Turner (2009) argued that FSAs regulatory and supervisory approach, before the 2007-2008 crises, was based on a sometimes implicit but at times quite obvious philosophy which believed that * Markets in general are self-correcting and disciplined which acts as effective tools than regulation or supervisory oversight to ensure firms strategies are sound and risks contained * Main responsibility for managing risks was of senior management and boards of the firms, who were thought to be at better place to evaluate business risk than bank regulators, and who are better off in making appropriate decisions about the balance between risk and return, provided proper systems, procedures and skilled people are in place. * Customers protection cannot ensured by product regulation or direct markets intervention, but by making sure that wholesale markets are tolerant and transparent as possible, and thats the way in which firms conducts business is appropriate. Turner argued that this philosophy in supervisory approach resulted in: A focus makes sure that systems and processes were defined well instead of challenging the business models and strategies. Risk Mitigation Programs set out after ARROW reviews therefore tended to focus more on organization structures, systems and reporting procedures, than on overall risks in business models. A focus within the FSAs failure to notice of approved persons on checking that there were no issues of honesty raised by past conduct, instead of evaluating technical skills, with the assumption that management and boards were in a superior position to assess the appropriateness of particular individuals for particular roles. A balance between business regulation and prudential regulation which, with the benefit of observation, appears biased towards the former. This was not the case in all sectors of the financial industry: the FSA for instance introduced in 2002-04 major and very important changes in the prudential supervision of insurance companies which have significantly improved the ability of those companies to face the challenges created by the current crisis. But it was to a degree the case in banking, where a long period of reduced economic volatility, which was attributed by many informed observers to the positive benefits of the securitized credit model, helped foster inadequate focus on system-wide prudential risks. Failure of Current Regulation Based on the â€Å"Geneva Report†, the â€Å"G30 Report†, and the â€Å"NYU-Stern Report† failure of current regulation Systemic risk:Reports established a point of view that the financial regulatory frameworks around the world pay little consideration to systemic risk. Carmichael and Pomerleano (2002) define systemic risk as systemic instability that â€Å"arises where failure of one institution to honour its promises leads to a general panic, as individuals fear that similar promises made by other institutions also may be dishonoured. Acharya, Pedersen, Philippon and Richardson (2009) argue that Current financial regulations seek to limit each institutions risk seen in isolation; they are not focused on systemic risk. As a result supervisions focus on individual institutions, instead of having it on the whole system, while individual risks are properly dealt with in normal times, the system itself remains, or is encouraged to be, weak and exposed to large macroeconomic shocks This focus was a common feature and a common failing, of bank regulation and supervisory systems in the world. As per the Ge neva Report regulations wholly assumes that it can make the system as a whole safe by simply making sure that individual banks are safe which is misleading. Pro-cyclical risk taking: Reports also agreed that financial regulations encourage pro-cyclical risking taking which increases the possibility of financial crises and their severity when they occur. Any economic quantity that is positivelycorrelatedwith the overall state of theeconomyis said to be pro-cyclical (Gordy MB and Howells B. 2004). Financial intermediation as a whole is inherently pro-cyclical. Financial activity such as new bond issues and total bank lending tend to increase more during economic booms than during downturns. Higher levels of economic growth lead to higher values of potential collateral, thereby loosening credit constraints and making access to debt financing easier. Another contributing factor to the financial systems pro-cyclicality is that financial market participants behave as if risk is counter-cyclical. For instance, bank loan standards tend to be most lax during economic booms (Lown et al 2000)) and banking supervisors have historically been most vig ilant during downturns (Syron (1991)). Regulations lead towards stability and reduce statistical measures of risk and encourage excessive risk taking. In bad times, the pendulum swings back producing excessive risk aversion. Large Complex Financial Institutions (LCFIs): All reports agree that current regulations do not deal effectively with LCFIs, defining LCFIs as â€Å"financial intermediaries engaged in some combination of commercial banking, investment banking, asset management and insurance, whose failure poses a systemic risk or `externality to the financial system as a whole.† (Saunders, Smith and Walter, 2009). The growing role of LCFIs poses various challenges.The complexity of these institutions has made it hard for financial analysis and effective supervisors oversight. The linkages among business areas within LCFIs are close which leads to increase of risk contamination from one business area to another as well as across jurisdiction. All reports also insist on the danger induce by implicit Too-Big-To-Fail guarantees. Too big to fail is an expression that refers to the idea that ineconomic regulation, the largest and most interconnected businesses are so big that a government cannot le t them to declare bankruptcy for the reason that said failure would have disastrous consequences on the overall economy. Mervyn King on June 17th, 2009, the governor of theBank of England, called for banks that are too big to fail to be cut down to size, as a solution to the problem of banks having taxpaye