Category: Business 11471

Risk Concept

An adverse impact on an organization and its systems if it is created by a possibility or occurrence of an event or activity is called a Risk. If a given threat exploits sensitivities of an asset or cluster of assets that may cause damages or loss to the assets, then it may be called a potential risk. It is normally calculated either by the probability of happening of an event or by a composite of effect. Inherent risks are those which are correlated with an event in the absence of precise controls. Residual risks are those which are correlated with an event when the controls in place to minimize the probability or the effects of that event are taken into consideration.

Risk assessment or evaluation is a process employed to recognize and evaluate risks and their probable effect on a business. (Barton, Shenkir and Walker, 2002, p.24).

Thus, risk management is the process whereby businesses methodologically address the risks attached to their business activities with the prime aim of attaining sustained advantages within each business activity and across the assortment of each business activity.

A risk evaluation process is one where the comprehensive process of risk evaluation and risk examination is carried out. It includes risk recognition, risk delineation, and risk estimation.

Risk evaluation in a business will include the following:

• Does the business have a vibrant liquidity status as corroborated by a high quick ratio or CR?
• Does the business have forex risk vulnerability?
• Does the business have a low gearing or leverage ratio?
• Is the business is susceptible to interest rate risks?
• What is the status of the market for the products of the business?
• What is the economic coverage of the firm? (Kit, 2005, p.281).

Risk Management Techniques

A business may encounter the following wide range of risks, which are classified into the following varieties;

1. Financial risks
2. Economic risks
3. Performance risks
4. Technological risks and
5. Legal risks (Kit, 2005, p.18).

The types of risks that a business may encounter:

Credit Risk

This risk arises if a debtor fails to pay his loan back or other lines of credit. The risk may be extended to both the principal or interest or both. (Lam, 2000, p.149).

Interest Rate Risk

This may arise if there is an increase in interest rates for the debentures or loans taken by the company or business. (Lam, 2000, p.183).

Volatility Risk

If a business is having forex exposures, this risk will arise due to volatility in the exchange rates. Thus, it is a probable yardstick of the risk that an exchange rate movement creates to an investors portfolio in a foreign currency. A data set of exchange rate movements is measured as a standard deviation to reflect the volatility of the exchange rate. (Lam ,2000,p.24).

Liquidity Risk

This risk is arising from the circumstances in which a party is enthusiastic about selling an asset who cannot encash it as there are no buyers in the market. It is especially significant to parties who are about to hold or currently are holding an asset since it impacts their capacity to trade. ( Lam ,2000,p.182).

Operational Risk

If any risk is created due to insufficient or failed internal systems, people, and processes, or from external incidents.

Some Illustrations of Operational Risk

• Technology failures
• Non-availability of business premises
• Insufficient record-keeping or document retention
• Lack of accountability, supervision, control, and poor management
• Errors in financial reports and models
• Fraud committed by the third party
• Efforts to conceal losses or make personal profits.( Lam ,2000,p.26).

Market Risk

If the value of an investment is affected due to volatility in market factors, then such risk is known as market risk. ( Lam ,2000,p.115).

Business Risks

The risk associated with a business can be classified into the following groups;

Compliance Risk

This risk is related to legal requirements to comply with regulations and laws.

Strategic Risks

These risks are specific to a particular industry and include the following:

• Changes in demand or customers preferences
• Impact due to merger and acquisition strategies
• Changes in industry
• Transformations due to research and developments. (Lam, 2000, p.23).

Financial Risks

It relates to the financial structure that the business is operating and the financial system that the business is already having and includes the following:

• By recognizing the financial risks involved by analyzing daily financial operations,
• Monitoring cash flow daily

It is to be noted that many businesses have operating or economic vulnerability that is not mirrored on their balance sheets. Even business that has no foreign exchange payments or receipts can still be vulnerable to forex risk. (Smith & Wilford, p.284).

Operational Risk

It is correlated with ones business administrative and operational procedures;

• Supply Chain
• Recruitment
• IT systems
• Accounting checks & controls
• Composition of Board
• Internal policies, rules, and procedures (Lam, 2000, p.26).

Other Risks in Business

Other risks include environmental risk including natural calamity, employee risk management like maintaining adequate employees, and risk associated with employee safety, economic, safety, and health risks and political instability in the foreign market where a business export its products. (Lam, 2000, p.25).

Management of the Business Risks

Companies witnessing large vulnerabilities to exchange rates, interest rates, or prices of a commodity can augment their market importance by employing derivatives to minimize their vulnerabilities. Derivatives include futures, forwards, options, and swaps. Derivatives can help minimize the vulnerability of corporate cash flows and reduce various costs linked with financial distress. Derivatives are extensively employed by large companies, mainly to buy protection against financial trouble. The majority of companies go for selective as opposed to full-cover hedging. (Lam, 2000, p.84).

Successful Risk Management Strategies by Business

There is no business without any risk. Risk is inherent in every business. A business must first know what risk it has to manage or control. In DuPonts initial days, all understood and admired the risk of making dynamite. For United Grain Growers (UGG) weather was a significant risk factor that could impact the performance of the company. In Chase, in its initial years, the loan portfolios risk could dramatically modify the companys earnings. For Unocal, the risk is to discover more gas and oil or else face losses. (Barton, Shenkir and Walker, 2002, p.12-13).

For Microsoft, it has to innovate continuously before someone edges it and occupies its market share. The risk management group in Microsoft repeatedly encourages the segmentation of risk management to the business units. Its business managers believe that they evangelize the business units about the significance of recognizing risk and its probable impact on business decisions. Further, risk managers emphasize face-to-face time with business units so that they could comprehend about 90% of risks facing the Microsoft. It also employs scenario analysis to recognize its material business risks. (Barton, Shenkir and Walker, 2002, p.12-13).

At Chase, all managers in various categories have to undertake self-assessment scorecards to recognize their units risks. Likewise, Unocal demands risk assessment on an annual basis in each of its business units. It stresses the dramatic change in its new risk-oriented approach by recognizing the provinces of the greatest risk and chalking out steps to administer all those risks. (Barton, Shenkir and Walker, 2002, p.12-13).

Some Failures due to Non-Management of Business Risks

The following failures in business have happened mainly due to the non-adoption of risk management techniques.

Due to fraudulent trading and internal fraud, Allied Irish bank had lost $691 billion, Barings lost $1 billion and Daiwa Bank limited lost $1.4 billion. Due to external fraud, Republic New York Corp had lost $611 million due to fraud committed by the custodial client. On the grounds of gender discrimination, Merrill Lynch paid $250 million through legal settlement under employment practices and workplace safety. (Mema & Al-Thani, 2008, p.269).

Household International lost $484 million due to improper lending practices and Providian Financial Corp lost $405 million due to improper billing and sales practices.

On the technology side, Bank of America lost $225 million, and Wells Fargo Bank lost $150 million due to system integration failures and due to failed transaction processing. Bank of New York lost $140 million due to damage to its physical assets on the September 11, 2001 incident. Further, Solomon Brothers lost $303 million due to changes in computer technology, which resulted in un-reconciled balances. (Mema & Al-Thani, 2008, p.269).

Likewise, Lego, a well-known toymaker had to recall one of its products worth £ 3.5 million even though the company had extensive risk avoidance procedures. NEC, a mobile phone manufacturer had to recall about 97,000 units of mobiles due to a faulty circuit in its mobile chargers, and it had incurred heavy losses including an advertisement, manning a call center, and cost of the defective products. Smith Kline Beach was compelled to recall 12 million glass bottles after it discovered a defect that made the neck of the bottle crack when opened. A manufacturer of baby car seats anticipated that a recall due to a defective seat-belt clasp made them forego a whole years profit. (Sadgrove, 2005, p.61).

The Steps the President and His Czars Have Taken to Address the Global Financial Crises

The first reaction from the US government came on September 7, 2008, to address the global financial crisis. It ordered the Federal Housing Finance Agency to absorb Freddie Mac and Fannie Mac thereby putting a full stop to their existence as government patronized corporations. By initiating this action, the U.S. Government openly guaranteed the debt of the two companies and barred them from declaring bankruptcy. (Nanto, 2009, p.9).

Obamas administration initiated its strategy for regulatory reforms in the U.S financial system on June 17, 2009. Various bills have been introduced in the Congress to sort out the financial crisis which includes measures like creating a select committee/commission to probe into reasons for a financial crisis, to offer greater oversight and accountability of Treasure and Federal Reserves lending policies, to sort out the issues in mortgage and housing markets, offer to fund for the IMF, to address the issues with consumer credit cards, to offer for enhanced supervision for commodities and financial markets, to deal with the national debt of U.S and to set up a methodical risk monitor. (Nanto, 2009, p.9).

For addressing the global financial crisis, G-20 under the leadership of the U.S.A along with IMF and the Swiss-based new Financial Stability Board is making its best efforts.

The G-20 summit held in April 2009 in London called for an enhanced role for the new Financial Stability Board and IMF to offer an early warning of financial and macroeconomic risks and actions required to address them. (Nanto, 2009, p.9).

G-20 London Summit resolved to fund $1.1 trillion in funds to the global financial institutions which include $250 billion to augment global trade, to grant $750 billion for the IMF, and $100 billion was earmarked for multilateral development banks. P.L 111-32 was signed as law by President Obama on June 24, 2009. This Act authorized to increase the U.S. share in the IMF by 4.5 billion SDRs and offered additional loans to the IMF of up to an extra 75 billion SDR and authorized the IMF to sell some stock of gold from its stock.

Obamas government introduced a proposal for financial regulatory reform on June 17, 2009. Obamas financial reforms spotlight five broad areas as detailed below:

• Financial firms should be under robust supervision and regulation.
• To frame overall oversight of financial markets.
• To safeguard investors and consumers from financial exploitation.
• To offer the U.S government the mechanism it requires to oversight future financial crises.
• To augment international regulatory norms and to enhance international cooperation. (Nanto, 2009, p.9).

The Major Historical Trends to Date Regarding the Use of Financial Derivatives as Hedging Tools

In 1600, Tulip dealing in Holland was a great business, and dealers and farmers engaged in trading in options to guarantee prices. Thereafter, many speculators joined and created a thriving option market. However, the market crashed soon as many speculators failed to honor their commitments.

Around 1650, Japan can be considered as the first futures contract which offered standardized contracts, which is analogous to present-day futures through the Yodoya rice market in Osaka,

In 1700, Options transactions were declared unlawful in London.

In 1848, CBOT (Chicago Board of Trade) was established, which offered forward contracts on different commodities.

In 1934, the USA legalized the Options through Investment Act. In 1968, the annual volume grew by 300,000 contracts.

In 1973, CBOT in Chicago commenced to trade listed call options on 16 stocks. The first-day volume of 911 contracts was reported.

In 1974, the daily volume in CBOT increased from 20,000 to over 200,000 contracts.

In 1980, the futures trade witnessed around-the-clock trading.

1n 1985, the top ten busiest traded futures exchanges in the world were situated in the U.S.A.

In 1990, 8 of the top 10 futures contracts which were traded on US exchanges, are started to be traded outside the US foreign exchanges. (Gupta, 2005, p.23).

Major Advantages of Derivatives

For companies that selectively employ risk management tools, VAR is useful for administering risk only in the provinces where the company distinguishes no proportional information benefit. For instance, an airline may find VAR more beneficial in evaluating its exposure to jet fuel prices. (Culp, Miller & Neves, p.467).

One study points out those users of financial risk management tools surpassed industry control clusters over 24 months by about one percent each year while nonusers underperformed their industry peers by about the same quantity. (Dolde, p.337).

Due to failure to hedge its anticipated dollar receivable, Daimler-Benz reported also DM 1.56 billion in 1995, which is the highest in its 109-year history. (Stulz, p.414).

Major Failures of Derivatives

Value at risk (VAR) is a technique evaluating the financial risk of an asset, exposure, or portfolio over some specific period. One research study examined the four great derivative disasters of 1993 -1995  Barings, Mettallgesllschaft, Procter & Gamble, and Orange County, mainly to know how ex-ante VAR evaluations likely would have impacted those scenarios. The research concluded that VAR had been only of little value in preventing those adversities. It concluded that in some cases, it had misled the results. (Culp, Miller & Neves, p.462).

In the case of MGRM, the U.S. oil marketing subsidiary of Metallgessellschaft, the use of futures and cash position ended in real losses and thereby leaving MGRM vulnerable to increasing prices on its remaining fixed-price contracts. (Stulz, p.414).

Integrated risk management

An Integrated Risk Management or Enterprise Risk Management (ERM) demands an integrated risk organization. Under IRM, the centralized risk management unit will report to the Managing Director or CEO and the board, with accountability for extensive policy setting across risk-taking activities in the business. Now, the majority of companies have employed a chief risk officer (CRO) who is accountable for supervising all features of risk within the business. (Lam, 2000, p.45).

Integrated risk management demands the amalgamation of risk transfer practices. Under this silo method, risk transfer policies were carried out either at an individual or at a transaction risk level. For instance, financial derivatives were employed to hedge market risk and insurance to transfer out operational risk. However, this strategy would not introduce diversification within or across the risk types in a portfolio and thus tends to end in over hedging and excessive insurance coverage. An IRM, by contrast, makes a portfolio approach for all kinds of risk within a business and trims down the employment of insurance, derivatives, and alternative risk transfer products to hedge only the residual risk deemed detrimental by management. (Lam, 2000, p.45).

Enterprise risk management demands the amalgamation of risk administration into the business processes of a business. Instead of the control-oriented or defensive approaches employed to administer downside risk and earnings volatility, IRM optimizes the performance of the business by influencing and supporting resource allocation, pricing, and other business decisions.

For multinational companies, their investment in risk management is more than counterbalanced by reduced losses and enhanced business efficiency. The major benefits of ERM are better risk reporting, increased organizational effectiveness, and enhanced business performance. (Lam, 2000, p.45).

COSO was established in 1985 as an independent body, initiated by private-sector, mainly to research the casual elements that can drive deceptive financial coverage and to support the National Commission on Fraudulent Financial Reporting. COSO also framed suggestions for SEC, for public corporations and their external auditors, educational institutions, and other regulators.

Its governing body not only consisted of representatives from the above-sponsored institutions but also representatives from public accounting, industry, the New York Stock Exchange, and investment firms.

ERM Integrated Framework (2004)

COSO issued ERM Integrated Framework (2004) guidelines to assist the business to devise and carry out efficient enterprise-wide approaches to manage risk. The aforesaid framework delineates critical enterprise risk management elements, defines vital ERM doctrines and concepts, recommends a common ERM language, and offers clear direction and assistance for an effective ERM. The above framework not only initiates an enterprise-wide overture to risk management but also introduces new concepts like risk tolerance, risk appetite, and portfolio approach. The above-said framework is widely used by companies around the globe to structure and introduce an efficient ERM process. (www.coso.org)

COSOs guidelines are mainly intended to assist businesses and other stakeholders to evaluate and improve their internal control system. COSOs framework has integrated into a rule, policy, and regulation and is widely utilized by companies to manage their business activities in shifting toward the achievement of their recognized goals. (www.coso.org)

Conclusion

Companies should use ERM to evaluate risk across the organization. Viewing risk, specifically on a project-wise basis can restrict a business capacity to evaluate the effect of risk connected with that project can have on the whole of the organization.

ERM plays a key role in mitigating the risk. Many case studies corroborated that ERM is an inevitable process for increasing shareholders value in any company, and it has to be efficiently introduced and managed to reap higher benefits from ERM.

The senior management should be committed to risk management, and they have to foster a risk culture in their company. The risk management team should be dedicated to playing a vital role in risk evolution, dissemination of information, and monitoring of risk in the organization.

Companies that are exposed to forex risks, interest rate risks, volatility in energy prices, and other market volatilities have to manage these volatilities by applying ERM, mainly to minimize the sensitivity of a companys future earnings and market value to external volatilities. Managing earnings volatility is more significant today than ever given that the stock market will harshly castigate stocks that do not meet earning expectations. (Lam, 2000, p.8).

Under ERM, financial price risk can be well managed. The risk that appeared in bearing any market position relies on the volatility of the fundamental market. The most significant volatility yardstick is the price volatility element, which is the paramount approximation of the future volatility of market prices daily. Under ERM, a company may study its historical volatility, the future volatility can only be guessed employing historical data, approximation about the future status of the markets, or the oblique volatility of traded options. Thus, ERM offers a very viable solution to the management of future financial price risks that a company may pose.

It has been now established that ERM does play a significant role in risk identification, elucidation and mitigation, avoidance, dissemination of information, and monitoring the risk control process and to improve the overall performance of the company resulting in enhanced value to shareholders.

References

Barton, Thomas L, Shenkir, William G & Walker, Paul L. (2002). Making Enterprise Risk Management Pay Off. New York: FT Press.

Culp, Christopher L, Miller, Merton H & Neves, Andrea M.P. Value at Riks; Uses and Abuses. The New Corporate Finance.

Dolde, Walter. The Trajectory of Corporate Financial Risk Management.

Gupta, S.L. (2005). Financial Derivatives Theory Concepts and Problems. New York: PHI Learning Pvt Ltd.

Lam, James. (2000) Enterprise Risk Management: From Incentives to Controls. New York: John Wiley and Sons.

Merna Tony & Al-Thani, Faisal F. (2008). Corporation Risk Management. New York: John Wiley and Sons.

Nanto, Dick K. (2009). The Global Financial Crisis: Analysis and Policy Implications. Congressional Research Service. Web.

Sadgrove Kit. (2005). The Complete Guide to Business Risk Management. London: Gower Publishing Ltd.

Smith, Clifford & Wilford Sykes. Managing Financial Risk. The Evolution of Corporate Finance.

Stulz, Rene M. Rethinking Risk Management. The New Corporate Finance.

coso. (2009). COSOs Enterprise Risk Management. Web.

Zandi, Mark M. (2009). Financial Shock: a 360^o Look at the Subprime Mortgage Implosion and How to Avoid Future Crisis? New York: FT Press.

Introduction

A mission statement is a broad statement, which precisely states and defines what the organization wants to achieve. It defines the greater intent of the organization and it gives the overall goals of the firm that provide a sense of direction and guidance in decision making to managers at different levels of management. The mission statement is in writing and communicated to all employees. Therefore, a mission statement provides criteria for strategy selection by the management (Barney & Hesterly 2012).

Benefits of Mission Statement

1. it provides strategic direction to the management,
2. It is a basis for strategy formulation, selection of objectives, priority setting, and resource allocation.
3. It acts as a marketing tool for the organization.
4. It reminds the management and non-management staff of their obligation to the organization.
5. It motivates the clients of the organization, as it appears to be a focus on the organization.

Case Study: Equate Company

The company is a joint venture between Petrochemical Industries Company, Qurain Petroleum Company, The Dow Chemical Company, and Boubyan Petrochemical Company. The company started its production process in 1997 and it supplies high-quality petroleum products to countries in Europe, Middle East, Africa, and Asia (About EQUATE 1995).

Elements of a mission statement

1. Purpose  It represents the firms responsibility to stakeholders. EQUATE aims at the provision of quality products.
2. Strategy  The commercial logic and game plan for the organization.
3. Policies and standards of behavior  It has to be converted and included in the daily activities of employees.
4. Values  Refers to the principles of the business, behavior of people, value system, and ethics adopted by the organization (Barney & Hesterly 2012).

According to the company website, About EQUATE, the mission statement is We provide valued products to the world (1995).

Negatives of the above mission statement

The mission statement is far from clear that the terms used to identify the components of a mission such as values, philosophy or strategy are unambiguous or easily reduced to actionable and operational terms by executives (Nigel & Neil 1994) There is more standard and widely acceptable consensus about the approach of mission analysis and formulation in organizations. According to a study done by Nigel & Neil Mission statements do not create a sense of mission, it is rather the other way round, and, defining mission is essentially a creative process (1994). This fact does not help managers in any way while he is evaluating the mission of his organization.

Positives of the mission statement

It enables managers to have enthusiasm towards the articulation of their responsibility, enables managers to build a consensus about the aims of the organization, to understand the significance of events, or to understand their expectations in the organization. Missions shape the corporate culture and they give the organization the charter to survive. Missions assist in strategic planning and line management.

Critique of the mission statement

1. Mission statements are for public relation purpose. As such, its usage is for external consumption rather than for internal decision-making.
2. It is a post-ad-hoc statement produced to rationalize its existence to a particular audience.
3. A mission statement is a wishful thought.
4. There is ignorance in the implementation of the mission since official goals do not always correspond with the mission statement.

Recommendations

The recommendation towards effective mission statements provides the following methodology, which involves three stages. Firstly, the mission analysis needs four areas, which are, critical success factors, product-market domain, organizational philosophy, and organizational key values. These factors represent the organizations environment and the broad and narrow dimensions covered by a mission statement. Secondly, there is a need to recognize that there exist different types of mission statements for different purposes and interests. Thirdly, carry out an analysis of internal consistency and external acceptability of the mission statement (Nigel & Neil 1994).

List of References

Nigel, P & Neil, A 1994, Mission analysis: an operational approach, Journal of General Management, vol. 19 no. 3.

Barney, B & Hesterly, S 2012, Strategic Management and Corporate Advantage, Pearson, New York.

About EQUATE 1995, Web.

Managers cognitive biases can negatively affect their decision-making process leading to suboptimal results. They normally include confirmation, overconfidence, loss aversion, bandwagon, information availability, and anchoring biases, as well as prejudices towards others based on religion, ethnicity, gender, age, and group identity, to name a few. Although a person cannot avoid mental mistakes while delivering a decision completely, managers are still encouraged to minimize the number of biases. Nevertheless, there may be certain situations or conditions when actions based on prejudice may have positive consequences.

Firstly, considering that biased decision is often heuristic in nature, meaning that the specific action plan and related information are easily accessible in a persons mind, it is delivered faster. This can be advantageous when leaders need to react quickly to the situation, under uncertainty, or when even suboptimal action is better than no action. For instance, when most investors sell some companys shares, predicting that the prices will go down soon, the manager can decide to trust the public opinion and avoid losing the money after the prices actually drop. However, if the leader wants to check whether other peoples expectations are reasonable, he or she would start selling the shares later, which would result in greater losses than in the former case.

Moreover, prejudices towards the members of certain groups may sometimes be correct. Indeed, wrongful generalizations about others, most of the time, do not appear without reason and are based on observations of a particular non-group representative number of cases. Therefore, there is a chance that a manager can meet someone  for example, a business partner or potential employee  who actually possesses the prejudiced qualities. Then, decisions on whether to cooperate with or hire this person would be more accurate when based on biased presumptions.

Therefore, it is seen that even mental mistakes can sometimes lead to better decisions. Nevertheless, the benefits of actions based on biases are usually sporadic and efficient in the short-term rather than in the long-term. As such, prejudice can prevent a company from building relations with a potentially competent employee or trustworthy and reliable business partner. In a similar vein, spending some additional time on the evaluation of the advantages and disadvantages of a particular decision usually leads to better results. Additionally, delivering one successful decision based on bias can make managers wrongfully believe that such a strategy will work in the future as well.

Executive Summary

This research paper seeks to explain the five forces as postulated by Michael Porter and how applicable they are in the modern industry. A case study of the cement industry in Saudi Arabia is used to shed light on the significance of Porters five forces. The fundamental competitive forces in the cement industry are also examined. Consequently, to understand Porters contribution to the field of strategic management, the generic strategies, and the value chain are also analyzed. Examples are used to enhance the understanding of the main items of the topic. The understanding of strategy according to Whittington and Porter are analyzed as well together with how significant they are to any business operation.

Introduction

In understanding the dynamics of competitiveness in an industry, it is always imperative that it is analyzed based on the five forces as was postulated by Michael Porter. It is understood that the more intense the forces are, the less the returns on investment and vice versa. Intense forces are found in industries like hotels, textiles and the airline sector, on the other hand, benign forces are found in industries like software, soft drinks, and toiletries and are more often profitable (Grant, 2005, p. 5).

Competition and profitability are driven by the structure of the industry irrespective of factors like whether the industry is service or product-oriented, regulated or unregulated and high or low tech, weather and business cycle are short term factors that affect the profitability and competitiveness of an industry. The knowledge of the industry is always important since it provides an opportunity for effective strategic positioning (Anon, 2002, p. 8).

Case Study

The cement industry in Saudi Arabia is one of the uncharted business territories and exemplary performing sectors in the Gulf Cooperation Council Cement (GCC) industry. This is necessitated by the construction boom that is being witnessed in the countrys construction sector. Despite the success that the industry is witnessing in growth and profitability, there are a lot of concerns that are imminent in the sector which may include the threat of oversupply and anticipated medium-term pricing. The cement industry in Saudi Arabia is, however, one of the strongest cement markets in the international market. This has been largely associated with the increased government expenditure on infrastructure and the flourishing real estate business in the country. This was evident in the year 2010 when the cement consumption increased by 17.1%.

There are twelve cement manufacturers and out of that eight of them are listed in the financial markets and also amount to two-third of the market capitalization of the GCC market and the third in the Middle East and the Maghreb region otherwise called MENA (Middle East and North Africa) market region. The combined cement production output of these eight companies is 47.3 million tons per annum (global research sector, 2007, 9) and it has been growing every year. The Saudi Arabian cement sector is a direct player on the countrys domestic infrastructure and real estate development. It is assumed that government spending is the major driving force in the cement industry.

There is increasing interest in the industry, especially after the government announced the 9^th development to develop some four economic cities under the Saudi Arabian General Investment Authority which is considered a wide and important source of market for the cement industry. The major factor that attracts interest in the Saudi cement industry is the void in the GCC regional market which makes them competitive and profitable since they benefit from subsidized energy costs (MENAinfocus, 2010, p. 5). The diagram below illustrates the projection of demand and the expected production.

Porters Competitive Forces

Porters competitive forces have been considered instrumental in defining the business strategy and also relevant in maximizing the utility of value creation and the companys performance towards its competitors (Porter, 2008, p. 79).

The five forces that shape competition in any industry vary depending on the type of the industry. The five forces that were formulated by Porter in explaining the competitive strategy of an industry in the markets are;

Entry of competitors

This is concerned with how hard it is for a new industry to enter into the market. It also examines the barriers that might exist that can prevent the entry of another industry.

Several factors hinder the entry of other cement players into the industry, these factors are;

• High initial capital requirements: the initial capital required to establish a new cement company ranges between SAR 490 and SAR 600 per ton which is equal to an integrated USD 120 and UDS 160 million. This high costs that are required to initiate a cement plant and to put into operation a cement factory is high and thus deters any potential entry of new players into the industry(global research sector, 2007, 1).
• Supply capacity: the overcrowding of the cement industry may lead to a threat of excess in supply of the product; this makes players who would want to join the market disinterested since it is already overcrowded.

Threat of substitutes

This explains how easy it is for the product of an industry to be substituted; it is more so concentrates on how their products can be substituted for cheap products.

Cement is one of the rare commodities that lack substitute products despite it being a requisite commodity in infrastructure and civil works. This makes cement a prime product in the market.

The bargaining power of the buyers

This seeks to explain the purchasing power of the customers and also whether they can be in a position to come together to purchase goods in large quantities.

There is the high bargaining power of the buyers; this is largely due to the diluted market as a result of several market players which weakens their negotiating power for better price of their commodity. The market is characterized by perfect competition with price-sensitive buyers. There is also a possibility of potential government intervention to prevent the increase in cement prices.

Bargaining power of the suppliers

This explains the importance of the bargaining strength of the suppliers; it answers the questions of whether the supply system is monopolistic or whether the potential suppliers are few or many.

The cost of production of cement companies in Saudi Arabia is low; this is precisely because of the existing mining agreement for limestone between the industry players and the government and also the energy subsidies. The above incentives by the government present cost advantage to the players as compared to their global competitors. The government is the only supplier of limestone as provided for in the royalty agreement. The plenty limestone reserve and subsidized energy that can supply the current clinker and cement capacity; this is a clear indication that the government leaves the players without any alternative supplier.

Rivalry among the existing players

This examines whether the industry has a lot of players and explains if there is a strong competition between the players in the industry. It seeks an understanding of whether there is a dominant player or all the players are equal.

The fact that there are 12 market players in the cement industry is a clear indication of the existence of fierce competition. The availability of several players has led to divisions based on Zones to ensure that every company gets a share of the market. Upon inception of the industry, the entry of new players had an impact on the already existing players losing their share of the market.

Porter introduced the sixth force which he identified as the Government. This explained factors such as the government regulations governing the industry or rather whether the government has an interest in the industry (Value-based management, 2011, p. 1).

Forces to be considered by the cement industry players and why

The forces that shape an industry vary from one industry to another, for example in the airline industry, the rivalry between Boeing and airbus is shaped by the bargaining power of the airlines and issues like the threat of entry, threat of substitution and the powers of suppliers are considered peripheral. In the cement industry, the factors that are likely to shape competition in the industry are

Threat of entry

Despite the overcrowding cement market in Saudi Arabia, the favorable investment climate, the government support of the industry through subsidies and regulations and the booming construction and the real estate sectors can be some of the conditions that make the entry of new players imminent and unavoidable. The entry of new players will have an impact on the price of the commodity and the investment rate and costs. Other factors that may prevent the entry of other players are the incumbency advantages, unequal access to the distribution channels, expected retaliation and also restrictive government policy (Mcguigan et al., 2007, p. 142).

The power of suppliers

In the case of cement industry players in Saudi Arabia, suppliers have the greatest leverage to switch industry players. This is due to the large number of industry players and this has the effect of squeezing profits out of the industry and this can compromise the quality of the products (Porter, 1998, p. 89).

Power of the buyers

In any industry, cement companies included, powerful customers may force producers to cut down prices and they may also demand that the price of the commodity be brought down. Powerful consumers may also play down one industry against the other which can jeopardize the industrys profitability. As in the case of Saudi Arabia, the major customers are a powerful clique who can dictate prices. The main customers are the government, civil contractors and real estate developers. Among the factors that increase the leverage customers are; when few buyers can purchase the commodity at a large quantity and when the industry commodity is undifferentiated. The buyers can also be price sensitive or they earn low profits (Global Research, 2002, p. 7).

Rivalry among the industry partners

Rivalry among the players in the cement industry may take different forms which include price discounting, new product introductions, advertising campaigns, and service improvements (Porter, 1996, p. 10). The success of a cement company will depend on its competitive edge taking into consideration the market forces. Extreme competition can affect the profitability and the growth of the companies. In an industry like the cement one, there is high competition because the product is uniform which makes the likelihood of price cuts inevitable. Overcoming competition in such an industry calls for measures like capacity expansion (Porter, 1996, p. 10).

Contribution of Michael porter in the field of strategic management

Strategy according to Whittington is defined as a rational process of deliberate calculation and analysis designed to maximize long-term advantage (Whittington, 2001, p. 3). Every industry or firm has its strategy that is different from the other depending on how it matters for the management practice. Besides the five forces, porters contribution is in terms of the generic strategies and the value chain.

Porters generic strategies

Michael Porter defined three generic strategies that are important in analyzing the performance and management of firms (Anon, 2005). These three generic strategies are differentiation, overall low cost, and focus. The three are fundamental in defining and identifying major alternatives that a business should consider before choosing their strategies (Griffin, 2006, p. 207).

According to Porter, a firm that has implemented the three generic strategies has a high chance of benefiting from a higher return on investment as compared to firms that use hybrid strategies. Porter identified the kind of industries that are favored by the generic strategies and came up with the goods industry, paint industry, and electronics industries. A recent study as posited by Kim et al. indicated that differentiation and focus strategies were also practiced in non-profit organizations after researching on Israel health care system in the Israel sick fund (Eldring, 2009, p. 12).

According to Porter, a firm may pursue a differentiation strategy when it intends to distinguish the identity of its products from that of rival firms. This is achieved through enhancing the quality of its products and services. When a firm implements differentiation strategy, there is a high likelihood of it charging more price than that of its rival competitors since consumers are willing to pay more to get the quality product or services, the implementation of this strategy of differentiation will also serve to enhance the reputation and the reliability of the company. The examples of firms that apply the strategy of differentiation are Rolex and Lexus, Mercedes who use quality and reliability as their mark of their products (Jones and Hill, 2009, p. 89).

The strategy of overall cost is applied when a firm seeks to charge less than what its competitors charge for the same service or product; they reduce their manufacturing and other costs which translate into price reduction (Salem, 2005, p. 1). This enables the firm to sell its products or services at a lower price while making a profit since the volume and the quantity of the sales will be high; the objective of firms that use this strategy is to target the mass market. Examples of the firms that use overall cost strategies are Timex watch manufactures, Hyundai and Kodak.

A firm that pursues the strategy of focus is only interested in specific markets which may be regional; they may also choose to concentrate on one product line or may choose to focus on specific buyers. An example of a company that has implemented the focus strategy is the fiat automobile company that only specializes in selling its product in Italy and selected countries of Europe (Griffin, 2006, p. 207).

Porters value chain

Michael Porter described the value chain as the sequential activities that are involved in the production of a product or the provision of a service. Michael Porter argued that no firm will incur costs in organizing with particular suppliers to purchase goods that they are freely available in the market. The reasons given for this were;

Product definition

This applies when several firms apply the strategy of product differentiation which forces them to provide the suppliers with the exact specifications.

Risk of supply failure

This is necessitated by the importance of non-price competition which is brought about by factors like quality and reliability which make the consumers vulnerable to the performance of suppliers (Schmitz, 2005, p. 5).

The product chain involves the identification of attributes of the commodities that customers want and what they value most. It is implemented in three stages in the following order; constructing a value chain both for the firm and the customer, identifying the drivers of uniqueness and selection of the differentiation variables (Grant, 2005, p. 290).

Critique of Porters Forces

Porters forces have been heavily criticized. These weaknesses have their foundation in the historical development of the forces. Since the corporate world is driven by profitability and survival, it can only be realized through the maximization of the companys strategy. Those days as compared with today are different because the operating environment at that time was steady and conventional unlike the modern environment which is ever-changing and this puts into doubt the applicability of the forces in the modern changing environment.

The utility of porters forces has been curtailed by;

Perception on economic sense, the model assumes that the market is characterized by the classic perfect market while the model itself is applicable in the simple market structures. The model acknowledges a static market structure which is not the case with the modern markets which are dynamic (Porters 5 forces, n.d., p. 1).

Another criticism of porters work is that it is based on an unproven assumption like, for example, there is no relationship between the buyers, the competitors, and the suppliers and they only exist for the structural advantage which can create tendencies for market participants to manipulate others behavior and can exist to act as barriers to market entry. Consequently, the five forces create low culture of uncertainty which necessitates market actors to plan and respond to competitive behavior.

On the generic strategies, porters work has been heavily criticized; first, the fact that he posited that the generic strategies are mutually exclusive has been put into question and also makes his work flawed. This is because; differentiation is an avenue to low-cost leadership particularly in this era of technological change. Another criticism also stems from the fact that hybrid strategies may be fit for some industries especially those that are mature in the market.

Consequently, it is argued that combination or rather a hybrid strategy has a comparative advantage than pursuing one generic strategy which can prove disastrous and may result in poor performance, this is because porters generic strategies fail to link strategy and performance.

Porters generic strategies have also been criticized for their failure to introduce other alternative strategies since it dwells a lot on the low-cost differentiation in a dynamic and competitive global market (Rubach and McGee, Anon).

On value chain, porters work has been heavily criticized, not the idea of his work but the order required in putting it into practice since it requires a detailed analysis and it also varies on situations and this makes it time-consuming and unreliable (Journal of management inquiry, 2007, p. 269).

The porters equation of competitive advantage with added value has also been criticized since his commensuration of value with profitability is an indication that the theory in under defined; this criticism continues with the adoption of neoclassical principle concerning rationality, this makes the theory a more theory of value and not a theory of value creation. The fact that porter places fixed boundaries on the knowledge and the structure of the market has been a subject of criticism.

Value chain theory has also been criticized due to its prefacing premise that is founded on the principle that when the value chain reduces so does the returns in terms of validity (Dietz and Morgan, n.d.).

Conclusion

The paper has analyzed the contribution of porter in the field of strategic management which is the formulation of the five forces, the understanding of the generic strategies and also the value chain contribution. The Whittingtons explanation of strategy put together with porters contribution has revolutionized the way businesses operate.

The Saudi cement sector is a complicated one, this is due to the numerous cement companies and the zoning effect introduced; the zoning may threaten the survival of other cement companies especially those in the northern region where the market share is minimal as compared situated on the proximity to the cities. This zoning has been criticized since it cause against the principle of free market and trade liberalization. Many companies have applied an unethical tactic in trying to bar other cement companies from expanding by obtaining or renew and their mining licenses.

References

Anon. (2005) Value Chain Analysis. Web.

Dietz, A and Morgan, D. (n.d.) A Marketing Interpretation of Value Creation. Web.

Eldring, J. (2009) Porters (1980) Generic Strategies, Performance and Risk: An Empirical Investigation with German Data. New York: Cengage Learning.

Global research sector. (2007) Saudi Arabia cement sector. Web.

Global research. (2002) Kuwait cement sector. Web.

Grant, R. (2005) Contemporary strategy analysis 5^th ed. New York: Wiley-Blackwell.

Gregory, G and Davies, P. (1980) Empirical explanation of Porters generic strategies. New York: Cengage Learning.

Jones, G and Hill, C. (2009) Strategic Management Theory: An Integrated Approach 9^th ed. New York: Cengage Learning.

Journal of management inquiry (2007) Competitive Advantage Revisited: Michael Porter on Strategy and Competitiveness. Web.

Mcguigan et al. (2007) Managerial Economics: Applications, Strategies, and Tactics. New York: Cengage Learning.

MENAinfocus. (2010) Issue no76. Web.

Oxford Business Group. (2006) The report: emerging Saudi Arabia. Oxford: Oxford University group.

Porter, M. (1996) what is strategy. New York: Harvard business review.

Porter, M. (1998) Five competitive forces that shape strategy. New York: Harvard business review.

Porter, M. (2008) The Five Competitive Forces that Shape Strategy, Harvard Business Review, January: 78-93.

Porters 5 forces (n.d.) Porters Five Forces. Web.

Rubach, A and McGee, S. (n.d.) Stuck in the middle: for retailers, perhaps not such a bad place to be. Web.

Salem, G. (2005) The Use of Strategic Planning Tools and Techniques in Saudi Arabia: An Empirical study. Web.

Schmitz, H. (2005) Value chain analysis for policy-makers and practitioners, International Labour Organization. New York: Cengage Learning.

Value-based management. (2011) Value-based management; five competitive forces framework. Web.

Whittington, R. (2001) What is strategy, and does it matter? London, UK: Thomson learning center.

Introduction

Resistance to change especially at the workplace is inevitable in any organization. It is considered a natural condition because it is a basic tenet of human behavior. Organizations should devise mechanisms for dealing with change resistance on organization policies. Change resistance may take different forms ranging from obvious ones like active resistance or refusal to corporate with change to more complex resistances that are hard to deal with.

Assessing resistance to change in the workplace

Change resistance in the workplace could be assessed in many ways depending on the change in the behavior and reaction of workers to change. Firstly, there is the level of tolerance to change. Where there is low tolerance to change, the possibility is that people are resistant to change. Secondly, there is a perceived threat to job security. This is one of the causes of change resistance and therefore where people perceive change as a threat to their jobs, then there is resistance to that change.

Shifts in communication patterns could also express the level of resistance (Borkowski, 2005, 9). There may happen to be a lot of grapevine within the organization which is dominated by the change just implemented. A decline in the levels of performance and productivity by affected individual employees after a change has occurred in the organization may also be an indication of resistance to change. The level of motivation after the change should be escalated if the change is accepted, otherwise, there is resistance.

Techniques for overcoming change resistance

Change resistance could be overcome by a number of factors. The first technique is to effectively educate and communicate about the change beforehand so that people can see the logic in the change effort being made (Schlesinger, & Kotter, 1979, 1). Resistance is more intense where change is introduced before the employees are educated and informed about it. The other approach is to involve the employees in the change effort so that they can participate effectively in its implementation.

If this is ensured, employees would buy into the change rather than reject or resist it. To overcome change, managers should facilitate and support the employees where they are facing adjustment problems. This approach is effective where there is fear and anxieties during transition that make people resist to change. Negotiation and agreement between the change initiators and the employees could also be used to combat resistance (Schlesinger, & Kotter, 1979, 1). The managers should use effective incentives to create consensus with the employees. Manipulation and co-option is another technique whereby the managers manipulate resisters by incorporating their leaders into the change effort. Other resisters will follow their leaders. Explicit and implicit coercion can also be used if all the other techniques fail or where necessary to do so.

Learning from an analysis of resistance

The analysis presents that lack of proper communication of the change beforehand and educating people on how to adjust with is the main cause of resistance. Learning about why people resist change is the most important point that might be applied to a successful change product. It is also essential to learn about the techniques that are effective in combating resistance (Bacal, 2010, 1). The managers should also perform an analysis of the problems that the employees are likely to encounter as they adjust to change (Spector, 2010, 6). They should then device mechanisms to offer solutions to the problems.

It is also essential to learn how participation and involvement of employees in the change effort influence their reaction to change. The same should be done to other factors before they are employed in combating change.

Reference list

Borkowski, N. (2005). Organizational behavior in health care. Sudbury, MA: Jones and Bartlett Publishers.

Schlesinger, V. S. & Kotter, J. P. (1979). Dealing with Resistance to Change: Six Approaches. U.K: valuebasedmanagement. Web.

Bacal, M.A. (2010). Resistance to Change  How and Why People Resist. Ontario: work911. Web.

Spector, B. (2010). Implementing Organizational Change: Theory into Practice (2nd Ed.) Upper Saddle River: NJ: Pearson Prentice Hall.

International business is a business activity that encompasses the transfer of resources, goods, services, and information across countries. In simple terms, it is the carrying out of trade and investment activities across countries (Cavusgil et al., 2022). The business activity entails crossing geographical boundaries, and as a result, it is often referred to as a cross-border business. Corporations procure, manufacture and market their goods and services on an international level since they engage foreign customers and establish collaborative relationships with any potential foreign partner. Although international business is mainly carried out by individual corporations, the government and other international agencies often perform cross-border activities which involve the transfer of assets, both physical and intellectual, labor, services, and capital.

Cross-border business is characterized by six interlinked elements. These elements include globalization, international trade, international investment, international business risks, foreign market entry approaches, and business participants. To facilitate the exchange of products, and services across boundaries, firms require to undertake certain business activities which form part of what is referred to as key concepts in cross-border business. One of the key concepts is exporting goods and services. Exporting entails selling products or services to a foreign country from a domestic country. Alternatively, the exchange can happen through the importation of goods and services, which is the procurement of goods or services from the supplier in a foreign country to be consumed in the home country.

Another concept is an international investment, which is the transfer or acquisition of assets in a foreign country. International investment is further broken down into two types of investment; international portfolio and foreign direct investment. International portfolio investment revolves around ownership of foreign securities, and it does not involve absolute control of the assets. Lastly, foreign direct investment is more of a foreign market entry approach than an investment itself. In this investment, the firm acquires productive assets in a foreign country and creates a physical presence in that country.

Domestic business refers to a type of business or trade that is confined within the geographical location of a country. Technically, domestic business and international business are more similar since they are all based on the same basic principles of trading. For instance, both international business and domestic business are subject to a code of conduct and ethics including corporate governance. Furthermore, adherence to set regulations either local or international is a noticeable similarity.

However, the main differences arise from the risk exposure due to economic, cultural, and political conditions. The firms performing international business find themselves in unfamiliar environments that they firm has no control over, creating business risks (Cavusgil et al., 2022). One of the noticeable differences between the two is that in international business the buyer and the seller are from different national boundaries, while in domestic trade, the buyer and seller belong to the same national boundary (Kumar, 2020). In addition, different currencies are often used in cross boarder business, since the buyer and the seller are from different countries, while in domestic business, a single currency is often used.

In conclusion, both international and domestic business plays a critical role in developing a countrys economy. They are technically similar since they are based on the same principles of trade. However, there exist differences in terms of risk exposure, geographical location, and application of currencies.

References

Cavusgil, T. S., Knight, G., & Riesenberger, J. R (2022). International Business: The New Realities, Global Edition (4th ed.). Pearson India.

Kumar, N. (2020). Difference between Domestic & International Business. Enterslice. Web.

Introduction

Religious ethics, as applied to economics and business, dates back to the thirteenth century. Subsequent developments in this area have resulted in the intertwining of Christian faith and reason. This situation has given rise to a plethora of principles, guidelines, and criteria for action and a set of virtues that underpin different business aspects. With over 2000 thousand years of history, believers in the Christian doctrine have integrated various religious ethics and spirituality into organizational leadership. Globalization, on the other hand, has resulted in the expansive production of products that have increased the pollution levels in leading manufacturing countries. This research paper focuses on providing a philosophical understanding of globalization and its role in creating opportunities for faith expression in China. Manufacturing and export opportunities that are available in this country have been thrown down the gauntlet by a challenging economic environment characterized by increased levels of pollution.

Product: Clean Air Solutions, Inc. Room Filter

Clean Air Solutions Inc. is a technology company based in Northern Carolina that manufactures innovative products such as air filters to help in controlling air pollution. The super-efficient in-room multi-sensor air purifier would be beneficial for China. The Clean Air Solutions (CAS) product is suitable for countries with high production companies, such as China and India, where pollution has surpassed unacceptable levels (Rohde & Muller, 2015). In the last three decades, China has experienced enormous growth and integration of international businesses in its market structure. The domestic environment relies on the prevailing laws and policies laid by the Chinese government, while the business climate of foreign investments depends on interrelated forces, including cultural and religious diversity.

Several compelling reasons underpin the marketing of a CAS in China. At the outset, a first-rate, cost-effective air purifier is needed to ensure a cleaner environment with a view of improving health and prolonging the lives of people around the world (Peng, 2016). The demographics of the target audience would be the middle and low-class population living in highly polluted areas in China. Another reason for expanding this business is to increase sales and profits (Suzuki & Okamuro, 2017). Newmarket entry and fast-growing markets in this region favor the production, sale, and use of affordable in-house air purifiers.

The plan is to establish a production plant in China, where the cost of labor and carrying out other business activities is deemed cheap. Research and Development (R&D) has received international authorization to license, produce, and distribute this HEPA-approved air purifier. Marketing of the product will include in-home demonstrations aimed at remote and marginalized rural areas. However, there is a need to work with the government to ensure subsidized prices for the pollution control devices to ensure affordability.

Challenges, Issues, and Opportunities

Expanding businesses to an international level is met with various challenges and issues. The availability of limited opportunities for business development is one of the primary reasons for compelling individuals to venture into foreign markets (Golebiewski, 2014). On the other hand, industrialized nations, such as China, Japan, Australia, South Korea, New Zealand, and Western Europe, possess a convenient climate for private entrepreneurship and consumer orientation. The business environments of such countries feature high literacy rates, state-of-the-art business-oriented technology models, and high per capita incomes.

Another challenge of globalism is the variation of business practices that are regarded as ethical in such areas as labor, corruption, regulatory compliance, product safety, and environmental stewardship. These factors have continued to dramatically influence the success or failure of international players (Golebiewski, 2014). For instance, Nike has been variously criticized for abusing low-wage laborers in its sweatshops around the globe, which damaged its reputation.

Hurdles related to organizational structure limit the efficient incorporation of business strategies into new regions within the value chain and corporate framework. The global expansion calls for substantial initial capital investment in most cases (Golebiewski, 2014). The need to develop specific strategic business units for managing operations is also inevitable. Therefore, organizations entering foreign markets face challenges in capturing value, which is an important initiative for global businesses.

Current Challenges Faced by International Expansion in China

One of the current challenges in choosing China as a potential expansion market is cultural and religious differences. People in this country blend modernity and traditional practices, which exposes foreign investors to an unfavorable environment for investment. The nation does not provide a suitable business climate for outside organizations (Golebiewski, 2014). Furthermore, leaders with exotic Christian views on organizational ethics often clash with the Chinese community because this part of the world is believed to focus on scientific approaches to reality rather than religious faith (Brody, 2015). Indeed, Christian business leaders have, in the past, tried to sojourn hate speech and spread the gospel of inclusivity. However, working in a country where the population of non-believers surpasses that of believers almost nine times can result in loneliness amongst Christian leaders due to the unlikeliness of supporting their religious business views.

Biblical Perspective

The Bible provides a reasonable explanation for globalization with Jesuss instruction to everyone. Go therefore and make disciples of all the nations, baptizing them in the name of the Father and of the Son and the Holy Spirit, teaching them to observe all things that I have commanded you (Matthew 28:19-20, NKJV). The implication of this verse is to witness people, nations, and corporations across transnational borders with the ultimate plan for reconciliation with God through Jesus Christ, who is deemed as the Lord and Savior in the Christian community.

The mission of the Christian doctrine is to increase the number of souls saved, just as businesses survive on constant growth, but God is the provider of all increase (1 Corinthians 3:5-6). People, nations, or corporations should not glorify themselves but rather exalt Him, for he who glories, let him glory in the Lord (1 Corinthians 1:31, NKJV). Jesus was proud of His Fathers business as a young boy, And He said to them, why did you seek me? Did you not know that I must be about my Fathers business? (Luke 2:49, NKJV). Jesus, as revealed in the Christian faith, is the redeemer and reconciler of people. His aim for humankind is that of redemption and reconciliation. The spread of Christianity and its integration into international expansion will eventually bring buyers and sellers together without any geographical borders and limitless boundaries. For instance, disregarding religious differences and working together as Gods people, the Clean Air Solutions (CAS) systems can be marketed and sold effectively in China.

Personal Position on International Expansion

My philosophy on international expansion is based on a bipartisan approach towards creating a permanent solution to global business challenges. Although there is no quick fix for issues faced by the countries, providing a favorable climate in which people and organizations can thrive and prosper will lead to an improved global economy. Many people hold the view that globalization is a mere influence of Western ideologies on other nations (McFarlane, n.d.). It is undeniable that developed countries control many international business activities by using their powerful economic tools to manipulate foreign markets, especially in developing and emerging economies. Some unrelenting nations, such as China, have defied such tactics for a long time, limiting foreign investments and the influence of Western culture in its communist state (McFarlane, n.d.). Along these lines, I stand with the proposition that American effects are widespread in the world today.

International expansion is a healthy practice for both state and international players. However, this tendency dates back to the period when the Roman Empire dominated the world. Many of the renowned Western ideologies and Christian beliefs emerged from the Roman Realm (Werner & Sun, 2015). During this time, globalization was a way in which the Romans pushed their influence on others in various regions outside of Rome. At this time, Constantine was in power, and some historians hold him mainly responsible for making Christianity a powerful globalization tool. Today, the Christian community has made efforts to convince the world that prayers can drive businesses.

Conclusion

International expansion has turned the world into a smaller place where people can conduct businesses across international boundaries. Nonetheless, there are still many challenges that modern companies encounter while transacting on a global scale. Religion and culture have been significant players in this area, as Christian leaders face solitude and complexity in rapidly changing and information-saturated countries, such as China. Religious views on leadership have continued to create chaos in organizations driven by scientific approaches. However, it is crucial to realize the importance of integration and diversity inclusion in organizational leadership to develop global businesses whose powers to surpass religious and cultural boundaries are limitless.

References

Brody, D. (2015). Christian business owners under attack in Indiana. CBN. Web.

Golebiewski, D. (2014). Religion and globalization: new possibilities, furthering challenges. E-International Relations, Forthcoming. 1-11. Web.

McFarlane, S. (n.d). Six ways to get involved in the business as missions movement. CBN. Web.

Peng, M. W. (2016). Global business (4^th ed.). Cengage learning.

Rohde, R. A., & Muller, R. A. (2015). Air pollution in China: mapping of concentrations and sources. PloS one, 10(8), e0135749.

Suzuki, S., & Okamuro, H. (2017). Determinants of academic startups orientation toward international business expansion. Administrative Sciences, 7(1), 1.

Werner, D., & Sun, X. P. (2015). Christianity in China. The Ecumenical Review, 67(1), 1-6.

Introduction

Some conditions offer different companies the advantages of manufacturing goods and services at relatively low prices for their customers. Strategic advantages allow companies to generate more revenue in a competitive environment (Lestari et al. 365). The rationale is that they are positioned to provide their clients with goods and services at relatively lower prices than their rivals. Several factors play into formulating a companys strategic advantage, including the cost structure, customer support, intelligence, branding, and distribution network. The significance of strategic advantage is that it provides an edge against rival companies at the end of high-value production. This report provides a UK-based companys evaluation of its strategic advantage concerning pricing. Travelodge, a UK-based hotel, will be evaluated against two choice models to determine its positioning for success against its competitors in terms of pricing.

Travelodge hotel is a private hotel-based company in the United Kingdom. It provides service for the hospitality industry with a bedroom capacity of 44984 spread throughout the country. The bed capacity places and budget hotel places the company second in the UK hotel chains. The company offers guests various services, including en-suite bathrooms, free connection to the internet, free drinks such as tea and coffee, LCD, and widely spaced rooms (Travelodge 1).

Customer reviews of the hostel are good, a parameter that will likely draw several other tourists to their premises. Different hotel facilities are spread all over the country to provide customers with various choices. Such facilities are near shopping centers and various restaurants for tourist accommodation purposes. In this regard, whatever the pricing value that the company places on its services, they stand advantaged against its competitors.

Since an eternal pricing factor has been identified, it is pertinent to understand how Travelodges pricing strategy works. Travelodge offers different packages of bookings, including flexible rates, saver rates, and group bookings. While booking across multiple hotels is almost impossible, booking up to 10 rooms is allowed even through online platforms such as group bookings (Travelodge 1). After the reception of the confirmation number, the booking is not transferable. Rates of bookings per room depend on various factors and range from between 46 pounds to 200 pounds. All of these payments are available in the public domain on their websites. They provide cancellation services where flexible rates are refundable. Saver rates, however, do have not refunded in full; instead, there is a discounted proportion that is allowed. Refund for cancellation of group bookings is subject to contracts signed by the organization (Travelodge 1).

VRIO Framework Assessment of Travelodge

VRIO is an acronym of four letters that stand for value, rarity, imitability, and organization as a framework for analyzing an organizations position (Lee et al. 1-8). This analysis provides the VRIO analysis of the Travelodge Company because of its pricing against its competitors.

Value

This aspect solicits whether an organization offers resources that add value for its customers. In the case of Travelodge, it has already been determined that they provide services that add value to their customers. Services including spacious rooms, WI-FI connection, LCD, and complimentary beverages add value for their customers (Travelodge 1). Despite a good customer rating, Travelodge Company does not provide room, porter, or concierge services. These are services that are common to any company that provides accommodation services. In this regard, customers are prone to shying away from Travelodge to other service providers who may have these value provisions. In assessing value provision, Travelodge falls short of the basic requirements. There is, therefore, a need for adjustments in pricing based on these revelations.

Rarity

This aspect of the VRIO framework solicits whether an organization controls scarce resources and capabilities. Because of rarity, Travelodge does not have the monopoly of controlling any scarce resources within the hotel industry in the United Kingdom. While they provide over 44984 tourist hotel rooms for accommodation, it is on record that this is second after Premierinn hotels in terms of the budget hotel industry. Notably, the two hotels provide a rarity compared to Vlodge, and as such, it suffers a price disadvantage against the two companies.

Imitability

Imitability requires organizations and companies to have resources and capabilities that are almost difficult to replicate. The argument is that when they have capabilities and resources that are not imitable, they can provide services that allow for specialized preferences that cannot be sought elsewhere. This strategy monopolizes their service-making and gives them an economic advantage against other service providers. The brand of Travelodge hotels is very costly to imitate. Their design for responsible luxury is also complicated to imitate. Whereas imitation occurs in the duplication of products and production of substitute products, the patent and copyright that the company has on its design and brand are almost impossible to imitate. However, the services they offer are offered by almost all the other substitute companies. Arguably, the organization enjoys a pricing advantage based on its brand and not the quality of service it provides.

Organization

This parameter of the VRIO solicits a company to have a management system and structures that place it ahead of the rest in capitalizing on resources and capabilities. The only viable asset of management that Travelodge has is its human resources. They also provide training to their staff. This information is resourceful in helping the company to deal with customer needs and skyrocket their experiences. It is notable that almost all other rival companies, like the Premierinn hotels, have similar arrangements. If this is the only management asset and layout of structures that the company has, it is prone to suffer a price disadvantage against its competitors.

Value Chain Framework for Travelodge

The value chain framework summarizes the steps that are pertinent to the creation of a finished product. It involves the processes that go into the sourcing, manufacturing, and marketing stages of the entire production process. The value chain model is essential because it helps foster the efficiency of a business for the product of the value at the least possible cost. The value chain framework has five components: inbound logistics, operations, outbound logistics, marketing and sales, and service.

Travelodge hotel of the UK provides complimentary beverages for its clients. It also provides laundry services when it is necessary. They provide all these through a systemized arrangement that follows all agreements of the governments institutions. In addition, they have an HR team that deploys employees for inventory control management. Analytically, these are inbound logistics provided by all other hospitality service providers. For strategic advantage, Travelodge Company cannot benefit based on their inbound logistics.

Operations

The operational procedures of Travelodge follow that of any other industry that provides service for the accommodation industry. The HR of Travelodge ensures that all staff has been trained to function in their respective capacities. Customer reviews rate the hotel as one of the best in the UK to mean excellence in operations. The customer ratings place the Travelodge hotel at a point of advantage compared to other hotel service providers.

Outbound Logistics

Travelodge offers a variety of services to its clients. They provide complimentary beverages, internet connection, and wisely spaced rooms. Any organization that offers hospitality will have the same services. On the flip side, they fail to provide essential services which are logistically necessary. They fail to provide courier services, room services, and concierge services. Travelodge is bound to suffer a strategic price disadvantage compared to other service providers.

Marketing and Sales

Travelodge primarily utilizes its brand as a marketing parameter. This step is not enough. In the wake of technology, this company ought to deploy techno-friendly marketing strategies to reach a vast marke. In addition, other marketing strategies such as giving discounts to group bookings, giving special offers, and digital marketing are a few marketing strategies that Travelodge needs to deploy. At present, they are doing some of these things; it is only advisable that they increase their capacity to provide them with a pricing advantage against other competing service providers.

Service

It is not arguable that Travelodge offers some of the best services in the industry. The company provides fully furnished rooms, family rooms, group bookings, affordable pricing, special deals, and other services. The argument is that all other top hotels provide the same services. This reality makes the industry competitive, making the commodity and service prices relatively cheaper. If Travelodge does not incorporate additional services to spruce its bargain, it will likely suffer a strategic disadvantage.

Challenges and Tensions of The Effect of Pricing

Having analyzed the position of Travelodge as a service provider in the hotel industry, it is evident that the company stands neither disadvantaged nor advantaged. However, if the company does not deploy a few measures and strategies, several effects will face the company and its stakeholders. When the business begins to lose customers, revenue declines and presents a situation where shareholders shy away from investing in the company (Aman 79-105). Travelodge stands where its rivals will quickly take some of its clients if it does not implement measures to achieve a price advantage.

The capability and the resources of the company are then strained in order to meet up with quota allocations. As a result, the depletion of such resources and capabilities generally leaves the company bankrupt and phased out. The organizational culture is also affected because its employees can no longer interact with their clients as before. Hopefully, this is a situation that Travelodge can avoid by implementing strategies that would provide it with a price advantage.

SWOT Analysis Table of Travelodge

This table summarizes the strengths, weaknesses, opportunities, and threats facing Travelodge Company. It summarizes the analysis of the VRIO and the Value Chain framework of the organization, as discussed. Therefore, it provides a rough positioning of Travelodge with pricing against its competitors.

TOWS Analysis of Travelodge

Conclusion

Travelodge sits where it can either tilt towards achieving a competitive advantage or not. It provides accommodation services in the United Kingdom, which several other service providers also provide for that it must have a price advantage over. Most of Travelodges strengths are characteristics shared well among its competitors. There is a need for the company to rise and do things differently and achieve different outcomes.

As such, some of the few interventions the company must address include; upgrading its services, strengthening its imitability status, deploying technology for marketing, expanding its service space to the international domain, and revising its policies on overbooking. Travelodge hotel must also build its production capacity to control scarce resources and capabilities. These provisions have been arrived at through VRIO analysis, the value chain framework, and the SWOT analysis. Further implementation of the TOWS analysis provides a clearer path that Travelodge can deploy for greater success.

Works Cited

Aman, Awol Hussien. S Systematic Literatures Review on Marketing Pricing Strategies. International Journal of Social Science Research and Review 5.1 (2022): 79105. Web.

Lee, Jun-Ho, Taejoong KIM, and Hyunjun PARK. Smart Studys Strategy in the Kids Content Industry: VRIO Framework. The Journal of Economics, Marketing, and Management 8.3 (2020): 1-8. Web.

LESTARI, Setyani Dwi, et al. Antecedents and Consequences of Innovation and Business Strategy on Performance and Competitive Advantage of SMEs. The Journal of Asian Finance, Economics and Business, vol. 7, no. 6, Korea Distribution Science Association, 2020, pp. 365378. Web.

Travelodge., Booking Terms and Conditions.. 2022. Web.

Travelodge Where Would You like to Go?. Web.

Management refers to all the activities and ones duties undertaken by one or more persons to plan and control the duties and activities of others to do a given goal or complete a given duty. Management also involves staffing, directing, and controlling the employees of a given company or organization (Mintzberg, H, 6). Managerial skills, on the other hand, is the ideas or knowledge that enables one to complete a given activity or role.

The knowledge could be acquired through learning or practically through experience by continually doing the given activities. The skills may also be learned through personal experiences that one has undergone in life. Some of the skills normally come through ones talent considered as a gift of nature. All these are skills used by managers to create positive feedback with how the employees respond to doing their work. It deals with the effectiveness and efficiency of the employees (Robbins, S.P, 10).

John Ilhan was the brain behind the famous Crazy, which grew to become Australias most famous mobile phone company. John started the company as a small mobile shop, and through his hard work and determination, he managed to transform the company into a huge multinational company. He talked about business as risk-taking. In every business, one must take a risk to succeed, and that not all the customers being trusted as others could put your business at risk.

He used his crazy image to market his own business and to entice people into bargaining his products. He was up to date in technology, and this proved handy as it boosted his business, and the company adapted to the new technology, which enabled him to expand his business. He argued that for a business to succeed, the manager has to bring up a culture that everyone must follow to succeed and that the employees in the company be in a place to follow the rules given. Though he did not go to school, his experiences and personal ambitions enabled him to become a successful businessman this through the way he related with his customer, and that brought him immense success.

The theoretical basis used to explain the management process is the systems approach. According to this theory, the concerns about the internal functioning of an enterprise or organization are described using an open systems model that includes interactions between the organization and the external environment. This model argues that inputs from the external environment, which include people, capital, managerial skills, as well as the technical knowledge and skills of the workers, contribute to the success of the organization. It further stipulates that the purpose of the managers is to transform the inputs in an effective and efficient way to produce desirable outputs that will benefit the organization (Dahlgaard et al, 8).

Robert L. Katz, in his model, classifies the managers essential skills into three categories that are technical, human, and conceptual skills. In his, model Katz argues that technical skills are the most important skills at the career levels. According to him, technical skills refers to a managers ability to use specific knowledge in completing the given work and assignments assigned to him or her. This may include skills in accountancy, engineering, research, and many more. It may also include such things as written or oral communication, computer literacy, math, and numerals (Katz, R.L., 16)

According to Robbins et al., managerial skills include technical skills, conceptual and human, or interpersonal skills. Most of the organizations in the recent or modern world, both private and public sector, demand improved quality, cost reduction, and innovations and so the managers need to respond accurately, quickly and cost efficiently so that they may not become obsolete in the modern world.( Robbins et al.2006. 14)

The conceptual skill is another important aspect of management. His model argues that the conceptual skills are more important as people advance to higher management. This is because managers face problems at this level that are more ambiguous and more complicated and if not handled properly can result to consequences that are long-term (Bergman, 5). Katz discusses conceptual skills as the ability to see the organization entirely.

A conceptual skill in an organization enables the managers to find a particular problem in the organization and look for some of the ways to solve the problem. It involves planning and organizing some of the goals in a given organization. The skills in this case show the personal business relation existing in the organization, community and nations political, social and economic factors. (Katz, R.L., 42)

He further stresses on the urgency of conflicting goals and ways, methods and probabilities and not certainties. These skills are through training subordinates as the managers can divide a particular task and respond in searching for opinions and not answers.

Human relations skills also known as interpersonal skill discusses on the ability for top managers to work with other people. This entails the managers ways of coexisting well with employees through proper channels of communication that the organization establishes. Interpersonal skills enable managers be leaders and encourages for better completion of work. Human skills in Katz model ranks second and he argues that this is the foundation for managerial success.

For Katz model human skills is important across all levels. This is because a human skill enables managers to show awareness about the feelings and emotions of their employees hence enhancing good relations in the organization (Katz, R.L., 12). A good manager must also posses high intelligence is ways a manager to manage ourselves and our relationships effectively. John Ilhan who possessed good interpersonal skills connected well with people and many of his customers trusted him. His public recognition built and his moral and ethical principles were good. He did not take advantage of his customers but the trust between then brought loyalty among them.

For him, emotional intelligence (Bar-on, et al, 23) is build upon five foundations including:

1. Self-awareness is about understanding moods and emotions
2. Self regulation about thinking before acting by controlling disruptive impulses
3. Motivation is perseverance and hard work
4. Empathy which is the ability to understand the emotions of others
5. Social skills about gaining understanding and building good relationships

In management, the role of theory is to give a way of classifying important and relevant management ideas. For example in structuring an organization principles have mutual relationship and predictive values for managers. Management theory brings the understanding of what we undergo and offer what is important. It also enables communication in hard relationships with other people and thus faces challenges and learns about our world. (Eccles. R.G. & Nohria, N, 38)

Works Cited

Bar-On, et al.Handbook of Emotional Intelligence. San Francisco: Jossey Bass, 2000. Print.

Bergman, B. & Klefsjo, B. Quality from Customer Needs to Customer Satisfaction.Lund: Studentlitteratur. 2003. Web.

Dahlgaard, et al. Fundamentals of Total Quality Management.London:Chapman & Hill. 1998. Print.

Eccles. R.G. & Nohria, N.Beyond the Hype: Rediscovering the Essence of Management. Boston: Harvard Business School Press. 1991. Print.

Katz, R.L. Skills of an Effective Administrator,.Harvard Business Review, Vol. XXXIII, No. 1(1955), pp. 33-41. Print.

Mintzberg, H.The Nature of Managerial Work. New York: Harper & Row. 1973. Print

Robbins, S.P. Organizational Behavior, Australia,10th Edition, Prentice Hall, Sydney. 2003. Print.

Introduction

Overstock.com is an organization that is based in the United States of America. The company was launched in 1999. Overstock.com conducts its business online. This article evaluates the mission and vision statement of Overstock.com. The paper will also focus on the major stakeholders of the company and how it meets its goals. A PEST analysis of Overstock.com will also be conducted.

Companys mission and vision

Overstock.coms mission is: to offer high quality, brand name merchandise at up to 30-70% off, and ship your entire order for $2.95 or less every day. The vision statement is: to provide online shoppers the best value and a superior customer experience. We are honest, helpful, efficient, accountable and trustworthy and we are committed to profitability and service (Overstock.com, 2013).

Stakeholders of an organization refer to the people who have a connection to the organization either directly or indirectly. Each organization must satisfy all its stakeholders (12manage.com, 2009). The stakeholders of Overstock.com include the shareholder, the employees, managers and directors, and the customers (Luca, 2007). The main aim of the shareholders is to get maximum profits. Overstock.com went public in the year 2002. The company offers goods at low prices; hence maximizing sales and earnings consequently. The low prices also meet the goals of consumers since most buyers wish to spend less. Managers and employees are well remunerated and rewarded and, therefore, they feel motivated and satisfied.

Environments

Political environment

Overstock.com is affected by laws related to the internet since it conducts its transactions through the internet. For instance, it has lawsuits against Wall Streets acts, one of which is on hedge funds and the other on independent research firms. In the year 2005, the companys CEO started a campaign against naked short selling, which he alleges hurts the prices of his company (PEST analysis, 2009).

Economic environment

The American economy has been hit by the recent economic environment that has affected the growth of many companies, but the company has adopted business strategies that have helped it survive in a difficult economy. It sells its goods at a low price, thus attracting more customers (Quickmba, 2007).

Social environment

The company has built close relationships with its customers (PEST analysis, 2009). It is also involved in several corporate social responsibilities where it dedicates part of its income to projects that benefit the community.

Technology environment

Overstock.com operates in the world of technology. It is highly innovative and can produce high-quality goods at low prices (Quickmba, 2007).

Porters Analysis

Threat of entry

There are few barriers to entry in this industry. The only two major barriers are some products that cannot be sold online and government regulations. Therefore, the threat of entry is high.

Threat of rivalry

Amazon.com, eBay, and Google are the major rivals. Competition in this industry is high because there are also a few barriers to entry.

Threat of suppliers

The threat of suppliers is low since the company has many suppliers. Anyone who uses the internet can be a supplier; hence suppliers do not have much bargaining power.

Threat of buyers

There are a very large number of buyers for Overstock.com products. The low prices also attract many customers, thus there is no much threat of buyers.

Threat of substitutes

Not many substitutes trade online. Most of the substitutes to Overstock.com products are found in auction houses. Therefore, Overstock.com only needs to maintain a positive image, and the threat of substitute will be very low (Quickmba, 2012).

Conclusion

Overstock.com is a company that has grown too fast since its inception in the year 1999. Its business strategies have been effective. The company faces stiff competition from E-Bay.com, amazon.com, as well as Wal-Mart, but its low price policy has been of many benefits in its competition.

References

12manage.com (2009). Stakeholder analysis: Assessing who or what counts. 12manage: The executive fast track. Web.

Luca, A. M. (2007). Organizational stakeholders. PowerPoint presentation Overstock.com (2013). Who we are. Overstock.com. Web.

PEST analysis. (2009). Web.

Quickmba (2012). Porters Five Forces: A model for industry analysis. (2007). Web.