Creativity is when you cut a zero off the budget - Jaime Lerner
http://www.youtube.com/watch?v=haKh9mCk3xk
One day, one day...
Jesus Changed the world with just the WORD of GOD
13 years ago
Wednesday, October 27, 2010
less business stuff
since I won't have time to write business-y stuff anymore, I am thinking of closing this down. will see how it goes.
'If you got nothing better to say, it is better to say nothing.'
'If you got nothing better to say, it is better to say nothing.'
Sunday, August 30, 2009
Part of Merdeka Awards interview of Royal Prof Tun Dr Ungku Abdul Aziz
Royal Prof Tun Dr Ungku Abdul Aziz – Economist
The secret thing is national unity (perpaduan). That’s absolute. That is above all. So I think it is a very holistic institution that comes about naturally. It cannot be created unnaturally. We cannot say ‘Now we can have perpaduan’ ‘Now we will have national unity’ and we will all shake hands and so on. That’s ok, for drama.
........................................
I think the corporate people will have to bring the change. This change can only come from people who have new ideas, new understanding of the use of IT , the use of management. The course to excellence is to have the idea that you will do your best and you will continually strive to use your knowledge and to improve your knowledge. The quest for excellence. This is the big thing, it can be done. So you have to build it in. You have to get this sense of ‘Strive for excellence’ – the best
http://www.aleph-one.com.my/webcast/petronas_ads/merdekaaward.htm - Merdeka Award
Life only has meaning in the struggle. Triumph or defeat is in the hands of God. So let use celebrate the struggle.
The secret thing is national unity (perpaduan). That’s absolute. That is above all. So I think it is a very holistic institution that comes about naturally. It cannot be created unnaturally. We cannot say ‘Now we can have perpaduan’ ‘Now we will have national unity’ and we will all shake hands and so on. That’s ok, for drama.
........................................
I think the corporate people will have to bring the change. This change can only come from people who have new ideas, new understanding of the use of IT , the use of management. The course to excellence is to have the idea that you will do your best and you will continually strive to use your knowledge and to improve your knowledge. The quest for excellence. This is the big thing, it can be done. So you have to build it in. You have to get this sense of ‘Strive for excellence’ – the best
http://www.aleph-one.com.my/webcast/petronas_ads/merdekaaward.htm - Merdeka Award
Life only has meaning in the struggle. Triumph or defeat is in the hands of God. So let use celebrate the struggle.
Thursday, June 25, 2009
Economics Essay - Macroeconomics, Global Credit Crunch and New Zealand
Economics Essay - Macroeconomics, Global Credit Crunch and New Zealand
©Wilson Gan, Economics, U of Auckland, May 2009
The recent global economic crisis is causing the world’s economy to contract. This has caused a major economic downturn for the US; is New Zealand to worry about the same matter? Both countries are heavily dependent on borrowing from foreigners to finance their economic activities but how do they differ? This essay will discuss the rationale of borrowing, the impact on the recent credit crisis, the ability to repay, the banking sectors and the impact of recovery packages.
We know that New Zealand is a country that borrows because the Current Account Balance (CAB) is less than zero; which is a current account deficit (i.e CAB<0). This also means that, with a current account deficit, the total of net export (NX) and net inflow of income (NFI) is negative. (i.e NX+NFI<0). The result of this is; national disposable income will be less than domestic spending. If this is the case, then savings must be lower than investment. Therefore, because the country is saving less, it must be getting some of its investment from abroad. Thus explaining why New Zealand borrows; it borrows for investing. US imports more than they export i.e, net export is negative, mainly because their exchange rate is higher than the countries that they heavily import from, which means it is generally cheaper to import. US’s net foreign income is zero compared to New Zealand, which is negative. This is mostly due to the interest payments on foreign debts. New Zealand’s friendlier tax laws and safer economy also causes more foreigners to invest here. The savings for both countries are different. New Zealanders consumes about 58% of their income but US citizens consumes even more; with 75% of their income being consumed (Bandyopadhyay, 2009). This means that US has less money going into their savings. US’s government spending is more than the amount of tax they collect, which is opposite of New Zealand. This causes US to borrow to pay for their expenditures.
The recent global financial contraction has caused a lack of credit in the market. The credit market is important in paying for household consumption, productions expenditures and investments, marketing and with import and exports. The lack of credit causes a drop in output, which results in a drop in sales, which then causes job losses, further reducing the loanable fund available and thus causing a lack of credit available to the market. This is a vicious cycle of decay which may cause a depression if it persists (Bandyopadhyay, 2009). During a credit crunch, the supply of loanable fund in the market is low, where New Zealand doesn’t have enough to take a loan from. Foreign investment also fall as investors are not able to get credit to fund their activites.
US government has collected a large amount of debt. If it is not able to pay them back in time, their credit rating will go down, thus making it harder to borrow in the future. They may even face a higher interest rate as a result of the lack of confidence in the US government. The decision that US government makes will affect the investment and export of New Zealand products to US. We will discuss 3 ways how the government can pay off their debt; additional private saving, additional public saving and inflation. Government will have additional private saving by encouraging individuals to consume less, save more and for businesses to grow; which will increase disposable income. To have additional public saving, government can put higher taxes or lower government spending. Inflation may be use to devalue the dollar, which makes the exchange rate lower, so to discourage import and increase export.
There is a vast difference in the banking and financial sectors of the US and New Zealand. Firstly, the US, over time, has slowly deregulated their banking and financial sectors, making it easier to lend out money. New Zealand is contradictory to that; it has a prudential supervision from the Reserve Bank of New Zealand. It constantly measures the bank’s capital and its risk weighted credit exposures, by using the capital adequacy ratio. The reserve bank also uses official cash rate (OCR) to influence the price of borrowing money. Just before the credit crisis hit the US, the OCR in New Zealand is high; about 8.25% (Reserve Bank of New Zealand, 2009). As a result of this, people spend less on goods and services because their savings are getting a higher interest rate. Conversely, people with mortgages and other loans experience higher interest rate, which means that people with a better credit rating are only able to borrow money. US is innovative in the sense that they have a mortgage based securities and insurance of financial products. As we have seen back in 2008, the mortgage based securities are collapsing; following the fall of Fannie Mae and Freddie Mac, which are issuers of these securities (Economist, 2008). New Zealand has legal restrictions against mortgage based securities, thus reducing our risk to such products. In US, as a result of these deregulations and financial products, banks are issuing subprime loans. When people start to default on their loan (which are mostly based by their property, mainly their house), banks start to foreclose on these properties. When the banks are trying to recuperate their losses by selling the property, it causes an oversupply, thus making the house prices to fall, by up to 30% in some areas. As more and more foreclosures and bankruptcies occur, banks start make losses and have trouble keeping their books healthy. In the financial sector, the collapse of security prices caused the insurance of financial products to fail. The discovery of frauds also adds to the lack of confidence that people are now facing (Janet Morrissey, 2008). Eventually, confidence is so low that banks stop lending, thus causing a credit crunch. New Zealand’s regulations restricted issuing of subprime loan, thus not resulting in a credit crunch.
Government are now trying to get out of this crisis by giving recovery packages to the economy. There are 2 major packages; monetary policies and fiscal stimulus. Monetary policies are used to reduce the OCR to boost investment. Lowering the reserve rate will also pump more credit to the market and will help firm carry out production (Mankiw, 2004). Government can bail out banks and financial institution by buying low quality assets thus preventing bankruptcies and foreclosures. International coordination (e.g, G20 meetings) of interest rate and exchange rates also boost the flow of credit between countries. Fiscal stimulus is ways to pump money back into the economy. One of the ways is to reduce tax and run the government on a deficit, thus providing more money for them to spend and save. Government can bail out troubled firms by giving subsidy and by buying shares. Finally, government can invest in health, education, energy and infrastructure. In the long run, a fiscal stimulus on health, education, energy and infrastructure will foster sustained economic growth. We shall discuss this with an aid of a graph.
The economy is now at point A, which is the current equilibrium point. Monetary policies and fiscal stimulus will cause the long run average supply (LRAS) curve to shift to the right, increasing the natural rate of output. The shift in LRAS will cause increase the aggregate demand (AD) curve, shifting it to the right. Firms will follow the lead of this demand shift and increase supply, thus shifting the short run average supply (SRAS) curve to the right. This will cause the equilibrium point to shift from A to B, thus increasing price level, causing inflation. If at any point in time, the economy did not react to the monetary policies and fiscal stimulus, the LRAS curve will shift to the left; back to its original position before the recovery packages are introduced. Firms will react to this cutting back production or shutting down, causing the SRAS curve to shift to the left. The equilibrium point will then shift from B to C, causing hyperinflation. A hyperinflation will cause capital flight, causing a sudden drop in the value of currency, which may start a currency crisis.
In the essay, we can discuss and conclude that New Zealand borrows to invest as compared to US, which borrows to consume. We noted that a decrease in loanable fund will cause a cycle of decay which in turn, leads to the credit crunch. We have discussed how Policy-makers are using monetary tools to affect the ability to pay off the debts. The differences of the banking and financial sector of the two countries has shown us that New Zealand’s restrictions has prevented a credit crisis. Recovery packages; both monetary policies and fiscal stimulus will help the economy back on track. Is there a similar cause for concern as the US, I say no. However, other concerns may arise as to whether or not the recovery packages will boost confidence, if not; we might be seeing an increase in barter economy.
Word count: 1499 words
Reference
Bandyopadhyay, D. (2009, May). A Crisis of Confidence in the Monetary and Financial System and the Prospect of a Great Depression. Unpublished lecture notes, University of Auckland, New Zealand.
Economist (Jul 17th 2008). Fannie Mae and Freddie Mac: End of illusions. Retrieved May 26, 2009, from http://www.economist.com/finance/displaystory.cfm?story_id=11751139
Janet Morrissey (Monday, Mar. 17, 2008). Credit Default Swaps: The Next Crisis?. Retrieved May 26, 2009, from http://www.time.com/time/business/article/0,8599,1723152,00.html
Mankiw.N.G (2004). Brief Principles of Macroeconomics (Third Edition). United States of America: Thomson South-western
Reserve Bank of New Zealand (2009). What is the official cash rate?. Retrieved May 25, 2009, from http://www.rbnz.govt.nz/monpol/about/0072140.html
©Wilson Gan, Economics, U of Auckland, May 2009
The recent global economic crisis is causing the world’s economy to contract. This has caused a major economic downturn for the US; is New Zealand to worry about the same matter? Both countries are heavily dependent on borrowing from foreigners to finance their economic activities but how do they differ? This essay will discuss the rationale of borrowing, the impact on the recent credit crisis, the ability to repay, the banking sectors and the impact of recovery packages.
We know that New Zealand is a country that borrows because the Current Account Balance (CAB) is less than zero; which is a current account deficit (i.e CAB<0). This also means that, with a current account deficit, the total of net export (NX) and net inflow of income (NFI) is negative. (i.e NX+NFI<0). The result of this is; national disposable income will be less than domestic spending. If this is the case, then savings must be lower than investment. Therefore, because the country is saving less, it must be getting some of its investment from abroad. Thus explaining why New Zealand borrows; it borrows for investing. US imports more than they export i.e, net export is negative, mainly because their exchange rate is higher than the countries that they heavily import from, which means it is generally cheaper to import. US’s net foreign income is zero compared to New Zealand, which is negative. This is mostly due to the interest payments on foreign debts. New Zealand’s friendlier tax laws and safer economy also causes more foreigners to invest here. The savings for both countries are different. New Zealanders consumes about 58% of their income but US citizens consumes even more; with 75% of their income being consumed (Bandyopadhyay, 2009). This means that US has less money going into their savings. US’s government spending is more than the amount of tax they collect, which is opposite of New Zealand. This causes US to borrow to pay for their expenditures.
The recent global financial contraction has caused a lack of credit in the market. The credit market is important in paying for household consumption, productions expenditures and investments, marketing and with import and exports. The lack of credit causes a drop in output, which results in a drop in sales, which then causes job losses, further reducing the loanable fund available and thus causing a lack of credit available to the market. This is a vicious cycle of decay which may cause a depression if it persists (Bandyopadhyay, 2009). During a credit crunch, the supply of loanable fund in the market is low, where New Zealand doesn’t have enough to take a loan from. Foreign investment also fall as investors are not able to get credit to fund their activites.
US government has collected a large amount of debt. If it is not able to pay them back in time, their credit rating will go down, thus making it harder to borrow in the future. They may even face a higher interest rate as a result of the lack of confidence in the US government. The decision that US government makes will affect the investment and export of New Zealand products to US. We will discuss 3 ways how the government can pay off their debt; additional private saving, additional public saving and inflation. Government will have additional private saving by encouraging individuals to consume less, save more and for businesses to grow; which will increase disposable income. To have additional public saving, government can put higher taxes or lower government spending. Inflation may be use to devalue the dollar, which makes the exchange rate lower, so to discourage import and increase export.
There is a vast difference in the banking and financial sectors of the US and New Zealand. Firstly, the US, over time, has slowly deregulated their banking and financial sectors, making it easier to lend out money. New Zealand is contradictory to that; it has a prudential supervision from the Reserve Bank of New Zealand. It constantly measures the bank’s capital and its risk weighted credit exposures, by using the capital adequacy ratio. The reserve bank also uses official cash rate (OCR) to influence the price of borrowing money. Just before the credit crisis hit the US, the OCR in New Zealand is high; about 8.25% (Reserve Bank of New Zealand, 2009). As a result of this, people spend less on goods and services because their savings are getting a higher interest rate. Conversely, people with mortgages and other loans experience higher interest rate, which means that people with a better credit rating are only able to borrow money. US is innovative in the sense that they have a mortgage based securities and insurance of financial products. As we have seen back in 2008, the mortgage based securities are collapsing; following the fall of Fannie Mae and Freddie Mac, which are issuers of these securities (Economist, 2008). New Zealand has legal restrictions against mortgage based securities, thus reducing our risk to such products. In US, as a result of these deregulations and financial products, banks are issuing subprime loans. When people start to default on their loan (which are mostly based by their property, mainly their house), banks start to foreclose on these properties. When the banks are trying to recuperate their losses by selling the property, it causes an oversupply, thus making the house prices to fall, by up to 30% in some areas. As more and more foreclosures and bankruptcies occur, banks start make losses and have trouble keeping their books healthy. In the financial sector, the collapse of security prices caused the insurance of financial products to fail. The discovery of frauds also adds to the lack of confidence that people are now facing (Janet Morrissey, 2008). Eventually, confidence is so low that banks stop lending, thus causing a credit crunch. New Zealand’s regulations restricted issuing of subprime loan, thus not resulting in a credit crunch.
Government are now trying to get out of this crisis by giving recovery packages to the economy. There are 2 major packages; monetary policies and fiscal stimulus. Monetary policies are used to reduce the OCR to boost investment. Lowering the reserve rate will also pump more credit to the market and will help firm carry out production (Mankiw, 2004). Government can bail out banks and financial institution by buying low quality assets thus preventing bankruptcies and foreclosures. International coordination (e.g, G20 meetings) of interest rate and exchange rates also boost the flow of credit between countries. Fiscal stimulus is ways to pump money back into the economy. One of the ways is to reduce tax and run the government on a deficit, thus providing more money for them to spend and save. Government can bail out troubled firms by giving subsidy and by buying shares. Finally, government can invest in health, education, energy and infrastructure. In the long run, a fiscal stimulus on health, education, energy and infrastructure will foster sustained economic growth. We shall discuss this with an aid of a graph.
The economy is now at point A, which is the current equilibrium point. Monetary policies and fiscal stimulus will cause the long run average supply (LRAS) curve to shift to the right, increasing the natural rate of output. The shift in LRAS will cause increase the aggregate demand (AD) curve, shifting it to the right. Firms will follow the lead of this demand shift and increase supply, thus shifting the short run average supply (SRAS) curve to the right. This will cause the equilibrium point to shift from A to B, thus increasing price level, causing inflation. If at any point in time, the economy did not react to the monetary policies and fiscal stimulus, the LRAS curve will shift to the left; back to its original position before the recovery packages are introduced. Firms will react to this cutting back production or shutting down, causing the SRAS curve to shift to the left. The equilibrium point will then shift from B to C, causing hyperinflation. A hyperinflation will cause capital flight, causing a sudden drop in the value of currency, which may start a currency crisis.
In the essay, we can discuss and conclude that New Zealand borrows to invest as compared to US, which borrows to consume. We noted that a decrease in loanable fund will cause a cycle of decay which in turn, leads to the credit crunch. We have discussed how Policy-makers are using monetary tools to affect the ability to pay off the debts. The differences of the banking and financial sector of the two countries has shown us that New Zealand’s restrictions has prevented a credit crisis. Recovery packages; both monetary policies and fiscal stimulus will help the economy back on track. Is there a similar cause for concern as the US, I say no. However, other concerns may arise as to whether or not the recovery packages will boost confidence, if not; we might be seeing an increase in barter economy.
Word count: 1499 words
Reference
Bandyopadhyay, D. (2009, May). A Crisis of Confidence in the Monetary and Financial System and the Prospect of a Great Depression. Unpublished lecture notes, University of Auckland, New Zealand.
Economist (Jul 17th 2008). Fannie Mae and Freddie Mac: End of illusions. Retrieved May 26, 2009, from http://www.economist.com/finance/displaystory.cfm?story_id=11751139
Janet Morrissey (Monday, Mar. 17, 2008). Credit Default Swaps: The Next Crisis?. Retrieved May 26, 2009, from http://www.time.com/time/business/article/0,8599,1723152,00.html
Mankiw.N.G (2004). Brief Principles of Macroeconomics (Third Edition). United States of America: Thomson South-western
Reserve Bank of New Zealand (2009). What is the official cash rate?. Retrieved May 25, 2009, from http://www.rbnz.govt.nz/monpol/about/0072140.html
Managment Essay 2 - Corporate Social responsibility
Managment Essay 2 - Corporate Social responsibility
©Wilson Gan, Management, U of Auckland, May 2009
Bierce, an American columnist, suggested the definition of a corporation is “an ingenious device for obtaining profit without individual responsibility.” (Birece, 1911, as cited in West, 1993). This could not be further from the truth. I disagree with Bierce’s statement against corporations. Corporations can be compared to as a living organism, living and interacting with its environment and are responsible for those interactions. A corporation does not live in a pit; nor could it stand without interactions from other sources. It lives in a socially interactive environment, where organizations interact with other groups in society and are socially responsible for their actions. Social responsibility is a business’ obligation to make decisions and take actions that serves the best interest and welfare of society and the organization itself (Samson and Daft, 2009). Corporations are responsible towards the groups of people it deals business with, towards the environment, being ethically responsible and being proactive in its responsibilities.
A corporation does not stand alone when conducting business. It interacts with people, groups, businesses and government during the normal running of the business. These groups are called stakeholders. Stakeholders are persons or groups with legitimate interest in the company (Williams. C, 2005). Management has a responsibility to ensure the long-term survival of the company and it can achieve that by trying to best satisfy the interest of the multiple interest groups that are present in the company. Addressing the needs and concerns of the stakeholders is important because, when a stakeholder group is dissatisfied, they may terminate the relationship with the company or will go against the company in the form of protest or other negative activities to show their concerns. These actions could seriously harm a business or even cause the company go out of business (Williams. C, 2005). A recent example is the dispute between Air New Zealand and the air crew hired by Zeal that is contracted to work in Air New Zealand. The crews that are working under Zeal feel that they are under paid and mistreated. The union representing the crew went into negotiation but ended up in a standstill, which eventually led to an aggressive campaign with full page newspaper advertisements and a four-day strike. Air New Zealand had arranged management staff to fill in for cabin crew on short-haul flight, therefore not affecting the airline’s operations (Vass, 2009). Although this strike has not cost much in terms of lost of immediate airline operations and sales, it has definitely affected the reputation of the company. The company is now under public scrutiny on their employment policies and the treatment of their staff. Again, we can see that, this case is contradicting with Bierce’s comment. The economic position of Air New Zealand may not be severely compromised by the strike but the reputation has been damaged caused by the lack of consideration towards their employee.
Special interest groups are beginning to play a major role in the decision company makes. Although they are not directly trading or in a relationship with a company, the actions that these special interest group make will influence the outcome of a company’s decision; may affect the public perceptions on what social responsibility is (Williams. C, 2005). In 2000, Los Angeles-based Kaufman & Broad Home Corp and Dallas-based Centex Homes, two of America’s largest home builders, announced that they will start phasing out the use of wood from old-growth forests in their new-home construction. This is due to the protest campaign by environmental groups concerning the sustainability of forest used to creating wood based products (Wedner, 2000). This shows that external pressures can and will affect the decision and strategy of a company. Corporations cannot live in a hole where they are only concern about the profit; which is what Bierce comment is based upon. Special interest groups can change the course of a company and will inveterately cause a paradigm shift among the members of the public; which are customers to the company. Therefore companies need to always take into consideration on these groups and their issues during their planning and decision making.
Increasingly, corporations are more and more aware of its responsibility towards the environment. Environmental issues are among the hot topics that business leaders and corporations are targeting their marketing efforts (Samson and Daft, 2009). Corporations are starting to move towards sustainable production because they seen the need to be sustainable in order to keep the environment healthy for the future generations (Bebbington, 2007).. FedEx Office (use to be called FedEx Kinko),has numerous paper and packaging materials containing post-consumer recycled (PCR) fiber, which helps create a market for recycle materials and recycling programs. FedEx Office is also dedicated to forest protection and conservation. In 2003, the company adopted a forest based product policy, which includes requirements surrounding vendors source of materials for paper making as well as recycled-content standards (FedEx, 2009). This shows that companies not only concentrate on their core business activities and obtaining profit. They take steps, make policies and go the extra mile to help protect the environment.
ISO14001 and Eco-Management and Audit Scheme (EMAS) are set level and standards for environmental management system; aim to promote sustainability amongst corporations. Although we can foresee many advantages in adopting these principles of sustainability, few firms have actually attempt or have these management standards (Marcus and Wiling, 1997). BMW is an exception. The BMW plant in Munich has EMAS and ISO14001 environmental management system put in place, with environmental experts documenting and ensuring the implementation of these requirements. Cars are being painted using water-based paint, minimizing the effects on the environment. Almost 50% of the cars assembled in this plant are delivered by rail transport, which saves energy (BMW, 2009). BMW has made a lot of effort in complying with these standards, even when the company may not directly gain from their actions. Bierce statement on corporation is only for obtaining profit is being challenged with BMW’s efforts towards sustainability.
The topic of organisational ethics, in recent years, has evolved into a significant theory based and a specialised are of study with well-documented cases (Vardi and Weitz, 2004). Ethics includes conducts that are not in the rule books or coded into law, may not serve a direct economical interest but may have an effect to the society (Samson and Daft, 2009). Ethical issues have risen up time and time again in recent years. This has caused damages or bad publicity to certain companies; such as WorldCom, Adelphia, Ford and Firestone (in the automobile safety controversy) etc . Conflicts of interest, is one of the ethical issues faced by corporations. One well used case is Enron and its fall from being one of the top 5 largest companies is United States to filing for Chapter 11 bankruptcy. Top executives of the company made a series of off-the-books partnerships to hide the company’s dept and help inflate stock prices. These actions are a clear conflict of interest as the executives stood to benefit financially from the deals. This issue extend as far as investment banks such as Credit Suisse First Boston, Citigroup and JP Morgan Chase, that helped Enron to structure such partnership. These banks, on top of receiving fees for their service, also profited from investment in Enron stock. Enron also used aggressive accounting practices to boost the bottom line of their financial statements. Enron employees lost their 401(k) plans as their stock price plummeted, wiping out their retirement funds (Trevino and Nelson, 2004). The executives of Enron and the investment banks, was clearly looking at profiting their own companies and themselves when they enter into these questionable and unethical deals and partnership. This is what Bierce mention, when he stated that corporation is only for profit without individual responsibility. However, the decisions of these executives, when only profit is in mind, have cause the fall of a great company, and cause personal and finical loses to their employees. These unethical behaviours also caused the reputation of investment bankers, audit committee other traditional gate keepers to be damaged. We can see that when money is the primary force in pushing a decision and ethical consideration is being pushed aside, even normal system that has been put in place to prevent such undesired behaviour to occur failed to prevent it. (Levitt. A, 2005)
At times, corporations may take actions on responsibilities that are not economically viable but are socially desirable. This includes discretionary responsibilities; which means corporations desire to make contribution to society for the common good. These activities include philanthropically contribution or relief efforts in times of a national disaster (Samson and Daft, 2009). In May 12 2008, an earthquake shook the nation of China, causing death and displacing many lives. Mc Donald, in responds to this crisis, mobilized and helped with the relief efforts by providing food to the earthquake victims, relief workers, military personnel, hospitals and police and fire department officers. In addition to that, Mc Donald set up several food and beverage station, adjacent to blood donation centers, and gave a free sandwich and an orange juice to anyone who donated blood. (Mc Donald, 2009). Mc Donald took action in times of need, even though it will suffer financial loss from these efforts. This shows that Mc Donald is committed to its social responsibly and takes actions in helping the community. Mc Donald clearly shows that does not only concern about profit but also put efforts into other social responsibilities.
Corporation may use proactive response to tackle social responsibilities. The proactive response simply means that the company is taking the lead in social issue, without being pressured by stakeholders; to serve the public interest (Samson and Daft, 2009). The company anticipates and act upon that anticipation before it needs to, and more likely than not, will not have a direct financial benefit from it. Mc Donald has been in the forefront of being environmentally friendly. Over 30 years ago, Mc Donald initiated energy conservation measures, which is 1990, was formally established as Global Environmental Commitment. In the 1990s alone, the company have redesigned packaging items and reduced materials used to making them. Mc Donald’s commitment goes beyond just material and recycling, even the equipment that are used are made environmentally friendly. In January 2003, Mc Donald opened its first hydrofluorocarbon (HFC)-free restaurant in Denmark (Mc Donald, 2009). We can clearly see that Mc Donald has been proactive in response to social responsibilities. They are always trying to keep on step ahead in leading the way to environmentally friendly production and running of business. One of the biggest fast food restaurants in the world does not only keep economic responsibilities but also up holds and are corporate leaders in being a ‘green’ company. Bierce claim of corporations only serving as a device for obtaining profit is clearly not supported by Mc Donald.
In conclusion, Bierce’s statement is not consistent with what we see amongst the corporations that are alive and well today. Stakeholders are among the main groups of people that corporations are responsible to, and the actions that both the stakeholder and corporations make, will have an effect on them both. Corporations are making an effort to be environmentally friendly and moving towards sustainability with adopting management standards such as ISO 41000 or EMAS, even when corporations may not be directly in contact or involved in the natural environment. Ethical issues, although at times may not be of any economical significance, is very important in keeping a business running smoothly. We also see that, having unethical practices can and will cause damages and even the fall of a corporation. Discretionary responsibilities are an active part of a corporation, especially in a disaster situation. Corporations may use tools such as proactive responsibilities to react to social issues and leading the industry in that area. I conclude that Bierce’s statement of corporations only focusing on profit without personal responsibilities is incorrect and we can see that statement being challenged everyday in the corporations around us today.
1996 words
Reference
Bebbington. J (2007). Accounting for Sustainable Development Performance. Chennai, India: Charon Tec Ltd
Bierce, A. (1911) The Devil’s Dictionary (web ed. A. West, 1993), Retrieved May 15, 2009, from http://www.alcyone.com/max/lit/devils/p.html,
BMW. (2009). BMW Munich Plant. Retrieved May 15, 2009, from http://www.bmw-plant-munich.com/lowband/com/en/index.html
FedEx. (2009). Paper. Retrieved May 15, 2009, from http://about.fedex.designcdt.com/corporate_responsibility/the_environment/conservation/material_resources/paper
Levitt. A (2005). Frontline: “Bigger than Enron”. Retrieved May 15, 2009, from http://www.pbs.org/wgbh/pages/frontline/shows/regulation/lessons/#levitt
Marcus, P A., & Wiling, J T(ED). (1997). Moving Ahead With ISO14000. United States of America: John Wiley & Sons, Inc
Mc Donald (2009). Mc Donald’s Corporate Responsibility. Retrieved May 15, 2009, from http://www.crmcdonalds.com/publish/csr/home.html
Samson, D., & Daft, R. L. (2009). Management: Third Pacific Rim Edition. South Melbourne, Victoria: Thomson.
Trevino, L K., & Nelson, K E. (2004). Managing Business Ethics: Straight Talk About How To Do It Right. United States of America: John Wiley & Sons, Inc
Vardi, Y., & Weitz, E. (2004). Misbehavior in Organizations: Theory, research, and Management. Mahwah, New Jersey: Lawrence Erlbaum Associates, Inc.
Vass, B. (2009, May 07). Union ad blitz over Air NZ ‘rip-off’. New Zealand Herald. Retrieved from http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10570854
Wedner, D. (2000, April 01). Kaufman, Centex to Reject Old-Growth Wood. Los Angeles Times. Retrieved from http://articles.latimes.com/2000/apr/01/business/fi-14823
Williams. C (2005). Management. United States of America: South-Western
©Wilson Gan, Management, U of Auckland, May 2009
Bierce, an American columnist, suggested the definition of a corporation is “an ingenious device for obtaining profit without individual responsibility.” (Birece, 1911, as cited in West, 1993). This could not be further from the truth. I disagree with Bierce’s statement against corporations. Corporations can be compared to as a living organism, living and interacting with its environment and are responsible for those interactions. A corporation does not live in a pit; nor could it stand without interactions from other sources. It lives in a socially interactive environment, where organizations interact with other groups in society and are socially responsible for their actions. Social responsibility is a business’ obligation to make decisions and take actions that serves the best interest and welfare of society and the organization itself (Samson and Daft, 2009). Corporations are responsible towards the groups of people it deals business with, towards the environment, being ethically responsible and being proactive in its responsibilities.
A corporation does not stand alone when conducting business. It interacts with people, groups, businesses and government during the normal running of the business. These groups are called stakeholders. Stakeholders are persons or groups with legitimate interest in the company (Williams. C, 2005). Management has a responsibility to ensure the long-term survival of the company and it can achieve that by trying to best satisfy the interest of the multiple interest groups that are present in the company. Addressing the needs and concerns of the stakeholders is important because, when a stakeholder group is dissatisfied, they may terminate the relationship with the company or will go against the company in the form of protest or other negative activities to show their concerns. These actions could seriously harm a business or even cause the company go out of business (Williams. C, 2005). A recent example is the dispute between Air New Zealand and the air crew hired by Zeal that is contracted to work in Air New Zealand. The crews that are working under Zeal feel that they are under paid and mistreated. The union representing the crew went into negotiation but ended up in a standstill, which eventually led to an aggressive campaign with full page newspaper advertisements and a four-day strike. Air New Zealand had arranged management staff to fill in for cabin crew on short-haul flight, therefore not affecting the airline’s operations (Vass, 2009). Although this strike has not cost much in terms of lost of immediate airline operations and sales, it has definitely affected the reputation of the company. The company is now under public scrutiny on their employment policies and the treatment of their staff. Again, we can see that, this case is contradicting with Bierce’s comment. The economic position of Air New Zealand may not be severely compromised by the strike but the reputation has been damaged caused by the lack of consideration towards their employee.
Special interest groups are beginning to play a major role in the decision company makes. Although they are not directly trading or in a relationship with a company, the actions that these special interest group make will influence the outcome of a company’s decision; may affect the public perceptions on what social responsibility is (Williams. C, 2005). In 2000, Los Angeles-based Kaufman & Broad Home Corp and Dallas-based Centex Homes, two of America’s largest home builders, announced that they will start phasing out the use of wood from old-growth forests in their new-home construction. This is due to the protest campaign by environmental groups concerning the sustainability of forest used to creating wood based products (Wedner, 2000). This shows that external pressures can and will affect the decision and strategy of a company. Corporations cannot live in a hole where they are only concern about the profit; which is what Bierce comment is based upon. Special interest groups can change the course of a company and will inveterately cause a paradigm shift among the members of the public; which are customers to the company. Therefore companies need to always take into consideration on these groups and their issues during their planning and decision making.
Increasingly, corporations are more and more aware of its responsibility towards the environment. Environmental issues are among the hot topics that business leaders and corporations are targeting their marketing efforts (Samson and Daft, 2009). Corporations are starting to move towards sustainable production because they seen the need to be sustainable in order to keep the environment healthy for the future generations (Bebbington, 2007).. FedEx Office (use to be called FedEx Kinko),has numerous paper and packaging materials containing post-consumer recycled (PCR) fiber, which helps create a market for recycle materials and recycling programs. FedEx Office is also dedicated to forest protection and conservation. In 2003, the company adopted a forest based product policy, which includes requirements surrounding vendors source of materials for paper making as well as recycled-content standards (FedEx, 2009). This shows that companies not only concentrate on their core business activities and obtaining profit. They take steps, make policies and go the extra mile to help protect the environment.
ISO14001 and Eco-Management and Audit Scheme (EMAS) are set level and standards for environmental management system; aim to promote sustainability amongst corporations. Although we can foresee many advantages in adopting these principles of sustainability, few firms have actually attempt or have these management standards (Marcus and Wiling, 1997). BMW is an exception. The BMW plant in Munich has EMAS and ISO14001 environmental management system put in place, with environmental experts documenting and ensuring the implementation of these requirements. Cars are being painted using water-based paint, minimizing the effects on the environment. Almost 50% of the cars assembled in this plant are delivered by rail transport, which saves energy (BMW, 2009). BMW has made a lot of effort in complying with these standards, even when the company may not directly gain from their actions. Bierce statement on corporation is only for obtaining profit is being challenged with BMW’s efforts towards sustainability.
The topic of organisational ethics, in recent years, has evolved into a significant theory based and a specialised are of study with well-documented cases (Vardi and Weitz, 2004). Ethics includes conducts that are not in the rule books or coded into law, may not serve a direct economical interest but may have an effect to the society (Samson and Daft, 2009). Ethical issues have risen up time and time again in recent years. This has caused damages or bad publicity to certain companies; such as WorldCom, Adelphia, Ford and Firestone (in the automobile safety controversy) etc . Conflicts of interest, is one of the ethical issues faced by corporations. One well used case is Enron and its fall from being one of the top 5 largest companies is United States to filing for Chapter 11 bankruptcy. Top executives of the company made a series of off-the-books partnerships to hide the company’s dept and help inflate stock prices. These actions are a clear conflict of interest as the executives stood to benefit financially from the deals. This issue extend as far as investment banks such as Credit Suisse First Boston, Citigroup and JP Morgan Chase, that helped Enron to structure such partnership. These banks, on top of receiving fees for their service, also profited from investment in Enron stock. Enron also used aggressive accounting practices to boost the bottom line of their financial statements. Enron employees lost their 401(k) plans as their stock price plummeted, wiping out their retirement funds (Trevino and Nelson, 2004). The executives of Enron and the investment banks, was clearly looking at profiting their own companies and themselves when they enter into these questionable and unethical deals and partnership. This is what Bierce mention, when he stated that corporation is only for profit without individual responsibility. However, the decisions of these executives, when only profit is in mind, have cause the fall of a great company, and cause personal and finical loses to their employees. These unethical behaviours also caused the reputation of investment bankers, audit committee other traditional gate keepers to be damaged. We can see that when money is the primary force in pushing a decision and ethical consideration is being pushed aside, even normal system that has been put in place to prevent such undesired behaviour to occur failed to prevent it. (Levitt. A, 2005)
At times, corporations may take actions on responsibilities that are not economically viable but are socially desirable. This includes discretionary responsibilities; which means corporations desire to make contribution to society for the common good. These activities include philanthropically contribution or relief efforts in times of a national disaster (Samson and Daft, 2009). In May 12 2008, an earthquake shook the nation of China, causing death and displacing many lives. Mc Donald, in responds to this crisis, mobilized and helped with the relief efforts by providing food to the earthquake victims, relief workers, military personnel, hospitals and police and fire department officers. In addition to that, Mc Donald set up several food and beverage station, adjacent to blood donation centers, and gave a free sandwich and an orange juice to anyone who donated blood. (Mc Donald, 2009). Mc Donald took action in times of need, even though it will suffer financial loss from these efforts. This shows that Mc Donald is committed to its social responsibly and takes actions in helping the community. Mc Donald clearly shows that does not only concern about profit but also put efforts into other social responsibilities.
Corporation may use proactive response to tackle social responsibilities. The proactive response simply means that the company is taking the lead in social issue, without being pressured by stakeholders; to serve the public interest (Samson and Daft, 2009). The company anticipates and act upon that anticipation before it needs to, and more likely than not, will not have a direct financial benefit from it. Mc Donald has been in the forefront of being environmentally friendly. Over 30 years ago, Mc Donald initiated energy conservation measures, which is 1990, was formally established as Global Environmental Commitment. In the 1990s alone, the company have redesigned packaging items and reduced materials used to making them. Mc Donald’s commitment goes beyond just material and recycling, even the equipment that are used are made environmentally friendly. In January 2003, Mc Donald opened its first hydrofluorocarbon (HFC)-free restaurant in Denmark (Mc Donald, 2009). We can clearly see that Mc Donald has been proactive in response to social responsibilities. They are always trying to keep on step ahead in leading the way to environmentally friendly production and running of business. One of the biggest fast food restaurants in the world does not only keep economic responsibilities but also up holds and are corporate leaders in being a ‘green’ company. Bierce claim of corporations only serving as a device for obtaining profit is clearly not supported by Mc Donald.
In conclusion, Bierce’s statement is not consistent with what we see amongst the corporations that are alive and well today. Stakeholders are among the main groups of people that corporations are responsible to, and the actions that both the stakeholder and corporations make, will have an effect on them both. Corporations are making an effort to be environmentally friendly and moving towards sustainability with adopting management standards such as ISO 41000 or EMAS, even when corporations may not be directly in contact or involved in the natural environment. Ethical issues, although at times may not be of any economical significance, is very important in keeping a business running smoothly. We also see that, having unethical practices can and will cause damages and even the fall of a corporation. Discretionary responsibilities are an active part of a corporation, especially in a disaster situation. Corporations may use tools such as proactive responsibilities to react to social issues and leading the industry in that area. I conclude that Bierce’s statement of corporations only focusing on profit without personal responsibilities is incorrect and we can see that statement being challenged everyday in the corporations around us today.
1996 words
Reference
Bebbington. J (2007). Accounting for Sustainable Development Performance. Chennai, India: Charon Tec Ltd
Bierce, A. (1911) The Devil’s Dictionary (web ed. A. West, 1993), Retrieved May 15, 2009, from http://www.alcyone.com/max/lit/devils/p.html,
BMW. (2009). BMW Munich Plant. Retrieved May 15, 2009, from http://www.bmw-plant-munich.com/lowband/com/en/index.html
FedEx. (2009). Paper. Retrieved May 15, 2009, from http://about.fedex.designcdt.com/corporate_responsibility/the_environment/conservation/material_resources/paper
Levitt. A (2005). Frontline: “Bigger than Enron”. Retrieved May 15, 2009, from http://www.pbs.org/wgbh/pages/frontline/shows/regulation/lessons/#levitt
Marcus, P A., & Wiling, J T(ED). (1997). Moving Ahead With ISO14000. United States of America: John Wiley & Sons, Inc
Mc Donald (2009). Mc Donald’s Corporate Responsibility. Retrieved May 15, 2009, from http://www.crmcdonalds.com/publish/csr/home.html
Samson, D., & Daft, R. L. (2009). Management: Third Pacific Rim Edition. South Melbourne, Victoria: Thomson.
Trevino, L K., & Nelson, K E. (2004). Managing Business Ethics: Straight Talk About How To Do It Right. United States of America: John Wiley & Sons, Inc
Vardi, Y., & Weitz, E. (2004). Misbehavior in Organizations: Theory, research, and Management. Mahwah, New Jersey: Lawrence Erlbaum Associates, Inc.
Vass, B. (2009, May 07). Union ad blitz over Air NZ ‘rip-off’. New Zealand Herald. Retrieved from http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10570854
Wedner, D. (2000, April 01). Kaufman, Centex to Reject Old-Growth Wood. Los Angeles Times. Retrieved from http://articles.latimes.com/2000/apr/01/business/fi-14823
Williams. C (2005). Management. United States of America: South-Western
Managment Essay - Contingency Theory
Managment Essay - Contingency Theory
©Wilson Gan, Management, U of Auckland, April 2009
In this day and age where there is a vast variety of different industries; each with a different set of objectives which has different sets of rules of operation, one will not be able to say that there is one set of management system that will fit across the whole industrial spectrum. This is where Joan Woodward’s work on contingency theory plays a major role in fitting in to each variation of management. Her work marks the beginning of a situational approach to organization and management (Golembiewski. R, Gibson. F & Miller. G, 1978). This essay will look into 4 types of contingency factors in light of Joan’s contingency theory and how it applies within the New Zealand’s industrial sector, in which we will look at Fisher and Paykel as a case study. First, we will look in to how the change in business environment required the company to adapt to it. Secondly, the growing size of a company’s operation will need to be addressed and we will look into it from the contingency point of view. Thirdly, this essay will study the strategies introduced to cope with the change it organization of the company. Last, we will cover the technology used to improve productivity. The sum of this essay will look at how contingency view has being adapted for the current business environment.
A business lives in an environment; just as the natural world’s environment where different animals live in the same environment, it is subjected to adaptation natural selection and dependence (Bogatti, 1996). Adaptation is one of the key factors of survival in the business environment. A company needs to change with the time in order to keep up with its competitors. The definition for natural selection, as stated in the Cambridge Learner’s Dictionary, is the process which results in the continued existence of only the types of animals and plants which are best able to produce young or new plants in the conditions in which they live in (Cambridge Learner’s Dictionary, 2004). Although this is a biological term but it clearly depicts the situation in which most (if not all) business must survive in, but instead of producing young or new plants, business need to continue to grow and expand. Those companies of which could not adapt fast enough will eventually shut down. Businesses are also dependant on other elements of the environment in which it lives in. Suppliers, consumers and even governments are all part of the environment and the business needs to depend and cater to their needs. Businesses around the world are becoming more and more connected, one business function with another, one business unit with another , one company with another. (Dantin, Sheridan, and Urquhart, 2007) . All these factors that we have just discussed have, in one way or another, affected the management and course of the Fisher & Paykel. One of the major events that Fisher & Paykel had to endure was the restrictions on importation that was caused by the foreign exchange crisis in 1938. This caused the company to make a major decision of shifting from retail to manufacturing; which they started the year after that. They have to make that move; either that or the company will have to shut down because it won’t be able to supply the stores. (Hansen & Hunter, 2005) This was really a test of their adaptation of the business environment.
As we have discussed before, a company needs to grow and expand in order to survive. However, with growth, comes another factor in this theory; that is the size of the business. Size covers a lot of ground, e.g. capacity, employees, sales volume, resources etc. Different businesses are of different sizes and not all companies aim to be big; there are some that are more effective in a smaller size. With this in mind, we can clearly see that it is hard to have just one set of system to suit all, because the size of the company will also dictate the way it is managed. One of the problems that big companies like Fisher & Paykel face is the amount of workers and staff that it has in the different departments and operations. Cooperation, both vertically and horizontally in the business organization is important for the smooth operation of the company. There was a study conducted by the Partnership Resource Center, under the Department of Labor (Harvey, 2006) on how the partnership of Fisher & Paykel and the Engineering, Printing and Manufacturing Union (EPMU). With this partnership, Fisher and Paykel has greatly cut down its amount of unions that it needs to deal with from 13 to just one. This has increase productivity and motivated staff.
Strategy can be considered as the primary form of attack and deference of a company. A strategy is a fundamental pattern of present and planned objectives, resource deployments and interactions of an organization with markets, competitors and other environmental factors (Boyd, Walke, Mullins & Larreche, 2002). As Dr Pete Mazany defines, strategy is where an organization wants to go, why and how, and communicates this (Mazany, 1995). The Porter’s 5 forces which was developed by Michael E. Porter in his book Competitive Strategy: Techniques for Analyzing Industries and Competitors (Porter. M.E ,1980) shows the different types of forces that affects the company. The five factors that are buyer power, supplier power, threat of substitute, threat of new entrants and rivalry among competitors. These factor are what companies use to evaluate their current strategy and how they can improve it. Using the Porter’s 5 forces model, we can see there are different types of forces for different types of business; requiring a tailored strategy for each situation (even within the same company). Fisher and Paykel is a major international players; with exports reaching as far as the United States. This requires the company to use different strategies to suit the different countries that it is trying to enter. As Tian puts it ‘It is argued, in the international business literature, that market entry mode is closely associated with the degree of recourse commitment, risk exposure and management control of transnational corporation, and that the choice of market entry modes is determined by a variety of factors’ (Tian. X, 2007). In the 1980s Fisher and Paykel spent $8.1million, just to break into the United States market. The money spent is a way to make sure that they have a good foot hold on the niche market that they have. This is money well spent; as at 2004, the American market now takes up 22% of the total export revenue of the company. (Hansen & Hunter, 2005)
Technology is at the forefront of all modern industries. Each form of company will have various levels of technology running the company. Technology includes machinery, employee skills and work procedures and it vary between manufacturing and service organizations. (Samson and Daft, 2009). Joan Woodward’s made a study about the relationship between manufacturing technology and organization structure (Woodward, 1965). There are three basic production technology, first of which is small-batch and unit production. It is where firms produce goods in batches of one or a few products, as to the customer specification. This can be compared to project based production. The second is Large-batch and mass production. This is a bigger size compared to the previous type. Technology is distinguished by the standardized production it runs. Normally deals with big volume and involves employees complement to the machinery. The last type is continuous process production where the entire work flow is mechanized in a sophisticated nd complex form of production technology. (Samson and Daft, 2009). Fisher and Paykel, in the has adopted various types of technology to increase production. In 1964, for example, engineers Julian Williams and Graeme Currie, perfected a flexible manufacturing system. Man-hours on an average home freezer, which Woolf Fisher benchmarked against other overseas manufacturers, dropped from 25 hours to five hours, significantly reducing costs and increasing output. (Hansen & Hunter, 2005). One of the achievement of Fisher and Paykel in the technological forefront is winning one of the New Zealand Hi-Tech Awards (Hitech, 2005). This shows the level of commitment that the company has in the advancement of technology. This is also evident in the company’s ‘DNA’, where innovation is at the core of their business; in everything that they do. (Fisher and Paykel Appliances,2009)
From this essay, by using Fisher and Paykel as a New Zealand example, that the Contingency Theory developed by Joan Woodward has a great impact in our society. We have seen that the change in business environment requires an adaptation to the new situation in order to survive. Secondly, the different sizes of companies requires different management styles, particularly how a bigger company that have a big number of staff resolve employment related issues. Third, this essay discussed about strategy in a company and how it has to adapt and change strategy when dealing with international business. Lastly, this essay dealt with the technological improvements and how it has affected a company’s productivity. Overall, we can say that Joan Woodward’s work on contingency theory has made a great impact in modern times, especially in this age, where technological improvement is so rapid; just as Fisher and Paykel, that contingency styled management, at times, is the best way forward.
Reference
Boyd. H, Walker.C, Mullins. J & Larreche. J (2002). Marketing Managemnet. New York: McGraw-Hill/Irwin
Cambridge (2004). Cambridge learner’s dictionary. Cambridge : Cambridge University Press
Dantin. U, Sheridan D, and Urquhart. C, (2007). Business Computing. Australia: McGraw-Hill Australia Pty Ltd.
Department of Labour: Partnership Resource Centre. (n.d.). Case Studies - Fisher and Paykel with the EPMU – A Partnership Case Study. Retrieved March 31, 2009, from http://www.dol.govt.nz/services/PartnershipResourceCentre/resources/casestudies/casestu diesfandp.asp#1
Golembiewski. R, Gibson. F & Miller. G,( 1978). Managerial Behavior and Organization Demands. Illionis: F.E Peacok Publishers Inc.
Hansen.P & Hunter.I, (2005) Fisher and Paykel Appliances: creating a worldwide exporter. Auckland: University of Auckland, Business School.
Mazany.P (1995). TeamThink: Team New Zealand. Auckland: SmartSims.com.
Hitech (2005) New Zealand HiTech:Hall of fame (2005). Retrieved March 31, 2009, from http://www.hitech.org.nz/fisher-and-paykel.html
The Wearshop. (2056). Business Profile. Retrieved March 25, 2057, from http://www.wearshop.co.nz
Fisher and Paykel Appliances (2009). Our DNA. Retrieved March 31, 2009, from http://www.fisherpaykel.co.nz/global/index.cfm?7B27A510-EFFC-C410-B681-DCA6A52EE3AF
Porter. M.E (1998). Competitive strategy : techniques for analyzing industries and competitors : with a new introduction / Michael E. Porter. New York : Free Press
Samson, D., & Daft, R. L. (2009). Management: Third Pacific Rim Edition. South Melbourne, Victoria: Thomson.
Stephen P. Borgatti (1996). Organizational Theory: Determinants of Structure. Retrieved March 30, 2009, from http://www.analytictech.com/mb021/orgtheory.htm
Tian. X (2007). Managing International Business in China. United Kingdom: Cambridge University Press.
Woodward.J (1965). Industrial organization: theory and practice. London : Oxford University Press
©Wilson Gan, Management, U of Auckland, April 2009
In this day and age where there is a vast variety of different industries; each with a different set of objectives which has different sets of rules of operation, one will not be able to say that there is one set of management system that will fit across the whole industrial spectrum. This is where Joan Woodward’s work on contingency theory plays a major role in fitting in to each variation of management. Her work marks the beginning of a situational approach to organization and management (Golembiewski. R, Gibson. F & Miller. G, 1978). This essay will look into 4 types of contingency factors in light of Joan’s contingency theory and how it applies within the New Zealand’s industrial sector, in which we will look at Fisher and Paykel as a case study. First, we will look in to how the change in business environment required the company to adapt to it. Secondly, the growing size of a company’s operation will need to be addressed and we will look into it from the contingency point of view. Thirdly, this essay will study the strategies introduced to cope with the change it organization of the company. Last, we will cover the technology used to improve productivity. The sum of this essay will look at how contingency view has being adapted for the current business environment.
A business lives in an environment; just as the natural world’s environment where different animals live in the same environment, it is subjected to adaptation natural selection and dependence (Bogatti, 1996). Adaptation is one of the key factors of survival in the business environment. A company needs to change with the time in order to keep up with its competitors. The definition for natural selection, as stated in the Cambridge Learner’s Dictionary, is the process which results in the continued existence of only the types of animals and plants which are best able to produce young or new plants in the conditions in which they live in (Cambridge Learner’s Dictionary, 2004). Although this is a biological term but it clearly depicts the situation in which most (if not all) business must survive in, but instead of producing young or new plants, business need to continue to grow and expand. Those companies of which could not adapt fast enough will eventually shut down. Businesses are also dependant on other elements of the environment in which it lives in. Suppliers, consumers and even governments are all part of the environment and the business needs to depend and cater to their needs. Businesses around the world are becoming more and more connected, one business function with another, one business unit with another , one company with another. (Dantin, Sheridan, and Urquhart, 2007) . All these factors that we have just discussed have, in one way or another, affected the management and course of the Fisher & Paykel. One of the major events that Fisher & Paykel had to endure was the restrictions on importation that was caused by the foreign exchange crisis in 1938. This caused the company to make a major decision of shifting from retail to manufacturing; which they started the year after that. They have to make that move; either that or the company will have to shut down because it won’t be able to supply the stores. (Hansen & Hunter, 2005) This was really a test of their adaptation of the business environment.
As we have discussed before, a company needs to grow and expand in order to survive. However, with growth, comes another factor in this theory; that is the size of the business. Size covers a lot of ground, e.g. capacity, employees, sales volume, resources etc. Different businesses are of different sizes and not all companies aim to be big; there are some that are more effective in a smaller size. With this in mind, we can clearly see that it is hard to have just one set of system to suit all, because the size of the company will also dictate the way it is managed. One of the problems that big companies like Fisher & Paykel face is the amount of workers and staff that it has in the different departments and operations. Cooperation, both vertically and horizontally in the business organization is important for the smooth operation of the company. There was a study conducted by the Partnership Resource Center, under the Department of Labor (Harvey, 2006) on how the partnership of Fisher & Paykel and the Engineering, Printing and Manufacturing Union (EPMU). With this partnership, Fisher and Paykel has greatly cut down its amount of unions that it needs to deal with from 13 to just one. This has increase productivity and motivated staff.
Strategy can be considered as the primary form of attack and deference of a company. A strategy is a fundamental pattern of present and planned objectives, resource deployments and interactions of an organization with markets, competitors and other environmental factors (Boyd, Walke, Mullins & Larreche, 2002). As Dr Pete Mazany defines, strategy is where an organization wants to go, why and how, and communicates this (Mazany, 1995). The Porter’s 5 forces which was developed by Michael E. Porter in his book Competitive Strategy: Techniques for Analyzing Industries and Competitors (Porter. M.E ,1980) shows the different types of forces that affects the company. The five factors that are buyer power, supplier power, threat of substitute, threat of new entrants and rivalry among competitors. These factor are what companies use to evaluate their current strategy and how they can improve it. Using the Porter’s 5 forces model, we can see there are different types of forces for different types of business; requiring a tailored strategy for each situation (even within the same company). Fisher and Paykel is a major international players; with exports reaching as far as the United States. This requires the company to use different strategies to suit the different countries that it is trying to enter. As Tian puts it ‘It is argued, in the international business literature, that market entry mode is closely associated with the degree of recourse commitment, risk exposure and management control of transnational corporation, and that the choice of market entry modes is determined by a variety of factors’ (Tian. X, 2007). In the 1980s Fisher and Paykel spent $8.1million, just to break into the United States market. The money spent is a way to make sure that they have a good foot hold on the niche market that they have. This is money well spent; as at 2004, the American market now takes up 22% of the total export revenue of the company. (Hansen & Hunter, 2005)
Technology is at the forefront of all modern industries. Each form of company will have various levels of technology running the company. Technology includes machinery, employee skills and work procedures and it vary between manufacturing and service organizations. (Samson and Daft, 2009). Joan Woodward’s made a study about the relationship between manufacturing technology and organization structure (Woodward, 1965). There are three basic production technology, first of which is small-batch and unit production. It is where firms produce goods in batches of one or a few products, as to the customer specification. This can be compared to project based production. The second is Large-batch and mass production. This is a bigger size compared to the previous type. Technology is distinguished by the standardized production it runs. Normally deals with big volume and involves employees complement to the machinery. The last type is continuous process production where the entire work flow is mechanized in a sophisticated nd complex form of production technology. (Samson and Daft, 2009). Fisher and Paykel, in the has adopted various types of technology to increase production. In 1964, for example, engineers Julian Williams and Graeme Currie, perfected a flexible manufacturing system. Man-hours on an average home freezer, which Woolf Fisher benchmarked against other overseas manufacturers, dropped from 25 hours to five hours, significantly reducing costs and increasing output. (Hansen & Hunter, 2005). One of the achievement of Fisher and Paykel in the technological forefront is winning one of the New Zealand Hi-Tech Awards (Hitech, 2005). This shows the level of commitment that the company has in the advancement of technology. This is also evident in the company’s ‘DNA’, where innovation is at the core of their business; in everything that they do. (Fisher and Paykel Appliances,2009)
From this essay, by using Fisher and Paykel as a New Zealand example, that the Contingency Theory developed by Joan Woodward has a great impact in our society. We have seen that the change in business environment requires an adaptation to the new situation in order to survive. Secondly, the different sizes of companies requires different management styles, particularly how a bigger company that have a big number of staff resolve employment related issues. Third, this essay discussed about strategy in a company and how it has to adapt and change strategy when dealing with international business. Lastly, this essay dealt with the technological improvements and how it has affected a company’s productivity. Overall, we can say that Joan Woodward’s work on contingency theory has made a great impact in modern times, especially in this age, where technological improvement is so rapid; just as Fisher and Paykel, that contingency styled management, at times, is the best way forward.
Reference
Boyd. H, Walker.C, Mullins. J & Larreche. J (2002). Marketing Managemnet. New York: McGraw-Hill/Irwin
Cambridge (2004). Cambridge learner’s dictionary. Cambridge : Cambridge University Press
Dantin. U, Sheridan D, and Urquhart. C, (2007). Business Computing. Australia: McGraw-Hill Australia Pty Ltd.
Department of Labour: Partnership Resource Centre. (n.d.). Case Studies - Fisher and Paykel with the EPMU – A Partnership Case Study. Retrieved March 31, 2009, from http://www.dol.govt.nz/services/PartnershipResourceCentre/resources/casestudies/casestu diesfandp.asp#1
Golembiewski. R, Gibson. F & Miller. G,( 1978). Managerial Behavior and Organization Demands. Illionis: F.E Peacok Publishers Inc.
Hansen.P & Hunter.I, (2005) Fisher and Paykel Appliances: creating a worldwide exporter. Auckland: University of Auckland, Business School.
Mazany.P (1995). TeamThink: Team New Zealand. Auckland: SmartSims.com.
Hitech (2005) New Zealand HiTech:Hall of fame (2005). Retrieved March 31, 2009, from http://www.hitech.org.nz/fisher-and-paykel.html
The Wearshop. (2056). Business Profile. Retrieved March 25, 2057, from http://www.wearshop.co.nz
Fisher and Paykel Appliances (2009). Our DNA. Retrieved March 31, 2009, from http://www.fisherpaykel.co.nz/global/index.cfm?7B27A510-EFFC-C410-B681-DCA6A52EE3AF
Porter. M.E (1998). Competitive strategy : techniques for analyzing industries and competitors : with a new introduction / Michael E. Porter. New York : Free Press
Samson, D., & Daft, R. L. (2009). Management: Third Pacific Rim Edition. South Melbourne, Victoria: Thomson.
Stephen P. Borgatti (1996). Organizational Theory: Determinants of Structure. Retrieved March 30, 2009, from http://www.analytictech.com/mb021/orgtheory.htm
Tian. X (2007). Managing International Business in China. United Kingdom: Cambridge University Press.
Woodward.J (1965). Industrial organization: theory and practice. London : Oxford University Press
Thursday, September 25, 2008
The Beginning
The beginning of a new blog.... Here we go...
Business and Leadership has been a major part of my life since I was a young 15 year old lad in a little town called Keningau.
It all started with the 'Rich Dad, Poor Dad' book by Robert Kiyosaki that I read when I was 15. From then on, my mind really opened up and i got really excited about the business world. On top of that, I was really involved with Leo Club and I've acquired a lot of my leadership skills from there. I'm really blessed with having a wonderful dad which helped mold me and shape me to become the person that I am now and I owe a lot of my leadership qualities and styles to him.
So, coming back to the present...
The entires on my blog will mainly be my thoughts and finding through my readings and my personal experinces. I hope these entries will sheld light into topic regarding business and leadership.
Business and Leadership has been a major part of my life since I was a young 15 year old lad in a little town called Keningau.
It all started with the 'Rich Dad, Poor Dad' book by Robert Kiyosaki that I read when I was 15. From then on, my mind really opened up and i got really excited about the business world. On top of that, I was really involved with Leo Club and I've acquired a lot of my leadership skills from there. I'm really blessed with having a wonderful dad which helped mold me and shape me to become the person that I am now and I owe a lot of my leadership qualities and styles to him.
So, coming back to the present...
The entires on my blog will mainly be my thoughts and finding through my readings and my personal experinces. I hope these entries will sheld light into topic regarding business and leadership.
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