Bidding For Hertz: Leveraged Buyout Essay

TO ACCESS THIS DOCUMENT This is a protected document. The first two pages are available for everyone to see, but only faculty members who have verified faculty status with Darden Business Publishing are able to view this entire inspection copy. Username: Submit VERIFIED FACULTY If you have verified faculty status with Darden Business Publishing, simply enter the same username that you use on the Darden Business Publishing Web site, and then click â€Å"Submit.† Please note that this is an inspection copy and is not for classroom use. Faculty Register UNVERIFIED FACULTY If you are teaching faculty and do not yet have verified faculty access with Darden Business Publishing, please click on the â€Å"Faculty Register† link and submit your information requesting verified faculty access. Buy Case Now OTHER USERS If you would like to read the full document, click on â€Å"Buy Case Now† to be redirected to the Darden Business Publishing Web site where you can purchase this and other Darden cases. If you have any questions or need technical help, please contact Darden Business Publishing at 1-800-246-3367 or email sales@dardenbusinesspublishing.com Document Id 0000-1402-9024-00009159 The protectedpdf technology is  © Copyright 2006 Vitrium Systems Inc. All Rights Reserved. Patents Pending. UVA-F-1560 Rev. April 17, 2009 BIDDING FOR HERTZ: LEVERAGED BUYOUT Overview In late summer 2005, Greg Ledford, managing director and head of automotive and transportation buyouts at the Carlyle Group, found himself examining his BlackBerry atop the Great Wall of China. Though he had planned to be sightseeing with his daughter, his immediate focus was to finalize the terms of the second-largest leveraged buyout in history. The target in question was Hertz, a subsidiary of the Ford Motor Company, which was up for sale. Ledford needed to decide the price he and his co-investors would offer for Hertz as well as assess the potential returns and risks of the deal. Already months of work, many dollars of due diligence, and arrangement of tentative financing had gone into the bid. Complicating matters, he knew he faced tough competition from a rival buyout group, no doubt engaged in a similar process. The race to win Hertz had been set in motion several months earlier, when William Clay Ford Jr., the chairman and CEO of Ford, announced plans to explore â€Å"strategic alternatives† for Hertz in April 2005. That announcement was followed in June 2005 by the filing of an S-1 registration statement setting up a â€Å"dual track process† that would result in a Hertz IPO should other sale prospects fail. Ledford, who spoke to senior Ford managers on a regular basis, had gleaned that there was interest on Ford’s part for an outright sale of Hertz. He believed a private sale that was competitive with an IPO would be viewed favorably by Ford due to its greater upfront cash proceeds and certainty of execution. When no strategic buyer surfaced, Carlyle, Clayton, Dubilier & Rice (CD&R), and Merrill Lynch Global Private  Equity (collectively â€Å"Bidding Group†) joined forces to bid on Hertz. It faced competition from another buyout consortium that included Texa s Pacific Group, Blackstone, Thomas H. Lee Partners LP, and Bain Capital LLC. This case was prepared by Susan Chaplinsky, Professor of Business Administration, Darden Graduate School of Business, and Felicia Marston, Professor, McIntire School of Commerce. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright  © 2008 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to sales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation. Rev. 4/09. UVA-F-1560 Hertz Ownership History Hertz’s ownership history was characterized by a series of sales, public offerings, and leveraged buyouts (Exhibit 1).1 The company was first established in 1918 by 22-year-old Walter L. Jacobs as a car rental operation with a modest inventory of 12 Model T Fords that Jacobs personally had repaired and repainted. The venture was immediately successful, leading Jacobs to expand and generate annual revenues of approximately of $1 million within five years. At the $1 million mark, in 1923, Jacobs sold his company to John Hertz, president of Yellow Cab and Yellow Truck and Coach Manufacturing Company, who gave his name to the company, creating â€Å"Hertz Drive-Ur-Self System† and a brand name that had endured ever since. John Hertz sold his investment three years later to General Motors (GM). In 1953, GM in turn sold the Hertz properties to the Omnibus Corporation, which simplified the company’s name to â€Å"The Hertz Corporation† in connection with a public stock offering on the New York Stock Exchange (NYSE). In late 1987,  together with Hertz management, Ford Motor Company participated in a management buyout of the company. Hertz later became an independent, wholly owned subsidiary of Ford in 1994. Less than three years later, Ford issued a minority stake of shares through a public offering on the NYSE on April 25, 1997. In early 2001, Ford reacquired the outstanding shares of Hertz and the company again became a wholly owned subsidiary of the Ford Motor Company. Hertz Financial History and Business Segments The large investor interest in Hertz over time was due in part to the company’s proven financial ability. In fact, the company had produced a pretax profit each year since 1967. During the period 1985 to 2005, revenues had grown at a compound annual growth rate of 7.6% with positive year-over-year growth in 18 of those 20 years. Over the past same period, Hertz had emerged as a truly global enterprise; it had car rental operations in 145 countries, and more than 30% of its total revenues were from outside of the United States. Hertz was among the most globally recognized brands and had been listed in BusinessWeek’s â€Å"100 Most Valuable Global Brands† (limited to public companies) in 2005 and every year since it was eligible for inclusion. Hertz currently operated in two business segments: car rental (â€Å"Hertz Rent A Car† or â€Å"RAC†) and equipment rental (â€Å"Hertz Equipment Rental Company† or â€Å"HERC†). In 2005, it was estimated that RAC would comprise 81% of company revenues and HERC 19%. RAC was supported by a network of franchises that together with company-owned facilities operated in more than 7,600 airport and local locations throughout the world. The company led its competition in the airport car rental market in Europe with operations at 69 major airports. Hertz owned and leased cars from more than 30 manufacturers, most of which it had long-term leasing.

Portraying the Carpe diem Theme through Poetry Essay

The two poems, Robert Herrick’s To The Virgins, To Make Much of Time and Andrew Marvell’s To His Coy Mistress, both employ the â€Å"carpe diem† (seize the day) theme. Using both stock and original imageries, they effectively send the message across the reader that Time runs and keeps running so that one should enjoy the pleasures of love and romance while in one’s youth. However, the manners in which the two poets express this theme differ from each other. The tone, metaphors and other poetic devices present in the two poems convey varied effects to the mind of the readers as to how the carpe diem theme should be considered. Herrick’s poem is the simpler and more urgent of the two. Throughout the 16 lines comprising the piece, Herrick consistently paints through his metaphors the image of impending death and loss thus creating the sense of urgency in favor of his cause, which is for the virgins, to whom he is addressing the poem, to get married while they are young. The images of â€Å"Old Time†¦a-flying (line 2) followed by a â€Å"flower (that) smiles today/ Tomorrow will be dying (lines 3-4)† both allude to the temporariness of beauty and youth. In contrast, To His Coy Mistress is a more complex way of expounding the theme. While Marvell also exhorts the woman, by whom the poem is being addressed to, to hurry and seize the available opportunities while she is still young, there is a tone of hopefulness and optimism accompanying the sense of urgency. The poet begins by presenting hyperboles as to how he would like his love to be—growing through time, from â€Å"ten years before the Flood†¦Till the conversion of the Jews (lines 8 and 10). He would like to leisurely enjoy the romantic experience, spending â€Å"An hundred years†¦to praise/ Thine eyes†¦Two hundred to adore each breast,/ But thirty thousand to the rest (lines 13-16). † He states that the reason for this is that his lover â€Å"deserve this state/ Nor would I love at lower rate (lines 19-20). † Only in the second stanza does Marvell present the carpe diem case by presenting a similar personification of Time present in Herrick’s poem. In Marvell’s Time rides a â€Å"winged chariot hurrying near (line 22). † He follows this with frightening imageries of death such as how, if the woman keeps resisting, in the end â€Å"worms shall try/ That long preserved virginity (lines 27-28). † This sudden shift from beautiful romantic metaphors in the first stanza to the images of death in the second stanza actually makes the theme more effective and urgent to the reader. The shock element of death makes the young reader consider the theme and really hurry to enjoy love’s pleasures while it is too late. Finally, while Herrick’s poem suggests that life and love is only worth it â€Å"when youth and blood are warmer/ But being spent, the worse (lines 10-11)†, suggesting that everything is downhill after youth, Marvell thinks that love is a consolation for humans against the ravages of Time. The final lines, â€Å"Though we cannot make our sun/ Stand still, yet we will make him run (lines 45-46)†, suggest that although death is inevitable, loving is a way by which we can forget thinking about old age and death. Carpe diem poems all seek to send the same message to the reader: to grab the opportunities present in youth for once these are gone, they can never be reclaimed nor repeated. Herrick and Marvell both wrote poems to illustrate this point using varied metaphors like the personification of Time rushing by, the rising and dying of the Sun and other temporal objects like flowers and birds. Herrick’s poem is the classic carpe diem poem, urging the reader to enjoy youth and make much of it because everything is temporary, while Marvell incorporates an additional point about how seizing love during one’s youth is a way to distract one from thinking about how temporary youth is in one’s life.

Corporate Governance and Financing Decisions by Saudi Companies

Corporate Governance and Financing Decisions by Saudi Companies Ali Al-Nodel College of Economy and Administration, Qassim University, P. O. Box 4667, Burydah 51412 Al-Qassim, Saudi Arabia. Email: [email  protected] edu. sa Khaled Hussainey Ain Shams University, Egypt Accounting & Finance Division Stirling Management School Stirling University Stirling FK9 4LA United Kingdom Email: Khaled. [email  protected] ac. uk 1 Abstract Purpose: This paper aims to contribute to the corporate governance literature in emerging economies by examining the effect of some corporate governance mechanisms on financing decisions in Saudi Arabian listed companies.Methodology: A multiple regression model is used to examine the association between financing decisions and corporate governance mechanisms for a sample of 37 listed Saudi companies. In particular, we examine the effect of board size; ownership concentration and corporate governance reporting on the debt-to-equity ratio. Corporate governance reporting is measured by the content analysis approach. Findings: After controlling for companies’ profitability and their growth opportunities, we found that both board size and ownership concentration are positively associated with debt-to-equity ratio.Research limitations: We limit our analysis to a small sample of firms that use the internet to communicate corporate governance information between October 2005 and January 2006. Practical implications: The findings suggest that managers are likely to choose higher financial leverage when they have stronger corporate governance (large number of directors on the board and higher ownership concentration). However, we did not find any statistical association between corporate governance disclosure and debt-to-equity ratio.This suggests that firm’s asymmetric information is not an important driver of the financing decision of Saudi Arabian companies. This might be due to the nature of the Saudi business environment. Orig inality: We strongly believe that this paper provides a novel contribution to the existing literature as we are the first to examine this issue in Saudi Arabia. Keywords: Corporate governance, financing decisions, emerging economies, Saudi Arabia. Paper type: Research paper. 2 1. IntroductionThis paper aims to contribute to the corporate governance literature by examining the effect of corporate governance characteristics on financing decisions in Saudi Arabian listed companies. In particular, it examines the effect of board size; ownership concentration and corporate governance reporting on the debt-to-equity ratio. The investigation of these research issues in Saudi business environment could extend prior research and give different explanations to those carried out in more developed countries Research related to determinant of corporate capital structure is a well established part of the accounting and finance research.Modigliani and Miller (1958) is the first to study this area of research. They also provided another study in the same area of research after modifying some assumptions such as relaxing the prefect market assumptions and considering corporate tax into their models (Miller and Modigliani, 1963). In their later study, they suggested that firm value will be enhanced if the level of debt increases because interest rate is a tax deductible and consequently companies would enjoy debt tax shield when funding their activities by long-term debt. Further accounting and finance research studies were more expressive.Those researches were concentrated on examining some determinants of corporate capital structure. For example, the association between board size and capital structure decisions have been suggested by a number of empirical studies (see for example Mehran 1992, Berger et al. 1997, Wiwattanakantang 1999, Wen et al. 2002, Du and Dia 2005, Abor and Biekpe 2005 and Al-Najjar and Hussainey 2010a and 2010b). Another determinant of capital structure decision which received significant attention is the ownership concentration (see for example Wiwattanakantang 1999, and Al- 3 Najjar and Hussainey 2010a and 2010b).More recently, number of studies have, also, investigated the association between asymmetric information and corporate decisions (see for example Li and Zhao, 2006 and Bharath et al. 2009). The results of these research studies suggest that firm value will be enhanced if the level of debt increases, board size and ownership concentration are associated with capital structure decisions and firms with higher levels of information asymmetric are more likely to use debt in financing their activities than equity. Unfortunately, the results of these research studies cannot be generalized for number of reasons.First, these results provided mixed evidence. For example, Mehran (1992), Berger et al. (1997), and Abor and Biekpe (2005) found a significant negative association between the size of the board of directors and debt-to-eq uity ratios, while Jensen (1986) found a positive association between higher debt ratios and larger board size. Further, other researchers found that there is no significant association between board size and debt-to-equity ratios (i. e. Wiwattanakantang, 1999; Wen et al. , 2002; and Al-Najjar and Hussainey, 2010). A second reason for the difficulty behind generalizing the results of these esearch studies are that the majority of them were carried out in most developed countries such as U. S and European continental. More precisely, in developing countries the conclusions of this line of research are likely to be challenged due to the business environmental differences between those of developed and those of developing countries. In another words, in a different business environment such those of the Middle Eastern countries, there are significant environmental factors that may affect corporate capital structure decisions.Hove (1986 and 1990) asserted the importance of political, ec onomical, and social systems on corporate decisions. 4 Third reason for the difficulty of generalising the evidence of prior research examining determinants of corporate capital structure is that there are very limited numbers of studies that have examined determinants of capital structure in developing countries and even fewer such studies may be found in the Middle East countries, leaving significant doubt about the applicability of these evidence in the business environment of Middle east countriesAccordingly, a natural area of extending the lines of the accounting and finance research related to determinant of corporate capital structure decisions is to explore other drivers of corporate capital structure decisions and to consider suggested drivers within a different business environment. In the present paper, we aim to examine the degree to which corporate governance affect the financing decisions of Saudi Arabian listed companies. We focus only on three corporate governance me chanisms.These are board size; ownership concentration and corporate governance reporting. The main reasons for concentrating on these issues are the possibility of making comparison with other studies because these are the most studied issues in the literature, the availability of data regarding these issues1, and the importance of advising regulators whom are more concern about these issues in the process of regulating corporate governance in Saudi Arabia.To help us in focusing on a group of firms that report corporate governance information on their websites, we utilised a sample of 37 companies listed in Saudi Stock Market in January 2006. This was based on a recent paper by Hussainey and Al-Nodel (2008) who collected their sample from Saudi listed companies’ websites 1 Cost of capital is an important factor in corporate capital structure decisions; however data for capital structure was not available. 5 etween October 2005 and January 2006 representing a total number of 77 companies listed in the Saudi Stock Exchange at that time. We found that both board size and ownership concentration are positively associated with the debt-to-equity ratio. However, we did not find a significant association between corporate governance reporting and the debt-to-equity ratio. The findings seem to suggest that managers are likely to choose higher financial leverage when they have stronger corporate governance (large number of directors on the board and higher ownership concentration).However, firm’s asymmetric information seems to be not a driver of the financing decision of Saudi Arabian companies. A possible explanation is that decisions relate to capital structure are affected by the Islamic view of financing which prohibits interests and in turn to the public view who disrespects such practice. This is enhanced by the weakness of the business reporting practice in Saudi Arabia which could provide pave for a different mean of getting information by parti es related to loan agreements.The results of this paper may be of use to the Saudi Arabian Capital Market Authority (SACMA, thereafter) who issued a guidance in 2006 that recommends all listed companies to disclose corporate governance information to the public. This would help SACMA to explore the attitude of companies to voluntarily report corporate governance rather than being enforced to do so. The paper proceeds as follows. Section 2 reviews prior research on the determinants of corporate capital structure. In Section 3, a description of the Saudi business environment is provided.Sections 4 and 5 discuss the development of the research hypotheses and the research model. Section 6 is the data description. The 6 main regression results are presented in Section 7. Section 8 concludes and suggests areas for future research. 2. Literature Review Although the relationship between corporate governance and capital structure has been the subject for an extensive research in developed co untries2, a limited research has been carried out to investigate the issue in business environment of developing countries.The association between board size and capital structure decisions have been well established in prior accounting and finance research. In particular, Mehran (1992), Berger et al. (1997), Wiwattanakantang (1999), Wen et al. (2002), Du and Dia (2005), Abor and Biekpe (2005) and Al-Najjar and Hussainey (2010a and 2010b) examined the association between board size and corporate capital structure decision, but the results are mixed. Mehran (1992), Berger et al. (1997), and Abor and Biekpe (2005) reported a significant negative association between the size of the board of directors and debt-toequity ratios.However, Jensen (1986) revealed a positive association between higher debt ratios and larger board size. Other researchers found that there is no significant association between board size and debt-to-equity ratios (Wiwattanakantang, 1999, Wen et al. , 2002, Al-Naj jar and Hussainey, 2010). 2 Examples include the UK (see, for example, Demirag 1998; Ezzamel and Willmott 1993; Writer 2001; Vinten 2001), The Netherlands (Groot, 1998), and Canada (Elloumi and Gueyie, 2001). Other researchers compared the corporate governance practice between developing countries.For instance, Vinten (2000) compared the corporate governance practice between the UK and the US. Another comparative study is Charkham (1994) which found significant differences in the corporate governance practices in five countries: Japan, Britain, France, the United States and Germany. 7 Ownership concentration is considered as one of the key determinants of capital structure decision. Wiwattanakantang (1999) reported that managerial shareholdings have consistent positive influence on family-owned firm leverage.In addition, Al-Najjar and Hussainey (2010a) found that insider ownership is positively and significantly associated with the debt-to-equity ratio. However, Al-Najjar and Hussai ney (2010b) did not find the expected significant results. A relatively recent and growing number of studies have investigated the association between asymmetric information and corporate decisions (see Li and Zhao, 2006 for more details). For example Bharath et al. (2009) used a novel information asymmetry index and examined the extent to which information asymmetry is a determinant of capital structure decisions.They found that information asymmetry affects capital structure decisions of US companies. In particular, they found a significant positive association between information asymmetry and debt-to-equity ratio. In other words, their results suggest that firms with higher levels of information asymmetric are more likely to use debt in financing their activities than equity. On the other hand, other research found that voluntary disclosure is negatively related to asymmetric information. For example, Hussainey et al. 2003) found higher levels of voluntary disclosure reduce info rmation asymmetry between the firm and investors and hence increase investors' ability to better anticipate future earnings. Research investigating corporate governance in developing countries is much beyond in considering the impact of issues of corporate governance on corporation capital structure. A review of research investigating issues of corporate governance revealed that most such research approach the issue whether to describe the state of 8 orporate governance from an official perspective or from the perspective of what should the practical applications of its principles be. For example, Al-Motairy (2003) explored the state of corporate governance practices in Saudi Arabia. He concluded that there is a vital need for (1) a review of these regulations to reflect the current practices of corporate governance, (2) the issuance of guidance for best practices for management and financial affair in corporations and (3) the establishment of an organisation to accelerate the adopt ion of best practices of corporate governance.Similarly, Fouzy (2003) evaluated the practices of corporate governance’s principles in Egypt. He recognised the development in Egyptian official regulations toward the application of best practices of corporate governance. He then argued that these developments are not met enough by Egyptian companies in their practical applications. Another example is the study which was carried out by Oyelere and Mohammed (2005) investigating the practices of corporate governance in Oman and how it is being communicated to stakeholders.They recommend enhanced regulation and communication for the Omani stock market to keep pace with the international developments. Finally, a research paper by the Centre for International Private Enterprise (CIPE, 2003) examined the corporate governance practice in four Middle Eastern countries (Egypt, Jordan, Morocco, and Lebanon). It found that corporate governance practice is approached differently by each cou ntry depending on the sophistication of the financial market in each country. The research paper further provided several 9 ecommendations to improve the application of the principles of corporate governance in the region as a whole. The impact of the corporation attitude toward their corporate governance on their financing decisions needs further investigation giving the unique of the Saudi business environment and the mixed results of the accounting and finance research relating to the determinants of corporate capital structure. This is evident by the unique aspects of the business environment of Saudi Arabia which will be discussed in the following paragraph. 3.Saudi business environment This section provides a general description of the environment of the Saudi business practices. The discussion will be directed to the most important environmental factors, as suggested by the literature. The main aspects of the Saudi business practices that will be discussed are the social, eco nomical, and political systems. Also, some highlights will be given to the 1965 Company Law that regulates the practice of Saudi businesses and the guidance of corporate governance issued by SACMA in 2006 which regulates corporate governance reporting.As a conservative society, a significant number of Saudis are adherent to Islamic values such as avoiding loan interests. This does not mean there is no such type of transactions but to mean that the majority of Saudis do not openly accept such transactions. Saudi society is also characterized by the impact of the personality and power of particular individuals, the role of family and friend relationships over regulations, privilege given to personal relationships over tasks, and the existence of a high level of secrecy (Al-Rumaihi 1997; Al-Nodel 2004). 0 The economy of Saudi Arabia is an oil-based economy and government exercises strong controls over major economic activities. Since the discovery of oil in 1938, oil revenue represents the biggest contribution to the economy. In 1990s, it accounted for around 35% of nominal GDP, about 75% of government revenues, and 85% of export receipts (Economist Intelligence Unit, 2003). Table 1 presents the country’s budgetary revenues, expenditures and net surplus or (deficit) for the last three years.Insert Table 1 here Similar to most developing countries, Saudi businesses are characterized by the domination of family businesses, the deep involvement of the government in the private sector, and the existence of a number of foreign-owned and controlled companies based on joint venture agreements with domestic companies. Al-Nodel (2004) reported that joint-stock companies represent only 1. 14% of the total number, and account for less than 40% of the total capital of the registered businesses.Since the type of businesses is mostly small to medium size companies, there was an apparent need for more foreign investors and involvement of the government in the private sec tor to carry some important activities which cannot be carried out or provided by local companies. This has left the country with significant number of foreign-owned and controlled companies based on joint venture agreements with domestic companies and significant involvement of government in some major business activities (Presley, 1984; Aba-Alkhail, 2001).The political system of Saudi Arabia is a monarchy, headed by the King. Within the political system, there are three legislative bodies, which have the authority to initiate and/or approve policies, regulation or rules: the Council of 11 Ministers, the Consultative Council, and various individual Ministries (Al-Amari, 1989; Al-Rumaihi, 1997). The legal system of Saudi Arabia is derived from Islamic law (Shariah; Alqur’an Alkareem and Sunna Alsharifah3), and coded laws for a number of specific fields, such as commerce, tax and labour.Al-Amari (1989) reported that Islamic law prevails in legal disputes. Two of the most impor tant aspects of the Islamic values relating to corporate financing are that Islamic law prohibits loan interests whether giving or taking by individuals or business institutions and obligation of Zaket4 which should be giving, calculated based on the capital of the business or individual, and given to specific groups as mentioned by Alqur’an Alkareem and Sunna Alsharifah.Taxes duty is imposed on non-Saudi or Gulf States companies operate in Saudi Arabia. There are some differences between Zaket and Taxes whether on whom to impose, the manner of collection, or calculation. For example, Zaket is based on the wealth of the business with some specific deductions for specific items as indicated by Shariah; Alqur’an Alkareem and Sunna Alsharifah, while Tax is based on the net income with some deduction according to the law of Taxes. The 1965 Company Law regulates the practice of businesses in Saudi Arabia.It sets conditions for several aspects of businesses such as legal fra meworks through which business companies can be established, the registration requirements, minimum capital to be maintained, number of partners, number of directors, accounts, the 3 Alqur’an Alkareem is the Holly book of Islam and Sunna Alsharifah is the interpretations, speeches and actions of prophet Mohamed Peace be up on him. Alqur’an Alkareem and Sunna Alsharifah provide the main of Islamic instructions. 4 Zaket is a financial religious duty and represents the third pillar.Alqur’an Alkareem and Sunna Alsharifah explain to Muslim the compliance with the Zaket duty. 12 annual audit of the accounts, and so on. Shinawi and Crum (1971) asserted that the origin of the 1965 Saudi Company Law goes back to the British Companies Act of 1948. The similarity between the 1965 Saudi Company Law and the UK acts issued in 1948, 1967 and 1976 was also reported by Kahlid (1983). The reporting requirements which are imposed by the 1965 Company Law represent the only rules th at should be observed.It requires the issuance of a balance sheet, a profit and loss account, and a report on the company’s operations and financial position every fiscal year. It further stipulates that all corporations and limited liability companies must issue annual financial statements audited by an independent auditor licensed to practice by the Saudi Ministry of Commerce and Industry. Similar to stock markets in developing countries, the Saudi stock market is new and small. In 1984, the Royal Decree No. 81230 was issued as an attempt to officially regulate the stock exchange (Abdeen and Dale, 1984; El-Sharkawy, 2006).Under this Royal Decree, the Saudi Arabian Monetary Agency (SAMA) was given actual control over the stock exchange through national commercial banks. The significant change was in 2003 when the Saudi Arabian Capital Market Authority (SACMA) was established to oversight the exchange of Saudi stocks (Ramady, 2005). This period observed significant increase o f the number of listed companies, regulations for the market in general and reporting in specific. Table 2 compares some key numbers of the Saudi stock market between 1996- 2005. Insert Table 2 here 13For example, in 2006 SACMA issued a draft for reporting requirements of corporate governance for listed companies. The draft provides recommendations of the criteria for the best corporate governance practice that should listed companies counsel. It has covered to some extent the main five principles issued by the Organization for Economic Co-operation and Development (OECD): the rights of shareholders, the equitable treatment of shareholders, the role of stakeholders in corporate governance, disclosure and transparency, the responsibility of the board of directors.According to the recommendations of SACMA, listed companies are required to report to SACMA about their compliance with the criteria of corporate governance as issued by SACMA or reasons for uncompliance if any. The disclosu re contains, for example, the board of directors’ functions, responsibilities, formation, committees of board of directors; audit committee; Nomination and Remuneration Committee; Meetings of the Board and Remuneration and Indemnification of Board Members5.Finally, SACMA asserted that the criteria for the best corporate governance practice mostly constitutes the guiding principles for all listed companies unless any other regulations, laws or rules require such requirement. 4. Research hypotheses To examine the effect of corporate governance characteristics on financing decisions in Saudi Arabian listed companies we formulated three research hypotheses; 5Detailed information about these regulations is discussed in the following articles (SACMA, 2006): Article 9: Disclosure in the Board of Directors’ Report; Article 10: Main Functions of the Board of Directors; Article 11: Responsibilities of the Board; Article 12: Formation of the Board; Article 13: Committees of the B oard; Article 14: Audit Committee; Article 15: Nomination and Remuneration Committee; Article 16: Meetings of the Board; Article 17: Remuneration and Indemnification of Board Members. 14 he effect of board size; ownership concentration and corporate governance reporting on the debt-to-equity ratio as following. Board size hypothesis Given that prior research investigating the association between board size and debt-to-equity ratios gave mixed result (see section 2), we also revisited this research area and examined the association between board size and capital structure for Saudi Arabian companies. We set the following first research hypothesis for the impact of board size on capital structure:H1: Ceteris paribus, there is a relationship between board size and debt-to-equity ratio. Ownership concentration hypothesis Given the results of the prior research are – to some extent – mixed, we also revisited this research area and examined the association between ownership concentration and capital structure for Saudi Arabian companies. We set the following second research hypothesis for the impact of ownership concentration on capital structure: H2: Ceteris paribus, there is a relationship between ownership concentration and debt-to-equity ratio. Corporate governance reportingTo examine the role of the information environment on capital structure decision in Saudi Arabian companies, we used a corporate governance voluntary disclosure index as a measure of a firm’s information environment and set the 15 following third research hypothesis for the impact of corporate governance reporting on capital structure: H3: Ceteris paribus, there is a relationship between corporate governance reporting and debt-to-equity ratio. 5. Model Development In order to test the above hypotheses, we regress debt-to-equity ratio on some corporate governance characteristics and some control variables.The study will investigate the following model: Levit = ? + ? ? X it + ? it Where: Levit is defined as long term debt to equity ratio; ? is the intercept. ? ? is the slope coefficient estimates of regressors. X it is the corporate governance variables (and control variables) for firm i at time t. Dependent variable: The dependent variable ( Levit ) is defined as the long term debt to equity ratio. Independent variables: We have three independent variables and two control variables. We identified three types of corporate governance variables: 1) Board size (BOARD): This represents the number of executive and non executive directors on the board. (2) Ownership concentration (OWNERSHIP): This represents the total percentage of the company’s shares that owned by owners. 16 (3) Corporate governance reporting (DISCLOSURE): This is calculated as the number of sentences that include at least one corporate governance related information. Control variables: (1) Profitability (PROF): we used return on total assets as a measure for firms’ profitab ility. (2) Growth opportunity (MB): we used share price to book value ratio as a measure for firm’s growth opportunity. . Data Our data collection is based on a recent paper by Hussainey and Al-Nodel (2008). This helped us to focus on a group of firms that report corporate governance information on their websites. We focused on firms that disclose information through internet because prior research argued that internet reporting is one of the most important sources of voluntary disclosure and this source is more likely to complement published annual reports (Aly et al, 2010). Hussainey and Al-Nodel (2008) collected their sample from Saudi listed companies’ websites between October 2005 and January 2006.At that time, the total number of companies listed in the Saudi Stock Market was 77 representing eight sectors: agriculture, services, cement, industrial, banks, electrical, telecommunication and insurance. They used TADAWUL website (www. tdwl. net) and Google website (w ww. google. com) to access every company's website. They deleted some companies from their analysis for a number of reasons. These include 11 firms without websites; one firm with a website under construction and one firm with a restricted website. This reduced their sample to 64 companies. We also further excluded 27 firms because of missing corporate 7 governance and accounting information. This led to a sample of 37 listed firms for the current study. Data on debt-to-equity ratio, Board size, ownership concentration, profitability and price-to-book value ratio were collected from TADAWUL website. Following Hussainey and Al-Nodel (2008), we used the content analysis approach to measure the number of sentences that contain corporate governance information. Accordingly we used the corporate governance disclosure index developed by Hussainey and AlNodel (2008) to analyse the content of every company's website. 7.Empirical Results This section discusses the descriptive analysis, the c orrelation analysis and the empirical results. Descriptive analysis Table 3 shows the descriptive analysis (mean, minimum, maximum and the standard deviation). It shows that on average the number of directors on board in Saudi Arabia companies is around 8, with a minimum of 4 members and a maximum of 11 members. Mean ownership concentration is 35. 6 and the mean corporate governance disclosure is 5 sentences with a minimum of zero corporate governance sentence and a maximum of 21 corporate governance sentences.A broad range of variation in financial variables is also evident in our sample. The debt-to-equity ratio ranges from 0 to 97 with a mean of 24. 52 and a standard deviation of 32. 576. The return on total assets ratio ranges from -37. 3 to 71. 74 with a mean of 8. 8535 and a standard deviation of 13. 81767. The share price to book value ratio ranges from 0 to 21 with a mean of 5. 03 and a standard deviation of 5. 336. On 18 average, our sample covers large firms as the mean fi rm size is 23240077. 81.Finally, our sample covers nine sectors as follows: Banks (9 firms), Chemical (8 firms); Cement (6 firms); Retailers (2); Energy (I firm); Agriculture (7 firms); Telecommunication (2 firms); Advertising (1 firm) and Insurance (1 firm). Insert table 3 here Table 4 shows the correlation analysis. The correlation between each of the independent variables is not too high. The highest correlation found between corporate governance disclosure and share price to book value ratio (MB) is 43. 5, which is acceptable. This confirms that no multicollinearity problem exists between the independent variables. Insert table 4 hereTable 5 shows our empirical results. It shows that the coefficient estimate on board size is positive significant with a p-value of 0. 059 (see model 4). This is consistent with Jensen (1986) who also found a positive association between higher debt ratios and larger board size. Our finding indicates that larger board size puts Saudi Arabian firms i n a good position to finance their activities by using debt. This is consistent with the fact that higher quality of corporate governance improves companies’ financial performance (Bhagat and Bolton, 2008) and hence leads increase the ability of the company to obtain debt.Liang and Zheng (2005) provided an explanation for this positive sign. They argued that boards with a large board size are more likely to have a difficulty in getting an agreement because of different and conflict opinions and views. Accordingly, firms with large number of directors on board might not choose equity financing which requires high transaction cost to resolve communication and coordination dilemma. In addition, they argued that 19 directors would choose debt for financing their activities because this source of finance will not dilute the equity of current shareholders and change their current position.This leads us to accept hypothesis 1. Table 5 also shows that the coefficient estimate on owne rship concentration is positive significant with a p-value of 0. 005 (see model 4). This result is consistent with Wiwattanakantang (1999) Al-Najjar and Hussainey (2010a). This indicates that when the total percentage of the company’s shares is concentrated internally, managers will prefer to use debt to finance their companies’ activities. This is because – as mentioned in Liang and Zheng (2005) – debt will not dilute the equity of current shareholders and change their current position.This leads us to accept hypothesis 2. Insert table 5 here Finally, corporate governance disclosure as a proxy for asymmetric information between managers and investors is expected to be negative and statistically significant. However, Table 5 shows that the coefficient estimate of DISCLOSURE variable is positive, indicating that firms with higher levels of corporate governance disclosure (less information asymmetry) has higher debt-toequity ratio. This finding is statistic ally insignificant and not consistent with prior research. This leads us to reject hypothesis 3. . Conclusion The aim of this paper was to examine the effect of corporate governance mechanisms on capital structure for Saudi Arabian listed companies. Our results show that the corporate capital structure decisions in Saudi Arabia is driven by some of the same corporate governance determinates suggested in prior research. Based on 20 a sample of 37 Saudi Arabian listed companies, our results show that the number of directors on boards and ownership concentration are the main drivers of Saudi companies for capital structure decisions.Our results, however, show that corporate governance reporting was not an important driver of Saudi companies for capital structure decisions. This might be due in part to the nature of the Saudi business environment where there is a weak reporting requirement of the practice of corporate governance in the country. This fact could have encourage parties to loan agreements approach different means to get the needed information rather than the traditional reporting mechanisms which is likely to be practical in a small community of businesses.This is also likely to be affected by the characteristics of Saudi society whereas the impact of the personality and power of particular individuals, the role of family and friend relationships prevail over regulations, and tasks, and the existence of a high level of secrecy. The main limitation of the study is that it did not cover the whole market so the sample may not be representative of the population of Saudi companies. This, however, is justified by the nature of the study, which relied on the availability of data needed. Further recheck was carried for companies which are not included.We found that these companies are in general small and less likely to affect the results. Nevertheless, a study with a large number of companies is needed for future research. A future research may also try to overcome the limitation of the availability of data and investigate other determinants of capital structure decisions by utilising other mean of research tools such interviews with parties involved in loan agreements.21 References Aba-Alkhail, K. (2001). Regulating the auditing profession in Saudi Arabia: the formulation of early auditing standards. PhD Thesis. University of Essex.Abdeen, A. and Dale, S. (1984), The Saudi Financial System in the Context of Western and Islamic Finance, John Wiley ; Sons. Abor, J. and Biekpe, N. (2005). â€Å"Does Corporate Governance Affect the Capital Structure Decisions of Ghanaian SMEs? , Working paper, University of Stellenbosch Business School Al-Amari, S. (1989). The development of accounting standards and practices in the Kingdom of Saudi Arabia. PhD Thesis. University of Glasgow. Al-Motairy, O. , (2003), â€Å"Implementing corporate governance in Saudi Arabia†, Arab Journal of Administrative Sciences, Vol. 10, No. 3, pp. 281-305. Al-N ajjar, B. nd Hussainey, K. (2010a). â€Å"What drives firms’ capital structure and dividend policy? †, Working paper, Middlesex University, UK. Al-Najjar, B. and Hussainey, K. (2010b). â€Å"Revisiting the capital structure puzzle: UK evidence†, Working paper, Middlesex University, UK. Al-Nodel, A. (2004), † The business risk audit approach: international dissemination and the impact of a business orientation on auditors’ perceptions of risks†. PhD Thesis. University of Manchester. Al-Rumaihi, J. (1997). Setting accounting standards in a non-western environment with special reference to the Kingdom of Saudi Arabia.PhD Thesis. University of Dundee. Aly, D. , Simon, J. and Hussainey, K. (2010). ‘Determinants of corporate internet reporting: evidence from Egypt’. Managerial Auditing Journal, 25 (2): 182-202. Berger, P. G. , Ofek, E. , Yermack, D. L. , (1997). â€Å"Managerial entrenchment and capital structure decision†. Journ al of Finance 52, 1411–1438. Bhagat, S. and Bolton, B. (2008). â€Å"Corporate governance and firm performance†, Journal of Corporate Finance, 14(3): 257-273. Bharath, S. , Pasquariello, P. and Wu, G. (2009). â€Å"Does asymmetric information drive capital structure decisions? , Review of Financial Studies, forthcoming. Capital Market Authority (CMA), 2006, http://www. cma. org. sa/cma%5Far/ (Accessed on 15th September 2006). Driffield, N. , Mahambare, V. and Pal, S. (2007).â€Å"How does ownership structure affect capital structure and firm value†. Economics of Transition, 15 (3), 535-537. 22 Du, J. and Dai, Y. (2005). â€Å"Ultimate corporate ownership structure and capital structures: Evidence from East Asian economies†, Corporate Governance, 13 (1): 6071. El-Sharkawy, H. (2006),†Historical years in Saudi stocksâ€Å", Al-Jazirah Newspaper, September, No. 12413. Fouzy, S. 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(2005), â€Å"A survey of internet reporting of corporate governance practices by companies listed in Oman†, The 2nd Annual International Accounting Conference, Istanbul – Turkey, November. Presley, R. (19 84). A guide to the Saudi Arabian economy. London, Macmillan Press. Ramady, M. (2005), The Saudi Arabian Economy: Policies, Achievements and Challenges, Springer.Regional Corporate Governance Working Group of Middle East and North Africa, (2003), Recommendations in Corporate Governance, Center for International Private Enterprise, Website http://www. cipe-arabia. org/search. asp (Accessed on 20th September, 2006). Saudi Arabian Monetary Agency (SAMA), (2007), http://www. sama. gov. sa/ (Accessed in 20th September 2007). Shinawi, A. , and Crum, W. (1971). â€Å"The emergence of professional public accounting in Saudi Arabia. † International Journal of Accounting Education and Research Vol. 6(2): pp. 103-110. Wen, Y. , Rwegasira, K. and Bilderbeek, J. (2002). Corporate governance and capital structure decisions of the Chinese listed firms†, Corporate Governance, 10 (2), 75-83. Wiwattanakantang, Y. (1999). â€Å"An empirical study on the determinants of the capital struct ure of Thai firms†, Pacific-Basin Finance Journal, 7, 371–403 Wikipedia website (2006) http://www. Wikipedia. Com (Accessed on 10th July 2008). 24 Table (1): Saudi Arabia budgetary revenues, expenditures and net surplus or deficit 2005-2007 Annual government budgeting ( estimates ) Million Saudi Riyals ($1= 3. 75 SR) Total Non-oil Total (Deficit)/ Oil revenues revenues revenues expendituresSurplus Amount Amount % Amount % Amount Amount 2005 280000 220000 79% 60000 21% 280000 0 2006 390000 320000 82% 70000 18% 335000 55000 2007 400000 330000 83% 70000 17% 380000 20000 Source: SAMA (Saudi Arabian Monetary Agency) annual report (2007). 25 Table (2): Key Figures of Saudi Stock Market between 1996-2005. YEAR 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 NO. OF TRANSACTIONS (THOUSAND)) 284 460 377 438 498 605 1,034 3,763 13,320 46,607 TRADED STOCK (MILLION) 138 314 295 528 555 692 1,736 5,566 10,298 12,281 Source: TADAWUL website accessed on 29th September 2006 26 MARKET VALUE ($MILLIAR ) 46 59 43 61 68 73 75 157 306 650 INDEX 1,531 1,958 1,413 2,029 2,258 2,430 2,518 4,438 8,206 16,713 Table (3) Descriptive Statistics ; Industry Classification a) Descriptive Statistics N Minimum Maximum Mean Std. Deviation Lev 37 0 97 24. 52 32. 576 Board 37 4 11 7. 89 1. 822 Ownership 36 .0 82. 7 35. 550 27. 7875 PROF 37 -37. 30 41. 74 8. 8535 13. 81767 MB 37 .00 66. 87 9. 9181 10. 56721 Total assets 37 0 Disclosure 37 0 136950480 23240077. 81 21 b) Industry Classification Sectors Number of firms Banks 9 Chemical 8 Cement 6 Retailers 2 Energy 1 Agriculture 7 Telecommunication 2Advertising 1 Insurance 1 27 5. 03 3. 888E7 5. 336 Table (4) Correlation analysis Disclosure Board Ownership Lev MB PROF 1. 000 .077 .246 .301 .435** -. 139 .649 .149 .070 .007 .410 37 37 36 37 37 37 Pearson Correlation .077 1. 000 .234 .395* .083 .212 Sig. (2-tailed) .649 .170 .016 .626 .207 Disclosure Pearson Correlation Sig. (2-tailed) N Board N 37 37 36 37 37 37 .246 .234 1. 000 .504** . 097 .064 .149 .170 .002 .574 .711 36 36 36 36 36 36 Pearson Correlation .301 .395* .504** 1. 000 .109 -. 062 Sig. (2-tailed) .070 .016 .002 .520 .716 37 37 36 37 37 37 .435** .083 .097 .109 1. 000 -. 019 .007 626 .574 .520 37 37 36 37 37 37 Pearson Correlation -. 139 .212 .064 -. 062 -. 019 1. 000 Sig. (2-tailed) .410 .207 .711 .716 .910 37 37 36 37 37 Ownership Pearson Correlation Sig. (2-tailed) N Lev N MB Pearson Correlation Sig. (2-tailed) N PROF N **. Correlation is significant at the 0. 01 level (2-tailed). *. Correlation is significant at the 0. 05 level (2-tailed). 28 .910 37 Table (5) Regression analysis 5. 1 Model summary R Square Adjusted R Square 1 .617 a .380 .277 28. 002 2 .616b .379 .299 27. 565 3 .602c .363 .303 27. 492 4 .576d .332 .291 27. 726 Model R Std. Error of the Estimate a.Predictors: (Constant), PROF, MB, Ownership , Board , Disclosure b. Predictors: (Constant), PROF, Ownership , Board , Disclosure c. Predictors: (Constant), Ownership , Board , Disclosure d . Predictors: (Constant), Ownership , Board 29 5. 2 ANOVA analysis e ANOVA Sum of Squares df Mean Square F Sig. Regression 14436. 181 5 2887. 236 3. 682 .010a Residual 23524. 187 30 784. 140 Total 37960. 368 35 Regression 14405. 109 4 3601. 277 4. 739 .004b Residual 23555. 258 31 759. 847 Total 37960. 368 35 Regression 13774. 798 3 4591. 599 6. 075 .002c Residual 24185. 570 32 755. 799 Total 37960. 368 35 Regression 2592. 380 2 6296. 190 8. 190 .001d Residual 25367. 988 33 768. 727 Total 37960. 368 35 Model 1 2 3 4 a. Predictors: (Constant), PROF, MB, Ownership , Board , Disclosure b. Predictors: (Constant), PROF, Ownership , Board , Disclosure c. Predictors: (Constant), Ownership , Board , Disclosure d. Predictors: (Constant), Ownership , Board e. Dependent Variable: Lev 30 5. 3 Coefficient estimates Coefficients Unstandardized Coefficients Model a Standardized Coefficients t Sig. -1. 839 .076 .315 2. 079 .046 .181 .400 2. 619 .014 1. 064 1. 032 .174 1. 031 .311 MB -. 101 .507 -. 0 32 -. 199 .844 PROF -. 311 .352 . 132 -. 886 .383 -39. 272 20. 901 -1. 879 .070 Board 5. 669 2. 696 .312 2. 102 .044 Ownership .475 .178 .401 2. 672 .012 Disclosure .971 .906 .159 1. 072 .292 PROF -. 315 .346 -. 134 -. 911 .369 -38. 586 20. 831 -1. 852 .073 Board 5. 185 2. 637 .285 1. 967 .058 Ownership .466 .177 .393 2. 630 .013 Disclosure 1. 113 .890 .182 1. 251 .220 (Constant) -35. 046 20. 814 -1. 684 .102 Board 5. 196 2. 659 .286 1. 954 .059 Ownership 4 .519 .173 .438 2. 990 .005 21. 252 5. 721 2. 752 .474 Disclosure 3 -39. 090 Ownership 2 Std. Error Board 1 B (Constant) (Constant) (Constant) a. Dependent Variable: Lev 31 Beta

Labor Unions and Their Impact on the Economy Essay - 1

Labor Unions and Their Impact on the Economy - Essay Example As the report declares the state employees are not happy with the proposal of the governor that they would have to make a contribution of 5.8 % of their salary towards schemes of pension along with the payment of 12.6 % of their insurance premiums for health. In this report of the research paper, various arguments in support of the union’s protest will be presented.This paper highlights that on  February 15, 2011, the public employees, community supporters and union activists in a number of more than 15,000 jammed at the Capitol Square in Madison for protesting the governor’s plan to band the rights of the workers and demolish jobs of middle class community of the society. The governor denied making any changes in his plans and has mentioned that if the bill is not passed by the state legislature, he would compel massive layoffs along with hampering of state services and thus would cost several jobs.  The move of the governor has been demonstrated as a way of politi cal business that is interested in taking the rights away from the people. The appeal of a few protestors is such that they are in complete support to the governor’s activities for balancing the budget but not at the sake of the worker’s rights, as evident from the views of a retired Communications Workers of America member.  The protestors mentioned that the governor was imparting the bad effects of a budget bill by setting up such a policy that would take away the general rights of the people.

Film Essay Example | Topics and Well Written Essays - 1250 words - 4

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The Design of Health and Safety Control Systems Assignment - 1

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Reaserched, documented position paper Essay Example | Topics and Well Written Essays - 750 words

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The Basic Function Of Strategic Management Accounting Essay

The Basic Function Of Strategic Management Accounting - Essay Example In terms of capital investment decisions, Tesco Plc should set up more grocery outlets in other communities. Based on prior feasibility studies done on a prospective new location, Tesco will use both investor funds (retained earnings reserved for branch expansions), and long-term borrowings to finance another big Tesco grocery outlet. In terms of the evaluation of multidivisional companies, Tesco Plc should conduct classify each multi-divisional company as cost and revenue centers. Each company will generate its own financial statements. Thus, the financial statements will indicate the number of a multi-divisional company under Tesco Plc that generates profits. Likewise, the same financial statements will vividly indicate the number of multi-divisional companies generating net losses (Garrison, 2003). The strategic management accounting system of Tesco Plc focuses on ascertaining if the company’s final reports conform to international accounting standards.The strategic managem ent accountant of Tesco is a driving force to develop a global accounting system is the desire to underwrite securities in any, or all, of the world's capital markets using a single set of financial statements. Currently, the Tesco Stocks are listed in the stock exchanges. A positive incentive for a capital market to support a global accounting system is the enhancement of its volume of business by being able to participate in underwritings in other capital markets.   Reinforcing the positive incentive is the realization that a capital market, which ignores the development of a global accounting system, may find itself with a unique set of accounting standards while the rest of the world relies on a common set of accounting standards. This would lead to an irretrievable loss of business (Brigham & Houston, 2002). Heely (1993;25) emphasized â€Å"the globalization of corporate activity, coupled with

Early and late industrialization Essay Example | Topics and Well Written Essays - 2000 words

Early and late industrialization - Essay Example These late industrialized nations assumed the role of learner ‘instead of the inventor & innovator’ as their economic and industrial development resulted through â€Å"borrowing and improving technologies which has already [been] developed by experiencing firm in more advanced nations† (Do the theories of ‘late industrialization’ explain national differences in the institutional and organisational characteristic of contemporary business? How do these ideas help to explain variations in economic performance?). However, one can notice that the economic growth of the late industrialist nations have been more rapid as they heavily depended on the successful models of institutional and organizational foundations tested by their forerunners. It was the American economist Abramowitz who coined the terms ‘forging ahead’, and ‘catching up’ to refer to the industrial and economic progress achieved by early and late industrial nations. Even though Britain forged ahead in the late 19th century with the new industrial revolution, USA, Germany and Japan caught up and even surpassed Great Britain’s achievements in many respects. According to Shin (1996), â€Å"the existence of forerunners has both complementary and competitive aspects to late comers’ development†: the late comers can benefit heavily from the successful models of the forerunners, but â€Å"they have to develop facing formidable competition from existing forerunners† (p. 2). The author is of the opinion that there have been only two instances of forging ahead in the modern industrial history-one by Britain in the late eighteenth century and the other by USA during the first half of the 20th century; he believes that the process of ‘catching up had a much greater impact than forging ahead’ in the growth of the world economy (Shin, 1996, p. 2). There is a close link between the nature of corporate governance and the industrial or economic development of a nation.

Innovation Term Paper Example | Topics and Well Written Essays - 1000 words

Innovation - Term Paper Example In the global societies, the organization needs to be rebuild in order to navigate themselves out from the economic and social morass and it is through innovations that an organization can get there, but the organization and leaders are usually focused on status quo. An innovative organization creates people, process and philosophies to create, support and nurture innovation (Sorenson, 2011). This project would deal with the innovation strategy adopted by Vodafone, Vodafone group Plc is the world’s largest mobile telecommunications, with its presence in Europe, Asia, Africa, Middle East and the United States. Current Business Situation The company current strategy titled, a stronger Vodafone to a more valuable Vodafone comprised of four main components. They are, to focus mainly on the new areas of growth like by entering into emerging markets, introducing new service and many more. Next to deliver value and efficiency by driving off cost effectiveness and operational effectiv eness, thirdly, to generate liquidity and lastly apply the capital for the investment of the company (Vodafone Group Plc, 2011, p.3). The company, Vodafone primarily focused mainly on its expansion strategy in the emerging countries where there is a potential growth. The enterprise customers of Vodafone range from small-office-home office business to small to medium sized enterprises. The company has 34 million customers as enterprises comprising of 9% and about 23% of service revenue. In 2010 Vodafone acquired Quickcomm and TnT Expense management. This acquisition has strengthened the ability of the company to provide the enterprise customers with a greater visibility and control. As an innovation strategy, Vodafone has been working with its partner Novartis on a health project (Vodafone, 2011). Strength Vodafone is one of the largest mobile phone operators by terms of revenue had planned to focus more on the high growth strategy in India and as time Vodafone has been able to do it by introducing more low cost handsets, wireless connectivity and finally being a good corporate citizen and is India’s fourth largest mobile operator (Lall, 2007). Vodafone’s one of the successful strategy was the introduction of ZooZoo in the year 2009, the new brand ambassadors of Vodafone. This character was successful in repositioning the brand. The Indian Premier League 2 (IPL2) was chosen as the platform for Vodafone to launch their advertisements made on ZooZoo, which proved to a great marketing strategy for Vodafone. With the success of the ZooZoo character the company has launched many ZooZoo goodies such as Zoozoo mugs, toys, t-shirts, key chains and many more. This step was seen as one of the major step taken by the company in the form of innovation. Vodafone is the only company which has come up with such a concept of ZooZoo and has proved to be essential in attracting the customers. Weakness A major weakness of Vodafone was reported to be the network cove rage. It did not have a widely accepted coverage and the customers often complained about the network and also customer service. The company did not invest much in the R&D which led to the dissatisfaction of the customers. Opportunity The current market situation of the company is showing a steady rise not only in India but also in UK. Vodafone profits have rose as about 9.4 million new customers have joined up Vodafone. It

The Right To Education As A Human Right Education Essay Example for Free

The Right To Education As A Human Right Education Essay The right to education is identified as a human right and is understood to establish an entitlement to free for all also compulsory primary education for all children. An obligation to the secondary education accessible to all children as well as access to higher education. The right to education is one of the most fundamental right but also human right. The right to education to eliminate discrimination at all levels of the educational system, to set minimum standards and to improve quality of education. The education shall be directed to the full development of the human personality and to the strengthening of respect for human rights and fundamental freedoms. The human rights shall promoting understanding and friendship among all nations, religious or racial groups and shall further the activities of the united nations for the maintenance of peace. This right to education is most fundamental as a human right. Education promotes a man, as individual freedom, and it shown way of life, change the thinking, and it makes smart. 2. What is right to education? Education is the most important thing in man life, it makes sense, it effect on mind, it change the character. The right to education is a inherent right. Right to education is the right which deals with the right to know and right to change their life and life style. The various types of right to education are primary education, secondary education, vocational education and higher education. Every child has the right to education of primary education. â€Å"Everyone has the right to education. Education shall be free, at least in the elementary and fundamental stages. Elementary education shall be compulsory. Technical and professional education shall be made generally available and higher education shall be equally accessible to all on the basis of merit. †¦Ã¢â‚¬ . Education shall be free for development of human personality. The human rights are developing of understanding, gender quality and make a friendship among all nations. 3. Education and the 4 A’s: The education should be meaningful right and it must be available, accessible, acceptable and adaptable. Every person shall be able to get the benefit from educational knowledge which is desire to get their basic learning knowledge. 3. 1 Availability: Education should be available for all and without cost, minimum the primary education and fundamental level. The government should be able to make it available for the citizen. The governments have to make sure availability of school. â€Å" States parties recognize the right of the child to education, and with a view to achieving this right progressively and on the basis of equal opportunity, they shall in particular; make primary education compulsory and available free to all†. The primary education and higher and also basic education should be available for all. Article 13. 2(a) of the International Covenant on Economic, Social and Cultural Rights says, Primary education shall be compulsory and available free to all. The basic education should be available. 3. 2 Accessibility: All of the educational institute should be accessible for everybody. Nobody can be discriminate on the basis of race, sex, color, religious, economic status, language and immigration status or disability. The school should be safe for all, the school should be reasonable distance from the community. Education should be affordable to all and text book. Higher education should be accessible for all and also equitable for all. â€Å"Persons with disabilities can access an inclusive, quality and free primary education and secondary education on an equal basis with others in the communities in which they live† Read more: http://www. ukessays. com/essays/education/the-right-to-education-as-a-human-right-education-essay. php#ixzz36Egth2rh.

The Introduction To Argos And Amazon Information Technology Essay

The Introduction To Argos And Amazon Information Technology Essay This report has been prepared regarding the operations of Argos and argos.com and it will look at their operational processes and also with discussed in details the theory of capacity planning, inventory management, supply chain management, performance measurements and total quality management and will look at the chosen organizations with relation to above mention theories. Operational management is the process of effectively managing resources and converting them into final goods and services to offer to the customers, the process of operational include all the management of all the resources which are used in the manufacturing of goods and services to used them effectively for the better result and achievement of goals for the organization. In this assignment the operational management processes of two organizations Argos and Amazon.com will be look into with details and they efficiency regarding the operations will be discuss to see how they manage their operations to provide better goods and services to the customers. Argos is one of the U.K leading retailer and it provide customers different goods, the company was establish in 1973 and now it is part of Home Retail Group, which is UKs leading home and general merchandise retailer. Argos, has nationwide network of over 670 stores coupled with its many ways to shop via catalogue, online and in store allows customers to mix and match from the full range of selection, order, pickup and delivery. The Argos retail experience is also made more convenient with home delivery, the innovative check and reserve and text and take home services, and the in-store Quick Pay kiosks, enabling consumers to make the best use of their free time. According to an HPI tracking study running from January to March 2006, 96% of customers would recommend Argos to a friend. Moreover some research agencies has issued interesting figures about retail sector businesses like Argos, Tesco and Asda. According to new Nielsen Online figures, Argos held its number two ranking above Tesco and below Amazon, with a 32% year-on-year growth in the number of UK visitors to 8.2m (homeretailgroup.com) Argos has supply chain management system which is very effective it provide the services through its catalogue system which allows the user to check the item without visiting the store and finding the best product their looking for and booking it online and collecting it either from the store or by home delivery. Argos also has a very effective distribution channels which enable them to have outlets on different locations so the customers can visit the stores and select the items from either looking at the catalogue or at their online system and making the payment on the system and just collect the items they want to purchase which reduces the time which usually customers have to face in order to buy the item because of this effective management of the Argos supply chain and distribution channels the users can get their items less than the time which they will take in other stores which is one of the reason of Argos success. Amazon.com:- Amazon was first establish as a book selling website in 1995 but diversify itself to selling other items such as DVDs, appliances, video games and other electronic goods it also provide the users and option to download some of its item instead of waiting to received it on mail. Amazon.com work on the basis of e-commerce providing its customers different facilities to use for their shopping and its simply a website for online shopping and provides latest items to different customers according to their needs. The features provide by amazon.com are: Reviews By Customers:- Amazon.com provide the customers to review any item they have bought from the website and rank it on the scale from 1 to 5 stars and also discuss what they think about the product this feature enables the other buyers understand the product help them make their decision regarding the product. The view are check by amazon.com to avoid any false information provided by the users and amazon.com like to post both good and bad reviews about the item for the convenient of their customers and to make them understand about each aspect of the product. Content Search:- This is one of the most useful tool provide by amazon.com for its users, the content search tool allow the customers to search for a specific word or content in a book. This feature has been design for customers who wants to buy books regarding specific information this tool enable them to find out what books have the information required by them and show them a photo of the page from the book and sometime give a free preview of the book to its customers to help them decide whether it is the book or information they were looking for it not. Third Party Sellers:- Amazon.com also helps in selling product from third parties on their website by listing them at amazon.com and directs the customers to other sellers product according to their desired information needed. Amazon.con use a centralized payment system for all its users whether sellers or buyers and control and monitor it. Just like Argos the company Amazon.com also has a very effective supply chain management system which enables them to deliver the products desired by the customers on time, with their content search feature the customers get the chance to select their products. They also have an effective distribution system usually the customers who order from amazon.com get their delivery within 2 to 4 days which make the whole process of shopping very enjoyable for the customers. By using the principle of operational management both the companies Argos and Amazon.com have been proving the customer best service and which is one of the reason of the success of both companies that their users prefer to shop from them and also recommend them to their friends and family, the principle use by Argos and Amazon.com are the basic principle of operational management and if used correctly can result in success for any organization in the long run. Part B Capacity Planning:- Capacity planning is the process of determining the amount of work that an organization can do in any given time it is basically determines the capacity of the organization to meet the demands in the market which is always changing due to change in customer taste or in technology. Capacity planning is the crucial part of any organization operational management which determine the capacity of the firm to meet the demands of customers in the market as it will provide the organization the competitive advantage and better utilization of the resources of the organization. Capacity planning is part of the strategic planning of the organization and it provides them a guide to utilize the resources with full capacity and managing the organization resources effectively and making the organization a success. Inventory Management:- Inventory management system was already used in America and Japan it is the most important part of any organizations operation as organization need to maintain a sufficient level of inventory not only helps in the production processes but also it helps in meeting the demands of the market as the manufacturer needs to have sufficient level of stock to supply to the market. Maintaining sufficient level of stock whether raw material or finished products to supply to the market involve many costs such as maintaining cost, ordering costs and carrying cost handling these costs is also a part of a better inventory management system as it is the responsibility of the operations management to handle this processes they need to be sufficient enough to manage the processes of inventory handling efficiently. There are many inventory management systems available to help the management in this processes some of the famous systems are Economic Order Quantity and Just In Time inventory management which enables the managers to use the inventory effectively in the operations. A example of inventory management systems can be seen in the Sainsburys operations where they focus on the maintaining the inventory in the stores through computerized systems and whenever a item short on inventory the system automatically place the order for the new one and which arrive before the item ran out of stock thats been a major part of Sainsburys success. Supply Chain Management:- Supply chain management consist of managing the supplies of the organization efficiently to maintain the level of organization products and services, it not only consist of managing the suppliers but also consist of monitoring and controlling the activities associate with the production of the products and their effective management the process consist of many activities which are: Procurement. Customer service management. Physical distribution. Product development. With these activities an organization creates chain of values and add values in them for the customers and in the product as well which is why these are one of the important activities in the operational management process. An example can be seen in the case of Toyota where the company understands the importance of these activities and provide the customers with products with added value through not only their manufacturing processes but also through their distribution and customer relationship process also this is one of the reason that the company Toyota has grown over the years and its customers preferred to buy its car because they believe that they get value for money. Performance Measurement:- Performance measurement is the process which enables the organization to set the measurements to determine where they are in terms of goals and their achievement it gives the organization an overview of their current position and where they want to be in the future. It is a great way to control and measure the activities of any given department by measuring the actual performances to the target it gives them an idea about their performances and what improvements they need to make. Many organizations used this model in their employee appraisal as well to reward the employees who have achieved the tasks to motivate them also to identify the employees who are behind the tasks to ask them the reasons behind it and if there any help they need in order to achieve the tasks. The application of performance measurement is used at every level of the organization as it is a used for tool for the organization it helps them where they, How they will improve and such questions are answer through performance measurements therefore it is a useful tool. The example of companies using performances management can be seen in Sainsburys where the company not only measures the performances of its employees but also the performance of its store by sending mystery shoppers to the store and checking the budget performances of the stores and also doing performance appraisal for the employees as well. Total Quality Management:- Total quality management is a programme use by many firms to gain competitive advantages by providing the customers with best quality products and increasing their satisfaction, it is a philosophy of management which emphasis on continuous improvement in the quality of the product. The process of total quality management involves involve everyone working in an organization as it is believe that every one working is the organization is responsible for the continuous improvement of the product and services and it should not be consider the activity of only one department. In application of quality management can be seen in the case of sports direct where every employee working in the organization strives to provide best quality services to their customers not in terms of products but also in customers services which result in many customers preferring sports direct over the other sports shop, once a customer enter into the outlet of sports direct they get the feeling of somewhere really sports related from shelving to staff working there the sports fan get this feeling when they are shopping at sports direct because of their total quality control management and which result in many customers buying their sports related stuff from the company because they trust the name and the quality of sports direct which is because sports direct never disappointed them when they come to shop over there. Part C In this part of the assignment the application discuss above will be relate to the organizations or Argos and Amazon.com to see how these applications helps these companies to achieved their goals and objective and what competitive advantages the company are having due to each module and how they develop the companies strategies over the years. Argos:- The first organization that will be look in detail regarding the above mention theories will be Argos as it is the believe of many that these theories are working fine with Argos and they will be look one by one with operations of Argos. Capacity Planning at Argos:- As it has already been discuss how proper capacity planning helps an organization in its operations and proper planning of resources to achieve the goals set by the management. Being one of the biggest retailer of U.K Argos understand the importance of capacity planning and plan all its operations based on the proper planning of its resources as many customers can get the information about the product they want to buy from Argos website that where they will be available and if not available at one store where else they can find the item and how much quantities left to collect which enables the customers to know about the product and how much time they will have to wait to get their hand on the product. Due to this properly planning of capacity Argos has been having competitive advantage over its competitors and it also helps them in their marketing strategy by distributing their catalogue to the customers for free and providing the idea of items they can collect from the outlets of Argos. Inventory Management:- Inventory management has been one of the strong points of Argos operations as Argos has to hold many items in their inventory to meet the demands of customers they been keen on providing the products by different manufacturers to the customers. One of the unique features which is provided by Argos is that it provide the customers information about the products and their availability by providing them information is the item available for home delivery or if the item out of stock in one store which other store they can collect the item and it also provide them the option to reserved the item on their website if the item left has not much quantity so by reserving the item on the website the customers make sure that the item will not be sell by the time they reach they store and they can collect is because of this method of maintaining inventory the operational capacity of Argos can be seen and understand properly. Supply Chain Management:- Argos has many outlets all over U.K and supply the items to all the stores is not an easy job and Argos realized that but they overcome this problem but having a good chain of distribution channels and also by providing information about the product and its availability and also make sure that the customers will get their desired product on time and without having to wait much for the product, the distribution channel consist of both the supplies for stores and also for home deliveries as well to manage effective system of deliveries. Performance Measurements. The use performance evaluation techniques have been an integral part of any organization and Argos is no difference in fact using performance measurement has been a part of Argos success and it gave them an idea how the company is performing not only with the products but also with the customer satisfaction which make them realised the areas they need to make improvements and the areas where they are working fine can improve even more to provide better services to the customers. Total Quality Management:- Just like other features the total management concept has been also used by Argos under this principle the Argos staff has been trained to make them understand the role they play in the success of Argos and what they can do to improve the services at Argos even more. Argos not only emphasis on improving the quality of the services offer by the staff but also make sure that the products offers by Argos are of great quality and value to the customers as they know that making the customers happy is the most thing to do if a business wants to survive. Amazon.com:- Same like Argos the company Amazon.com also employed the principles discusses in part b of this assignment and will be look one by one. Capacity Planning:- Millions of customers visit amazon.com daily and do their shopping form the website due to which it is very important for the website amazon.com to provide their customers the best items they has to offer and keeping this thing in mind the company use their resources very well in term of proper capacity planning this can be seen by looking at the growing number of people who log in to amazon.com to buy the stuff they need with confidence and amazon.com has been delivering stuff from books to health equipment to all sort of customers and making them happy which is the reason they achieved the competitive advantage. Inventory Management:- Amazon.com has storage facilities all over the world and due to which the company is able to deliver anything anywhere in the world and due to having storage facilities all over the world the delivery cost is less for some countries. They have an effective system of managing the inventories which are far more than any other company as the website provide many options to the customers and their customers are in millions they know how important it is for them to utilized their inventory management to provide the customer the products they need on time and with less delays. Supply Chain Management:- Being provider of many products and having millions of customers supply chain management its one of the biggest issue for amazon.com and the company knows its importance that is why they manage their supplies very carefully to make sure that the products ordered by the customers reach them on time and without any delays due to which the company gain popularity. Amazon.com has also introduced the service for their customers where they can also sell their items on amazon.com website to other customers for some fee chargeable by amazon.com for providing these services but the company make sure that whatever the item is presented for sale by other customers of amazon.com should meet the quality standards of amazon.com and provide their other customers the products which give them value for money because when a customer visits amazon.com they visit with the expectation that they will get good deals from amazon.com than any other supplies of the goods and it provide amazon.com not only the competitive advantage over the competitors but also it helps them market their name all over the world due to the services they offer to their customers. Performance Measurement:- For the purpose performance management amazon.com always ask its customers for feedbacks about the services provided by amazon.com and also it provide them a review system in each item where the buyers of that item post their reviews about the experience they had with the product and does it meet with their requirement so the other customers can see and decide whether they should buy the product or not amazon.com not only publish the good reviews but also the bad reviews of the website and products and try to improve the areas where they have been criticized by the customers to provide them best quality services. Total Quality Management:- The quality of the product and services offer by amazon.com is the main focus point of their business and they take it very seriously through conducting surveys and reviewing the reviews post by the customers to understand their weakness and overcome them. As it been said before the company provide other users to sell their products on their website as well but they make sure that the product presented for sale meets the quality requirement of amazon.com and all the sellers are present with stars based on the feedback they get on their sales by doing this amazon.com make sure that the buyers get the best quality products from the sellers and also to make sure that the quality standards are maintain by amazon.com at all time, they also make sure that the staff at their customer service communicate with the customers positively and help them out in their queries to give a positive image of the company to the customers and by doing this the company has been able to increase its market share over the years. Sources:- Â  Operation Management By Frank Rowbotham, Masoud Azhashemi, Les Galloway Operation Management By C. Donald, J Waters, Donald Waters. Service Management Improving Service by Robert Johnston and Graham Clark Operations management policy, practice and performance improvement by Steve Brown, Kate Blackmon, Paul Cousins www.argos.co.uk www.amazon.com www.thetimes100.co.uk