Crafting Strategy Essay Example

Crafting Strategy Paper Henry Mintzberg’s Crafting Strategies is based on conclusions from decades of research that tracked 11 organizations through important moves they made in the observed period. . Patterns were marked and lumped as strategies, graphically showing distinct periods of stability, flux, or global change. (Mintzberg:75) His thesis: strategizing is more of crafting a strategy a potter shaping clay aware of her past experience and her future prospects as she performs her craft.. In contrast, the popular notion of bosses rationally and precisely plotting strategy in corporate meetings is an inaccurate depiction of strategizing and therefore misguides those who adhere to this notion uncritically. The article only seems to tilt towards an emergent approach to strategy. The author argues that a key to managing strategy is the ability to detect emerging patterns and to help them take shape. A manager’s job is not merely to see ahead but to detect patterns and get involved when the time is ripe. (Mintzberg:74,75). But Mintzberg also clarifies that all strategy making â€Å"walks on two feet: deliberate and emergent. † Purely deliberate precludes learning, and purely emergent has no control. Neither approach makes sense, which explains why strategy means emergent and deliberate behavior. (69) Mintzberg’s theory therefore also aptly captures the ideal mix of the four archetypes of Richard Whittington’s classical, evolutionary, systemic, and processual schools of strategy. These archetypes are in fact meant as conceptual reference points, set up in descriptive archetypal quadrants that are not necessarily exclusive of each other. We will write a custom essay sample on Crafting Strategy specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Crafting Strategy specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Crafting Strategy specifically for you FOR ONLY $16.38 $13.9/page Hire Writer In his interpretive article, William Sheridan aptly applied Whittington’s conceptual framework. His summary of Whittington is this: that strategic thinking requires conceptual space in which there is room for different policies, tactics, and intelligence gathering. Within each strategic space, the four archetypal quadrants each stand up for different assumptions, goals, methods, and perspectives. Sheridan translated the four quadrants into their operational core as behavioral, institutional, societal, and cognitive. He said strategic thinking now means anticipating and preparing for implications and consequences of present actions. Whether acting alone (classical), on behalf of another(evolutionary), or as adviser (processual), or as societal leader (systemic) , strategic thinking (considers ) the interests of all stakeholders to protect systemic integrity. (Sheridan: full article). Sheridan then intertwined Whittington and Mintzberg: The craft of strategy consists in identifying the mix of appropriate policies, deploying them as needed, and staying alert to the prospect that changing circumstances will require changing the mixture. Citing Mintzberg, within the context of Whittingtons four schools of strategy, Sheridan summed up that strategy is not predominantly rational modeling nor formal planning, but rather an informed overview, of which the key factor is the breadth of strategic thinking also labeled as wisdom in Crafting Strategy. (Mintszberg: 69 ) Mintzberg’s theory captured the four archetypes of Richard Whittington’s classical, evolutionary, systemic, and processual schools of strategy archetypes that characterized the potter as a craftman strategist. Theoretical Underpinnings, Assumptions on strategy, business environment or organizations of the essay : Is the author’s worldview rational or based on logic/chaos/uncertainty? Are the assumptions realistic? In the book Critical Approaches to Strategic Management by David L. Levy, Mats Alvesson and Hugh Willmott the authors concede that much current thinking on strategic management is anchored on the work of Michael Porter and Henry Mintzberg. Mintzberg and colleagues (1998) with their ten schools and five definitions of strategy. My own random survey of literature on strategic management shows the complexity of the task of selecting strategies, and the overload of very involved prescriptions and descriptions of strategy. Levy and group have panned against Mintzbergs approach for its skeptical look on established classical and rational perspectives. They note that his views miss broader issues of domination and fail to scrutinize managerial assumptions. For example, Mintzbergs view on power tends to look at this issue narrowly within an intra-organizational perspective that eschews broader social and political issues, according to these same authors. Though Mintzberg shares the basic comprehensive perspective of Whittington, I believe his school of thinking shows a palpable emphasis on the micro side of strategic management. Under his method, broader social issues affecting management concerns ( for example , current issues as the Wall Street crash and our problems in Iraq, etc) would have to be relatively relegated to the rear ground, and this may not serve the end of strategic management. Sheridan is right that in terms of social insights, critical theorists of strategic management have the edge. In the present essay, Mintzberg cited the example of GM as a large and complicated organization, describing the complexity and confusion that gets tucked under the veneer of strategic order meetings, debates, dead ends, folding and unfolding of ideas as the company pursues its strategies. (68) From its lens, Crafting Strategy sees the reality hidden in the veneer of strategic order. As a craft theorist, one would see alternately a balance of chaos or order. The craft theorist would therefore not just think of new clever strategies, but allow them to develop gradually. His strength would be in the intuitive balance, his espousal of both learning and controls, his responsiveness to the material at hand. (69) In this context the theory is receptive to application, creativity, and intervention. Crafting Strategy: Main strengths and weaknesses –Persuasive Power and Basis of Persuasion Within the framework of its own assumptions and findings, Henry Mintzberg’s â€Å"Crafting Strategy† has a persuasive expressive content. It however presents a doubtful diminution of previous schools of strategic management , arguably presenting itself as a comprehensive modifying school of thought. (Sheridan: c. 2003). On the other hand it has yet to offer operational tools for managers confronted with, for example, labor unrest or racial inequity. Of course its adherents may argue that managers schooled in its perspective would have the sensitivity and other skills of the craft, but as negated by Levi et al, its relative de-emphasis on broader social issues may limit management leaders from the optimal application of established strategic tools. If anything can be said on Crafting Strategy , it is that its arguments are always nuanced. For example, it upheld both the grass roots approach to strategic management, and its opposite, the hot house strategy, estimating Reality falls somewhere between the two. (68) There is however no evidence presented that traditional tools espoused by other schools of thought have necessarily become obsolete, even granting that those findings on the research basis of its thesis have been validated. Also, the example of 11 observed firms may be a statistically insignificant in a universe of millions of counterparts in other countries. Finally I find the potter inadequate as a metaphorical parallel of corporate reality. The metaphor fails to capture the sophistication of managing complex emotions, social distinctions, biases, intrigues, competition in the marketplace, corporate politics, etc†¦that are the problems of strategic management.

Visas J-1 para prcticas profesionales en USA

Visas J-1 para prcticas profesionales en USA Si ests estudiando una carrera universitaria fuera de Estados Unidos o  finalizaste hace menos de un aà ±o puedes sacar una visa J-1 para prcticas profesionales.   Categorà ­as para las que es posible aplicar para una visa J-1 para prcticas profesionales No se puede realizar una pasantà ­a en cualquier tipo de especializacià ³n. Tus estudios tienen que estar comprendidos en uno de los siguientes campos: Administracià ³n Pà ºblicaAgricultura, Pesca y ForestalArquitecturaArte y CulturaBibliotecasCienciasCiencias SocialesComercioComunicaciones y PeriodismoConstruccià ³nDerechoEducacià ³nFinanzasIndustriaIngenierà ­aMatemticasNegocios Salud y todos los campos relacionados con la misma. En el caso de medicina se puede, adems, utilizar una visa de intercambio para hacer la especializacià ³n en USA.Servicios Sociales Encontrar patrocinador Antes de aplicar por la visa en un consulado americano, hay que encontrar un patrocinador. Es decir, una empresa en la que se van a realizar las prcticas. No todas las empresas estn autorizadas para patrocinar a extranjeros para realizar prcticas profesionales. Sino que sà ³lo unas pocas. Y estn incluidas expresamente en un listado que publica anualmente el Departamento de Estados (puedes ver el enlace en el à ºltimo prrafo de este artà ­culo). Vers que el listado incluye multitud de organizaciones. Tienes que ir analizando una por una cul patrocina especà ­ficamente pasantà ­as, ya que en la lista tambià ©n estn las que ofrecen otros patrocinios tambià ©n amparados por la visa J-1 pero que son vlidas para otros perfiles, como mà ©dicos, estudiantes en prcticas de verano o au-pairs. Lo ms prctico es que donde pone Program en letra negrita presiones la flecha y busques entre todo el menà º la opcià ³n intern.  Ã‚  Una vez que encuentres varias que se ajusten a lo que buscas, debes aplicar. Ellas decidirn si te patrocinan y si lo hacen te enviarn un documento DS-2019 e incluirn informacià ³n sobre ti en el sistema conocido como SEVIS. Solicitar la visa de intercambio J-1 Sà ³lo una vez que tienes en tus manos el DS-2019 puedes solicitar el visado en el consulado o embajada que te corresponda, segà ºn tu lugar de residencia. Esta es una visa no inmigrante. Tienes que tener claro que para que te la aprueben no basta con haber encontrado el patrocinador. Adems, el oficial consular que tramite tu caso tiene que quedar convencido de que no tienes intencià ³n de quedarte en Estados Unidos, de que tienes lazos econà ³micos y familiares fuertes en tu paà ­s de origen. Adems, como ocurre con el resto de los visados no inmigrante, no puede haber nada que te convierta en inelegible o inadmisible para ingresar a Estados Unidos. Como por ejemplo, haber cometido ciertos delitos, haber estado ilegalmente en el paà ­s con anterioridad o no tener recursos suficientes. A tener en cuenta Si has finalizado ya tus estudios universitarios no puede transcurrir ms de doce meses desde el momento en que los acabaste y el de comienzo el programa de prcticas profesionales. Una vez que se finaliza la visa, ests obligado a salir de Estados Unidos por un periodo de dos aà ±os en la mayorà ­a de los casos. Esto no quiere decir que no puedas visitar el paà ­s como turista, que sà ­ que puedes. Pero no puedes beneficiarte de visas de trabajo o de peticiones para la residencia permanente realizadas por un familiar. Es cierto que existen excepciones conocidas como waiver, pero son eso: excepciones. Obviamente, el nivel de inglà ©s es muy importante. Hablarlo y escribirlo fluidamente y poder demostrar los conocimientos con exmenes tipo TOEFL sin duda ayuda a conseguir las prcticas profesionales. Si el programa finaliza en el plazo previsto, tienes 30 dà ­as para salir de Estados Unidos.   Informacià ³n fundamental Enlace para encontrar un patrocinador de la visa J-1  para el programa de prcticas profesionales en la pgina oficial del Departamento de Estado. Pueden solicitarte una acreditacià ³n de tus creedenciales acadà ©micos que tiene que ser realizado por una institucià ³n aprobada por el patrocinador de la visa. Este es un artà ­culo informativo. No es asesorà ­a legal.

Abercrombie & Fitch case study exam Essay Example | Topics and Well Written Essays - 3500 words

Abercrombie & Fitch case study exam - Essay Example Another example is the complaint mail and lawsuit threats that A&F received for their racy and explicit ads. There, the activities in the micro-trading environment of A&F were influenced as the company decided to take measures against the complaints. B. There are several major macro trends that are impacting on A&F’s sales performance in the UK. The first is the economic trend of high cost of overhead. Secondly, the products are being sold at a considerable mark-up from United States prices, which is a competition trend. Third, a social trend is that the fashion scene in the UK is similar to that in the USA, but must also be followed carefully to ensure that the products that hit the stores are the ones that customers want. The fourth is a social trend mentioned in the case brief is that UK customers are attracted by that souvenir appeal. Customers previously would only buy A&F merchandise on a visit to the USA, and this is affecting the company’s popularity now that they have moved to the UK. A. The Augmented Product model is represented by 3 circles: inner, middle, and outer. The inner circle represents the core products that are seen at every A&F store; i.e. basic jeans and logo t-shirts. These are expected by every consumer at every store. The middle circle represents the products that are just beyond the basic elements; i.e. clean and comfortable stores. In order to be classified as a quality provider, A&F needs these elements. The outer circle represents the surprises that customers are not expecting if they have never been to the store before; i.e. the loud music, lighting, and fragrance. This is what really sets them apart from their competitors. B. They take painstaking care to always be abreast of the latest clothing looks and they even design their stores (with the loud music, lighting, and fragrance) to appeal to the trendy

Transfer and Studies Essay Example | Topics and Well Written Essays - 750 words

Transfer and Studies - Essay Example I would be grateful to you if you would take my case on humanitarian grounds and take the necessary steps to sanction the transfer to a school at California as soon as possible. The situation that calls for a transfer is as follows. I could pursue my studies at the school in Seattle only till the third semester because I was expecting my child during that period. I finished the third semester while I was expecting the child. My family and the father of my child work and live in California. This made it difficult for me to attend the school, as I had to fly back and forth from southern California and Seattle on weekend all through my third semester. I had to take a year off from school afterward, as I gave birth to my child. As I continue to stay with my family at California, it puts me in a position to resume the pattern of flying back and forth between southern California and Seattle. This may not be an ideal situation for me and my infant. As a first generation American, I need to follow the family values in our culture that demands a situation where the child grows up among both the paternal and maternal relatives. The father of my child works at Southern California, and if I continue my studies at Seattle, it would mean that the family is separated. Moreover, the financial burden will be much heavier for us to handle, since I will have to use the flight more frequently. I am the first in my family to attend law school, and I realize the significance of my studies and am very keen on completing the course. Therefore, I would like to get a transfer to a school in California, where I can pursue my studies diligently, as it would not create any difficulty for me as a mother and a student. I hope you will try to understand my situation and necessitate a transfer as per my request. My grades were affected during the third semester when I had to travel a lot for attending the classes.  Ã‚  Ã‚  Ã‚   I put before you the humble request to consider my case on humanitarian grounds, as the decision to have a child at this stage was unavoidable due to some health reasons. At the same time, I am keen on pursuing my studies in the best way poss ible and look forward to developing a good career in law. I hope you will consider this matter seriously and comprehend the good intention and dedication that prompts me to request a transfer to a school in California.  

Unit 5 IP introduction to law enforcement Essay

Unit 5 IP introduction to law enforcement - Essay Example Members, especially, those living in organized societies have the right to be protected by law. Most states have law enforcement agencies at the local, national and international level. Apart from this, there are specialized agencies that focus on specific areas like drugs, terrorism because local agencies do not have the required expertise, reach or resources to effectively tackle them. In general, it is the local police that arrive at the scene of a crime. But taking into consideration the nature, extent and scope, the local police may require or be compelled to work with other law enforcement agencies. The advantage is that a cooperative effort will be much more effective in solving and controlling such crimes mentioned above. But the disadvantage is the conflict of interests, lack of cooperation or coordination among the agencies involved and to a certain extent, ethical dilemmas. This paper focuses on the concept of ethical dilemmas that may occur during cooperative effort between various law enforcement agencies and the local law enforcing department or agency (police department). In the process, the paper will attempt to identify possible dilemmas and also provide practical solutions in order to solve or prevent such occurrences. The paper will take the form of a case study with regard to a local enforcement agency in a large city in the United States. The city in question is large and multiracial in nature. Typical of similar places, the main instances of crime are robbery, dealing and use of drugs (illegal substances), homicide and murder. Within the past decade new forms of crime have appeared the two major ones being terrorism and cyber crime. It should be noted that the city has not experienced any form of terrorist attack in the past. But after the 9/11 attack, security has been strengthened and the local enforcement administration has to work in

Determining Rates of Interest in the Money Market

Determining Rates of Interest in the Money Market Explain in detail how interest rates are determined in the money market. Examine the likely consequences for the macroeconomy of a reduction in the rate of interest and highlight the factors that might limit the effects. This essay is going to demonstrate how the rate of interest is determined in the money market. It will examine the impact that a reduction in the interest rate has on the economy. The framework used will be the interest rate mechanism, where an increase in the money supply will change interest rates and stimulate interest-sensitive expenditures. It will then highlight the factors that can limit and offset the effects of a reduction in the interest rate. The interest rate is defined by Sloman et al. (2012) as the price paid for borrowing money. Two factors that determine the interest rate is the supply of money and the demand for money. The supply of and demand for money in the economy interact together to reach a level of equilibrium. According to Sloman et al. (2012) the money market is a market for short-term debt instruments in which financial institutions are active participants. Figure 1 and 2 illustrates the money market and the demand for money. The demand for money refers to an individual’s desire to hold their wealth in the form of money instead of using it to purchase goods or financial assets. The money demand curve is downward sloping as an increase in the interest rate leads to a decrease in the quantity of money demanded. Money supply is the entire stock of currency and other liquid instruments in the economy. The money supply is set by the central bank (Bank of England) and is exogenous (does not depend on the demand for money). The money supply is fixed and is not influenced by the rate of interest. In figure 1, the x-axis measures the money supply, the y-axis represent the rate of interest and the L curve represents the liquidity preference curve (demand for money). The money supply is represented by the vertical line Ms. The intersection of the money supply and money demand curves reveals the equilibrium rate of interest and is fixed at that point where they equate. According to Keynes the intersection of the curves is purely a monetary phenomenon. John Maynard Keynes (1936) in his book the General Theory of Employment, Interest and Money described the demand for money through liquidity preference framework. According to this theory, the primary reasons for holding money are for transactional, precautionary and speculative demands. The sum of all three demands make up the total demand for money. According to the theory, if interest rates are high individuals demand for money (liquidity preference) is low and when interest rates are low, the demand for holding money increases. In figure 2, the curve L1 is the transaction plus precautionary demand for holding money. L stands for the liquidity preference and by definition; the liquidity preference is the demand for holding assets in the form of money. L is the total demand for money balances and is derived by the horizontal addition of curves L1 (the transactions plus precautionary demand for money) and L2 (the speculative demand for money). The shift from L1 to L2 illustrates a s hift in the liquidity preference (an increase in the demand for holding assets in the form of money). The interest rate mechanism is graphed in a three-stage process. Stage 1 illustrates the money market, where an increase in the money supply from M to M’ (with everything else being equal) leads to a fall in the rate of interest from r1 to r2. At stage 2, the fall in the interest rate leads to an increase in the level of investment from I1 to I2. The increase in the level of investment translates in the third diagram shown in stage 3. Lower interest rates increases investment as it becomes relatively cheaper for firms to invest and businesses to take out loans to finance greater spending and investment. Stage 3 shows how a rise in investment leads to a multiplied rise in the national income from Y1 to Y2. Stage 3 shows the Keynesian withdrawals and injections function where an increase in investment has increased the level of injections J1 to J2. This excess in injections over withdrawals will lead to a rise in the national income from Y1 to Y2. Interestingly, an increase in t he level of income means that consumers will have more disposable income for consumption purposes (Sloman et al. 2012). Consumption is the largest component of aggregate demand and has an effect on other components of aggregate demand such as net exports and investment Griffiths and Wall (2007). Lower interest rates increases the level of consumption by making the opportunity cost of consumption is lower. This encourages greater expenditure as borrowing through credit cards becomes cheaper. Lower interest rates makes saving less attractive by reducing an individual’s incentive to save. This lower incentive to save encourages consumers to spend rather than to hold onto money. It also reduces the income from savings and the interest rate that is due on loans taken out. However, borrowing now becomes more attractive and this stimulates an increase in spending. Lower Interest rates can boost the prices of assets such as shares and houses. Higher house prices means that current home owners must extend their mortgages which further enables them to finance higher consumption. Interestingly, the higher asset prices increases the wealth of households (through the wealth effect) which increases their incentive to spend as confidence will be higher. Higher asset prices means that businesses are also able to finance their investment (purchase of capital) at a lower cost. Lower interest rates also reduces the cost of interest payments on mortgages by reducing the monthly cost of mortgage payments. This increases the disposable income of householders which increases their level of spending. Moreover, lower interest rate can reduce the value of the Pound Sterling. If UK interest rates fall relative to overseas, saving money in UK becomes less attractive as higher returns can be earned in another country. This reduces the demand for the pound sterling and causes the reduction in the value. In figure 6 at stage 2, the fall in the currency is due to a decrease in the demand for the Pound Sterling in the foreign exchange market. The rise in the supply of the domestic currency from S1 to S2 leads to a fall in the demand for the currency from D1 to D2 and this causes a depreciation in the exchange rate from er1 to er2. This fall leads to a rise in the demand for exports as UK exports become relatively cheaper and more attractive overseas. There will also be a fall in demand for imports (as they become more expensive) and thus causing an increase in the national income (which further increases spending). What if other factors can offset the full extent of a reduction in interest rates? There exist time lags in the economy that can limit the impact of rate cuts on the level on interest-sensitive expenditures. In figure 4, the increase in the money supply lead to a multiplied effect and resulted in a rise in the national income. However, the mechanism failed to highlight how a rise in income will also lead to a rise in the transactional demand of money (L1). In this circumstance, at stage 1, L1 would shift to the right and thus lead to a smaller fall in the interest rate than illustrated. Thus, the level of investment at stage 2 and the national income at stage 3 will not rise as much as shown as well. The overall effect of the money supply on national income will depend on the size of each stage. Their relative sizes depend on the shapes of the liquidity preference and investment curves (as in figure 6 and 7). A bigger change in the interest rate will be caused if the liquidity prefer ence is less elastic. The more interest-elastic the investment curve is, the bigger the change in investment. If the marginal propensity to withdraw is lower and therefore the curve is flatter, this will cause a bigger multiplied change in the national income than illustrated (Sloman et al. 2012). Keynesian economists stress how volatile stages 1 and 2 are in the interest rate mechanism. What if increasing the money supply leads to no interest rate reductions? What if investment is inelastic and cannot be influenced by changes in rates. Figure 6 illustrates an elastic liquidity preference curve. The less elastic the liquidity preference is, the bigger the change that will be caused in the interest rate. Due to its gently sloping curve, a rise in the money supply from M to M’ will lead to an only small fall in the interest rate. This will them limit the impact that the interest rate has on consumption, saving decisions and any other interest-sensitive expenditures. According to Keynesians, the demand for money (L) can be very elastic in response to changes in the interest rates and the liquidity preference curve can become relatively flat. The full effect of a rate cut can be limited greatly by the nature of the demand curve. At r2, if individuals perceive and expect no further rate cuts, any increase in the money (from M’ to M’’) will have no impact on r. The liquidity trap is where Keynes believed this additional money will be lost in. within this theory, interest rates have a floor where an increase in the money supply has no further impact. The financial crisis 2008-09 was a predicament where policy makers feared that increases in the money supply will lead to idle balances lost in the liquidity trap. The central bank used an unconventional monetary policy known as quantitative easing, where they deliberately increased the base rate via the purchase of bonds and other securities in exchange for money. This process of credit creation was used to increase bond prices and thus reduce the interest rate and stimulate growth. Arguably, increases in the money supply will have some impact on the rate of interest as we have seen in the financial crisis where deliberate increases in the money supply lead to further increases in the i nterest rate and thus spending as well (Sloman et al. 2012). Figure 8 illustrates the effect on interest rates of an unstable liquidity preference curve. This figure further explains how the liquidity preference curve fluctuates due to factors such as expectations in the inflation rate and direction of the interest rate (to name a few). Therefore, due to its instability it is difficult to predict the effect on interest rates of a change in the money supply. Another factor that can influence the investment schedule are changes in investor confidence. An increase in investor confidence can shift the investment curve to the right and at any given interest rates, firms will want to invest more. A decrease in their confidence would shift the curve to the left. If investors believe that the economy is going to get out of recession, their confidence and level of investment will increase. If firms believe that inflation will rise and that the central bank will soon increase the interest rate, confidence and investment in the economy will be low (Sloman et al 2012). In Figure 7, a bigger change in investment will be caused if the investment curve is more interest-elastic. In the liquidity preference framework, investment demand is unresponsive to interest rate changes and that a large change in the interest rate is detrimental to affect investment. Evidence to confirm this was illustrated through the impact of investor confidence. This consensus on the behaviour of investment can be argued in that the focus should be more on how volatile and erratic investment is in response to confidence than its responsiveness to the interest rate. For example, in figure 9, the impact of a fall in interest rates is limited by business confidence. Initially, the reduction in the interest rate has increased investment. However, if the fall in interest rates is accompanied by an increase in business confidence by investors, the investment curve will shift from l1 to l2. On the other hand, if the fall in the interest rate is accompanied by a decrease in confidence then the investment curve will decrease and fall shift from l1 to l3. This impact is contrary to what was illustrated when the investment curve was believed to be inelastic. Therefore, expansionary monetary policy is likely to be more effective if firms have confidence in its effectiveness (Sloman et al. 2012). In the liquidity preference framework, the assumption is that an increase in the money supply leads to lower interest rates if everything else remains equal. However, in reality an increase in the money supply might impact other factors in the economy that could increase the interest rate instead of decreasing it. Two factors to highlight are the income effect and the price-level effect. The income effect describes how an increase in the money supply has an expansionary influence on the economy and this in effect raises the national income and wealth. The liquidity preference theory predicts that an increase in the national income and wealth will increase the interest rate and offset the original impact of an increase in the money supply. Another effect that can limit the impact of a reduction in interest rates is the price-level effect. In this effect, an increase in the money supply increases the overall price level which also increases the interest rate. In conclusion, economics is a social science where theories are constantly examined and redrafted. In the interest rate mechanism theory, an increase in the money supply will lower interest rates and stimulate interest-sensitive expenditures. This stimulation will have a multiplied effect on the level consumption, business investment, mortgage payments and asset prices. However, the impact of a reduction in the interest rate on the economy is quite a complex subject to address. Many determinants must be factored in for the full impact to be noticeable. Even if the overall effect of a reduction in the interest rate is quite strong, it is highly unpredictable to measure and estimate the magnitude of it. Investment is influenced by confidence and on elasticity to the interest rate. This changes the original impact of a rate cut. The nature liquidity preference curve can be highly unstable and not be impacted by any changes in the interest rate. There also other factors like the price-le vel, expectations and income that can impact and offset the intended purpose of an increase in the money supply. All the factors highlighted in this essay can limit and offset the impact of a reduction in interest rates on interest-sensitive expenditures and the growth of the economy. REFERENCES Keynes, J.M. (1936), The General Theory of Employment, Interest and Money, CreateSpace Independent Publishing Platform Griffiths, A. and Wall, S. (2007) Applied economics, 11th ed. Harlow: Addison Wesley Longman. Sloman, J., Wride, A. and Garratt, D. (2012) Economics, 8th ed. Harlow: Pearson Education Limited. BIBLIOGRAPHY http://www.bankofengland.co.uk/monetarypolicy/Pages/overview.aspx http://www.macrobasics.com/chapters/chapter8/lesson83/ http://harbert.auburn.edu/~thommsn/FINC-3700/ME7-WebChapters/WebApp04_4.pdf http://www.stlouisfed.org/publications/re/articles/?id=2505 http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/qb120104.pdf https://www.creditwritedowns.com/2010/10/on-liquidity-traps-and-quantitative-easing.html

Essay --

Kelly Larson The Glass Castle Book Review The Glass Castle, written by Jeannette Walls, is a fiction, memoir, usually recommended for young adults. It’s based on a true story, from the viewpoint of a young girl about the struggles of her childhood. Just like the book Half Broke Horse, it describes the hardships they faced as children, and how they beat the odds of following in their parents’ footsteps knowing that just because they had a bad childhood, didn’t mean they were going to have a bad life. The book starts off displaying that the parents show little interest in their kid’s safety and exposure to the world. They moved from town to town for as long as their Dad could hold a job. They lived anywhere from the dessert grounds, to abandon houses, and when they were really desperate, the Grandparents house. Their dad was a brilliant man who taught them everything from physics, math, and astronomy, to capturing their imagination and teaching them to live without fear. But, from his own childhood experiences, he had become an alcoholic and was hardly ever home. When they moved on ...

Nec Electronics Corporation (Nece) Case Study Essay

INTRODUCTION In early July 2007, the New York based hedge fund Perry Capital proposed to raise its stake in NEC Electronics Corporation (NECE), the then publicly listed subsidiary of Japanese conglomerate, NEC Corporation, from 4.8 percent to 25 percent. The offering was  ¥5,000 a share, at about 60 percent premium. Perry’s investment in NECE traced back to late 2005, the year its first exposure to Asian markets, with the initial investment cost at around  ¥3,200 a share. Perry believed the intrinsic value of NECE was to release after restructuring its business strategy, albeit NECE was expected a loss in FY2005. This paper studies the investment of Perry Capital in NECE, and particularly looks at Perry’s consideration to increase its stake in NECE to 25% at that time. INVESTMENT OPPORTUNITIES IN JAPAN As shown in Exhibit 1, the long-lasting deflationary Japanese economy since 1997 probably comes to an end with its CPI rebounded from negative in 2006. At the same time, Bank of Japan has loosed its monetary policy by raising the interest rate above zero since 2006. These two data suggest that Japanese economy is pending an exit from the lost decade. Looking at the Nikkei 225 index shown in Exhibit 2, the bullish trend since 2003 shows the investors are optimistic towards companies’ future earnings. The improving market sentiment stems from the amelioration of Japanese economy, with its GDP growth rate has become positive since 2000, as shown in Exhibit 3. Moreover, Japan’s export industries have been performing well due to its weak currency. Perry’s investment in NECE can be a sensible move as Japan is one of the leading countries in producing innovative technological products. In 2007, Japanese high-tech products secure a significant market share in the world. These industries include automobile, IT, communications, mechanism and robot, new materials, etc. In addition, Japanese firms allocate significant amount of resources in their product R&D area, the efforts paid in improving product quality and promoting innovation enhance Japanese firms’ competitive strength overtime. Essentially, Perry’s investment philosophy is looking at the fundamental of the company, building good relationship with the management, investing in good company, and possibly keeping its portfolio beta at a considerably low level. As Perry’s portfolio has been performing well since its inception, the venture into Japanese market is compliant with its investment strategy, where stocks in Japanese market produce reliable streams of cash flow, and more importantly, there are valuable cheap stocks to pick in Japanese market, these characteristics are aligned to Perry’s taste. CHALLENGES TO INVEST IN JAPAN The first time venture suggests Perry is novel to the Japanese market. As the probability of success of Perry’s investment in NECE highly depends on the assumption made to restructure NECE’s business division, Perry must convince the parent company NEC to share its vision. Agency problem would be a potential challenge for Perry to maintain a good relationship with NEC. As the subsidiary will become a separate entity from its parent company upon listing, it is questionable whether the parent company will longer treat the two different entities equivalently. For instance, will the parent company shift the loss-making divisions to its subsidiary, which then can help the parent company to get rid of loss at the expense of its subsidiary’s financial report? Furthermore, Japan’s system of corporate governance is said lacks of effective protection to minority shareholders. Controlling shareholders in Japan are not required to prove that their dealings with the company are fair, and self-dealing is not formally defined by law. Furthermore, in Japanese model of stakeholder capitalism, management could be entrusted to safeguard the interest of a range of key shareholders, rather than focusing more narrowly on maximizing returns to shareholders, which might weaken minority shareholders’ power in deciding an important issue. FUNDAMENTAL VALUE OF NEC ELETRONICS CORPORATION Perry team made a few assumptions to evaluate NECE in early 2006. Since the exact date of evaluation is not clearly stated in the case, we will first evaluate NECE at 2007 based on the assumptions made and then apply the same methodology to other years. Team Perry used an approach that employed EBITDA multiples for each segment: MCU, CCD and Communications. We use the information from exhibit 7 and exhibit 8 to infer the fundamental value from 2004 to 2007 and future. We then make inference on value of NECE based on 03/2006 and 03/2007 values. Note that information from exhibit 6 and 8 are from 2007. Fundamental Value of NECE at 03/2007 Assumptions used in valuing MCU division: I. MCU is able to match the average EBIT margins of comparable firms, which is 17.70%. II. 15% of the  ¥83 billion depreciation cost is attributed to MCU for the next few years. III. A conservative approach of 9 times EBITDA multiples is used. Assumptions used in valuing CCD division: I. EBIT margins of the remaining business are 5%. II. 45% of the  ¥83 billion depreciation cost is attributed to MCU for the next few years. III. 7 times of the EBITDA multiples is used. Assumptions used in valuing communications division: I. EBIT margins could be negative. II. To avoid loss, exiting this line is an attractive option. III. Estimated cost of exit at most  ¥100 billion. The fundamental value of NECE on 03/2007 is the summation of each division’s fundamental value: Note that the Fundamental value is higher from year 2005 to 2007 except year 2004. EVALUATION ON ASSUMPTIONS USED The first assumption expects MCU would be able to match the EBIT margins of comparable firms. However, there is a large dispersion in the EBIT margins among the comparable firms. The large difference of EBIT margins between the comparable firms could suggests that the cost differentials are significant among these firms. Indeed, the uneven distribution of EBIT margins among comparable firms could also because of the small number of sample size used, which in turn soften the estimation power of this assumption. The second assumption is to give the CCD EBIT margins of 5%. However, as the average EBIT margins of the comparable firms is around 16%, with the range between 7.3% to 42.3%, Ercil’s might probably be too conservative than he should in valuing the CCD segment in NECE. Moreover, Ercil also assumes that he will be able to exit the communication segment at a cost less than 100b which is again a conservative estimation as mentioned in the case. Given the above these assumptions made by Ercil, it seems that he is a conservative investor who prefers to take conservative valuation in his investment discretion. Though his conservatism might make the estimated NECE fair value become less attractive, his prudent investment strategy could probably in turn safeguard his clients’ money in any unfavorable event. Below shows some assumptions made by Ercil that are reasonable. First, instead of using 11x EBITDA multiples to value NECE’s MCU segment, Ercil used a lower of 9x EBITDA multiples. This assumption is definitely acceptable as it is in line with Perry team’s prudent investment strategy. In addition, the depreciation cost allocation made by Ercil seems reasonable. Ercil allocated 45% of depreciation cost into the communications segment, as there was a significant amount of capex used to build the plant in Yamagata in the recent past. Based on Ercil’s assumptions we manage to breakdown NECE balance sheets based on its divisions. This activity illustrates that the EBIT margin estimates are consistent with exhibit 8 and has no mathematical or financial discrepancies in terms of amount allocated to each sectors. EBIT margin for communications segment is indeed negative for year 2007 based on Ercil’s assumption. We observe high expense in communications area possibly due to expropriation of NECE by its parent company, NECE that will be discussed below. POTENTIAL AGENCY PROBLEM ON NECE’s MARKET VALUE Our case analysis assumes that market is efficient, implicating that outsider anticipate potential agency problem within NECE. Besides demanding fair return on their capital, controlling shareholders should ultimately bear all agency costs they create. This is consistent with the journal â€Å"Agency Costs, Mispricing and Ownership Structure† by Sergey, Fritz and Greenwood (Sergey Chernenko, 2010), whereby the case of NECE is used to illustrate the impact of agency cost on market value. Agency problems in subsidiary-parent relationships could stem from 3 scenarios: I. Related party transactions: Based on the journal, following NECE listing in 2003, the development of microchips for NEC’s phone brought in excessively high capital expenditures and research and development expenses to NECE. Following it was the low transfer prices to the parent company, NEC. This is due to the weak fiduciaries duties law on company in the interest of minority shareholders. II. Usurped business opportunities: Indirect influence of parent company on their subsidiaries such as continuing a business venture that profits the parent despite the subsidiaries making losses make it hard to be detected. In particular, NECE incurred excessive R&D cost and capital expenditures to enhance NEC competitive position in the market. III. Minority squeeze outs- Cash-out merger is an example of minority investors being squeezed out. NEC bought back NEC System Technologies 20 months after listing it, evidently showing NEC’s involvement in this form of related party transaction. Based on the journal’s samples, Investors who bought the subsidiaries share upon listing sold their shares back to the parent during repurchase at a loss of 39% to 71%. Therefore, in perfectly efficient market, minority shareholders fully anticipate agency problems. If controlling shareholder is expected to divert resources, the market will price the equity accordingly (lower) than in the scenario where agency problem is absent. One caveat is that, investors might not be fully informed (market is not totally efficient) that in turn creating incentive for agency problems. PROSPECTS OF NECE The fundamental value of NECE is severely undervalued compared to its market value in 2007; this might be due to the agency problem that persisted between NEC-NECE. We conclude that NECE is a potential lucrative investment if Ercil is able to remove the communications segment and thereby removing the potential agency problem in NECE. Nevertheless, the reluctance of NEC to remove the communications segment and the weak protection of minority interest in Japan cast shadow on the prospects on NECE. Worsening the situation, NECE was nearly delisted in 2007, implying that liquidity could have drastically decreased. Note that also the MCU and Other Divisions remains relative stable (slight increase) over the projection years. Historical Performance of Publicly Listed Subsidiaries of Parents in Japan Our findings are consistent with the data given in Exhibit 4. If market is efficient, the incentives for parent company to list its subsidiaries arise either when the market value of subsidiaries is overpriced upon listing or if the parent company’s internal capital is inadequate to fund attractive investment opportunities. In the case NECE, the former scenarios seem to be more plausible as according to the graph above. This could lead to drop in future market performance as market absorbs more information. Source: http://www.nber.org/papers/w15910 According to Fritz (2010), the negative performance of listed subsidiaries over the first 36 months following IPO can be seen via industry adjusted returns of -6.2%,-13.43% and -13.98% over the one-,two- and three year horizons after IPO. This is again consistent with the case of NECE. Both subsidiaries with ex ante scope for agency problem (such as sales relationship) and those where parent has retained little equity despite substantial control over its subsidiaries illustrated poorer performance. On top of that, a great portion of listed subsidiaries were subsequently repurchased by their parent at a discount to the IPO price. The historical performance of publicly listed subsidiaries of parents is consistent with the case of NECE. In this case, NEC hold 20% of NECE total equity but have significant control over NECE operations and sales. This leads to expropriation of minority shareholders and lower market price following IPO. A FEASIBLE STRATEGY FOR PERRY TEAM There are three options for Perry team: to increase its stake in NECE with the expectation that NEC management will eventually share Perry’s vision to dispose the communications segment; to arrange for possible merger and acquisition for NECE; to exit the investment in NECE. To consider the action on the $150 million position in NECE, Ercil is likely to expect the maximum likelihood among these three scenarios. The first option is essentially the proposed increasing stake in NECE by Perry in the case. However, this move requires substantial amount of capital to fund the investment; the investment does not necessarily realize Perry’s objective to dispose NECE’s communications division as NEC will still be the largest shareholder in NECE. Since the investment in NECE in 2006, Perry team has been approaching NEC and asking for NECE business restructuring, the two parties have yet reached a consensus about the issue. It seems that NEC executives are unlikely to change their position in the future as well. The second option is to create a proxy fight for possible takeover or merger of NECE. The biggest impediment in this strategy is the same as the first strategy – the parent company NEC is holding a controlling amount of 70 percent stake its subsidiary, proxy fight might be too costly to execute. Furthermore, it is generally believed this strategy is far from reality because a hostile acquisition for NECE would significantly destroy the business relationship between the acquirer firm and the giant conglomerate, NEC. In addition, it is the time where Tokyo Stock Exchange is placing NECE on a watchlist for possible delisting due to its concentrated ownership structure. For Perry team, unwinding the 5 percent stake (or more if either option 1 or option 2 is adopted) in NECE would mean more difficult after delisting. Perry needs to find a potential buyer for the whole or portion its holdings in NECE. Exit strategy implies to realize the loss in this investment. Suppose Perry bought NECE stocks at an average price of  ¥3,200 per share, NECE share price is around  ¥2,900 per share in July 2007, which means Perry will record a loss of about 10 percent in its investment in NECE. As NECE has been recorded loss during Perry’s investment period, this small 10 percent loss may in turn support the immediate exit strategy, so as to minimize the loss because NECE’s business prospects are full of uncertainties. SCREENING GLOBAL ECONOMIC CONDITION Before making the final decision among the above three options, Ercil will definitely examine the current global economic condition. Generally speaking, if the global market sentiment is positive, it may worth for a riskier investment strategy to seek for higher return. On the contrary, higher return investment securities such as equities markets are usually too risky to attract capital inflow. As government bonds are deemed safe haven for investors, bonds yield curve can give some signal about the likelihood of future economic condition. Ercil examine the U.S. government bonds yield curves and TED spread at that time. It is observed that the T-bills have begun to deviate downward from T-bonds since Q1/2007 (Exhibit 5). Soon after July 2007, TED spread begins to rise (Exhibit 6). The declining short term T-bills yield suggests the investors become cautious and allocate their money in the bonds market. The increasing TED spread may infer the condition of liquidity shortage in the market, where lenders require higher returns for lending out their money. According to bonds yield equation: Forward Rate=Expected Discount Rate Tomorrow+Liquidity Premium As TED spread implies liquidity premium becomes dearer, the declining T-bills yield is attributed to the expected fall in future interest rate in the U.S. market. Simply saying, market anticipates a loosening monetary policy adopted by the Federal Reserve. RECOVER LOSS: JPY/USD EXCHANGE RATE INCREASE While the exit strategy might be a better move after looking at global market sentiment, Ercil will consider whether he should immediately convert the JPY to USD. As exchange rate movement is closely related to interest rate movement between two countries, it is observed that Japan’s interest rate is at 0.50% (Figure 1) while U.S. interest rate is around 5% (Exhibit 7). The huge differential between the two countries interest rate infers the potential gain from going against USD. In addition, given the interest rate parity condition in Forex market, the expected decrease in U.S. interest rate (as the declining yields curves suggest) will probably result in the appreciation of JPY against USD, as shown in Figure 8. In conclusion, if there could be a potential gain from holding JPY against USD, which can in turn recover some of the loss from Perry’s investment in NECE. By holding JPY, Ercil probably can go for his conservative investment strategy by buying fixed income securities, gold and other safer investment assets, or just holding cash. If JPY/USD does not perform as what Ercil predicted, he will only face one side risk (the continual increase in U.S. interest rate that further pumps up USD/JPY) but is protected from the continual decline of JPY (as Japan’s interest rate is near zero that means Bank of Japan is effectively powerless in pushing down its interest rate).

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