Stewardship Financial Reporting

To What Extent And How The Stewardship Aspect Helps The Decision Usefulness Aspect In Financial Reporting

Financial reporting is a formal process by which a company communicates with its stakeholders through disclosing its financial figures. According to the recent conceptual framework of IASB about financial reporting, there are two aspects of objectives of financial reporting. One is stewardship, which deals with management responsibility towards the company, and another one is decision-usefulness, which mainly deals with the decision-making users of the financial statement.

Stewardship is an ethical term in accounting that imposes a responsibility to the management of an organization to take care of business carefully and provide reliable information the stakeholders about the resources of business by financial reporting (Williamson, 2002). On the other hand, decision usefulness is a concept related to the preparation of financial statement in which a company try to provide better information by considering the relevant decision makers.

There was a debate among the experts whether the stewardship should consider as an objective of financial reporting or not and whether the decision usefulness provide same concept like stewardship. However, later the IASB and FASB resolve this debate by introducing an exposure draft. In the exposure draft, it told that stewardship should consider as a separate objective of financial reporting (Kothari, 2008).

Stewardship Financial Reporting
Stewardship Financial Reporting

Some experts believe that the stewardship has relationship decision usefulness. They also believe that the stewardship aspect of objective helps the decision usefulness to an extent. On the other hand, some experts believe that there is no relationship between these two. Let us see how and to what extent stewardship helps the decision usefulness.

  • Stewardship helps to increase the decision usefulness to the relevant decision maker by imposing responsibility to the management to take care of business professionally. When the management take cares the business resources in an efficient way, the output of financial report will automatically be reliable (Young, 1998).
  • Stewardship influences the organization to conduct audit of their financial statements by an independent auditor. The decision usefulness will rise when an independent auditor review the financial statement (Latham, 2005).
  • Stewardship helps in accurate valuation of a company by recording and providing accurate information to the decision makers. This accurate valuation information increases the reliability as well as decision usefulness among the stakeholders.
  • It protects the interest of all related parties to the business by disclosing right information to the right parties. When the flow of information is in a perfect condition, the related parties of business will not lose their interest to the business and can make their decision in an efficient way.
  • Stewardship helps to satisfy the regulator body’s of an organization by managing the organization carefully, ethical financial disclosure and giving proper payment such as tax to the tax authorities. When the users of financial statement see that the regulator body’s are satisfied with this origination, they will also satisfied and the decision usefulness of financial statement will ultimately rise (Latham, 2005) .
  • It highlights the responsibility not only the management but also the regulators, investors and credit providers etc. This helps to increase the financial accuracy of the company. For an example, stewardship imposes the government to seek accurate documentation of financial statement of a company to project future growth in the stock exchange. When the company provide actual documents, the relevant decision makers of financial statement can take proper decision by using accurate information.
  • Stewardship helps to reduce agency problem in an This attracts more potential investors to the organization. When the agency problem reduces, the decision maker can make better financial decision about business and the concept decision usefulness will increase (Gjesdal, 1981).

Advantages of Stewardship

The extent to which the stewardship helps the decision usefulness is a relative concept rather than absolute. This means the decision usefulness may vary upon the degree of stewardship of the management or agent of a company. According to the Joachim Gassen (2007), the usefulness of financial statement in decision-making is much depends on the information available to the market participant. The information availability directly related to stewardship of the management. If the management discloses fair information to the users, the decision usefulness of financial reporting will increase. Let us see a table about the extent to which stewardship helps decision usefulness.

Stewardship

Influence

Degree Decision usefulness Decision output

Management integrity to business

Good

High

Positive

Bad

Low

Negative

Recording financial information accurately

Yes

High Positive
No Low

Negative

Conduct audit by independent auditor

Yes

High Positive
No Low

Negative

Accurate financial disclosure

Yes

High

Positive

No High

Negative

However, there are some arguments against the relationship between stewardship and decision usefulness according to some expert’s opinion. This means the stewardship and decision usefulness are two separate objectives without any influence to each other.

  • Stewardship and decision usefulness should define as completely separate objectives because of their parallel relation (Ernst and Young, 2008).
  • Stewardship mainly deals with past performance of organization to asses’ future performance. On the other hand, decision usefulness provides better information by considering present situation of the company. Therefore, the relations between these two are different (Hand, Isaaks and Sanderson, 2005).

Though there are some negative views about the relationship between stewardship and decision usefulness, there are some strong positive points also. Stewardship directly or indirectly influences the decision usefulness of a financial statement. It helps to increase management integrity, accurate financial recording, increase the reliability of information to the decision makers by conducting regular audit and disclosing accurate information. These points ultimately increase the decision usefulness of financial reporting to the related decision makers. The extent to which stewardship helps decision usefulness may vary according to the degree of stewardship of management to the information in financial reporting.

References

Duncanwil.co.uk (2002) Duncan Williamson: Concepts and Conventions of Accounting

Ernst & Young (2008) International GAAP 2008: Generally Accepted Accounting Practice under International Financial Reporting Standards. International: Wiley (April 14, 2008), p.146 page, stewardship.

Gassen, J. (2007) Are stewardship and decision usefulness complementary of conflicting objectives of financial accounting?

Gjesdal, F. (1981) Accounting for Stewardship. Journal of Accounting Research, 19 (1), p.208-231.

Hand, L., Isaaks, C., & Sanderson, P. (2005). Introduction to accounting for non-specialists. London, Thomson Learning.

Kothari, S. (2008) conceptual framework of financial reporting. International: Pearson, p.38-40.

Latham, A. (2005) The Stewardship Function in Accounting

Ventureline, D. (n.d.) Accounting Theory Definition

What is Financial Reporting? (n.d.) What is Financial Reporting?

Young, R. (1998) The stewardship role in accounting

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Social Media and Consumer Decision Making

Social Media Influence In Consumer Decision Making

Abstract

The impact reference groups or social connections have in an online marketing environment, on the product purchase decisions of consumers is analyzed in this article. The influence of social media in the decision making process of consumers is investigated, and the influence of the strength of social ties on the final decision are discussed. The article discusses theories and concepts related to social relations, social media, and consumer purchase decision making process. To understand the impact social media has on consumer purchase decision, interview is conducted with micro and macro business owners using Facebook business pages, and having over 50 fans for their fan page. To analyze the data statistical analysis, and descriptive analysis methods are used. The research concludes that a strong tie in social relations serves to influence the purchase decision making process of consumers positively. To create a successful business by adopting an online marketing strategy, building strong social relations is important.

Research Overview

Social scientists have for a long duration highlighted the importance of group membership when it comes to determining individual or group behavior. The fact that individuals act according to a reference frame produced by groups to which they have widely been accepted has been perceived as a sound premise for some time. Marketers have widely accepted the construct of a reference group as critical in at least some forms of consumer decision-making. With the growth of the internet, and online marketing, social media is becoming an indispensable part in everyday lives of people. People are social beings, and at present, consumers are participating in activities like sharing experiences, knowledge, and opinions online. They also take part in online discussions to share their experiences with a product or a service.

The speed with which information transfers has increased with the electronic word of mouth growing more rapidly. Positive recommendations and discussions online have the potential to bring in increased business volume for firms in a short time. There is also the probability of a negative complaint online that can cause mistrust in a service or a product. A new form of social communication has been made possible by online media. Groups or individuals who might never meet in person are able to influence consumer behavior and their purchase decisions. The increasing use of social media is evident from the growth in online population using social network sites. Facebook the leading social media website has observed 23% growth in its user population during 2013, with 1.1 billion users making use of the site each month.

Social Media Decision Making
Social Media Decision Making

This study investigates the influence of reference groups online brand and product purchase decisions by looking at the interrelations between forms of product use conspicuousness and forms of influence from reference groups in social media. Consumers have a wide access to different types of social media, tools, and platforms. Social media significantly impacts the process of information sharing amongst individuals in the online shopping environment. Through this research, the role played by social media reference groups in forming strong or weak relationships with consumers that can influence the consumer decision making process are investigated.

Problem Statement

The study proposes to investigate the relationship between the social media influence of online users, the behavior intentions of consumers, and the role of social media influence in consumer decision making process. The strategy of information search online is adopted by consumers to reduce the risks involved in a purchase decision. Increasing technological advancements lead to ease of information access. Consumers can easily obtain information about services or products through social media before making a purchase. This research is focused on making both practical and academic contributions. Academically, it serves to bridge the gap between consumer decision making and the influence of social media reference groups in forming weak or strong relationship with consumers. Practically, social media marketers benefit from the research results. They can gain a deeper understanding of an online shopping consumer’s decision making process.

Research Questions

Research questions to be explored to investigate the social media phenomenon in online shopping are;

  1. What are the characteristics of social and online influence groups and references?
  2. Personal and demographic factors like gender, age, education, and profession have an influence on information shared through social media. Their experience and prior knowledge influences their level of social influence.
  3. What are the ways through which information and ideas travel through such a reference group or an online community?
  4. The credibility of the source depends on the reference group and the way in which information is conveyed. An understanding of how information or ideas travel through the reference community helps in identifying factors that have a high level of influence on consumer decision making.
  5. What are some forms of ties or connections do consumers have to other consumers in the communities?
  6. Consumers form ties in the online community, resulting in the establishment of a reference group or community. By investigating in what ways and how such communities are formed, social media marketers can leverage their online advertising campaigns.
  7. How is consumer decision making influenced by social media reference groups and communities.
  8. Social media reference groups, and communities alike, are proposed hypothesized to play a major role in the purchase decision of consumers.

Research Aims and Objectives

The research aims to investigate the ways in which social media influences consumer decision making during an online purchase. The various ways in which a social media group or community is used as a reference, the ways through which such groups or communities are accessed, and ways in which information is accessed from these groups by consumers are investigated. Main objectives of research are;

  • To identify the ways in which social media has established a source of power and leveled the playing field for consumers?
  • To investigate in what ways leaders of these reference groups or opinion leaders develop in online communities or any other reference group.
  • To analyze what some of the roles of social capital play when it comes to value of the social communities created on social media?
  • To offer recommendations to social media marketers on how reference groups and communities can be leveraged to their firm’s advantage.

Rationale for Research

The results obtained from this research could offer considerable evidence on the influence social media has on online marketing. The overall process of consumer decision making while making an online purchase decision, combined with the influence of social media helps managers reduce risks involved in social media marketing, at the same time offering recommendations on the ways in which they can increase their online credibility. Research on social media marketing is relatively new in marketing research. Negligible research exists on interrelating social media marketing and its influence in the consumer decision making process. This research focuses mainly on online shopping, social media, and reference group influence on consumer decision making. So, the theoretical contribution of this research helps fill in the gap in previous literature.

Research Methodology

Business pages created on Facebook are the central tool and the key research methodology is action research. Action research involves making systematic observations, and collection of data, that can be used to solve problems, and improve professional business practices. Micro and small businesses are focused. Data is gathered through interview and by using questionnaire. Facebook pages created by small entrepreneurs are used to create a fan base for their small enterprises. As the page continuous to grow and increase in size when it comes to the fan base of about 50 to 60 users data is to be conducted, mainly by carrying out semi- structured interviews.

The research design is action, qualitative research oriented with the conviction that reality is virtual created by factors of socio- economy. Primary data is gathered through semi- structured and open interviews. Data regarding the experiences of the entrepreneur while using and adopting social media like Facebook is focused upon. Secondary data is generated by the recording transcripts from the weekly training and interaction with the participants to understand their requirements and experiences. Tertiary collection of data is carried out through virtual ethnography by carrying out internet-based interviews through Google talk, chat, Skype and blogs.

Structure of Article

To ensure research meets its aims and objectives, clear research questions and research focus are developed first. Analysis of theories and concepts is done in the literature review part. Here theories and concepts relevant to social media as a marketing tool, and consumer decision making process are explored. Research methodology is developed based on literature review, and research aims. This gives a detailed outline of the research methodology to be employed for data collection. The research approach, philosophy, choices, ethical issues and methodologies are explained. Analyzed data gathered from semi – structured interview, and research findings are presented in based on which, conclusion discusses the research concisely, using which suitable recommendations are offered.

Conclusion

The way in which consumers make purchase decision has changed with the advent of social media. Rather than waiting for messages or advertisements giving information about a service or a product from companies, consumers are now seeking information on social media directly. Online community has the greatest amount of influence, especially on online shoppers. Research proposes to investigate the characteristics of online communities and reference groups involved in social media. The ways in which such groups influence the consumer decision making process is explored. For data collection, semi – structured interviews are conducted with online micro and small business entrepreneurs making use of social media tools like Facebook and blogs.

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Risk Management Alstom

Risk Management – A Case Study of Alstom

The advantages of rail projects involve cheap shipment transport costs, increased in the mobility of passengers, greater economic addition and the environmental advantages from condensed road traffic or develop and improved urban transportation. But for the railways projects financers needs to consider and keep in mind the risks factors that they can face throughout their projects and on the basis of that knowledge they should take some steps and start an awareness programs for those who relate to this project. Risks awareness programs should include the awareness about the hazards and controlled risks along with the steps that can reduce and almost decrease the risks which can be beneficial for the workers and for the rail projects as well.

Why the risk management department/function is an important function for a company

In the newly established private sector of railway, requests for contracts to offer railway services and rolling stick entirely relies on rewards and risk. Though ALSTOM has a massive share of market and substantial experience in the in business, each contract it creates divergence according to the specification of train, provisions of financing and spares, maintenance of various agreements (Quinn, & Strategy, 2013).

This consequently puts more stress on managers to obtain carefully whether every tender is value the risk and what the linked incentives are probably to be. From the suppliers of about two years British Rail will go to identify a short period of warranty after taking the train delivery. It will then renovate and maintain the trains, in addition to offer transport and rail services, like ticketing for passengers, facilities for station and maintenance of railway infrastructure. Financers are avoiding the risks of UK extreme environment and not having the feeling of urgency of Risk Management (Adger, 2010). And there is a lack of importance among firms that are being affected by the extreme weather.

And there is a lack of importance among firms that are being affected by the extreme weather. First of all we need to find out those steps that can reduce above discussed risks so that the railways project can be completed (Quinn, & Strategy, 2013). Investor should realize the risks of extreme environment that can affect the project.

ALSTOM refused the opportunity of business development in the secondary market. As an outcome, manufacturers of train like ALSTOM, depend entirely on big contracts for manufacturing trains and experience from either scarcity or gorge that is they were either snowed under with commands and instructions or had to deny as commands rejects. Train manufacturing was a start or stop business and therefore each command was dissimilar, there were no retained technology and high capital cost.

To manage risk, ALSOTM was realy concernd about it risk management department. And in order to manage the risk ALSTOM found a serious and vital change in focus for manufecturing tains through moving from being merely a train manufecturer to a service provider. Late 1980s passenger transport were becoming more complicated system, integrating an increasing amount of equipment which are high value from suppliers which are specialist.

It was observed at ALSTOM that though these more comlicated and sophisticated trains were a chance to increase and improve the product quality , the risk of late delievery and non-performance had raised. The main point was to incorporare the tasks of specialist suppliers so that those kind of riswks can be easily managed (Reuter, Foerstl, Hartmann, & Blome, 2010).

Long Term cost risk for ALSTOM can be the maor risk for the company. Now for a period of 20 years ASLTOM has a contrat to supply their trains for the Nothern Lines, it can no longer considers only of the manufecturing trains’ cost. As the company is not considering the long term cost of the company’s assets. So in ASLTOM’s main interest is to maintain trains in immaculate circumstance and enhance and develop them throughout the lifetime of the company, if they continue this kind of attiutde and apply risk management function this will lessen the cost of maitainance and generate more profits.

The project of Northern Line offered ALSTOM with major experience , not just in developing projects but also in capitilizing them. By taking the risk of asset for the scheme, ALSTOM unmitigate its rile as a train producer to act as a sytemeatic stock firm. ALSTOM then went to the pecuniary markets to offer the capital for manufecturing the trains with capatilists who took the monetary risk for the project.

Assess how different departments/functions of a company such as Alstom can help the company manage its risks

The business strategy and the human resource management should be entirely incorporated so that they can effectively and efficiently play an active role within the risk management and its assessment. Whenever there is amalgamation activity, the Human Resource Department frequently has a huge responsibility to ensure that business operation transition go easily and smoothly. When firms amalgamate, some of the most important modification happens in treatment and in number of its workers. If in ALSTOM human resource department can successfully tackle with these significant matters, they can have massive effects on the success of the firm (Reuter, Foerstl, Hartmann, & Blome, 2010).

Major goal and role of ALSTOM is to establish and sustain trains until the end of era of franchise of Virgin. But the company is experiencing problem in maintain trains. The company is facing legal issues like accidents or suicides relating impostor, defect, and fire, electrical or mechanical failure caused by ALSTOM’s train or the company and especially workers’ strike which is due to the mismanagement of human resource, and it can cost a lot to ALSTOM.

The company hoped that they can carry on sustaining trains and can be able to manage their human resource after the franchise. Northern Line scheme’s financiers did not abridge risk whether it’s related to technicality or human resource mismanagement. Though the investors and the sponsors for the West Coast Main Line WCML project were signifying banks and other institutions of finance, are taking releasing risk, further than the date of primary franchise (Dimant, Lindner, Liu, Ruiz, & Tejpal, 2011). Till 2012, investors and sponsors have assured income flow from this project. But the risk comes after the year 2012, and the question raised that will the revenue generated for rest of the life of the advantages is enough to fund the financial make-up and produce a profit on the speculation of latest trains?

It is the sponsors and investors who having created the train manufacturing possible, who take the acclaim risk of supplying trains for the Virgin franchise (Narasimhan, & Talluri, 2009). Due to systematic finance management of ALSTOM the company was able to generate profit on the speculation of latest trains. But the major types of risks that must be consider by ALSTOM are strategic risk, for instance a competitor will going to pose serious threat on the business, compliance risk for instance the introduction of new safety and health rules and regulations, financial risk for instance increased interest rates or non-payment by customers charges on business credit, last is operational risks for instance theft or breakdown of main instrument.

How risks for a business such as Alstom are assessed

Assessment of risk is not about developing a massive amount of paperwork, but rather about recognizing appropriate measures to manage and control risks in the organization. Organizations like ALSTOM is already taking serious steps to guard its business operations and employees, but the company cannot deny the importance of risk management because it will aid ALSTOM to determine whether the company have covered all it requires to (Burstein, Sohal, Zyngier, & Sohal, 2010).

Think about how ill health and accidents could occur and focus on the actual risks, those that are most probably and will cause the most damage. For several risks, other rules need specific control actions. The risk assessment can facilitate ALSTOM to recognize where they require at assured and definite risk and these specific control measures in more specification. These control actions do not have to be examining separately but can be measured as an expansion of overall risk assessment.

Analysis of railway safety is very complex topic in ALSTOM where safety is indomitable by various elements including error of human. Many assessment of railway safety method currently employed are relatively mature instruments. In many situations the executions of those tools might not give suitable and adequate results because of the lack of safety risk information or the high level of vagueness and ambiguity present in the available safety risk data.

For many businesses, particularly ALSTOM, simple five step approach including all elements of risk would work efficiently (Narasimhan, & Talluri, 2009).

Identifying risk

At ALSTOM looking for those factors at workplace that have the possibility to cause any kind of harm, and identifying employees who may be exposed to the dangers.

Evaluating and prioritizing risks

Evaluating the probability and the severity of the potential harm and the existing risks and prioritize them according to their classification of significance (Van Detta, 2013).

Deciding on Preventive Action

Identifying the suitable actions to control or eliminate the risks.

Taking Action

With the help of prioritization plan implementation of protective and preventive measures to eliminate the risk factors

Monitoring and Evaluation

The evaluation should be monitored at regular gaps to make sure that it stays up to date.

Risk Management
Risk Management

Evaluate approaches to managing risk

In business Enterprise risk management contains the procedures and the methods employed by the organization to manage and control risk and confiscate opportunities regarding to the attainment of their goals and objectives. It provides a framework for risk management, which naturally engross recognizing specific conditions or events related to the opportunities and risks of the organization, evaluating them in terms of magnitude and likelihood of impact, considering a strategy of response and progress observation (Wallin, Larsson, Isaksson, & Larsson, 2011).

COSO considers this ERM, incorporated framework fill up this requirement, and suppose it will become broadly adapted by the firms and other companies and meant all interested parties and stake holders. ERM’s incorporated framework extends on inner control, giving a more serious and widespread focus on the broader focus o ERM.

As it is not meant to and does not restore the inner control framework, but rather integrate the inner control framework within it, organizations might determine to look to this ERM framework both to satisfy their inner control requires and to move toward a risk management procedure.

Advantage

It is meant to aid promote new dialogue between senior executives and boards as they associate to more fully extend their resiliency of organization to risk and abilities of management to recognize opportunities to take appropriate risks for strategic and competitive benefits (Wallin, Larsson, Isaksson, & Larsson, 2011).

Disadvantages

As organization struggle to establish ERM procedure into models of more mature business operation, management and will require being tolerant. ERM should be observed as a long-term cultural modification as immediate achievement is exceptional. Unfortunately, no off the shelf explanations for firms looking to commence an effective and efficient enterprise, broad approach to risk management and lapse.

Analyze what causes various risks for Alstom transport

The P&O Nedlloyd Southampton encountered very rough climate in the Western advances to the English Channel. There was no proof that the transformer moved in stow on both ship but on entrance at the construction site of the power station at purpose, the transformer was found harmed to the degree of over 2 pound per meter (Reuter, Foerstl, Hartmann, & Blome, 2010). It had to be revisit to works of ASTLOM for repairs. ASTLOM was agreed that the harm to the transformer had been due to some strange and extraordinary event in the transit’s course and made a declaration under their insurance doctrine, which was entirely on the terms of all risks.

The insurers then believed that the harm to transformer resulted from the intrinsic incapability of the transformer to endure and survive and the common incidents of carriage by sea from United Kingdom to Malaysia throughout the cold seasons. They hence rejected the claim on the basis that the harm was caused by the intrinsic vice and then carried these proceedings looking for a statement that they were not accountable to cover ALSTOM under the doctrine.

The judge identifies that it was the general basis among the parties that directs the reasons for the harm to the transformer was the aggressive movement of the craft, specifically the Eliane Trader, due to the wind and sea actions. The action of wind and wavers obviously were a predictable incident of any journey and is therefore a danger to which all goods passed through sea are significantly exposed (Reuter, Foerstl, Hartmann, & Blome, 2010). Goods caring for shipment should therefore be able of enduring the forces that they can normally be normal to meet in the course of the journey and these might differ highly relying on the time and route.

According to the ASTLOM the employment of non-ASTLOM parts and sections without thorough design of industry and standards of safety, had caused in the sequence of failures in paths exchange machines, an unusual kind of structure and had resulted in the operational issues, together with a derailment of freight cars. ALSTOM warned against the integrated elements across all control system of trains.

Changes in government policies are also effecting the operations of the company. Increase in tax rates, duties on custom, import exports pricing policies are posing threats on the speed of business operations.

Risk Assessment Template

Risk Area

Risk Identified

3- S

4- P

Risk Impact 

Risk Severity

Non-ALSTOM Tools The particular risks linked with employing non-ALSTOM instrument are that it would need increasing the power level of device

8

9

This is the high risk that can increase the probability for a single breakdown that could not save the system from noticing the trains on the track, which can cause accidents. The risk is high because it is harmful for the system, and it can cause severe accidents in present and future as well.
Safety of Railways In ALSTOM safety is indomitable by various elements including error of human.

10

8

In many situations the executions of these tools might not give suitable and adequate results because of the lack of safety risk information or the high level of vagueness and ambiguity present in the available safety risk data. Again the severity is high because of human error and this can cost to the company a lot in future.

Identification and Assessment of the impact of risks: At ALSTOM looking for those factors at workplace that have the possibility to cause any kind of harm, and identifying employees who may be exposed to the dangers. It is very necessary to assess the impact of risk through evaluating the probability and the severity of the potential harm and the existing risks and prioritize them according to their classification of significance.

The Seriousness or Severity of the Risks: In October 2006 ALSTOM employee gave a verbal warning to another engineer of metro regarding the risks of combining instruments from various producers during a discussion. Illenberg said the particular risks linked with employing non-ALSTOM instrument are that it would need increasing the power level of device(Zavadskas, Turskis, & Tamošaitiene, 2010). This is the high risk that can increase the probability for a single breakdown that could not save the system from noticing the trains on the track, which can cause accidents.

Analyse the actions or strategies that Alstom can implement to manage the risks you have identified

All of the above risks can be controlled and managed. Well if talk about technical risks ALSTOM requires to consider few points that can develop the standards of technicality that can be very beneficial for the projects of railways, first of all the company should consider the importance of training its employees technically and conduct some sessions related to training sessions so that they can be able to technically equipped and skilled, and can be able to operate and construct the functions of the railway with the advanced and latest technologies (Zavadskas, Turskis, & Tamošaitiene, 2010). And for managing the economical and financial issues they require to have appropriate departments that can control, manage and reduce the economic and financial risks elements.

Analyse to what extent Alstom Transport, and other business, are vulnerable to major crisis

Due to extreme weather of UK, the temperatures become intolerable particularly in winters. But financers are avoiding the risks of UK’s extreme environment and not having the feeling of urgency of Risk Management. And there is a lack of importance among firms that are being affected by the extreme weather. In the storm the winds most usually are strongest; even though they can arise at any time of year it can effects the projects which are underdeveloped and undersized. Other modes of transport are poorly effected by the UK’s extreme weather, it’s possibly the weather will be estimated extremely severe (Arena, Arnaboldi, & Azzone, 2010). The severe situations also stated that firms are going to consider extra claims in extraordinary situations.

Last but not the least heavy rain risks may affect the project. In winter there is a heavy rain in UK it all rely on the extent of rain that may be fail. Heavy rain can be the bigger hindrance in the completion of these rail projects. It becomes important for the financers to take serious measures to handle these kinds of situations as all these factors are uncontrollable but we need to take those steps that can reduce the risks.

Control Risks involves technical, economic and financial, accidents, political and legal risks. All these factors can affect the railways project. While running the railway system technical standard are continuously coming across some problems. This might affect the railways projects. The distance need for the bridges cause more conflicts (Arena, Arnaboldi, & Azzone, 2010). Train accidents are increasing day by day due to miscommunication. The economic case for the ALSTOM railway comes out to be found on a supposition that there will be free movement of goods and people throughout the council area. The economic underpinnings for the line depend on continued economic growth and more trade between ALSTOM member states.

Critically evaluate in detail the approaches that Alstom Transport can use for crisis management and business continuity planning

First of all we need to find out those steps that can reduce above discussed risks so that the railways project can be completed. Investor should realize the risks of extreme environment that can affect the project. They should keep the gap between the railway tracks because in summers the tracks expand if there will be no proper gap between the tracks the train will be damage. Storms can increase the risks accidents (Renn, Klinke, & van Asselt, 2011). Because of storm and heavy snow fall the snow will cover the railway tracks and it will become difficult to drive over those tracks to avoid this kind of situation it is necessary to have air pumps in front of the train to blow the snow. Due to heavy rain in UK especially in winter season the aim to complete the project can be delayed. To handle this kind of situation there should have proper drainage system and canal system so that heavy rain cannot affect the ALSTOM railway project.

Control risks can be handling easily with having any kind of problem. Well if we will talk about technical risk we need to consider few steps that can increase the technical standards that can be beneficial for the railways project, first we should consider the urgency of training the workers technically and arrange some training sessions so that they can be technically skilled and equipped, and can be able to construct and operate the railway function with advance technologies. There are many rail projects which are on the ongoing stage and needs more financial investments to run the project smoothly. And for managing the financial and economical problems they need to have proper departments that can manage, reduces and control the financial and economic risks factors (Renn, Klinke, & van Asselt, 2011). Due to miscommunication lot of rail accidents have been occur to avoid this kind of problem they need to proper guide and train their workers how to communicate so that in future the risks of accidents can be reduce and almost vanished. Last is political and legal risk, for moving goods and passengers from railway is considering being free in future all over the council area but this needs a joint practices system for all states members to allow agree on a solitary point of entrance into the UK and have a similar tariff for the imported products.

References

Adger, W. N. (2010). Social capital, collective action, and adaptation to climate change. In Der klimawandel (pp. 327-345). VS Verlag für Sozialwissenschaften.

Arena, M., Arnaboldi, M., & Azzone, G. (2010). The organizational dynamics of enterprise risk management. Accounting, Organizations and Society, 35(7), 659-675.

Burstein, F., Sohal, S., Zyngier, S., & Sohal, A. S. (2010). Understanding of knowledge management roles and responsibilities: a study in the Australian context. Knowledge Management Research & Practice, 8(1), 76-88.

Dimant, E., Lindner, S., Liu, J., Ruiz, T., & Tejpal, V. (2011). Bombardier Inc.-Case Study of a brand in an Emerging Country.

Narasimhan, R., & Talluri, S. (2009). Perspectives on risk management in supply chains. Journal of Operations Management, 27(2), 114-118.

Quinn, J. B., & Strategy, E. S. (2013). Strategic outsourcing: leveraging knowledge capabilities. Image.

Renn, O., Klinke, A., & van Asselt, M. (2011). Coping with complexity, uncertainty and ambiguity in risk governance: a synthesis. Ambio, 40(2), 231-246.

Reuter, C., Foerstl, K. A. I., Hartmann, E. V. I., & Blome, C. (2010). Sustainable global supplier management: the role of dynamic capabilities in achieving competitive advantage. Journal of Supply Chain Management, 46(2), 45-63.

Reuter, C., Foerstl, K. A. I., Hartmann, E. V. I., & Blome, C. (2010). Sustainable global supplier management: the role of dynamic capabilities in achieving competitive advantage. Journal of Supply Chain Management, 46(2), 45-63.

Van Detta, J. A. (2013). Politics And Legal Regulation In The International Business Environment: An FDI Case Study Of Alstom, SA, In Israel. U. Miami Bus. L. Rev., 21, 1.

Wallin, J., Larsson, A., Isaksson, O., & Larsson, T. (2011). Measuring Innovation Capability–Assessing Collaborative Performance in Product-Service System Innovation. In Functional Thinking for Value Creation (pp. 207-212). Springer Berlin Heidelberg.

Zavadskas, E. K., Turskis, Z., & Tamošaitiene, J. (2010). Risk assessment of construction projects. Journal of civil engineering and management, 16(1), 33-46.

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Childhood Obesity

Physical inactivity, nutrition, genetics and psychological factors are the main causes of prevalence in childhood obesity

Sources: Langwith, J. (2013). Childhood obesity. Detroit: Greenhaven Press

This book by Jacqueline gives an overview of what childhood obesity encompasses. In the book, she talks about childhood obesity being a global health concern and health risk factors associated with childhood obesity. She also talks about the various causes of childhood obesity. They include Type II Diabetes, cardiorespiratory diseases, cancer, and hypertension, stroke, and sleep apnea and liver disease. She argues that children who are obese have a high risk of having a shorter life expectancy and also the controversies surrounding childhood obesity.

In her book, she talks of two main causes of childhood obesity which are genetic factors and stress, the effectiveness of anti-obesity programs, and whether bariatric surgery is appropriate for children the role government should play, focusing on contributing factors, and personal stories of people dealing with childhood obesity. This book is a credible source that will prove useful in the final research paper since it gives detailed information on the issue of childhood obesity. Jacqueline provides general views and clear evidence, and she is not biased in any way. This book will be useful in putting up a strong argument on genetic and psychological factors being causes of childhood obesity. (Langwith, 2013)

Jimerson, M. N. (2009). Childhood Obesity, Farmington Hills, MI: Lucent Books

The author of the book touches on childhood obesity, by talking about what it is its causes and the effects it has on the affected kids, its health risk factors, how it is to live with it as a child and future prevention measures. He says that childhood obesity could be prevented if parents carefully determined the environments they bring up their children. By parents and guardians encouraging their kids on healthy eating habits and an increase in participation in physical activity, cases of childhood obesity will be reduced. He urges parents to maintain their kids body weight, reduce the number of adverts promoting unhealthy food.

To support the suggested preventive measure, he provides information about medical issues of childhood obesity such as diabetes, emotional problem. This book is a credible source in the research as it talks about the main causes of childhood obesity. The book’s details are based on evidence making it of undoubted quality. The book having discussed diet and physical inactivity as the main causes of childhood obesity will help me in arguing out my case (Jimerson, 2009).

Juettner, F. B. (2010). Childhood Obesity. San Diego, CA: Reference Point Press

This book is a reliable and provides unbiased information on the issue of childhood obesity. Source to research on whether physical inactivity, nutrition, genetic factors and psychological factors are the main causes of prevalence in childhood obesity; The books discusses in depth on the origins of childhood obesity, how much of a problem childhood obesity has been all over the world. It also focuses on the causes of obesity which the author discusses in depth. He also tries to answer the question: can obesity in children be prevented and can it be reserve. It also discusses a few controversies that exist on the issue of childhood obesity. The information in the book goes a long way in helping one understand childhood obesity better and what exactly it entails. This source is credible and can be used towards the final projects. The book will provide information to strengthen the argument that the main causes of childhood obesity are physical inactivity, nutrition, genetic factors and psychological factors (Juettner, 2010).

Smith, J. C. (1999). Understanding Childhood Obesity. Jackson: University Press of Mississippi

The author of this book talks of physical inactivity as the main cause of childhood obesity. He urges growing children to exercise daily to help them grow healthy and avoid cases of childhood obesity and the health risk factors associated with it. He outlines the type of physical activities that kids need to undertake, through the help of their parents to remain physically fit. By parents acting as role models to their children in terms of physical activity, obesity in children will be reduced. This will act as a source motivation and could influence the child to do the exercises by themselves at a different time to help reduce some of the weight they have. This book is a reliable source to the research paper as it will because it in figuring out what motivates the child to exercise; is it an incentive by their parents? It will give an understanding on the causes of childhood obesity or is it through only bad eating habits. The information quality of this book is great though it does not focus on all the causes of obesity. This source is supportive to the argument that physical inactivity is associated with childhood obesity (Smith, 1999).

Childhood Obesity
Childhood Obesity

Institute of Medicine (U.S.). Koplan, J., Liverman, C. T., Kraak, V. I., Institute of Medicine (U.S.). & Institute of Medicine (U.S.). (2005). preventing childhood obesity: Health in the balance. Washington, D.C: National Academies Press

The authors of this book talk more on the extent of childhood obesity and the consequences it has on children with it. It also develops an action plan to fight with childhood obesity and make it a national public health priority. The authors also try to create awareness on the existence of childhood obesity through advertising, public education, through the media groups. This information passed to the local communities, homes and schools to help them eradicate the issue of childhood obesity in the society. This book is a credible source in the research paper as it talks about of the preventive measures of childhood obesity. The book mainly looks at childhood obesity in the United States and may seem biased to other areas in the world. The book will only help in arguing out what the consequences of childhood obesity are (Koplan, Liverman and Kraak, 2005).

Dehghan, M. Akhtar, N. and Merchant, A (2005) Nutritional journal: childhood obesity, prevalence and prevention

This article talks more on the causes of childhood obesity such as physical inactivity in that, children prefer playing video to having healthy activities such as swimming or playing in the playgrounds, poor dietary such as high caloric intake, foods with a high level of sugars, genetic factors, how cultural environment influences obesity among children and psychological factors. Impact of advertising junk food and also the preventive measures towards eradicating childhood obesity such as Parents being role models to their children on healthy eating and exercising at an early age. The article has a lot about the health risk factors associated with childhood obesity like type II diabetes, cardio respiratory diseases and stroke. It is a credible source as it has detailed information on the causes and prevention of childhood obesity. The information in the article will strengthen the argument on how poor diet or nutritional habits cause childhood obesity (Dehghan, Akhtar and Merchant, 2005).

Donahue, E. Paxson, C, Haskins and Ron (2006) Future of children: fighting obesity in the public schools

The article acknowledges how childhood obesity has increasingly grown the United States. It recognizes efforts schools are making toward fighting childhood obesity and encourages that more should be done such as including physical activities in the schools’ curriculum and making it mandatory as it will increase the chances of every child being physically active. Also, the article gives detailed information on how and why the government should take part in fighting this pandemic of childhood obesity. Information on the call to take action from congress to put more restrictions on the diet program in the school system; It gives more detail on setting up detailed goals and objectives for change in public school thus making it a credible source (Donahue, Haskins, Paxson and Ron, 2006).

Clinic, M (2006) Child Obesity

In the article, it is clear that childhood obesity is a serious problem globally and especially the industrialized nations. The article continues to give an explanation on the main causes of childhood obesity such as eating fast foods, foods with a high level of sugars and the e health risk factors associated with childhood obesity. It explains the processes of diagnosis and screening, effects it has on children and preventive measures that can be taken. This article is a very credible source in the research paper as it has detailed information on the causes of childhood obesity. Though it has great information, it lacks to provide enough supporting material of their conclusions (Mayo Clinic, 2006).

Centers for Disease Control and Prevention. (2010.) Childhood Obesity

This source states the many facts which have accrued as a result of childhood obesity. It shows how cases of childhood obesity have increased over the past thirty years with a higher percentage of children in the United States of age6- 11years being obese. This source defines obesity as having excess weight for a particular height. The causes of obesity Are also given in this article such as high caloric intake, environmental factors, genetic factors, behavioral factors and physical inactivity. It is clear that kids are the most affected and fall in this unhealthy balances and standards. This is a very credible source as it has information on the causes of childhood obesity as it also gives the preventive measures of this disorder among children. This source is very credible since it provides statistical evidence on issues relating to childhood obesity. The article looks at childhood obesity in the United States and may be questionable in terms of quality when talking about obesity globally. The source will support the argument that childhood obesity is on the rise (Centers for Disease Control and Prevention, 2010).

Centers for Disease Control and Prevention. (2006). Nutrition and the Health of Young People

This is a helpful source as gives more information on healthy eating, associated with the reduction of diseases associated with poor diet such as heart diseases, diabetes, cancer and stroke. Information on healthy eating among kids is given in order for the proper growth of children and prevents cases of child obesity. The article gives detailed guidelines for a recommended diet rich in grains, low fats dairy products, fat free for children. Schools are also are able to promote healthy eating among children by ensuring that only nutritious and the. The school food programs should provide appealing foods. Also, physical activity and nutrition program should be included in the school curriculum. The source will be supportive in the argument that poor diet causes childhood obesity (Centers for Disease Control and Prevention, 2006).

Did you find any useful knowledge relating to childhood obesity in this post? What are the key facts that grabbed your attention? Let us know in the comments. Thank you.

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Pharmaceutical Industry Analysis

Analysis of The Pharmaceutical Industry

Title: Analysis of The Pharmaceutical Industry. The pharmaceutical sector comprises of drug manufacturers, distributors and wholesale companies that handle the production of healthcare products. This industry largely focuses on medical as well as veterinary products, such as vitamins, biological compounds and other chemicals. Moreover, various diagnostic substance and devices are also included in the list of the products produced by these companies. The leading companies on the pharmaceutical sector are called as ‘Big Pharma’ that are responsible to generate almost fifty percent of the total revenue of this industry. The headquarters of these pharmaceutical leaders are mainly located in the west, however with the passage of time, the demand of medications is increasing in the third world countries consequently this drug manufacturing has become fifth most profitable industry in the world that is continuously growing. The following paper will illuminate various spheres of activities in this industry. It will be seen how these companies are surviving in a competitive environment and what it actually takes to become a pharmaceutical manufacturer.

Introduction

The pharmaceutical industry, as the name indicates is associated with the development, production and marketing of products that are intended to be used as medications. This industry comprises of various pharmaceutical companies that are legally allowed by the government of a country to deal in brand or generic medicines. There are various rules and regulations all over the world that are considered useful to ensure efficacy and safety during the marketing of pharmaceutical products as they are directly associated with the human life. This industry also largely relies on research and development activities and is the largest employer of scientists. Many new medicines are being developed in the world and with the discovery and identification of new drugs the future of pharmaceutical industry is becoming brighter (Michael, 2012).

The aim of this paper is to increase understanding about the global pharmaceutical industry and its role in the healthcare system of a country. It will also be seen how this industry contributes to the economy and what major players are there in the global pharmaceutical industry.

Background and History

The origin and development of pharmaceutical industry dates back to the early days when Greeks, Egyptians, Chinese and Indian people tried plant derived medicines. Morphine, codeine and pilocarpine are some primitive drugs. In 1940’s insulin, antibiotics and psychoactive medicines were brought into the market that received remarkable response from the users. The US first   introduced its food and drug administration act in 1906 and the UK drug regulatory rules were developed after World War I, since then these rules have faced various amendments regarding the marketing and distribution of drugs in these countries. Despite various conflicts between retailers, marketers, consumers and drug inspectors, this industry quickly thrived all over the world (Anderson, 2005).

Literature Review

Henske 2009 sheds light on the current situation of the pharmaceutical industry. He demonstrates that this industry is passing through some major structural changes. A lot of mergers, acquisitions (M&A) are underway in order to ascertain stability and success in the long run. Some major pharmaceutical companies are trying to generate higher revenues with these M&As. Although, bigger size of a company is not the sole reasons for its success but even then some important advantages can be achieved with such joint ventures, because bigger drug manufacturing companies invest more in their research and development procedure that finally allow them to diversify their portfolio (Henske, 2009).

For Instance, in 2003 a prominent acquisition took place between Pfizer and Pharmacia soon after which Guidant bought Johnson & Johnson in $25 billion. These acquisitions greatly helped both of the newly developed companies to enhance their market share in the US market. These companies further elaborated their research and development process.

These joint ventures are also not very uncommon in the UK, for example major companies in various states of the UK have developed after mergers and acquisition amongst two or more than two companies. For example:

  • Merger between SmithKline Beecham and GlaxoWellcome results in GlaxoSmithKline
  • Merger between Aventis and Sanoffi Synthelabo creates Sanoffi Aventis

Grieder undergoes the analysis of the major pharmaceutical players and shows that these are not diversified rather major source of revenue generation for these companies is their pharmaceutical products. Although some companies, such as Johnson and Johnson’s is involved in the production of other goods as well but in majority of the cases pharmaceutical industries have their focus on the manufacturing of consumer’s healthcare products and nutritional products (Grieder, 2007).

Statistical Analysis

Grieder 2007 demonstrates that there are some major players in the pharmaceutical manufacturing that actually dominate this industry globally. Following table shows the position of these industries in terms of sale and revenue generation. The financial data has been gathered from the annual reports of these companies to ease accurate comparison between all these companies; moreover, the data related to pharmaceutical manufacturers working outside the US has been converted into dollars using average currency rates in 2004.

Company Name Headquarter Annual Revenue Total Sales
Johnson and Johnson US                           22,190                              47,230
GlaxoSmithKline US                           23,434                              37,897
Pfizer US                           46,133                              52,506
Sanofi Aventis France                           17,861                              18,711
Novartis Switzerland                           18,497                              28,244
AstraZeneca UK                           21,426                              21,426
Abbott U.S.                           13,600                              19,680
Wyeth U.S.                           13,965                              17,684
Bayer Germany                             5,458                              37,013

Table courtesy: (Grieder, 2007).

The above data also reveals that the headquarters of major pharmaceutical companies lie in the US or other Western countries, such as France and Germany. Only a few international drug manufactures are there in Asia (Grieder, 2007). Following chart shows how these companies rely largely on Western markets for maximum profit generation.

Research and Development

Research and development activities are essential for the success of pharmaceutical companies and major players in this area put great focus on the development of new products. This phenomenon is not very simple because it needs a lot of hard work and investment from Big Pharma companies. Sometimes research process involving one or two drugs needs many years, moreover the investment of resources remains unclear until the end of the process that also involves the approval of newly synthesized drug for marketing, therefore, it can be said that rate of success is highly unpredictable in the pharmaceutical industry (Noack, 2007).

According to a report, it takes almost fifteen to twenty years for a company to develop a new pharmaceutical product and only one out of thousands of pharmaceutical products discovered by research teams become medically useful. Moreover, the introduction of these products into the market involves many legal issues (National Science Foundation, 2001).

Growth Perspectives

The drug manufacturing industry promises appropriate healthcare for the citizens of a country and in turn, these people directly or indirectly aid in the growth and development of pharmaceutical industry. The life expectancy is increasing in some developed countries of the world after which the population of these countries is becoming older and grayer. All these elderly people are buyers of life maintaining drugs and continuously demand the healthcare products sold by these Big Phrama companies.

Along with that, some countries of the world including various states of the US are going to introduce their new drug sale act (Drug improvement and modernization act) after which elderly people of these states will be able to have their access to some medicines that were previously unavailable for them. As a result their drug coverage will increase and the sale of relevant pharmaceutical products will also enhance (Aronovitz, 2005).

Situation in developing countries

The above literature review suggests that major pharmaceutical companies have their headquarters in developed countries of the world, but recently some pharmaceutical companies in developing countries have also shown prominent improvements in their research and development activities, after which it can be said that these companies have significant potential for future growth. Increasing solvency of population in Asian, South American and East European economies is making these countries very attractive for investment. However, further reformations in the rules and regulations regarding drug sale and patent protection are required in order to ensure safe and trial free business (Blumberg, 1999).

Pharmaceutical Industry
Pharmaceutical Industry

Despite being an attractive business, the pharmaceutical sector needs a lot of efforts from individuals who are involved in it. Opportunities are limitless but issues are also there that should be taken into account by the management before planning final strategies of their companies. In this regard the management needs to consider some key challenges that are there for them before taking the plunge into this sector, these challenges will be discussed one by one the following paragraphs:

Price Control Issue

The pharmaceutical sector needs to work in a highly regulated culture, although details are different but this culture is almost same all over the world. One important aspect of these rules is price control issue. For example in the U.S. Medication Protection and Modernization Act has resulted in severe price reduction pressure over this industry after which it becomes difficult for companies to support their research and development activities. This downwards pressure on prices is also very prominent in other countries such as Japan, France and Germany. Drug prices are subjected to strict review and they are solely controlled by the government (Lott, 2007).

Competition

The pharmaceutical industry currently operates in a very competitive environment. New rivals are merging for Big Pharma companies and this competition covers almost all segments of pharmaceutical marketing. Moreover, research oriented pharmaceutical companies also face severe competition from generic manufacturing companies. The price of generic manufacturers is much lower than that of their research oriented counterparts; finally they successfully achieve greater market shares (Roth, 2009).

Patent Protection

Research oriented companies can only be saved in a highly competitive environment by the introduction of patent protection rules and regulations because generic drug manufacturers start production of a patent protected analogue before a patent expires, consequently R&D companies face enormous financial loss.

Conclusion

The pharmaceutical industry has been an attractive business place for entrepreneurs and also for people involved in research and development activities, however, now the situation is changing fast. Immense competition is there for Maga Pharmas from generic manufactures and other healthcare companies that are involved in the production of pharmaceuticals. Therefore it must be stated that this industry sounds easy and attractive but must be difficult involving great risks. Companies that want to survive should keep a strong eye on the current market scenario in order to avoid loss and ensure maximum growth, moreover, mergers and acquisitions also turn out to be helpful for some companies because they augment their growth opportunities in the global pharmaceutical industry.

References

Anderson S., 2005, Making Medicines, Pharmaceutical Press.

Aronovitz G. L., 2005, Medicare Contracting Reform, DIANE Publishing.

Blumberg, 1999, Pharmaceutical Industry in developing countries, Conference Summary.

CPPR, Pharmaceutical Research centre, National science foundation.

Grieder K., 2007, Big Fix, Public Affairs.

Harper, 2002, Patent protection in pharmaceutical Industry, Forbes.com

Henske P., 2009, Mega Mergers cannot cure pharmaceutical industry, Business Week.

Lott R. J., 2007, Freedomnomics, Regnery Publications.

Michael J., 2012, The pharmaceutical industry, Michigan State University.

Noack A., 2007, Research and Development in pharmaceutical Industry, GRIN.

Roth T., 2009, Drug makers paying off to competitors, TPM Links.

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