International Trade Government Involvement

Impact of Government Involvement in International Trade

International trade can be described as the exchange of services and goods between countries, which gives rise to a world economy where prices are affected by global occurrences (Ajami & Goddard, 2013).  As indicated by (Wild & Wild, 2013, p. 123), international trade has the benefit of offering people in different countries a more expansive selection of goods and services at competitive prices.

Given that the idea of international trade has dominated business scholarship for some time, differing opinions exist on whether the international trade should adopt a free trade approach or opt for a protectionist approach. Free trade, in this regard, implies the application of a laissez-faire style of commerce, without market restrictions. The central concept in the international free trade is that demand and supply factors, applied on a global level, ensure efficient production, requiring nothing to be done to either promote or protect business growth. In contrast, the philosophy of protectionism insists on the importance regulating trade to ensure proper functioning of markets. Proponents of protectionism hold that certain market inefficiencies can impede the benefits of international trade, thereby requiring the application of mechanisms to guide the market accordingly. This paper explores the primary motives of government interventions and critically analyzes the consequences of the methods of intervention.

Government intervention in international trade has had a significant impact on trade patterns. Unfair government intervention practices thus have had lasting negative lasing impacts on global economics. This paper looks at the global political economy, reasons for governments to intervene in international trade, consequences of government involvement and ways to prompt the global economy despite the political influence.

The Motives for Government Trade Intervention

Though free trade implies the pattern of exports and imports without any barriers, most governments impose controls on trade for cultural, economic and political reasons. While political motivations include protection of jobs, preservation of national security, response to apparently unfair trade practices of other nations and the quest for influence over other countries, the economic motives include the protection of infant industries and pursuance of strategic trade policy.

Political Motivation: One category of reasons offered for government intervention is political. Most of the political motivations for government interventions are connected to the need for the government to remain popular among its citizens. As indicated by Ajami and Goddard (2013), the political motivations may have little or nothing to do with the economic performance of the country (p. 21).

One such political motive is to protect jobs and, therefore, prevent an increase in unemployment levels. The idea informs the motive for restricting trade to protect jobs that international trade lowers the number of jobs available locally for the citizens of a country (Wild & Wild, 2013, p. 132). Though this may be true for certain industries, studies have established that trade does not necessarily reduce jobs, since business offers consumers a chance to purchase products at competitive prices, which, subsequently enables them to buy more goods and services. Given that most of the products are locally produced, the enhanced purchasing power of the consumer is likely to stimulate the creation of jobs internationally and locally. Moreover, the protection of certain jobs may not be entirely beneficial, and has been shown to lower economic efficiency. According to Silva, Afonso and Africano (2010), an economy can function at maximum efficiency only when its labor force is mobile, and people are willing to alternate jobs need arises (p. 369). Governments must acknowledge that the nature of the economy and, consequently, jobs are constantly metamorphosing, meaning that even their labor force must be flexible and ready to change.

Another political reason often offered for government restriction of trade is national security interests. According to Ajami and Goddard (2013), the argument of national security is often a legitimate argument, especially when it concerns the production of weapons and printing of domestic currency (p. 34).  Consequently, industries that are pivotal to national security are offered protection by governments for both imports and exports.

Governments can, for instance, place restrictions on imports to guarantee domestic supply which preserves national security. It is important to note that national security as it is used here is not exclusive to issues of war and armed security. Rather, the concept of national security implies those goods and services that are critical for the wellbeing of the citizens of the country, including currency, agricultural products, oil, and weaponry. For instance, many countries actively protect their agricultural sectors since countries that depend on agricultural imports to feed their citizens risk starvation in the event of war. Governments also place restrictions on the export of defense-related goods, especially if such exports pose threats to international security.

The government can also restrict trade in response to apparent unfair trade practices by other nations. In situations where there is a feeling that their governments give certain industries an unfair advantage through subsidies or reduced restrictions, unilateral reduction in restrictions can be applied. For instance, Fertö and Hubbard (2003) show that, compared to industrialized countries, developing countries have significantly relaxed environmental laws, reducing the costs of operation (p. 245). Governments are often inclined to introduce trade restrictions especially in the face of restrictions by other countries.

Government Involvement in International Trade
Government Involvement in International Trade

States can also use trade restrictions to gain influence over other nations, especially the economically less developed. For instance, the China Uses trade interventions to increase its influence in Africa. The idea here is for an economically stronger country to use its position to influence less developed countries, which ultimately offer a market for its products.

Economic Motives: Besides the political reasons for governments’ intervention in trade, arguments are often fronted on the economic foundations for intervention. Some of the arguments from the economic perspective include the protection of infant industries and pursuance of strategic trade policy. The case for the protection of infant industries is often made so that young industries are protected by the government until they become self-sustaining (Silva, Afonso & Africano, 2010, p. 369).

However, it is not only infant industries that seek protection. According to Melitz (2003), some mature industries insist that they are protected to enable them to adapt to new business environments and conditions (p.1696). Nevertheless, the idea of protecting companies seems to go against the spirit of healthy competition that allows only the most successful businesses to be sustained. This presents problems to the government seeking to intervene on trade based on the argument of the infant industry. The first challenge would concern how to pick winners and reject losers. The idea also leaves room for people within the echelons of power to use that power to initiate protection for their companies. Besides, protection has the potential of encouraging complacency by domestic companies towards innovation and can limit company competitiveness.

Regarding the pursuance of strategic trade policy, government intervention can enable a company to enjoy the first-mover advantages and the subsequent economies of scale. The concept of first-mover advantage can be described as a type of competitive advantage that accompany attains by being the first entrant into an industry or a market (Fertö & Hubbard, 2003, p. 251). The understanding here is that, by being the first competitor in a new market, the firm can gain an advantage over its actual and future rivals. This idea applies whether a company is seeking to develop new demographic markets or sections of existent markets, or whether it is looking to introduce new products into its already existent market segments.

When a business is the first to enter a market, it can form a defensible ground, allowing it to capture the large sections of the market share quickly without being concerns about rivals competing for the same market. Also, by the time the competitors arrive, the first-mover is likely to have advantages in the competition because its products will have gained familiarity, besides other factors like brand loyalty established distribution systems. For instance, being a first-mover in soda production, Coca-Cola was able to develop its brand and build a reputable force in the beverage industry. The biggest problem with the strategic trade policy is that government support is often subject to political manipulation, and certain interest groups can usurp gains with no benefit to the consumer.

Cultural Motives: Cultures are created and modified through interactions. Consequently, the exposure of citizens of a country to other people and products from other nations can gradually alter the culture of a country. In this line of thought, the undesirable cultural influence caused by interaction with certain products can cause the government to block imports. The United State, for instance, is often perceived as a threat to national cultures due to its influential entertainment, consumer goods, and media.

Methods of Promoting Trade

Other than specialization and increased business potential, international trade has been linked to greater efficiency and greater opportunity for foreign direct investment. As described by Wang et al. (2012), foreign direct investment implies the amount of money invested by individuals and corporations in business as well as in research and development (p. 627). By attracting foreign direct investment, economies can grow in their level of competitiveness and production efficiency. For the receiving government, foreign direct investment is a way through which expertise and foreign exchange can enter the country, further stimulating economic growth. Given the importance of international trade to governments as well as consumers, various states adopt steps such as subsidies, export financing, foreign trade zones, and individual government agencies to encourage international trade.

Subsidies: For our purposes, a grant can be defined as financial assistance to domestic companies in the form of low-interest loans, cash payments, product price supports, or tax breaks. The primary intention of applying subsidies is to increase the advantage of the local companies and compete favorably with international firms. According to the World Trade Report (2006), export subsidies generate incentives for producers to supply products for export rather than for domestic use within a country (p. 56). This can be a drawback since the withdrawal of supply from the local market can lead to increases in the local price of the products. Simultaneously, due to increase in supply to the world market world prices of the product is likely to fall. If the re-importation of products from the world market into the domestic market is prevented, the result is a wedge between the world price and the local price. All the same, the impact of export subsidies on the domestic country is contrary, with local consumers having to pay higher for a product that they are prevented from sourcing from the world market as a lower price.

Export Financing: In export financing governments promote exports by assisting companies to finance their trade activities through loans as well as loan guarantees. Since funding is crucial, especially for entrants into the export business, the philosophy informing export financing is that by offering loans that would have otherwise been accessible of loans at reduced rates, the government can encourage export business, and enhance the competitive edge of the company. In the United States, for instance, export financing is offered by Export-Import Bank.

Foreign Trade Zones: A foreign trade zone is an area where goods can be landed, handled, reconfigured or manufactured, and even re-exported without going through customs authorities. The goods only become subject to the prevailing customs duties when they are moved to consumers in the country within which the zone is located. Organized in areas with various geographical advantages for international trade such as Singapore, Stockholm, Hong Kong, and Gdańsk, the primary purpose of the foreign trade zone is to eliminate seaport, border, and airport barriers to trade, often associated with complex customs regulations and high tariffs. Lowering customs facilitates international trade since customs duties elevate the cost of production as well as the time it takes for the products to reach the market. In the United States, for instance, the lowered customs duties are balanced by the created jobs.

Special Government Agencies: As a way of encouraging international trade, various governments create agencies charged with the promotion of exports. The agencies organize trips for business persons and trade officials to visit other nations and institute trade offices in other countries. These organizations, such as the Japan External Trade Organization not only promote exports but also occasionally encourage imports.

Trade Unions: Trade unions today play a critical part in moulding the lives of workers, though their influence has considerably diminished over the recent past. The union is often mandated to negotiate conditions and contracts with employers on behalf of the employee. Though the roles of trade unions are numerous, some being more prominent than others, the trade unions core functions can be summarized as social, militant, regulative, and fraternal. In this regards, the militant function implies the struggle that is likely to occur as the union tries to get employers to increase worker remuneration or to address the grievances presented by employees. The main issue addressed here is whether the perceptible incompatibility between industrial relations and employees can be resolved. Resolution of the conflict between trade unions and employers is only possible given the assumption that both parties share the objectives of employee development, fairness, and equity.

Unions need to acknowledge that collective bargaining may require some redesigning to include a lesser component increasing pay than in the past, and should push for involvement in skill-based and flexible elements of pay. Industrial relations remain the principal way of maintaining industrial order and should focus on approaches to avoiding and resolving disputes and conflicts.

Methods of Restricting Trade

Most governments restrict international trade to protect domestic companies from external competition, mostly from multinationals. One such method of restriction is through tariffs. Tariffs are taxes levied on imported products as they enter or leave the country. Tariffs can be categorized as import, transit and export. Import duties are further subcategorized into ad valorem, specific, and compound. An ad valorem tax is levied as a percentage of the cost of the imported good while specific tariff is levied according to each unit (by weight or number). On the other hand, the compound tax is levied as a percentage of the stated price of the imported product, and partly as a specific fee for each unit. According to Wild and Wild (2013), besides protecting local producers and employees from foreign competition, tariffs perform the function of raising revenue for the government (p. 232). Though domestic producers gain from import duties as they are shielded from foreign competition, this protection comes at a cost to the consumer. The consumers often have to pay more for some imported goods. Also, though the producers benefit from the lowered foreign competition, the lack of competitiveness may lead to laxity and reduced overall efficiency.

Quotas and Voluntary Export Restraints (VER): Quotas and Voluntary Export Restraints (VER) are restrictions directed towards the quantity of certain goods that can be imported into a country (Wild & Wild, 2013, p. 143). The quota limitation is usually imposed by allotting import licenses to a group of firms or individuals. The reason for issuance of allowances is to protect domestic producers by limiting the entry of certain goods into the country. This limitation enables local producers to maintain a considerable market share in to offer decent prices for their products within the country. Like in tariffs, the gain by producers comes at a cost to consumers, who have to contend with high prices caused by impeded competition. A VER, on the other hand, is a unique type of quota imposed by the exporting country upon the request of the government of the importing country. If the domestic producers do not limit production, consumers gain because of lowered prices from the increased supply. Other measures that can be applied by governments to restrict trade include embargoes, content requirements, administrative delays and even currency controls. Ultimately, the reasoning behind restrictions is to protect local companies from foreign competition and to ensure that the economic interests of the country are not ignored during the international trade.

Conclusion

Despite the theoretical benefits associated with international trade, governments are not always eager to openly welcome free trade at the expense of domestic businesses. This paper examined the reasons behind the government interventions to protect some of their local industries and the methods they use to offer such protection. Though it is evident from the analysis that many of the strategies like tariffs, the quota system, and subsidies appear to support domestic producers, this support often comes at a cost to the consumer, who often has to pay more for goods. Measures must be put in place to ensure that even in protecting the domestic companies, healthy competition that is important for production efficiency and reasonable pricing of products is not compromised.

References

Chaney, T. (2008). Distorted gravity: the intensive and extensive margins of international trade. American Economic Review, 98(4), 1707-21

Girma, S., Görg, H., & Wagner, J. (2009). Subsidies and exports in Germany, evidence from enterprise panel data. Applied Economics Quarterly, 55 (3), 175-195

Martincus, C. & Carballo, J., (2008). Is export promotion effective in developing countries? Firm-level evidence on the intensive and the extensive margins of exports. Journal of International Economics, 76, 89-106

Wang, C., Hong, J., Kafouros, M., & Wright, M. (2012). Exploring the role of government involvement in outward FDI from emerging economies. Journal of International Business Studies, 43(2012), 655-676

Wild, J., & Wild, K. (2013). International business: The challenges of globalization. Upper Saddle River, NJ: Pearson Education, Limited

World Trade Report. (2006). Exploring the links between subsidies, trade and the WTO. World Trade Organization

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HR Metrics Workforce Analytics Business

HR Metrics and Workforce Analytics

In the current business environment where competition and technological advancement is on the rise, it is imperative for the HR function to be on the forefront in enhancing the success of the business. One of the ways in which the HR function can help improve the work-ability of the business is by ensuring the workforce and the activities that relate to it bring the maximum returns to the company. As such it is pivotal to use the HR metrics and job analytics to track the return on investments channeled to the workforce. In the recent past, organizations have realized the importance of a balanced scorecard for the HR department (Smith, 2013). It is through this score card that the organizations have adopted the use of HR metrics and job analysis to measure the efficiency and the effectiveness of the workforce and use this information in decision-making.

One of the reasons that have led to an increased interest in HR metrics is the use of the data obtained from the metrics and job analytics towards improving the effectiveness of the company. The data obtained from the metrics acts as a basis in which the management can make major decisions for the improvement of the company and achieving the company’s goals. As such, the data acts as a thermostat that can measure the current situation and use the information in decision-making (Smith, 2013). Since the workforce comprises a major asset to the company, it is critical to ensure that decisions based on HR have facts that back them.

HR Metrics Workforce Analytics Business
HR Metrics Workforce Analytics Business

Additionally, organizations have realized that the use of technology in analyzing the HR function has the ability to save time and resources. Essentially the human resource department has the obligation of ensuring that the value of money and time spent in HR activities has major returns for the company. Therefore, it is their duty to provide the management with essential information that they can use to make decisions based on efficient use of the organization’s time and money (Sullivan, 2003). Using the HR metrics and job analytics, the HR department is able to track down the changes and trends in the workforce variables. Further, organizations can monitor the effectiveness of the activities based on people, process, and productivity. Thus it becomes easy to measure the value of time and money spent by the organization in the HR department.

The cost of HRIS is usually a debatable issue among organizations. However, it is important to realize the benefits that come with the use of HRIS in the HR department. For instance, when the HR uses the metrics and job analysis to analyze the cost per hire, the organization gets the facts on the amount it is using to hire. As such, it gives the organization the opportunity to find out whether the amount of money used in hiring is spent on the right people. In essence using the job analytics during the hiring process saves the company the situation where it could hire the wrong people for the job and consequently reducing the turnover rate in the organization (Sullivan, 2003). Primarily this justifies the cost of HRIS.

Additionally, the HR function spends the highest money in most organizations in terms of pay and allowances. Therefore, it is imperative for the organizations to ensure that they reap the most from the services offered by the workforce. Through the use of HRIS, the department can account for the training ROI in which the company spends money (Sullivan, 2003). The training returns on investment ensure that there are maximum financial gains from a training function to the employees. Without the use of this HRIS the company may make losses in training.

It is a significant loss to lose a valued employee by the organization. Therefore, it is important for the organization to have a functional HRIS that keeps track of the employees’ performance and improvements (Smith, 2013). For instance, using the manual employee tracking system may be compromised due to the human nature of being faulty. Such instances may lead to increased turnover and talent mismanagement. Thus a good HRIS saves the company all these losses.

References

Smith, T. (2013). HR analytics. Create-Space Independent Publishing Platform

Sullivan, J. (2003). HR metrics, the world-class way. Peterborough, NH: Kennedy Information.

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Innovation Entrepreneurial Development

How far do you agree with the statement: “It is not absolutely vital for an Entrepreneur to actually own resources when starting their businesses”

Innovation and entrepreneurial development today has become very significant attribute that is an important element for acquisition of economic and industrial development that includes regional growth and employment generation that relies on entrepreneurial growth. Entrepreneurs are thus seeds of industrial development that ultimately leads to increased employment opportunities, increased standard of living, and income of per capita and enhance profitability of government in terms of sales tax, income, import, export duties and balanced regional growth (Bacanak, 2013). The word entrepreneur is acquired from French verb enterprendre that means to carry out and it reflects about who carry out the risk of novel corporation and process of develop entrepreneurship.

In an organizational term entrepreneurship is the process that includes range of actions of an entrepreneur who is always seeking for something novel and bring in new ideas into profitable opportunities by accepting the risk and uncertain conditions in an organization. By becoming an entrepreneur several challenges need to be managed as there are certain qualities that are crucial if any individual wants to become stressful in business ventures and some of these attributes are being formed in different parts to acquire better personality and enhance this over the time (Singh and Hess, 2017). There are range of risks associated while initiating and running own business, as certain crucial of them are; under capitalization, poor management, lack of planning and marketing misjudgement.

However, I am in favour of this term that for an entrepreneur it is not vital to own resources when starting a business, the important thing that matters is the skills and creativity of an entrepreneur that helps in attaining success in business. Resources for any business can be arranged but having suitable talent is important, as an entrepreneur’s mind revolves around opportunities and new ideas (Lamine, Mian and Fayolle, 2014). There is a continuous effort required to seek for niche and undertake the risks in them, entrepreneurship includes assessment of existing business workflows and devise ways to carry them out efficiently.

Owning a resource is not so important than to optimally utilize the resources to create efficient processes and it is an outcome of undertaking new ideas that gives innovative goods or services. Apart from this an entrepreneur need to have patience to assess the result of any new idea and the risk involved in new system. So, a detailed evaluation and observation of entrepreneurial process reflects that creative thinking is a must have skills for creation of new ideas as it facilitates an individual to develop interesting process and attain entrepreneur can have a competitive edge. Moreover, would like to state that imagination and creativity is vital traits of an entrepreneur i.e. outside the box thinking that helps in coming up with something new, interesting and attain success for future (Holland and Garrett, 2015). Hence, this is apparent from evaluation that entrepreneurs need to look towards new aspects of traditional business than owning a resources and it could be in the form of transforming method to manufacture any product or deliver service to user that mainly helps in creating niche and has great potential for business.

Is innovation manageable – or just a random process? What factors are critical to success?

Innovation means different things to various people but usually it includes application of new ideas, products or process for some reasons. There has been significant change occurring in the way process of innovation is being understood and in this context development is being made in the manageability of areas of business activity in recent time period. In current extremely competitive business environment where innovation is must, there is a need to put better perspective and efficiency in innovation is must, due the present technological advancement in society needs of customers and expectations have been consistently changing so business organizations must innovate.

In this context it is evident to state that merely having good ideas is not enough and it takes lot of time and resources as the idea must bring something new. As stated by Parmentier and Mangematin, (2014) innovation needs to be organic and it has to mesh with core of company and stay focused on prioritizing smaller deliverables to keep the feedback loop tight and come up with new ideas. It is apparent that innovation is manageable but the actual work begins with fact that it should be managed in any other corporate function and it is similar as any other business activity. Indeed it is true that innovation is the work to know rather than doing and the prime motive today is to enhance and manage innovation with appropriate techniques and main strategy should be to build the innovation in corporation is attaining insight and work in creative manner to achieve framed objectives.

Innovation is like a sky with its horizons defined and it can only be widening with consistent hard work (Bessant, 2013). One of the way through which innovation can be managed is to have creative people in team who can produce ideas that are worthwhile and novel and must be consistently updated to foster innovation, assess the gaps and get adequate resources to manage. By motivating people towards innovation maximum of benefits can be acquired as main problem today persist within many corporation in terms that people with ideas need to possess strong sense of association and responsibility once the ideas are formed and it also help in finding out the details and implement ideas. Hence, it is vital to endorse employees not just bring new ideas but to also enforce them and attain maximum of benefit.

The other strategy that could be used to inspire innovation and share information by arranging people and have an creative management that can be applied in business, it is apparent that people develop new structure that are needed to redesign to carry out on daily basis and bring something new (Bacanak, 2013).  Innovation is all about overcoming risk and encourages innovation as corporation are performing well and there is a need to attain leading position to foster innovation. When any new product or services is introduced it might be acceptable in the market but not until risk of failure is taken and success is achieved. For attaining novel heights in business it is crucial to encourage the product innovation in several fields but one of the misconceptions prevails in terms of creating the new product and this where organizations need to focus a lot on research and development. As, it is easy for other business units to copy any new product or services so it is vital to encourage innovation in several field and maintain confidentiality to an extent possible.

One of the prime challenges in managing innovation exists in terms of meeting the change that innovation brings with it and growth of it within corporation helps in managing business risk that needs to be managed with ingenuity and focus on several aspects of innovation. As Chiaroni and et.al., (2016) have stated that one need to be prepared for execution of novel plan and must be willing to do research test as it has to be something that would consistently help in educating one self and learn, above all to manage the manage innovation it is crucial to give attention on below mentioned aspects;

  • First get the culture ready for innovation
  • Make sure that people know about innovating
  • Manage competency
  • Develop long term strategy
  • Seek out for good ideas
  • Show leadership

Knowledge workers and creative professional are largely autonomous and it helps in negotiating inter-dependencies among all professionals contributions. In order to manage innovation efficiently it is vital to give attention on design thinking process as it is an effective collaborative approach to assess and resolve issues. This is apparent that this competitive environment one need to undertake complexity and uncertainty that enhances everyday and the only way to sustain is by regular innovation through creative ideas.

Innovation can be managed through capturing and fully utilizing firm’s collective expertise as it constitutes the raw material for innovation that gives competitive edge to sustain in volatile business environment. In this current era innovation is the final way that helps in landing in success and achieve long term growth that can only be acquired through optimum utilization (Chesbrough, Vanhaverbeke and West, 2014). Hence, I would like to state that innovation can be managed and it is not just a random process. I am in favour that innovation system needs to be managed efficiently and it is not a process but a strategy that needs regular monitoring and adequate plan so that the expected results from it can be acquired. In an organization to innovate and manage it successfully it is crucial to promote and work with people as this will facilitate in acquisition of framed business objectives and inspire people to take risks and understand whatever they are doing is not the best and it helps in building an innovative organization.

Innovation Entrepreneurial Development
Innovation Entrepreneurial Development

You are the business owner of a small technology start-up firm. You have your initial business plan is place but realise that you need to take measures to protect your ideas and concepts

An intellectual property right (IPR) is thus a legal right that is based on relevant national law which includes particular type of intellectual right and it comes into existence only when the needs of relevant IP law is being accomplished following the prescribed procedure. The small technological firm that I am undertaking gives attention on managing intellectual property right which is a valuable asset in current business environment and for this my corporation gives attention on maintaining patents, trademarks, trade secrets and copyright of our services (Stiglitz, 2014). This is mainly done to safeguard organizational ideas, technology and product that enables in making investment in technology, the prime areas of IPR management are;

  • Patents – Implementing patents in the organization helps to provide security to disclose the technology to business partners without losing control of technological services. A unique and proprietary patent helps in increasing valuation of company and it is one of the key elements to exit strategy that acts as collateral for financing of business. Being functional in Europe technological start ups have to face certain difficulties in obtaining patent but have acquired the same.
  • Copyright – This IP law helps the company to precisely get associated with safety of artistic works and it also covers software coding, layout of website, database and many other works. It mainly protects the expression of idea rather than the idea itself and the right simply come in the work when it is created.
  • Registered right for design – This right helps the new technological firm to attain an opportunity to register a 3D design and is probably best thought of as filling the gap among copyright and patent protection. Unlikely copyright there is a test of designs merit that should be overcome and must represent individual character and these rights gives owner long term exclusivity in terms of design (Dosi and Stiglitz, 2014).
  • Maintaining trade secrets – This aspect is challenging however it requires no filling or registration that could therefore be very inexpensive means to secure intellectual property. It helps in maintaining secrecy by software coding and exploitation through licensing is not as common as patent licensing as it need to be conveyed to others for value.
  • Creating trademark – Although the business operations is right now small but have adequate company logo and name that act as a source identifies and is easily being protected by registration and trademark. This mainly helps in creating transferable rights that brings additional value in business and it is dependent in customer recognition for maintaining quality level.

For tech start-ups in particular, it is also worth noting that software and process patents are difficult to how can you monitor and protect your business from copycats?

One of the most important parts in dealing in any rival business is to understand the competition and accordingly develop strategy to safeguard business unit from competitors and most importantly copycats, in this regard the small technology gives precise attention on below mentioned aspects;

  • Business uses confidentiality agreement – While discussing any potential trade secrets or disclosing any kind of valuable intellectual property the written confidentiality agreement needs to be managed (May, 2013). These would clearly help to outline the ownership and usage rights to manage intellectual property being disclosed or provided to utilize.
  • Mark all property with adequate notices – In the technological firm while making any written material confidentiality is being maintained or proprietary would not completely deter someone that is determined to steal it, as it would help to discourage theft. All the services of company have intellectual property right with adequate notices and designations such as copyright and trademark symbols notices.
  • Copyrights are registered wherever possible – Most of the content of website are actually safeguarded to some extent under the copyright laws, but registering intellectual rights brings additional layer of security that offers some kind of legal recourse and it helps in saving the property from being stolen (Hagedoorn and Zobel, 2015). Copyright protection is swift and relatively inexpensive that makes it suitable for small business units with registered patent aspect.
  • Be careful on social media – Workforce in the corporation uses social media many of the time unknowingly or even knowingly release proprietary business information and intellectual property on some kind of open source forums this leads to increase fraud cases. There are chances that competitors might hack information from social networking sites and many of the times breach occurring from these sites provides a back door access to proprietary databases and other confidential information of company (Williams, 2013). So, the technological firm pays much attention on management of confidential information in suitable manner and safeguard business from competitors.

From the above accomplished discussion it is apparent that intellectual property rights provide numerous benefits as well as in acquisition of monetary gains. Such property provides financial incentives and helps in managing economic conditions of world that has become better and more emphasis is being given on managing intellectual property rights in better manner. Especially in developed country like UK IP rights play an important role in overall development of economy and undertake as large as two thirds to evaluate total assets of nation that can be traced back to bring some more than intangible assets for business.

It is evident from several secondary research also that business corporations that possess intellectual property as their assets have more earned more revenue than companies that do not have any intellectual property (Bently and Sherman, 2014). Some renowned economists also stated that by strengthening intellectual property rights maximum of benefits can be acquired to strengthen economic situations and these rights are precisely suitable to manage products and services that can be utilize to implies that even though an individual might claim that have an IPL right on any product that will also hinder any person from using such products.

Intellectual property right helps the small technological firm to assess efforts of an individual and accordingly strategy is being formulated for specific condition that has got IPR in business and any of the services can be easily used.  Moreover, it should also be kept in consideration that copyrights and patents in business does not create monopoly but it simply towards reward management for people who have assessed that new things helps in attaining monetary rewards for long term and make remuneration for their efforts and way intellectual property rights create monopolies.

Innovation – Explain to a skeptical entrepreneur the benefits of creating a business plan

Developing business plan help in identifying potential issues and opportunities your business might face, avoid penalty, fines and other legal issues that adapt to changes in the market place and helps in expanding business operations. For entrepreneurs prior to invest in any business it is crucial to develop a business plan that will provide those answers and it will also facilitate in organizing potential plans that includes aspects of legal, marketing, legal, human resources and financial resources which is need to carry out a business process. Some of the prime benefits of creating plans are as mentioned below;

  • Business always stays on the designed strategy – It is very much challenging for any business plan to stick to the strategy throughout the daily routine and interruptions. So by using developing business plan it would be convenient to summarize major aspects of business and keep it as a reminder that states about in and outs of business (Finch, 2016).
  • Business objectives will be clear – By using the plan it would be easy to define and manage precise measurable business objectives that states about web visitors, sales, margins or bring new product that helps in acquisition of success for long terms.
  • Educated guesses will be prominent – BY using plan one can refine the educated guesses about things like what would be the potential market, overall sales, cost of sales, drivers of sales, business and leads processing (Sugathapala and et.al., 2015).
  • Priorities will make more sense – Apart from this strategy adequate strategy also helps in making priority for important factor that involves growth of business, financial conditions and management. By using this plan one can frame foundation for attributes and enhance business strategies.
  • It helps in understanding interdependencies – By using business plan one can keep an eye on the needs that took place in order to manage conditions, as one should have time for product release to match with the testing need testing schedule so that business plan could be valuable in terms of organizing the work on track.
  • All the milestones can be tracked – Designing business plan will help entrepreneur to keep an eye of all the dates and deadline and it is crucial for valuable strategies even for an individual to manage everything easily (Serraand Kunc, 2015).
  • Entrepreneur will be delegating – An adequate business plan helps to develop who is responsible for what and every important task has to be manage by an individual who is in charged to keep the plan on track.
  • Managing team members and tracking outcomes will be easy – So many individual understand the need of having regular team members review and plan could be a great format for getting things done in written manner and follow up the difference between anticipations and outcomes with course corrections.
  • Cash flow can be managed better – None of the business can afford to mismanagement of cash and simple profitability is rarely the same as cash. An adequate cash flow plan is great way to associate together educated guesses on sales, cost, assets, expenses and debts to pay.
  • Course corrections will help in business from flopping – By developing business plans adequate way is formed to be proactive for business activity and not reactive. With this one does not have to wait for things to happen but only follow up is needed to track the results and make corrections in courses (Bently and Sherman, 2014). However, it is a myth that business plan is supposed to be predicted in future instead it helps in setting up of expectations and frame assumptions to manage contingency business conditions.
  • Helps in identifying problems – A detailed business plan helps in addressing several areas to initiate business process and carry out the research to include in business plan and learn suppositions for marketing budgets, cost of materials, licensing, labour costs and other crucial aspect of business to incorrect. Entrepreneurs by analyzing this prior to inception of business to make adjustments and committed funds, business plan includes adequate budget that helps in managing cash flow.
  • Provides exit strategy – In addition to this offering benchmark for success helps in developing business that frames realistic criteria to shut down business and prevent money from bad conditions. A business failure could be very emotional and owners need to mostly switch objective in terms of reality and appropriate numbers tell that business is untenable to make decision and fails to safeguard from losing more money from investors than it is actually needed.
  • Minimizing legal issues – One might need state local or federal licensing that helps in operating business efficiently and one need to pay taxes adequately for this using suitable forms and undertake business in proper format (Kuratko, 2016). An entrepreneur might need to attain a federal employer identification number as various internal revenue service’s helps in making classification and operate under different rules as business plan helps in addressing financial and legal issues that is included in operating a company to avoid any kind of penalty or loss of business.

Above all it can be concluded from this discussion that developing a precise business plan helps entrepreneur to evaluate the future opportunities and accordingly undertake precise course of action. By committing the plan all other options are efficiently managed and organization is aligned to give attention on different activities. This plan would help in assigning milestones to precise individuals and monitor the progress and it can be easily disseminated with readers assisting to ensure a more collaborative plan is produced. However, despite of several benefits there are certain deficiencies as well in business plan as once it is being submitted it becomes a static document. In this regard super dynamic nature of start up this plan become serious misfit and market conditions and strategies leads to financial projections and it keeps on changing that is quick.

References

Bacanak, A., 2013. Teachers’ Views about Science and Technology Lesson Effects on the Development of Students’ Entrepreneurship Skills. Educational Sciences: Theory and Practice, 13(1), pp.622-629.

Bently, L. and Sherman, B., 2014. Intellectual property law. Oxford University Press, USA.

Bessant, J., 2013. Innovation in the twenty-first century. Responsible innovation. Managing the responsible emergence of science and innovation in society, pp.1-26.

Chesbrough, H., Vanhaverbeke, W. and West, J. eds., 2014. New frontiers in open innovation. OUP Oxford.

Chiaroni, D., and et.al., 2016, June. How incumbents manage waves of disruptive innovation: an empirical analysis. In ISPIM Innovation Symposium (p. 1). The International Society for Professional Innovation Management (ISPIM).

Dosi, G. and Stiglitz, J.E., 2014. The role of intellectual property rights in the development process, with some lessons from developed countries: an introduction. Intellectual property rights: Legal and economic challenges for development, 1.

Finch, B., 2016. How to write a business plan. Kogan Page Publishers.

Hagedoorn, J. and Zobel, A.K., 2015. The role of contracts and intellectual property rights in open innovation. Technology Analysis & Strategic Management, 27(9), pp.1050-1067.

Holland, D.V. and Garrett, R.P., 2015. Entrepreneur start-up versus persistence decisions: A critical evaluation of expectancy and value. International Small Business Journal, 33(2), pp.194-215.

Kuratko, D.F., 2016. Entrepreneurship: Theory, process, and practice. Cengage Learning.

Lamine, W., Mian, S. and Fayolle, A., 2014. How do social skills enable nascent entrepreneurs to enact perseverance strategies in the face of challenges? A comparative case study of success and failure. International Journal of Entrepreneurial Behavior & Research, 20(6), pp.517-541.

May, C., 2013. The global political economy of intellectual property rights: The new enclosures? (Vol. 3). Routledge.

Parmentier, G. and Mangematin, V., 2014. Orchestrating innovation with user communities in the creative industries. Technological Forecasting and Social Change, 83, pp.40-53.

Serra, C.E.M. and Kunc, M., 2015. Benefits Realisation Management and its influence on project success and on the execution of business strategies. International Journal of Project Management, 33(1), pp.53-66.

Singh, A. and Hess, T., 2017. How Chief Digital Officers Promote the Digital Transformation of their Companies. MIS Quarterly Executive, 16(1).

Stiglitz, J.E., 2014. Intellectual property rights, the pool of knowledge, and innovation (No. w20014). National Bureau of Economic Research.

Sugathapala, I., and et.al., 2015. Quantifying benefits in a business portfolio for multi-operator spectrum sharing. IEEE Transactions on Wireless Communications, 14(12), pp.6635-6649..

Williams, H.L., 2013. Intellectual property rights and innovation: Evidence from the human genome. Journal of Political Economy, 121(1), pp.1-27.

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Currency Crisis Cause and Resolution

Currency Crisis

Currency crises are rapid and unpredictable decline in the value of the currency of a nation. The crises are often more severe if the country involved uses a fixed exchange rate than if the country has a flexible exchange rate since the monetary authority will be forced to abandon the fixed rate. Currency crises usually increase by selling pressure of a currency and can only be remedied through devaluation or establishing a new exchange rate at a sufficiently depreciated level. Several countries have experienced currency crises which are caused by different factors. One of the most severe currency crisis occurred in Mexico between 1994 and 1995. The crises led to huge massive economic crises that forced the Mexican government to seek assistance from the United States and the International Monetary Fund (IMF) (Carbaugh, 2016). The essay herein will, therefore, examine the sources of currency crises in Mexico and the specific resolution and also including some other countries that have experienced currency crisis such as Russia and Turkey.

Mexico Currency Crisis (1994-1995)

Before the 1994 Mexico currency crises, the central bank of Mexico maintained the value of peso within a depreciated band of four percent every year against the U.S. dollar. In 1994, the Central bank decided to issue debt that is linked to the US dollar as a way to reduce interest rates on debts. The debts kept rising until it exceeded the central bank’s falling foreign exchange reserves which led to the currency crises. Despite the government responding by devaluing the currency by 15 percent, the crises continued until 1995. The continued selling pressure on the currency forced the monetary authorities to withdraw support in foreign exchange markets as foreign reserves of the Bank of Mexico fell. Although the severity of the Mexican currency crisis in 1994 was unprecedented, Mexico’s history on exchange rate policy has been characterized by the duration of both fixed exchange rate and flexible exchange rates (Ötker et al., 1995). The devaluation registered by Mexico is the largest depreciation of the currency of a country within one year.

When the currency crises occurred, there was little information about the possibility of its occurrence. The crises were somehow similar to the debt crisis that occurred between 1982 and 1983. Several assessments have been conducted to establish the main cause of the situation, and most of them reveal that it was contributed by the exchange rate policy of Mexican monetary authorities. The other cause identified through the assessment is the excessive use of short maturity tesobonos for deficit financing. Tesobonos is a peso-dominated bond which is issued by the government of Mexico and the coupons associated with it are indexed to the United States dollar. The Mexican government issued the tesobonos as a way to convince the international investors to buy Mexican debt that is exempted from risks associated with currency exchange. The investors are therefore immune to the effects of changes in the dollar value of the peso between the period of purchase and redemption. The risk associated with the change of currency is therefore carried by the Mexican government and not the investors. For instance, if the value of peso depreciated during the period of purchase and redemption, the Mexican government and the taxpayers would be liable for the losses.

According to the international economic statistics that were available before the crises, the Mexican government had the chance to evade the crises if the monetary authorities had information about the actual state of Mexican reserves. At the beginning of 1994, the Mexican reserves were at around $25 billion, but towards the ends of the year, the reserves had reduced to about $5 billion (Tavlas, 1997). The existing reserves were insufficient to meet the existing financial obligations. Furthermore, a default was considered to be a perilous move for the stability of the international financial markets. The deficit, therefore, led to the currency crisis. The International Monetary Fund (IMF) failed to provide the Mexican authorities with information about the decline in the reserves. Following the crisis, the IMF has resolved to closely monitor the financial reserves of developing countries to avert the occurrence of a currency crisis. The IMF has also resorted to providing early warning indicators to avoid the occurrence of a currency crisis in any nation.

Currency Crisis
Currency Crisis

Mexico has a great deal of the forms of direct capital investment in 1994, but it was not sufficient. The government was receiving massive amounts of money through stock-brokers who were motivated by the quick returns which were about 20 percent annually. The investment bankers and the stock-brokers were ready to exit Mexico as soon as the crisis begun thereby increasing the magnitude of economic damage. The troubles of Mexico extended from insufficient reserves, inability to service the debts, and incapability to generate profits on the equity capital. The crises also contributed to other social and political problems such as the Chiaspas rebellion at the beginning of 1994 (Tavlas, 1997). The political issues made the foreign investors take their money out of Mexico thereby broadening the implications of the crisis. The implications of the crises forced the Mexican government to seek assistance from the International Monetary Fund and the United States government.

According to Gil-Diaz (1998), the currency crisis in Mexico was contributed by the execution of the privation of the public enterprises and the deregulation of the Mexican banking sector. He concluded that the confiscation of the banking sector followed by subsequent privatization in 1991-1992 is the cause of the currency crisis. The Mexican monetary authorities made the deregulation of the banking sector without due consideration about the implications that it would have on the federal reserves. The decision later resulted in an increase in unpaid debts to the banks. The currency was then triggered by the Mexican government in 1994 because of the economic decisions. The crisis was determined by the fragility of the banking system and not the macroeconomic factors as indicators by other researchers. Three years before the crisis, the Mexican peso was overvalued which also resulted in economic pressure. The monetary policy that was passed by the Mexican authorities was inappropriate because the Federal Reserve was raising the interest rate while the Bank of Mexico maintained the existing rates. It, therefore, made the investors leave increasing pressure on the reserves.

The Mexican currency crisis had a regional effect through a contagion in various markets such as Brazil, Argentina, Asia, and Thailand; the effect was referred to as the “Tequila effect.” The crisis affected both the stock market and the foreign exchange market. Only the countries that had high economic fundamentals were exempted from the effects of the crisis. The Mexican government responded to the adverse situation by requesting for loans from different countries and international bodies among them being the United States, the International Monetary Fund, and the Bank for International Settlements. In the end, Mexican government managed to secure a loan totaling to $50billion that was used to meet the financial obligations. However, the move by the government to ask for loans received criticism from some of the European authorities that considered the move to be a moral hazard.

The Mexican government continued to resolve the crisis by implementing a severe adjustment program. Some of the strategies in the program included reducing the public spending, increasing the value added tax from 10 percent to 15 percent, and raising the prices of all the public goods and services. The program worsened the situation in Mexico as the Gross Domestic Product dropped by 6.5 percent and inflation increased by 50 percent. Furthermore, the banking system collapsed thereby forcing the government to use public funds in the rescue. The government also changed the exchange rate from fixed to flexible. Later, a law was passed that would only allow the government budget to be approved if the deficit is zero to prevent further lending. The initiative had positive implications in the GDP because of the increased exports of products to the United States. Through the Banking Fund for the Protection of Savings, the government was able to bail out the banking system that had collapsed.  Years later, the government decided to sell the Mexican banks to the international financial groups. Presently, there is only one Mexican bank as foreign investors own the rest.

One of the international institutions that played a role in rescuing Mexico was the International Monetary Fund. The IMF is responsible for providing loans to nations that are in financial deficit. The loans are usually issued following an agreement between the nation and IMF. The IMF responded to the crisis by providing a loan to the Mexican government through the U.S Treasury as a way to protect the foreign banks and other existing financial institutions. The various government also played a vital role in rescuing the currency crisis among them being the United States and Canada. The U.S. has had a long outstanding relationship with Mexico, and it is also the largest trading partner. Although the Federal Service Bank contributed to the crisis by increasing the interest rate, the United States assisted the Mexican government with loans to end the crisis. On the other hand, Canadian government through the North American Framework Agreement (NAFA) contributed funds beyond what had been collected at the time of occurrence of the crisis.

Russia Currency Crisis (1998)

Russia was severely hit by a currency crisis in 1998 that left both the economic and financial system in crisis. According to Gerry & Li (2002), the financial crisis begun in August 1997 when the Russian government defaulted on its domestic financial and economic systems. The duration was characterized by an increase in inflation, high levels of unemployment, and shanking of the economy. Although the crisis lasted for a short period, Russian who was living in the urban areas were severely hit. Globalization and uncontrolled speculation in the financial markets is one of the leading contributors to a currency crisis in the developing countries. The rise in the amount of capital that is flowing in the international financial systems as a result of globalization has had negative impacts on the economies of different countries. The crisis is caused by failures of certain sectors of the economy in the countries involved which later spreads to other countries through contagion and spill-over effects. For instance, the Asian currency crisis spread through contagion and spillovers to other countries such as Thailand in 1997 and later to Russia in 1998. Therefore, Asia is one of the causes of the Russian crisis although research shows that there is a little linkage between the crises that hit the two countries.

The Russian crisis can also be attributed to both political and economic factors. The Russian government triggered the crisis by selling the GKOs and OFZs which denominated debt instruments and coupon bonds after the fall of USSR. The Russian government then started experiencing problems that had negative implications on both the financial and the economic systems. The Russian government responded by converting the Ruble dominated instruments into US dollar-dominated Eurobonds to alleviate the risks involved. The Russian government continued borrowing from external sources that later raised concerns of its default exposure as foreign investors decided to cut their connection with the Russian debt, equity, and commodity market because of lack of confidence. The withdrawal of investors from Russia economy reduced the government capability to finance the debts thereby causing a currency crisis. According to the reports provided by the Economic Intelligence Unit (1998) in 1998, 30 percent of the Russian expenditure was used to service the short-term debts that the government had secured from other governments and international institutions. Therefore, high levels of debts are one of the causes of a currency crisis in Russia.

Russian Currency crisis was also caused nu the fall in the value of the Rule, weak banking system, and the reduction in the level of the foreign reserves. The Russian government tried to remedy the situation through the Central Bank by pegging the Russian Ruble to the US dollar with a narrow band. Several other studies have been conducted to establish the causes of the Russian financial crisis which had serious consequences to the economic and financial systems of other countries such as Turkey, Ukraine, and Moldova. The devaluation of the Russian Ruble also had negative implications on the Russia banks regarding assets and liabilities. There was also a reduction in the foreign exchange contracts because of the increase in the value of liabilities. Furthermore, the Russian government debts such as bonds and treasury bills that were used assets were reduced to worthless assets because of the defaults. As a result, most banks were closed which made a majority of the Russians to lose their savings. Lastly, the crisis caused political fallouts and frequent demonstrations of workers who were demanding a pay rise (Margolin, 2000).

The Russian currency crisis was resolved after intervention by the International Monetary Fund (IMF) which has the mandate of monitoring the economic and development policies enacted by various nations. The other responsibilities of the international body are to lend money to countries that are experiencing financial challenges and provision of technical assistance regarding research and training to countries that are in need. The IMF intervened in the Russian crisis by lending money that would help the government to escape the financial collapse. Despite the IMF lending money to the Russian government, the situation was already out of control since the money could only be used to take care of the short-term debts but not offer a permanent solution to the difficult situation.

For a country to survive a financial crisis, it requires a plan for the aid to be used in a manner that will help escape the situation. It is an excellent idea for the international body to issue financial aid, but the Russian government was not prepared to use the funds to evade the crisis. The government had lost control of the situation, and therefore it required more than financial aid to help the situations. The Russian government responded by coming up with a plan that would ensure the crisis does not happen again. The funds issued by the IMF were used in rescuing the banking system which plays a vital role in maintaining economic growth in a nation.

Conclusion

A currency crisis is one of the challenges that has been experienced by several countries especially the developing countries. Among the countries that have been affected by currency crisis include Mexico between 1994 and 1995, Russia in 1998, and Thailand in 1997. The crisis has severe implications on the economic and financial systems of an economy. The causes of the crisis vary from one nation to another, for instance, the crisis in Mexico was caused by reducing the level of Federal Reserve while excessive borrowing caused the Russian crisis. Once the countries are caught in such difficult situations, it the responsibility of the international bodies and other government to assist in escaping the situation. International Monetary Fund played a vital role in helping the above-discussed countries escape the harsh implication of currency crisis. The United States and Canada through the North American Framework Agreement (NAFA) assisted Mexico financial aid in helping rescue the situation.

References

Carbaugh, R. (2016). International Economics. Boston, MA: Cengage Learning.

Economist Intelligence Unit (1998). Russia: Country Report. London. pp. 42.

Gery, C. J. & Li, C. A. 2002. Vulnerability to welfare change during economic shocks: evidence from the 1998 Russian Crisis. Working Paper. University of Essex, Department of Economics, Discussion Papers.

Gil-Díaz, F. (1998). The Origin of Mexico’s 1994 Financial Crisis. Cato Journal, 17 (3), pp. 303-313.

Margolin, R. (2000). The Russian Financial Crisis: from craze to crash. The Stern Journal, New York University.

Ötker, I., Pazarbaşioğlu, C., International Monetary Fund, & International Monetary Fund. (1995). Speculative attacks and currency crisis: The Mexican experience. Washington, D.C.: International Monetary Fund, Treasurer’s Dept. and Monetary and Exchange Affairs Dept.

Tavlas, G. S. (1997). The Collapse of Exchange Rate Regimes: Causes, Consequences and Policy Responses. Boston, MA: Springer US.

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Brand Management Reputation Marketing

Reputation and Brand Management

Title: Reputation and Brand Management. In the recent years, some companies have been paying little attention to managing their reputations. Although the image of some companies is at risk, they do not see the risk posed by the loss of reputation (Issacharoff & Rave 2013). The BP oil spill accident was one of the largest environmental crises to happen in the recent times because it affected both the marine life and the human sector (Issacharoff & Rave 2013). Although this accident may not have affected the company directly in terms of financial performance, it lost part of its reputation. The company spent a lot of money on restoring the undermined image, although its efforts were not largely successful. The reputation of BP was made even worse by the responses given by the CEO Tony Hayward (Economist, 2018). In particular, the CEO tried to shift blame to other parties without taking full responsibility and making the necessary efforts to curb the situation.

Despite some of the bad remarks made by Hayward, when the accident happened, the company tried as much possible to curb the situation. Even James Ross, the Chairman of BP in the U.S., decided to go to the scene and estimate the level of the accident in order to see how the damage can be minimized. In just two hours after the accident had occurred, BP opted to send skimming team to the accident scene (Du, 2012). In addition, after 24 hours, BP had had already sent about 36 specialists to the site, which was a crucial step due to the fact that it reduced damage which has been caused to the company’s reputation. The measures taken succeeded in one way or the other. The company should have focused further on how to deal with the situation instead of spending a lot of money on PR exercise.

Volkswagen Company in 2015 was involved in emission scandal, whereby EPA issued a statement stating the company had greatly violated the Air Act (Ewing, 2015). According to the report released by EPA, it is clear that their TDI engines emitted a few poisonous gases after conducting a laboratory test, whereby in the real sense it was not the case because these engines emitted about 40 times more poisonous gases (Benjamin, 2018). The scandal affected the reputation of the company because the diesel emissions from the engines made by Volkswagen are not currently considered suitable due to not being environmentally friendly.

In order to solve the problem, Volkswagen came up with ways of reducing the diesel emissions. First of all, the company acknowledged the fact that they were involved in manipulating the tests conducted to investigate the vehicle emissions. The CEO himself apologized to the customers by admitting that the scandal had completely damaged the public trust and customers as a whole (Zhang et al., 2016). In addition, the company decided to pay the fine as result of damage caused by the diesel emissions, although it was costly to the whole organization. The effort made by the company to compensate for the damage caused by the pollution proved to be important because after some time, Volkswagen started to regain its lost customers sales, brand management and Reputation.

Brand Management Reputation Marketing

Also, Wells Fargo scandal was one of the biggest financial crimes committed ever, whereby the bank intentionally created more than 2 million fake accounts (Corkery, 2013). According to the report conducted in 2016, it was clear that this scandal inflicted a lot of damage to the Company because its reputation was largely damaged. For example, negative perception towards the bank increased from 15% to 52% after the criminal activity was revealed, which means that the bank had to witness decreased loyalty and the number of customers as result of the scandal (Corkery, 2013). Most of the customers started leaving the bank because it had already lost its reputation.

Brand Management Dissertation
Brand Management Dissertation

Further, the management of the bank tried as much as possible to restore its image at all cost. For example, after the occurrence of the scandal, it decided to pay compensations to some victims. The bank wasted significant costs on settling the damage done to its reputation by the scandal. For example, it had to pay $ 185 million in order to settle the charges resulting from the manipulation (Mims, 2017). In addition, the bank paid 570,000 customers, whom the company claimed to have taken car loans without their permission (Mims, 2017). After making efforts to compensate the affected customers, the bank’s activity started to alleviate the situation. For example, it managed to win back the faith of some of the loyal customers. In addition, the reputation of the company started to improve to some extent because it made efforts to rectify the fault.

References

Corkery, M. Wells Fargo Struggling in the aftermath of Fraud Scandal. The New York Times, 2013.

Du, S., & Vieira, E. T. Striving for Legitimacy through Corporate Social Responsibility and Brand Management: Insights From Oil Companies. Journal of Business Ethics, 110 (4), 2012: 413-427.

Economist. “A year on, Wells Fargo cannot shake off its mis-selling scandal”, 2018.

Ewing, J. Volkswagen says 11 Million Cars Worldwide are Affected in Diesel Deception. The New York Times, 2015.

Issacharoff, S., & Rave, D. T. The BP Oil Spill Settlement and the Paradox of Public Litigation. Louisiana Law Review 74(2) 2013: 397.

Kervyn, N., Chan, E., Malone, C., Korpusik, A., & Ybarra, O. Not All Disasters are Equal in the Public’s Eye: The Negativity Effect on Warmth in Brand Management Perception. Social Cognition 32(3) 2014: 256-275.

Mims, J. H. The Wells Fargo Scandal and Efforts to Reform Incentive-Based Compensation in Financial Institutions. NC Banking Institute 2(1) 2017: 429.

Preston, Benjamin. “Volkswagen Scandal Tarnishes Hard-Won US Reputation as Green Company.” The Guardian, 2018.

Zhang, B., Veijalainen, J., & Kotkov, D. (2016). Volkswagen Emission Crisis: Managing Stakeholder Relations on the Web. In Webist 2016: Proceedings of the 12th International conference on web information systems and technologies. Volume 1. Scitepress, 2016

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