The Business Review Journal

Vol. 8 * Number 1 * Summer. 2007

The Library of Congress, Washington, DC  *  ISSN 1553 - 5827

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Comparative Study of American and Japanese Auto Industry: General Motors Versus Toyota Motors Corporations

Dr. Hailu Regassa, Colorado State University-Pueblo

Dr. Ahmad Ahmadian, Colorado State University-Pueblo

 

ABSTRACT

The automobile industry is undergoing rapid technological transformation and is currently faced with increased deregulation, accelerating globalization, and ever-changing consumer tastes. Likewise, firms in the industry are exploring new avenues to cope with demand in the market place and stay competitive.  The U.S. automakers are struggling with an ever-diminishing market share and have so far failed to bridge the gap with their Japanese counterparts on quality, reliability, product design, production, and cost efficiency. General Motors (GM), for instance, incurred a massive loss of $8.6 billion dollars, the highest ever, in 2005 alone and plans to eliminate 30,000 jobs or more and close or scale back operations in 12 facilities over the next two to three years. A misstatement in its accounting records could drive up its total loss to a whopping $10.6 billion. Ford Motors also reported record losses of $1.5 billion from its North American operations and Daimler Chrysler A.G., while performing slightly better than its peers in the U.S., fared far short of expectations relative to its Japanese competitors.  In contrast, their Japanese counterparts, Honda, Nissan, and Toyota Motors all recorded hefty growth in profits while their stock prices soared during the same period. Toyota Motors, the second largest automaker, so far, said that it will post record earnings for its fiscal year ending on March 31, 2006, as its sales grow across all key regions. Toyota is actually expected to overtake GM in market share in the upcoming year of its operations for the first time. While GM currently has a worldwide total market share of 26 percent followed by Toyota, the latter, however, commands a large market capitalization of almost $173.6 billion as of December 31, 2005, more than 14.3 times as much as that of GM. This paper will make an attempt to review the strategies pursued by the major automobile manufacturing companies in the U.S. and Japan in general, and GM and Toyota in particular, in their quest to enhance their dominance in the market place and streamline their costs in order to improve their financial performance and stay competitive.

 

Predicting Job Performance from Individual Characteristics among R&D Engineers

Dr. Robert T. Keller, University of Houston, Houston, TX

 

ABSTRACT

A study of 288 engineers from four corporate research and development (R&D) organizations investigated hypotheses generated from person-job models of individual characteristics as longitudinal predictors of job performance.  As hypothesized, higher levels of self-esteem, an innovative orientation, and job involvement, and a lower level of need for clarity predicted one-year later supervisory ratings of job performance.  Implications for the improvement of person-job models of performance for knowledge workers are discussed.  Why are some engineers better performers than others?  This question is important because the presence of productive employees can positively influence the effectiveness of others, and because advanced economies have become knowledge-based whereby engineers engaged in R&D share similarities with other knowledge workers such as physicians, lawyers, and accountants (Shalley, Zhou, & Oldham, 2004).  Organizational researchers have generally studied individual characteristics such as personality traits and job attitudes to predict job performance (Simonton, 2003).  The conceptual foundation of the present study was based on recent person-job models that help to specify the conditions within which selected personality traits and job attitudes can best predict performance in particular jobs such as that of engineers (Kristof-Brown, Zimmerman, & Johnson, 2005; Tett & Burnett, 2003; Shalley et al., 2004; Simonton, 2003).  Kristof-Brown et al. (2005) suggested two conceptualizations of person-job fit.  The first is the fit between the demands of the job and the abilities of the employees, whereby the knowledge, skills, and abilities of the employees are related to the requirements of the job situation.  This first conceptualization of person-job fit tends to emphasize the organization’s side as to how well the employee meets the employer’s job needs.  A second kind of person-job fit considers how the needs, desires, and/or preferences of the employees are met or satisfied by the jobs in which they work.  This second type of person-job fit tends to focus on the well-being, satisfaction, and level of adjustment of employees.  Both kinds of person-job fit are germane to the present sample of R&D engineers whereby the requirements for technical knowledge as well as innovativeness are valued by the employing organization, per the demands-abilities conceptualization. 

 

Wal- Mart and the Trap of Success:  An Organizational Ecology Perspective 

Dr. Elias G. Rizkallah, La Sierra University, CA

Dr. Nabil Y. Razzouk, California State University, San Bernardino, CA

 

ABSTRACT

This paper addresses the theoretical implications of corporate success on an  organization’s behavior, and the perception and response of rivals, consumers, and others in the corporate environment to that behavior.  More specifically, the paper examines the experience of Wal-Mart, whereby the giant retailer has been experiencing significant attacks from a number of constituencies in its environment.  Specific attention is given to the fact that much of the troubles ailing Wal-Mart were self inflicted and the result of the company excessive focus on short-term profit and growth goals and not enough attention given to anticipating and managing the response of its various relevant publics.    The paper then concludes with some specific recommendations for corrective action at Wal-Mart. The world economy has undergone radical change during the past two decades. Geographical and cultural distances have shrunk, technology development and globalization have changed how companies conduct their business. The result is vastly more complex and dynamic marketing environment for companies and consumers.  Along with this complexity, researchers and practitioners in all fields of inquiry have developed concepts and theories to explain and understand the dynamics of the new environment - the players involved, their behavior, power, performance, and relationships -- and suggested some requirements for survival and success. Emphasis was put on understanding the dynamics of the relationship among all the entities in the environment and the interdependency relationship that exist; and how such relationship may change over time as per the performance of each party.

 

Developing Virtual Team Problem-Solving and Learning Capability using the Case Method

Vu N. Tran, NDS Americas and Pepperdine University, CA

Hugo M. Latapie, NDS Americas, CA

 

ABSTRACT

Developing capable virtual teams is challenging but critical in today’s global economy.  Team-based problem solving and learning capability is a must-have characteristic of a high-performance virtual team.  This paper investigates the use of the case teaching method on virtual team development.  Research findings on the effectiveness of using this method to develop virtual team capability are mixed.  Negative findings include difficulties with (a) developing initial shared context for the case discussion, (b) maintaining team’s interest in case discussions, (c) guiding the learning process, (d) building up team momentum, and (e) ensuring team learns as they solve case problems.  Positive findings include (a) no observable degradation found in case-based virtual team learning, (b) team members developed more complete and thoughtful arguments, (c) virtual teams generated more ideas, and (d) more diverse opinions were developed and shared.  Proposed improvements included (a) development of richer case information, (b) development and discussion of cases from different cultural and social perspectives, (d) integration of learners to remote live cases, and (e) development of asynchronous case learning process.  We recommend few research areas for improving the case teaching method in virtual team environment. Developing highly capable engineering virtual teams is challenging but critical in today’s global economy.  Team-based problem solving and learning are essential characteristics of a high-performance virtual team.  This paper investigates the use of the case teaching method on virtual team development today. Specifically, we are interested in understanding the effectiveness of applying this method to team learning environments where team members themselves are not physically collocated (i.e., virtual teams).  Here, team members collaborated via computer-mediated systems such as email, instance messaging, groupware, and sometime POTS (plain-old telephone system). 

 

Patterns in High-Tech Firms Growth Strategies by Seeking Mass Mainstream Customer Adaptations

Dr. Bruce Buskirk, Pepperdine University

Dr. Stacy M. P. Schmidt, California State University, Bakersfield

Dr. David L. Ralph, Pepperdine University

 

ABSTRACT

This article summarizes the subjective insights the authors gained as a result of  in-depth interviews that were conducted of twenty business executives charged with directing strategic growth within their firm.  Each was asked, and then probed for the directions of growth they perceived to be open to their firm.  Furthermore this article examines the  Technological Life Cycles [TLC] and its six phases:  1.  Cutting Edge.2.  State of the Art (SOTA).3.  Advanced.4.  Mainstream.5.  Mature.6.  Decline.  In addition, it examined the paths to finding product niches in a “third wave” of market entry:1. Standardization.2. Technology convergence.3. Improved user interfaces.4. Improved “network” interfaces [plays well with other toys].5. Invisible security. In order for this to be successful, engineering must relinquish its control on product development.  Marketing needs to be  given rule over the NPD domain, which will allow them to be more effective in finding productive product niches. Growth by the five means listed above requires the cooperation of marketing and engineering in development.  This will require a cultural change in many firms.  In-depth interviews were conducted of twenty business executives charged with directing strategic growth within their firm.  Each was asked, and then probed for the directions of growth they perceived to be open to their firm.  The majority of this convenience sample of executives of heavily slanted towards middle sized electronics firms, but included some B2B services providers as well.  This piece summarizes the subjective insights the authors gained in this process. The process revealed the Technological Life cycle which consists of the following six stages: 1. Cutting Edge,  2.  State of the Art (SOTA), 3.  Advanced, 4.  Mainstream, 5.  Mature, and 6.  Decline.  These stages play a large role in the marketing of products and thus the strategic growth of the firms.  In addition, the study revealed the need for firms to find product niches in a “third wave” of market entry.  As a result, the following five paths for finding these product niches were examined: 1. Standardization, 2. Technology convergence, 3. Improved user interfaces, 4. Improved “network” interfaces, and 5. Invisible security.

 

Customer Perceptions of Attribute Importance in the Business-to-Business Environment

Ming Haw Leong, Centre for Nuclear Energy Research, Fredericton, NB, Canada

Dr. Jane Dunnett, University of New Brunswick, Fredericton, NB, Canada

 

ABSTRACT

Attributes used by organizational buyers in choosing their suppliers are studied, using a Japanese manufacturer of rubber flexible joints.  Surveying trade show participants indicated that quality was the most important attribute used to evaluate potential suppliers.  Follow-up in-depth interviews suggested which services provided by suppliers indicate quality to the customer. Findings were categorized into two quality dimensions: short-term (measurable, used as the decisive criteria) and long-term (immeasurable, focusing on the customer-supplier relationship). Most business-to-business (B2B) companies who want to expand into a new market should have a good understanding of that new market. Otherwise, their investment will be wasted or the return on their investment will be less than expected. While understanding the uncontrollable factors such as economics, societies, politics, and technologies are important, most companies concentrate on the operating environment such as the power of suppliers and buyers, possible substitute products, competitors, and most importantly, customers. In the B2B environment, most customers buy components or raw materials to manufacture products for end users or other organizational buyers. In order to be a supplier of an organizational buyer, the supplier must understand the needs or preferences of its customers. These needs and preferences can be categorized into attributes such as quality, price, and service. There are similarities between consumer and organizational buying behavior because both of them are affected by individual factors (Webster and Wind, 1972a). However, the complexity of organizational buying behavior (OBB) is high because it usually involves more than one decision-maker, with each one being influenced by the environment, organization, and individual factors. For a company to enter a new market or acquire new customers, the company must understand how customers evaluate their suppliers and how they choose or switch suppliers.

 

Energy Production Concerns: A Multi-Year Perspective

Dr. Jack A. Fuller, West Virginia University, Morgantown, WV

Robert Bessette, President, Council of Industrial Boiler Owners, Burke, VA

 

ABSTRACT

The authors analyzed data from a fluidized bed boiler survey distributed during the spring of 2003 to develop appropriate AFBC (Atmospheric Fluidized Bed Combustion) performance benchmarks.  The survey was sent to members of CIBO (Council of Industrial Boiler Owners), who sponsored the survey, as well as to other firms who had an operating AFBC boiler on-site. There were three primary purposes for the collection and analysis of the data contained in this fluidized bed boiler survey: 1. To develop AFBC benchmarks on technical, cost, revenue, and environmental issues. 2. To inform AFBC owners and operators of contemporary concerns and issues in the industry. 3. To improve decision making in the industry with respect to current and future plant start-ups and ongoing operations. In contrast to an earlier research paper which focused on operating data for a single calendar year, the current study analyzed data over a series of years. The authors analyzed data from a fluidized bed boiler survey distributed during the spring of 2003 to develop appropriate AFBC (Atmospheric Fluidized Bed Combustion) performance benchmarks.  The survey was sent to members of CIBO (Council of Industrial Boiler Owners), who sponsored the survey, as well as to other firms who had an operating AFBC boiler on-site.  In contrast to an earlier study of the authors, which focused on operating data for a single year (2002), this study analyzed data over a series of years. There were a total of 45 plants with 78 AFBC boilers included in the study. This represents a useable response rate to the survey of approximately 71 percent since there are approximately 110 operating AFBC units in the United States to whom the survey was directed.  Of the 45 plants, 17 were in the 1 - 39 MW (or 1 - 319 KPPH [thousands of pounds per hour steam]) range.  Of these, 12 used coal, two used gob, and three used wood or biomass as their primary fuel source.  There were 16 plants represented in the 40 - 99 MW (or 320 - 809 KPPH) range.  Of these, six used coal, five used culm (waste anthracite), four used gob (waste bituminous coal), and one used wood as their primary fuel source. 

 

Corporate Governance in China

Doreen M. McGunagle, Capella University

 

ABSTRACT

The financial crisis that overran Asia in the late 1990’s prompted most of the affected countries to make improved corporate governance a priority.  How has corporate governance changed in China since the financial crisis of the 1990’s? Analyze the current reforms of the businesses government on corporate governance. What is corporate governance? It is the determination of the broad uses to which organizational resources will be deployed and the resolutions of conflicts among the myriad participants in the organizations. Corporate governance involves the mechanisms and approaches that govern the way a corporation uses its resources so that stakeholders’ interest are taken into consideration and protected. Two areas in which corporate governance reform was mandated by Sarbanes-Oxley are the role of board of directors and financial reporting. Enacted July 30, 2002, the U.S. regulators passed a significant reform act which was the Sarbanes-Oxley Act of 2002, a U.S. federal law designed to protect investors by improving the accuracy and reliability of corporate disclosures. Corporate governance has become an important issue that today’s strategic decision makers must cope with (Coulter, 2005).  Senior managers have lead responsibility for crafting and executing a company’s strategy, it is the duty of the board of directors to exercise strong oversight and see that the five tasks of strategic management are done in a manner that benefits shareholders or stakeholders.  In watching over management’s strategy-making, strategy-executing actions and making sure that executive actions are not only proper but also aligned with the interests of stakeholders, a company’s board of directors has three obligations to fulfill (Thompson, Strickland, & Gamble, 2005).  Board members must ask probing questions and draw on their business acumen to make independent judgments about whether the strategy proposals have been adequately analyzed and whether proposed strategic actions appear to have greater promise than alternatives.

 

Valuing the Patent Risk Using the Finite Difference Method

Dr. Cherng-Shiang Chang, FRM, China University of Technology, Taipei, Taiwan

 

ABSTRACT

By using the real option approach, Backer (2006) investigates the impact of patent risk on firm values and research incentives.  The cost of engaging in litigation over intellectual property (IP) will be increased due to imperfect patent protection.  As profit rates rising up, may call for a lawsuit on infringing from the challengers, and lead to falling patent values.  Therefore, a trade-off between promoting innovative efforts and securing competitive market outcomes should be taken into account carefully.  In this article, we extend Backer’s model by employing the Ornstein-Uhlenbeck process for the cash flow rate to meet the real product specific lifecycle.  The resulting partial differential equations (PDEs) are so complicated that the bi-nominal tree technique originally applied by Backer (2006) fails to provide satisfactory results.  A novel finite difference method is then chosen and implemented to solve the problem numerically.  Patents and R&D projects can be regarded as a complex option on variables underlying the value of the project (Schwartz, 2004).  As acknowledged by Dixit and Pindyck (1994), patents are classic examples of real options: a patent holder has the option to develop certain types of products, or to license the technology, or to use it as an input for further research.  Once a patent is issued and valid, it grants the right to exclude others from using the technology.  Since enforcement is imperfect and costly, the right to exclude becomes the right to suit with some probability of success.  Empirical work shows that more valuable patents are more likely to be enforced through lawsuits against the alleged infringers (Lanjouw and Schankerman, 2001).  If the patents are imperfect protected or found invalid, the property right will have evaporated.  The risk that a patent will be declared invalid is substantial. 

 

Stock Market Performance Analysis for Three European Emerging Stock Markets

Dr. Timotej Jagric, University of Maribor, Maribor, Slovenia

Dr. Boris Podobnik, University of Rijeka, Rijeka, and Zagreb School of Economics and Management, Croatia

Dr. Vanco Balen, University of Zagreb, Zagreb, Croatia

Dr. Marko Kolanovic, Bear, Stearns & Co. Inc., Equity Derivatives Strategy, New York

Vita Jagric, University of Maribor, Maribor, Slovenia

 

ABSTRACT

The paper provides a stock market performance analysis for three European emerging stock markets: Croatia, Slovenia, and Bosnia and Herzegovina. We show that in 2005 the overall level of South-East stock market performance exhibited extraordinary results. Additionally, using monthly observations we perform a detailed study of the performance of Croatian and Slovenian mutual funds and Bosnian investment funds. The risk/return measures of funds are assessed using the Sharpe ratio, Treynor ratio, Information ratio, Jensen’s alpha, and Appraisal ratio. Funds are ranked according to their risk-adjusted performance. Furthermore, we analyze the timing ability of the funds using the quadratic regression of Treynor and Mazuy. Over the last few years, the mutual fund industry in transition economies has exploded. In the process of promotion mutual funds industry Slovenia and Croatia are in the forefront among transition economies, while on the other hand, the Bosnian market is still in its infancy. This paper studies the mutual fund industry in these countries in the first years of its development, i.e. in the period which is characterized by important flows to mutual funds. This period is interesting, since this is the period when the stock market seems not to be efficient (Podobnik et al., 2006; Jagric et al., 2005).  The mutual fund industry is among the most successful recent innovations. It is larger in countries with stronger rules, laws, regulations, and specifically where mutual fund investors’ rights are better protected. The industry is also larger in countries with wealthier and more educated population, where the industry is older, trading costs are lower and in which defined contribution pension plans are more prevalent (Khorana et al., 2005). We think that the trends in Slovenian, Croatian, and Bosnian mutual fund industry reflects these findings. Most research on mutual fund industry has been performed on US mutual funds. Recently there have been some studies of non-US mutual funds. In 2002 Otten and Bams performed cross-country analysis of European funds which includes Germany, France, Italy, the UK, Spain, and the Netherlands. In this paper we evaluate the performance of mutual funds in Slovenia and Croatia, and investment funds in Bosnia and Herzegovina.

 

Empirical Tests for Bubbles in the Asian Emerging Stock Markets

Dr. Ako Doffou, CFA, Sacred Heart University, Fairfield, CT

 

ABSTRACT

This paper investigates empirically whether emerging Asian markets stock prices can deviate from their fundamental values. Because standard tests are subject to size distortion, a more robust statistical test for non-cointegration due to Taylor and Peel (1998) is used here to test periodically collapsing emerging Asian markets stock price bubbles. The test results refute the bubbles hypothesis While policy shocks are negligible and market structures are stable in developed financial markets, emerging markets are affected by the pace and sequencing of policy reforms. Investors lost confidence in emerging markets following the East Asian financial crisis which started in July 1997 in Thailand and affected currencies, stock markets, and other asset prices in several Asian countries called East Asian Tigers. The Asian financial crisis was triggered by Japanese commercial banks that reduced their exposure to Asia in response to emerging troubles in Thailand and South Korea. Japanese banks had been severely weakened by the collapse of the real estate and stock market bubbles in Japan in 1990. Because Japanese banks are the largest lenders in Asia and the key creditors in Thailand, they signaled the change in sentiment to other foreign commercial banks that also withdrew their loans. Pressures on the Thai currency led its government to impose some mild controls on capital outflows. Then, there was a large current account deficit, low foreign exchange reserves relative to short term foreign currency debt and an overvalued currency. To speculators, Thailand looked like Mexico in 1994 and the speculative pressure started to build up in early 1997. Those mild controls on outflows did not work in 1997 and the currency collapsed in July 1997. After a futile defense of the effective peg, the collapse of the Thai currency led to a massive foreign reserve bleeding which triggered the Asian crisis that soon engulfed Indonesia, Malaysia and South Korea. These capital outflows triggered a devaluation in Thailand in mid 1997, but not in Korea until late 1997, due to the different exchange rate regimes in these countries.

 

An International Perspective on Internal Controls in Small and Medium Enterprises

Dr. Meena Chavan, Macquarie University, Australia

Dr. Anil S. Lamba, Maharashtra, India

 

ABSTRACT

This paper reports the results of an empirical examination of cultural influences on judgments of Australian, Indian and Malaysian SME managers in relation to whistle blowing as an internal control mechanism. Australia serves as a proxy for the Anglo-American cluster of countries comprising the U.S., UK and Canada, while India and Malaysia represent the Asian cluster. The study draws on cultural characteristics and differences among these countries to formulate hypotheses that Australian managers are both more likely and more accepting of engaging in whistle blowing as an internal control mechanism than Malaysian and Indian managers. Data was gathered through a survey questionnaire administered to samples of SME managers that have significant operations in all three countries. The questionnaire comprised two whistle-blowing scenarios, and used both single-attribute and multidimensional attribute measures of managers’ judgements. The results support the hypotheses about differences in Australian compared to Indian and Malaysian managers’ judgments. The findings of this study suggest that enterprises that aim to improve effectiveness in their control systems or achieve similar levels of reliability across divisions in various countries need to implement control systems that are compatible with cultural values. Specifically, the results suggest that compared to India and Malaysia, whistle blowing as an internal control mechanism is likely to be more effective in Australia. The findings of this study contribute to developing a comparative model of global whistle-blowers. This global model is likely to be useful to managers of both local and multinational enterprises.  The key role that employees can play in delivering effective corporate governance is changing. It is high time this is recognized and the multinational SME’s globally introduce policies to protect the whistle blowers who play a vital role in delivering effective corporate governance through their brave acts of whistle blowing.

 

The Global Downfall of Corporate Tax Rates

Dr. Dennis C. Stovall, Grand Valley State University

David P. Centers, Grand Valley State University

 

ABSTRACT

Competition for corporate tax dollars has increased dramatically around the world. Countries are competing with one another for a limited amount of tax revenue from corporate profits. They are reducing corporate tax rates to attract investment from companies within their borders as well as investment from abroad. This competition started in the United Kingdom and has spread across Europe and other industrialized nations.  The United States, however, has not followed this trend. Many within the U.S. support the reduction of corporate taxes to become more competitive with other industrialized nations. At the end of 2006, the U.S. ranked second behind Japan for having the highest corporate tax rates within the Organization for Economic Cooperation and Development (OECD). Ireland, in contrast, has used a reduction in tax rates to its advantage. It has one of the fastest growing economies in Europe, far outstripping the French, whose tax rates have essentially remained unchanged from 1993 to 2006. Ireland has also developed an effective network of double taxation agreements with 44 other countries with the purpose of stimulating foreign investment, but this is not to say that Ireland is not without its problems. Inflation has become a real fear on the Emerald Isle with its fast growing economy. Others feel that a reduction in corporate rates is not necessarily a good idea. Some fear that with a drop in rates there could be a corresponding drop in revenues from those taxes. This has been proven to be false in most instances. Governments will usually accompany a drop in rates with a tightening of tax rules and regulations, thus making it more difficult for companies to reduce their tax liabilities through deductions and credits.  Companies have also tried to use this competition among governments to their own advantage by pitting one country’s rates against another’s. After one government lowers its rates, companies will lobby another government to stay competitive in the global market place and lower its rates as well. A radical new idea has been introduced in the United States. Bills in the House of Representatives and the Senate have proposed the elimination of corporate income taxes all together.

 

The Broad Dimensions of Doing Business Abroad

Dr. Coen Heijes, University of Groningen, The Netherlands

 

ABSTRACT

Management literature on cross-cultural cooperation generally adopts a standardized approach that is based on the classic dimensions of researchers such as Hofstede (1980, 1991) and Trompenaars (1993). In this exploratory study, we show the importance of a broader perspective and discuss the ambivalences and ambiguities inherent in cultural identity. Both researchers and expatriate training centres usually view cooperation across borders from a standardized, positivist point of view. A set of fixed dimensions is generally used to describe the possible pitfalls of foreign-entry modes and cross-border cooperation. Countries are described and categorized across these dimensions and practical advice is provided, depending on where and how the respective countries differ in their cultural dimensions (Hofstede, 1980, 1991; Laurent, 1983; Adler, 1991; Trompenaars, 1993; Schneider & Barsoux, 1997). All in all, it is an approach that is extremely popular, offering both scientists and managers a handy toolbox for doing business abroad. However, it is an approach that in its standardization blatantly ignores the lessons anthropology has to offer us on the deeper layers of each specific society.  This is a pity, because in fact management thinking has a lot to gain from anthropology, but only if it really pays attention to what anthropology is about. Anthropology is not a way of thinking that categorizes nations or interactions among people along worldwide dimensions. In fact, anthropological literature hardly pays any attention at all to these dimensions that are so popular in management thinking. Anthropology is all about history, educational processes, language and colour issues and generally uses time-consuming field work instead of quantitative questionnaires to describe and analyze cultures.

 

The International Financial Reporting Standards and the United Kingdom Tax Implications

Dr. Maria Luisa Fernández de Soto Blass, CEU University of San Pablo, Madrid, Spain

 

ABSTRACT

On 13 June 2000, the Commission adopted [MSOffice1] Commission Regulation (EC) No 1725/2003 of 29 September 2003, adopting certain international accounting standards in accordance with European Parliament and Council Regulation (EC) No 1606/2002, in which it was suggested that all listed companies should be required to prepare consolidated accounts in accordance with international accounting standards beginning in 2005. The International Accounting Standards (IAS) are adopted by the London-based International Accounting Standards Board, on which the Commission will be represented. These common rules will be known in the future as the International Financial Reporting Standards " (IFRS). The Finance Act ("FA") of 2004 and the two Finance Acts of 2005 adopted in the United Kingdom  contain legislation aimed at ensuring that those companies choosing to adopt the International Accounting Standards (IAS) to draw up their accounts will receive broadly equivalent tax treatment with those companies that continue to use the UK GAAP (UK Generally Accepted Accounting Practices[MSOffice2] ).  The legislation also covers those companies that choose to adopt certain new UK Accounting Standards (new UK GAAP) which are very similar to IAS.  There are changes in the UK tax legislation affecting  IAS1, FRS, Reporting financial performance, IAS 11, construction contracts, IAS8/FRS3, Errors and changes of basis, IAS 16, property, plant & equipment, IAS 17, leases,  IAS 18, Renue, IAS 19, employee benefits, IAS 20, Government grants & SSAP 4. IAS 21, currency accounting, FRS 6 and 7, Business combinations, IAS 36, Intangible assets/impairment, IAS 38 ,intangibles, IAS 37, Provisions, IAS 39, Financial instruments measurement, IAS 40, investment property, IAS 41, biological assets, and the issues raised by IFRS 4, Insurance contracts. This paper is the result of research that the author is conducting at The Institute for Fiscal Studies, Ministry of Economy and Finance, [MSOffice3] Spain, CEU University of San Pablo, Madrid, Spain, and at University of Leeds, Leeds, United Kingdom during 2006 and 2007. International Accounting Standards (IAS) are often referred to as the International Financial Reporting Standards (IFRS). In this paper, the term "IAS" is used for ease of reference.

 

Global Tourism Winners: How Countries and Companies Succeed in Tourism

Dr. Paul Kauffman, National Institute for Governance University of Canberra, Australia

 

ABSTRACT

The paper examines changes in international travel destinations since 1990, and factors which account for high tourism growth including key economic and social data and policy interventions, in order to identify elements of a model which analyses outstanding tourism performance.  It was found that the highest performing large tourism countries were in Asia and south Eastern Europe. The methodology used was to analyse changes in national tourism numbers and income since 1990, and relevant explanatory factors, including the policy approaches of high performing countries, in order to identify factors that make for tourism excellence. What elements constitute global best practice for national tourism growth? Data published by the United Nations World Tourism Organisation, the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) allow rigorous study of economic dimensions of tourism and what makes for high net tourism growth in particular localities. The paper examines the extent to which such data can inform policy and investment decisions. It considers countries where tourism income exceeds US $5 billion per annum. All are mixed economies. About 21 of these countries are members of the OECD. The remainder have high economic growth and in some cases democratic government (1). The paper examines growth in receipts from international tourism between 1990-2005 and growth in international arrivals, on a country by country basis. Growth in national per capita gross domestic product, correlations between economic growth and tourism growth and relevant factors such as comparative national average incomes are examined to consider the following questions: 1. Which countries have recorded the highest growth in tourism numbers. 2. Which countries have recorded the highest growth in international tourism income. 3. What is the correlation between growth in numbers and growth in income 4. Which countries attracted higher than average growth from high net yield tourists. 5. What factors assist in attracting high net yield tourists (Case studies are used to identify and analyse varying national approaches) 6. How is tourism growth related to general economic growth, for example, how does GDP growth and average per capita incomes correlate with growth in tourism income.

 

Global Tourism Winners: How Countries and Companies Succeed in Tourism

Dr. Paul Kauffman, National Institute for Governance University of Canberra, Australia

 

ABSTRACT

The paper examines changes in international travel destinations since 1990, and factors which account for high tourism growth including key economic and social data and policy interventions, in order to identify elements of a model which analyses outstanding tourism performance.  It was found that the highest performing large tourism countries were in Asia and south Eastern Europe. The methodology used was to analyse changes in national tourism numbers and income since 1990, and relevant explanatory factors, including the policy approaches of high performing countries, in order to identify factors that make for tourism excellence. What elements constitute global best practice for national tourism growth? Data published by the United Nations World Tourism Organisation, the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) allow rigorous study of economic dimensions of tourism and what makes for high net tourism growth in particular localities. The paper examines the extent to which such data can inform policy and investment decisions. It considers countries where tourism income exceeds US $5 billion per annum. All are mixed economies. About 21 of these countries are members of the OECD. The remainder have high economic growth and in some cases democratic government (1). The paper examines growth in receipts from international tourism between 1990-2005 and growth in international arrivals, on a country by country basis. Growth in national per capita gross domestic product, correlations between economic growth and tourism growth and relevant factors such as comparative national average incomes are examined to consider the following questions: 1. Which countries have recorded the highest growth in tourism numbers. 2. Which countries have recorded the highest growth in international tourism income. 3. What is the correlation between growth in numbers and growth in income. 4. Which countries attracted higher than average growth from high net yield tourists. 5. What factors assist in attracting high net yield tourists (Case studies are used to identify and analyse varying national approaches).

 

An Analysis of Business Leaders in Thailand

Dr. Sinee Sankrusme, Ramkhamhaeng University, Bangkok, Thailand

 

ABSTRACT

The competitive problems facing business at present have changed in nature compared with the past.  Business leaders encounter competition in their businesses at the global level, which in turn poses a challenge for administrators both in the present time and in the future, specifically how to manage to make business survive and grow in a sustained manner. Currently, business is faced with the task of selecting methods that will simultaneously ensure an increase in productivity in management, a better level of customer response and a reduction in costs. In addition to quality, innovative ideas, an effective response to customers’ needs, and costs, it is necessary to reduce the time in bringing a product to market, the time in responding to customers and enhance the level of customer service. A business leader needs to have strength, flexibility, and agility in order to ensure the continued survival of the organization, which challenges his or her capacity for business leadership. Business leadership has an impact on working at the personal level, the group level and the organizational level. It is interesting, therefore, to analyze how the aspect of business leadership plays a role in supporting the working performance of groups and organizations, thereby enhancing efficiency in terms of organizational working performance, creating satisfaction, facilitating self-adjustment in the workplace, engendering a proper working atmosphere and leading to the need for achievement at work. Business leadership plays a central part in understanding group behavior, for it is the business leader who usually provides the direction toward goal attainment. Therefore, a more accurate predictive capability should be valuable in improving group performance. A major breakthrough in our understanding of business leadership came when we recognized the need to include situational factors. Business leadership, in other words, is a very complex phenomenon. How would you describe an effective business leader? There are as many aspects as there are answers to this deceptively simple question. Everyone wants to become a better business leader. Business leadership is a special case of interpersonal influence that gets an individual or group to do what the business leader wants done. There are many types of business leaders. However, this study classifies three types of business leadership.

 

Global Tourism Winners: How Countries and Companies Succeed in Tourism

Dr. Paul Kauffman, National Institute for Governance University of Canberra, Australia

 

ABSTRACT

The paper examines changes in international travel destinations since 1990, and factors which account for high tourism growth including key economic and social data and policy interventions, in order to identify elements of a model which analyses outstanding tourism performance.  It was found that the highest performing large tourism countries were in Asia and south Eastern Europe. The methodology used was to analyse changes in national tourism numbers and income since 1990, and relevant explanatory factors, including the policy approaches of high performing countries, in order to identify factors that make for tourism excellence. What elements constitute global best practice for national tourism growth? Data published by the United Nations World Tourism Organisation, the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) allow rigorous study of economic dimensions of tourism and what makes for high net tourism growth in particular localities. The paper examines the extent to which such data can inform policy and investment decisions. It considers countries where tourism income exceeds US $5 billion per annum. All are mixed economies. About 21 of these countries are members of the OECD. The remainder have high economic growth and in some cases democratic government (1). The paper examines growth in receipts from international tourism between 1990-2005 and growth in international arrivals, on a country by country basis. Growth in national per capita gross domestic product, correlations between economic growth and tourism growth and relevant factors such as comparative national average incomes are examined to consider the following questions: 1. Which countries have recorded the highest growth in tourism numbers. 2. Which countries have recorded the highest growth in international tourism income. 3. What is the correlation between growth in numbers and growth in income.4. Which countries attracted higher than average growth from high net yield tourists. 5. What factors assist in attracting high net yield tourists (Case studies are used to identify and analyse varying national approaches) 6. How is tourism growth related to general economic growth, for example, how does GDP growth and average per capita incomes correlate with growth in tourism income.

 

An Analysis of Business Leaders in Thailand

Dr. Sinee Sankrusme, Ramkhamhaeng University, Bangkok, Thailand

 

ABSTRACT

The competitive problems facing business at present have changed in nature compared with the past.  Business leaders encounter competition in their businesses at the global level, which in turn poses a challenge for administrators both in the present time and in the future, specifically how to manage to make business survive and grow in a sustained manner. Currently, business is faced with the task of selecting methods that will simultaneously ensure an increase in productivity in management, a better level of customer response and a reduction in costs. In addition to quality, innovative ideas, an effective response to customers’ needs, and costs, it is necessary to reduce the time in bringing a product to market, the time in responding to customers and enhance the level of customer service. A business leader needs to have strength, flexibility, and agility in order to ensure the continued survival of the organization, which challenges his or her capacity for business leadership. Business leadership has an impact on working at the personal level, the group level and the organizational level. It is interesting, therefore, to analyze how the aspect of business leadership plays a role in supporting the working performance of groups and organizations, thereby enhancing efficiency in terms of organizational working performance, creating satisfaction, facilitating self-adjustment in the workplace, engendering a proper working atmosphere and leading to the need for achievement at work. Business leadership plays a central part in understanding group behavior, for it is the business leader who usually provides the direction toward goal attainment. Therefore, a more accurate predictive capability should be valuable in improving group performance. A major breakthrough in our understanding of business leadership came when we recognized the need to include situational factors. Business leadership, in other words, is a very complex phenomenon. How would you describe an effective business leader?

 

Development of Financial Institutions in Transition Economies: The Importance of Financial Regulation:  A Croatian Case-study

Marta Bozina, University of Zagreb, Croatia

Josip Stajfer, University of Zagreb, Croatia

 

ABSTRACT

Numerous research and work papers discuss the positive correlation between a well developed financial system and a good overall economic performance in industrialized countries. In this paper we focus mainly on the particularities of transition countries and their financial sector – on a case study analysis of the current Croatian financial system development and trends in forming new financial institutions. In order to ascertain the role of financial intermediaries which are new to a transition economy, the paper analyses the structuring of investment funds and their economic management. We analyze the meaning of the structure of financial systems and the management of its markets, especially the capital market, in transition economies. We approach this issue with special regards to the Croatian capital market and investment funds as its component, analysing the existing unbalance in the financial system. The weakness of Croatian financial system is its structure symbolised by well-developed banks and by poorly developed market. As an EU candidate country, Croatia is undergoing substantive structural changes in the financial system. Strengthening of the non-bank financial institutions such as investment funds, would highly contribute to Croatia’s financial sector stability. These goals cannot be achieved without targeted state intervention through legal regulation in financial markets resulting in positive external effects – economic development and sustained prosperity.  Capital account liberalization is seen as an essential, and even inevitable, step on the path to economic development, analogue to the earlier reductions in barriers to international trade in goods and services. Modern financial markets are the structural basis of a well-performing liberal economy and the key vector of trans-border integration. The leading trend of financial globalisation and the increase in international financial flows challenge economic systems worldwide – demanding for a developed financial structure and a sound legal environment in which positive impacts of financial intermediation on overall economic performance can be expected.

 

A Study to Determine Compliance with Minimum Requirements for Quality Assurance in the College of Economic and Management Sciences at the University of South Africa

Dr. AG Oosthuizen, University of South Africa

Vadm PvZ Loedolff, University of South Africa

F. Hammann, University of South Africa

 

ABSTRACT

During 2004, the Council for Higher Education (CHE) commissioned an investigation into the provision of distance education in South Africa. The report revealed serious quality issues in distance education and recommended a set of quality criteria for distance education, some of which were labelled minimum standards that are non-negotiable.  During 2008, Unisa, as the only dedicated public distance education institution in South Africa, will in all probability be audited and measured against these minimum criteria.  The College of Economic and Management Sciences (CEMS) at Unisa consequently commissioned a research project to determine its compliance with these minimum standards.  The research entailed the evaluation of study material as well as opinion surveys amongst academic staff, students and tutors.  The evaluation of the study packages revealed pockets of excellence as well as examples of poor quality.  The results of the questionnaires were analysed statistically and revealed that certain issues that are deemed to be of critical importance have an extremely low level of satisfaction.  Unisa is one of South Africa’s newly merged institutions and is the only dedicated public distance education institution of higher learning in the country.  The Higher Education Quality Committee (HEQC) intends to visit the institution during May 2008 to do an audit of its affairs in terms of the Framework for Institutional Audits (CHE, 2004).  As part of its preparation for the audit, the CEMS commissioned a research project to determine the College’s compliance with a set of minimum standards published in a research report on distance education, commissioned by the CHE in 2004 (CHE, Policy Advice Report 2004:68). With the merging of Technikon SA, Unisa and the distance education section of the Vista University (VUDEC) in 1994, the University of South Africa became the only dedicated distance education institution for higher education in South Africa.  Although a distance education institution, Unisa is subject to the same quality regime and “common set of audit criteria” as the residential institutions of higher learning in the country (CHE, Framework for Institutional Audits 2004:6). In terms of the Higher Education Act 101 of 1997, the Council for Higher Education (CHE) has been assigned the responsibility for quality assurance in higher education in South Africa. 

 

The Impact of Projected Demographic Developments on Growth, Long-Term Real Interest Rates and Funded Pension Provision

Dr. Stefan W. Schmitz,  Oesterreichische Nationalbank

 

ABSTRACT

The following paper provides a critical analysis of the projected impact of demographic change on GDP-per-capita growth rates in the EU and on financial markets (in particular on long-term real interest rates). In addition, the paper argues that demographic change can have a large impact on funded pension provision. It does so by citing the results of a simulation study that integrates demographic developments in to a standard growth model, linking the results to the accumulation and annuitisation of funded pensions. Furthermore, the simulations introduce the possibility of the international diversification of investments and consumption as well as the integration of real capital markets.  The need to cut benefits in public pay-as-you systems is defended by the inevitable impact of demographic change on economic growth. At the same time, private funded pension provision is tax subsidized in many OECD countries (i.e. Austria), as if it were not subject to the negative impact of demographic change. This paper questions the implicit assumptions in the economic policy discourse that (a.) demographic change future economic growth relative to historical experience, and (b.) private pension provision would not be negatively affected by demographic change. Its impact on funded pensions is frequently discussed in economic literature on the basis of the “asset meltdown” hypothesis. According to this theory, an increase in the share of pensioners as a percentage of the total population (or relative to the working age population) triggers a decline in asset prices, as pensioners dissave in old age and, owing to this demographic development, there might be fewer economically active persons that actively save than dissvares who act as sellers in the capital markets. Following a methodical critique of this hypothesis, an alternative conceptual framework is employed. Within this framework, the main mechanisms are identified that are of cardinal importance for the interaction between demographic developments and funded pension provision. Since the two effects identified work in opposite directions, their relative significance within the conceptual framework is examined by means of quantitative simulations.

 

The Releasionship Between Service Failures, Service Recovery Strategies and Behavioral Intentions in Hotel Industry

Dr. Chen-Hsien Lin, Diwan College, Madou, Taiwan, ROC

Dr. I-Hua Lin, Lynn University, Boca Raton, FL

Cheng-Te Lin, National Chung-Hsing University, Taichung, Taiwan, ROC

 

ABSTRACT

This study explained the components of service recovery strategies used when service failure occurs in each situation in a hotel, and to link customer response to service recovery strategies to behavioral intention, as applied to the hotel industry in Orlando, Florida. The purposes of this study were to investigate the explanatory relationships between hotel guests’ sociodemographic characteristics and perceptions of (a) service failure; (b) service recovery strategies in each service failure situation; and (c) behavioral intentions; to investigate the impact of hotel guests’ sociodemographic characteristics and their perceptions of service recovery strategies used in each service failure situation compared with other strategies, in explaining behavioral intentions of hotel guests in Orlando, Florida.  One research questions and four hypotheses were developed for this quantitative, non-experimental study.  Several statistical measures, such as frequency distributions, reliability estimates, a correlational analysis, and multiple regression analysis were used for data analysis.  Future studies may try to strengthen internal validity of the study; conduct a replication study in other service industries in other city as Las Vegas. In marketing, the most important strategy is to maintain current customers and attract new ones (McCole, 2004).  As a result, most sellers attempt to deliver first-class service to customers because high-quality service is likely to enhance customer satisfaction (Simon & Kraus, 2005).  Numerous studies have shown a positive correlation between customer satisfaction and repurchase intention, which can lead to future profitability (Simons & Kraus, 2005).  However, failures, errors, mistakes, and complaints can frequently happen in the process of service delivery (Babakus, Yavas, Karatepe, & Avci, 2003). 

 

Fostering Critical Thinking in Business Courses: Pedagogical Innovations and Strategies

Dr. Kirti Sawhney Celly, Celly Services, Inc., Long Beach, CA

 

ABSTRACT

One of the key challenges facing business school educators in teaching at colleges and universities with large populations of minority and first generation college students is fostering critical thinking.  This paper documents a number of pedagogical innovations and strategies for motivating students to read and reflect on their textbooks, scan their environment as consumers, and document and reflect on a course’s major theories and concepts in the context of their own experiences as consumers.  Students are encouraged to use the WISE approach, that is, to wonder about, investigate, speculate, and evaluate theories, concepts and their own experiences.  These strategies were specifically geared at increasing student interest, involvement, technology use, learning, and critical thinking.  An exploratory look at the effectiveness of these innovations is provided through an examination of student assignments, results of in-depth interviews with students, and an examination of the course evaluations.  Three strategies that received excellent feedback were the use of: poetry in the form of “brandomes” to summarize the essence of brands; online psychographic segmentation that gave students a first hand experience of being categorized, and engendered a lot of questioning; and short movies, to discuss branding and promotions.  These strategies met with success in improving interest, involvement, technology use, learning, and critical thinking in the context of introductory marketing classes but have relevance for other undergraduate business courses. The genesis of this paper is a professional struggle that the author faced when she moved from teaching in what might be characterized as privileged environments to teaching at a major urban university that is one of the most diverse in the nation.  Rather than being segue, it turned out to be a discontinuous change in learning environment.  Several challenges hitherto not experienced included students being completely disengaged, acknowledging that they do not read the assigned text and materials, and reluctance to do any written work, whether in-class or out. 

 

E-Business Applications and Information Technologies: Providing New Opportunities for Women

Dr. Varuna Godara, University of Western Sydney, NSW, Australia

 

Abstract

The use of e-business applications and information technologies is increasing in almost all areas of for-profit Organisations and not-for profit organisations all over the world. These high-tech applications are capable of providing many benefits to individuals and organisations which include opportunity of telecommuting and equal opportunities. While the literature on benefits of e-business applications and information technologies is growing, there is limited substantive research focused on the impact of e-business applications and information technologies on gender bias and family-work conflict.  While walking through the hi-tech market of the 21-century, we would love to see the intelligent, competent as well as the elegant women, breaking the ice of unobtrusiveness, and overpowering the old-boy network. But there is a long way to go before we actually see gender equality everywhere, especially in developing countries like India. Even today gender bias and family-work conflicts are impacting women’s career differently from those of their male colleagues. Therefore it is often among the topical issues of the day.  In this paper the major hurdles or constraints coming in the ways of women and the status level or the class of the women working in IT companies are examined. After this a strategic plan to remove these constraints by the integration of women and E-Business applications and Information technologies have been suggested.  The use of e-business applications and information technologies is increasing in almost all areas of for-profit Organisations and not-for profit organisations all over the world. These high-tech applications are capable of providing many benefits to individuals and organisations which include opportunity of telecommuting and equal opportunities.

 

Exchange Rate Pass-Through to Domestic Prices: The Turkish Case (1994-2006)

Dr. Ilyas Siklar, Anadolu University, Eskisehir, Turkey

Dr. Nilgün Çaglarirmak Uslu, Anadolu University, Eskisehir, Turkey

 

ABSTRACT

In this paper, we use a VECM model on monthly data from January 1994 to December 2006. The paper finds an incomplete and decreasing exchange rate pass-through to inflation in Turkey, consistent with findings on other countries. Our empirical results suggest that: (1) the exchange rate movements have a moderate effect on domestic price inflation  (2) the exchange rate pass-through is more pronounced in PPI as compared to CPI due to the higher share of tradables in PPI relative to CPI; (3) the impact of pass-through on domestic prices spreads over 12 months, however, the effect is more pronounced in the first four months as indicated by pass-through coefficients of PPI and CPI; (4) the exchange rate pass-through to consumer prices have further weakened after the free float of lira against foreign currencies in February 2001 and resultant structural changes in the economy.  This result, which shows a low exchange rate pass-through to domestic prices, has an important implication for the monetary policy implementation. Low exchange rate pass-through provides greater freedom for pursuing independent monetary policy especially through inflation targeting regime. The term "pass-through effect" refers to the effect of changes in the exchange rate of a domestic currency for foreign currency on the country’s domestic prices for traded and non-traded goods. According to Goldberg and Knetter (1997) exchange rate pass-through is defined as “the percentage change in local currency import prices resulting from a one percent change in the exchange rate between the exporting and importing countries.” Other authors (Menon 1995, McCarthy 2000, Hufner and Schoder 2002) understand pass-though effect in a broader sense, as “the process how home prices change in response to changes of exchange rates”. The relationship between exchange rate movements and price adjustments of traded goods, which is termed as “exchange rate pass-through”, has long been debated in academics.

 

Measuring the Effects of Employee Orientation Training on Employee Perceptions of Organizational Learning: Implications for Training & Development

Dr. M. Akdere, University of Wisconsin-Milwaukee, WI

Dr. Steven W. Schmidt, East Carolina University, Greenville, NC

 

ABSTRACT

The most important goal of any given training effort is to achieve learning at the individual, group/team, and organization. This study used a paired samples design to measure the change in the employee perception of learning through an employee orientation training program in a large U.S. manufacturing company. The results and implications for training and development are discussed. The importance of training and development opportunities in the workplace cannot be overemphasized. An organization’s philosophy on workplace learning is a factor evaluated by potential employees in the job-hunting process. It is a factor that influences why workers accept jobs with certain employers. It is a reason why employees stay with an employer, and why they leave one employer for another. It is a key component in what employees look for in their jobs and in their organizations.  Many organizations offer new employee orientation training as a way to introduce new hires to a variety of organizational-specific topics. New employee orientation training serves many purposes and has many meanings from both an organizational and employee perspective. For trainers to get leaders to transfer learning to behavior, and for leaders to get their employees to transfer learning to behavior, a lot of disciplined, consistent effort is needed (Kirkpatrick & Kirkpatrick, 2005, p. 14).Researchers have found that successful new employee orientation training helps new employees become familiar with their organizational environment. Often included in orientation training is information on the organization’s philosophy on learning, and on training and development opportunities within the organization.

 

Stock Valuation by Simulation with a Jump-Diffusion Model

Dr. Wen-Lian Liu, China University of Technology, Taipei, Taiwan

Dr. Cherng-Shiang Chang,  FRM, China University of Technology, Taipei, Taiwan

 

ABSTRACT

By using techniques from real options theory and modern capital budgeting, Schwartz and Moon (2000, 2001) devise a rational pricing method of internet companies.  In this article we extend the valuation model of Schwartz and Moon (2001) in several ways.  First, we employed a jump model for the evolution of revenues in addition to the original pure diffusion model. A Poisson process is incorporated to capture the possible jumps of company revenues, which occur frequently in the real world.  Second, to deal with the problem of valuing the stock options with early exercise features, we apply the Least Square Monte Carlo method proposed by Longstaff and Schwartz (2001).  An illustrated company, eBay is valued and the results are compared with those obtained by Schwartz and Moon (2001).  The results reveal that the presence of random jumps will decrease the firm value or stock price.  For the non-equity claims, like warrants, or employees’ stock options, the early exercise of the claims will raise the equity value of firm earlier, and in turn, re-invest them earlier to increase the firm value. Nowadays it is widely accepted that the real options approach is superior to discounted cash flow (DCF) model.  As acknowledged by Mason and Merton (1985), a capital budgeting problem can be described as a collection of real options, i.e., a set of opportunities managers have to deviate from a previously decided course of actions.  Trigeorgis (1996) argues that the real options framework has become one of the main paradigms of capital budgeting. Schwartz and Moon (2000) develop a model for pricing Internet companies using real options theory and modern capital budgeting techniques.  Schwartz and Moon (2001) then improve their model by providing stochastic costs and future financing, and also by including capital expenditures and depreciation in their analysis.  In the model of Schwartz and Moon (2001), the revenues are assumed to follow a pure diffusion process-geometric Brownian motion. 

 

Marketing To Multiple Audiences: A Case of the Tang Teaching Museum at Skidmore College, NY

Dr. Elzbieta Lepkowska-White, Skidmore College, Saratoga Springs, NY

Dr. Kristina Powell, Skidmore College, Saratoga Springs, NY

 

ABSTRACT

In this research case we investigate marketing strategy in a new format of a museum.  Placed among the clusters of traditional red brick architecture covering the Skidmore College campus in Saratoga Springs, New York, the Frances Young Tang Teaching Museum and Art Gallery (commonly referred to as ‘the Tang’) “begs to be noticed.”  The Tang is a shift in the college museum model.  Rather than serving the interests of a specific discipline the Tang was built to serve as a teaching museum of modern art that crosses boundaries between multiple disciplines. Despite being a not-so-typical museum, the Tang is facing some marketing challenges that are very typical to the museum field.  The Tang serves multiple audiences including the Skidmore administration, faculty and students, the regional community, donors, and the contemporary art world.  All of these groups have different needs, interests, and goals which they envision for the Tang.  In this case we present efforts that have been undertaken by the Tang to target its multiple audiences and the outcomes of these approaches.  The case is based on the multiple interviews with the Tang administration and the Tang customers.  The Frances Young Tang Teaching Museum and Art Gallery, founded by Skidmore College, opened to the public in October of 2000.  The museum is named after a 1961 Skidmore alumna, Frances Young Tang, whose family provided generous support for its creation and development.  Traditionally, college museums are founded on the basis of an inherited collection in either the sciences or fine arts.  The Tang Museum is a departure from this convention as it does not house a significant donated collection of artwork or natural science objects.  Skidmore College provided financial support for its creation and has helped in its conceptual development.  From the beginning, the first director John Steinbeck, together with the architect Antoine Predock worked very hard to make the Tang a unique teaching museum.  Steinbeck summarized the mission (Exhibit A) of the Tang “The purpose of the Tang Teaching Museum and Art Gallery is to foster interdisciplinary thinking and studying, to invite active and collaborative learning and to awaken the community to the richness and diversity of the human experience through the medium of art.”

 

Organizational Commitment Across Different Employee Groups

Dr. Sinan Caykoylu, Simon Fraser University, Burnaby, BC, Canada

Dr. Carolyn P. Egri, Simon Fraser University, Burnaby, BC, Canada

Dr. Stephen Havlovic, SUNY Institute of Technology, Utica, NY

 

ABSTRACT

Although, over the decades many models for different employee groups were developed that examined commitment levels in organizations, this field of study still lacks a parsimonies unified model that encompasses all the employees of an organization as a whole. This study first proposes a parsimonies organizational commitment model and than tests it across different employee groups of a hospital. Our findings suggest that job satisfaction plays a key role in determining organizational commitment levels, as does effective leadership and less role ambiguity. Empowerment, job motivating potential, and role conflict have an important influence on job satisfaction. Interestingly, acceptance by coworkers was not related to either job satisfaction or organizational commitment levels.  Organizational commitment has received a great deal of interest and has been a subject of many studies (Bateman and Strasser, 1984; Iverson and Roy, 1994; Mowday, Porter and Steers, 1982). This interest about organizational commitment is driven by several reasons. Organizational commitment is a relatively stable construct over time (Porter et al., 1974); previous studies have consistently found that organizational commitment is negatively related to turnover, absenteeism and performance (Steer, 1977). Studies have also repeatedly found organizational commitment to be positively related to job satisfaction, job involvement and coping with job tension (Porter et al., 1974). Steer (1977) also showed the link between organizational commitment and various other variables such as, employee’s job, role and task identity; as well as, demographic differences (gender, age and job tenure).  These consistent findings indicate organizational commitment to be in the centre of a web that is made up of behaviours and attitudes, which can affect organizational outcomes positively or negatively.  Although, over the decades many models for different employee groups were developed that successfully predicted commitment outcomes, there is still a need for a unified model that can be applied to all the employees of an organization. Many of the studies either test their models on homogenous groups or treat their participants as if they are all similar. However, majority of organizations are made up of several distinct groups that work together. Models developed based on the findings of a single group of employees can be misleading and not be useful for an organization as a whole.

 

TFP Growth at Private Sectors of Turkey

Dr. Arzu Alvan, Yasar University, Bornova, Izmir, Turkey

Dr. B. N. Ghosh, Eastern Mediterranean University, Famagusta, TRNC

 

ABSTRACT

Aim of this study is to measure the Total Factor Productivity (TFP) growth in private sectors of Turkish Manufacturing Industry between of 1992 and 2001. Also Value Added (VA) growth components of the sectors are decomposed. For this purpose Two-Deflator Growth Accounting Approach is applied. There is a direct relationship between TFP growth and VA growth at the private manufacturing sectors. TFP growth is positive at almost all sectors. Raw labour’s contribution to VA growth plays the most significant role. Besides, capital’s contribution to VA growth of almost all private sectors is positive throughout the examined period.  Scarcity of resources is one of the main reasons to produce under efficient and productive production processes to get the highest possible volume of output. Researchers often find that productive production process is the result of the growth of Total Factor Productivity (TFP). And the two-way causality between TFP growth and output growth are also being proved by Harberger, among others (Robles, 2000, Harberger, 1998). Moreover, when TFP growth increases, the growth rate of Gross Domestic Product (GDP) follows an upward trend; while falls in TFP growth are correlated with decreases in GDP growth rates. Therefore, it is possible to understand growth in GDP by explaining the elements causing positive changes in TFP. This is why a comprehensive study of the growth process must include an analysis of the sources of TFP growth (Robles, 2000). Obtaining a stable and sustainable economic growth is one of the main macroeconomic challenges of ruling agents in every typical economy. Therefore, the sources and the outcomes of economic growth are being researched and analysed by economists. The empirical findings of their studies show that there is a variety of sources of economic growth such as productivity growth, increases in human capital, advances in Information and Communication Technologies (ICT), economic policy changes, technological advances and so on (Harberger, 1998, Notaro, 2003).   Several contemporary authors who analysed sources of  output growth concludes that if output growth is different than the sum of labour and  contributions of capital to output growth, the difference is attributed to the residual or Total Factor Productivity (TFP) (Cho, 2000). TFP growth enables firms to create competitive capability which is a special advantage. TFP growth and cost reduction in production process occur at the same time. Hence, reduced cost in production process leads to a strong competitive advantage (Kim, 2001). 

 

Investigating the Impact of Gender on Managing a Sales Force in a Developing Country: An Exploratory Study in Tajikistan

Dr. Musa Pinar, Valparaiso University

Dr. Joelle E. Nisolle, West Texas A&M University

Dr. Michael K. McCuddy, Valparaiso University

 

ABSTRACT

This exploratory study investigates applicant (student) perceptions of the gender effect on managing and supervising efforts regarding salespeople in Tajikistan. Based on 149 surveys, the results for the entire sample of students, as well as for male and female subsamples, show the existence of a significant gender effect where they prefer to work for male managers and feel that male managers would reward them satisfactorily. Also, comparisons of male students versus female students reveal significant differences between the two genders in terms of training, motivating, and rewarding recruits. The study discusses the managerial implications of these findings for developing and managing a successful sales force.  In recent years, as more women have joined the labor market, the makeup of the work force has changed in all industries. Seeing women in many traditional male-dominated fields is not uncommon. This change is not unique to western countries; rather it is becoming increasingly common to see women joining the labor market in many developing countries. These developments have brought both questions and challenges in managing an increasingly diverse work force. For example, recent research in the United States has shown that even though women are successful in the traditionally male-dominated field of selling, they still face some barriers in gaining entry to some selling jobs (Anonymous, 1988; Fugate, Decker, Decker, & Brewer, 1988;). Prior studies of women in sales (Comer & Jolson, 1991; McNeilly & Russ, 2000; Russ & McNeily, 1988; Swan & Futrell, 1978; Swan, Rink, Kiser & Martin, 1984) suggest that stereotypes of women in selling still exist in the minds of both potential customers and managers. Past research concerning gender effects in selling has addressed such issues as female managers’ leadership style (Comer, Jolson, Dubinsky, & Yammarino, 1995; Yammarino, Dubinsky, Comer, & Jolson, 1997); gender-role identity (Jolson & Comer, 1992); and behavior and perceptions of gender stereotyping (Comer & Jolson, 1991; Russ & McNeilly, 1988). However, these studies did not address how gender stereotyping in the sales field could influence the effectiveness of managing and supervising a diverse sales force.

 

Changing Organizational Structure to Accommodate New Management Technology in a University: A Case Study

Dr. Jay L. Tontz, California State University, Eastbay

Dr. Sam Basu, William Paterson University

 

ABSTRACT

 “… Companies have learned that information technology isn’t a silver bullet. New IT must be combined with organizational change to achieve real productivity gains.”  Business Week, February 9, 2004 In Organization theory [2, 3], technology and the choice of the organization structure have generally been closely related. Although there is little agreement about the strict causal direction of such a relationship, there is general consensus among most organization theorists that technology does play a role in determining the resulting organization structure [3]. From a macroeconomic point of view, a number of economists in the US and elsewhere, engaged in a series of debates around the question of a lag between the introduction of information systems technology and the desired gain in labor productivity [1]. It is quite possible that the lag was, at least partially, due to issues related to implementing the necessary organizational changes required to accommodate the new technology. It is generally understood that universities tend to be less dynamic than organizations which are to a greater degree market driven. It might therefore be of interest to look at the case of introducing a somewhat radical organization structure driven by evolving technological in a college/university setting. This paper provides an example of how one part of our university reorganized staff assignments to take advantage of new information technology and the subsequent increase in labor productivity. In the mid 1990’s the California State University system office signed a contract with PeopleSoft to provide management software for the central office and each of its twenty-three campuses. One of the campuses, The California State University, Hayward elected to adopt three modules, Human Resources, Financial Services, and Student Records.

 

An Integrative Framework of Workplace Stress and Aggression

Dr. Susan M. Stewart, University of Puget Sound, Tacoma, WA

 

Abstract

This paper presents an integrative framework based on research related to workplace stress and aggression.  While many researchers have demonstrated that individual differences in personality can affect both perceptions of job stressors and negative affective reactions to perceived job stressors, the role of cognitive appraisal has been largely overlooked.  This framework examines cognition, namely conditional reasoning (James, 1998), in the interpretation of stressful environmental events occurring prior to experiencing negative emotion.  Workplace aggression is treated as the result of a multistage process with four components: individual differences in personality, occurrences of stressful events, cognitive appraisals of those events, and emotional reactions to the appraisal process. During the past decade, aggressive workplace acts have been shown to be occurring at alarming rates and costing organizations billions of dollars every year.  Workplace aggression is defined as “attempts by individuals to inflict harm to others with whom they work, or have worked, or to the organizations in which they are currently, or were previously employed” (Neuman & Baron, 1997a, p. 38).  Incidents or patterns of aggressive behaviors (e.g., bullying, verbal/physical assault) can cause great financial loses due to litigation, employee turnover, lower productivity, and negative publicity (Le Blanc & Kelloway, 2002; Leymann, 1990; Vigoda, 2002).  Furthermore, employees subjected to workplace aggression report a wide range of physical, psychological, and social complaints that prevent them from effectively performing their jobs (Button, 2001; Fox & Spector, 2005; Raggins & Cornwell, 2001).  As such, aggression in work organizations has become a concern for practitioners and researchers alike. Although speculations about the causes of workplace aggression are scattered throughout the popular and trade literature, as yet there is little theoretical development published in the scientific business literature. 

 

Measuring the Effects of Employee Orientation Training on Employee Perceptions of Organizational Culture: Implications for Organization Development

Dr. M. Akdere, University of Wisconsin-Milwaukee, WI

Dr. Steven W. Schmidt, East Carolina University, Greenville, NC

 

ABSTRACT

Using a paired samples design, we measured the changes in employee perceptions on organizational culture. Employees at a major manufacturing company were surveyed before attending a new employee orientation training, immediately after the training, and one month after the training. The findings and implications for future research are discussed. Learning about an organization’s culture is very important to all employees as they go through the steps of the hiring process, and also as they become new employees in an organization. Potential and new employees form impressions about an organization’s culture from many sources, both formal and informal. There are a variety of ways organizations can teach new and potential employees about their cultures. An organization’s new employee orientation is often used to address organizational culture. Is this an effective venue, over both short and longer-term periods of time? The purpose of this research is to examine the effectiveness of new employee orientation training programs on new employee perceptions of organizational culture. Perceptions were measured both before and after new employee orientation, as well as one month after the conclusion of new employee orientation. This paper examines the results and findings of this study. Based on the results and findings, conclusions are made and recommendations are presented.  The variety of sources potential new employees use to learn about an organization’s culture can be problematic. Cable, Aiman-Smith, Mulvey, and Edwards (2000) found that information gathered by potential employees regarding organizational culture can be inaccurate, which could lead to a mismatch between employee expectations and the actual organizational culture. Mismatches could lead to a variety of issues. Sheridan (1992) found that the variation in organizational cultural values has a significant effect on employee retention, job performance, and voluntary termination of employment. Cable et al. (2002), when examining potential new employees’ sources of information regarding organizational culture, concluded that potential employees value information sources that have bases within the organization itself (and, therefore, that organizations can control). 

 

Contagion Intra-Industry Effects of M&A Announcements

Dr. Hironobu Miyazaki, North Asia University, Akita, Akita, Japan

Dr. Hiroyuki Aman, Nagasaki University, Nagasaki, Japan

 

ABSTRACT

M&A is generally considered to influence not only the firm engaging in M&A but also the rival firms in the corresponding industry. Using an event study methodology, this study investigates how stock prices of rival firms respond to the release of M&A announcements. On examining firms in the pharmaceutical industry, we find that some rival firms are under the contagion effect of M&A. Moreover, the major results of factor analysis are summarized as follows. First, there is a curvilinear relationship between firm size and the probability of the contagion effect hypothesis. At low levels of firm size, the relationship is negative; at high levels, it is positive. Second, R&D-intensive firms, which have the full potential to absorb new R&D knowledge, obtain technology from the M&A market to a large extent. There is complementarity between R&D intensity and M&A. Recently, M&A has become a popular strategy among Japanese firms. In 2004, the total number of M&A transactions exceeded 2000, and in 2006, the number of transactions recorded was 2775. M&A influences not only the firms engaging in M&A but also the rival firms, by exerting positive and negative effects upon them in the corresponding industry.  Generally speaking, M&A has the following merits: First, firms engaging in M&A increase productivity by obtaining synergistic gains, for example, economies of scale and scope (2). For instance, they strengthen marketing capacity, each complementing the other’s weak points. Second, firms engaging in M&A acquire technology from the M&A market or realize technological complementarity by combining both internal and external technological knowledge. M&A is preferred, because the acquisition of technology and know-how obtained by the firm that has already succeeded in R&D is speedy.  We consider that in many cases, although M&A announcements benefit the announcing firms, they do not always benefit the rival firms. In this paper, we empirically analyze the intra-industry effects of M&A announcements. Previous studies that have examined the intra-industry effects of M&A announcements are listed below.

 

Analyze of Tourist Destination Cluj-Napoca, Romania

Dr. Smaranda Adina Cosma, “Babeþ-Bolyai” University Cluj-Napoca, Romania

Dr. Adina Negrusa, “Babeþ-Bolyai” University Cluj-Napoca, Romania

Dr. Partenie Dumbrava, “Babeþ-Bolyai” University Cluj-Napoca, Romania

 

ABSTRACT

The industry of tourism represents one of the sectors with the highest development at global level. Romania has an important tourism potential but this is not sufficiently exploited. The city of Cluj-Napoca is one of the biggest from Romania, an important academic, cultural and business centre, combine with a various tourist offer - cultural and historical monuments, a diversified portfolio of accommodation establishments, restaurants, clubs, tourist agencies and an attractive natural-geographic space.  All those make from Cluj-Napoca an interesting tourist destination for various type of tourist. The paper analyses the tourist supply and identifies the demand for the destination. The study underlines possible differentiation elements for the city comparing with its main competitors. In conclusion, we try to find a correlation between the offer and the customer needs. Romania has almost all the features to be one of the preferred tourist destinations: it is blessed with a beautiful landscape, it can offer different types of tourism (mountain tourism, heritage and cultural tourism, rural tourism, spa tourism, geo-tourism, MICE tourism – meeting, incentives, conferences and exhibitions –, seaside tourism) and it has a diversified supply of lodging capacities. Despite this, the travel and tourism economy (direct and indirect impact of visitor activities, capital investment, export and government services) contribution to Romanian GDP varied around the 2%. The causes for the small percentage are multiple, various and complex: the slow pace of privatisation process in tourism and hotel industry; the degradation of the existing lodging capacities; an old road and railway infrastructure; the lack of financial resources; the absence of a strategy for tourism development at national level etc. Probably these are the reasons why in the last few years, travel and tourism sector has been identified by Romanian government as a focal point of the National Development Plan.The WTTC has forecasted for 2006 that travel and tourism economy is expected to contribute 4,8 per cent of Romania’s GDP and account for 485,000 jobs (5,8% of the total employment).

 

An Empirical Analysis of the Impact of ISO Quality Standard Certification

Dr. C. P. Kartha, University of Michigan - Flint, Flint, MI

 

ABSTRACT

ISO9000 is a series of internationally accepted guidelines as to how companies should set up their quality assurance systems. Focusing on procedures, controls and documentation, the standard is designed to help a company identify mistakes, streamline its operations and be able to guarantee a constant level of quality. It is rapidly becoming to be a de facto requirement for doing business in many industries.  The certification process requires a significant investment of both human as well as financial resources of the organization. There have been questions raised as to the worthiness of making such investments by organizations for obtaining certification. This paper presents the results of a survey designed to study the impact of certification on a number of factors such as customer satisfaction, improved productivity and profitability.  Quality is the most important concept in the corporate world today. The quest for quality is probably more widespread and intense globally today than at anytime in history.  Organizations have realized that the key to increased productivity and profitability is improving quality and in order to survive competition from home and abroad, they are forced to return to the basics of better quality management and cost competitiveness measures for their products and services. One of the most effective strategies evolved over the years has been based on the concept of Total Quality Management (TQM). TQM is a systems approach to management that aims to enhance value to customer by designing and continually improving organizational processes and systems.  It provides a new vision for management leadership.  It places customer as the principal focal point and redefines quality as customer satisfaction.  The emphasis is on continuous improvement of processes through employee involvement and empowerment.  TQM relies on fact-based decision making. A number of large corporations have been actively involved in the introduction and implementation of TQM in the last few years.  An emerging need for guidelines and standards for TQM implementation forced countries to develop models for self-appraisal and for identifying and addressing quality issues.  Perhaps the first such attempt in the West to develop a comprehensive set of guidelines for achieving world-class quality was in the United States.  In 1987 the Congress established the Malcolm Baldrige National Quality Award.  The purpose was to promote quality awareness, to recognize quality achievements in the U.S. companies, and to publicize successful quality strategies. 

 

Integrating SEE Countries in the European Services Trade: The Case of Romania

Dr. Ana Bobirca, Academy of Economic Studies, Bucharest, Romania

Dr. Paul Miclaus, Academy of Economic Studies, Bucharest, Romania

 

ABSTRACT

Services account for more than 70% of overall European GDP, while exports represent only one-fifth of intra-European trade. One of the justifications is that trade costs resulting from the multitude of regulatory barriers in the European states constitute a significant impediment to services trade.  In the course of their negotiations with the WTO and the EU, most countries in South-Eastern Europe (SEE), including Romania, have started to make noticeable progress towards opening up their services markets. But barriers to the integration of services markets are still important. The paper indicates that removing these barriers would raise the area’s economic growth potential and enhance its resilience to shocks.  The enlargement of the European Union to include several Central and Eastern European countries has led to intense investigation and speculation regarding its impact on both existing members and future participant countries, as well as on the multilateral trading system and world trade in general. Some analysts consider that European integration to date has caused considerable trade diversion, manifested especially in agricultural products. Previous enlargements of the European Union led to prolonged negotiations with the Union’s trade partners, such as the United States. The recent inclusion of two South-Eastern European (SEE) countries (i.e. Romania and Bulgaria) is already raising similar concerns. Taking into account that the services sector assumed dominant position among economic activities in most SEE countries (Romania, Bulgaria, Croatia, FYR Macedonia, Albania, Bosnia and Herzegovina, Serbia and Montenegro), bearing heavily on economic development, it became of utmost importance to explore and discern the tendencies in services trade in the region, aspects dealt with in the first part of this paper.  The characteristics of existing regulatory and socio-economic frameworks in the services sector are addressed in the second part of the paper.

 

Globalization & Labor: Needs, Means & Returns

Dr. Alev M. Efendioglu, University of San Francisco, San Francisco, CA

Dr. L. W. Murray, University of San Francisco, San Francisco, CA

 

ABSTRACT

The technological changes of the past two decades have brought about significant and profound changes in our society and economy. Technology, specifically the telecommunications technologies, has created environments and delivery systems that have accelerated globalization with increased offshoring of business processes and 24/7 business operations. However, increased globalization has often resulted in local labor shortages, especially in countries which have been the major recipients of globalized business processes. These changes have also created opportunities and challenges for organizational trainers, as they extend their training efforts, unburdened by time, location, or knowledge source. Unfortunately, in spite of the best efforts of organizations and the professional trainers’ associations, there are significant problems in evaluating the true impact of training. These attempts encounter significant challenges in measurement of the costs and benefits and use valuation methods which will not be acceptable for valuation of other organizational investments. This paper reviews and discusses the impact of globalization on shortage of skilled labor in developing countries, and proposes and demonstrates how traditional investment valuation methods, can and should be incorporated in to the valuation of organization training. The technological changes of the past two decades have brought about significant and profound changes in our society, economy, and educational systems. Technology, specifically the telecommunication technologies, has created environments and delivery systems that have spawned e-commerce and virtual retail outlets, increased globalization with offshoring, and 24/7 business operations. During 2004, 20 percent of U.S. companies spent over 20 percent of their outsourcing budget offshore. (Campoy, 2004) According to Forrester Research, an estimated 315,000 U.S. services jobs had been moved overseas by the end of 2003, and by 2015, roughly 3.3 million U.S. business-processing jobs will be performed abroad.

 

Cross-Cultural Competence: The Role of International Project in US Business Schools Curricula

Dr. Gordana Pesakovic, Argosy University, Sarasota, FL

 

ABSTRACT

The purpose of this exploratory paper is to assess the concept and practice of the short-term programs abroad in the US business schools. The paper addresses the following questions: What do US companies need to operate successfully in a global economy?  How is academia addressing these business needs? What is the role of study-abroad programs? The paper uses a case study of short programs abroad offered between 2004 and 2006 at Argosy University/Sarasota. The world is changing! How many times have we heard this statement? “The world is flat,” according to ancient Pythagoreans or according to Thomas Freedman. Plus ça change, plus c’est la même chose. “All is one,” Hinduism declares! How much do we know? How much do we not know? How much of what we know is false and how much true?  How much…? Allan Goodman (2005) portrayed the alarming status of “the American mind”: 87% of college-educated adults cannot find Iraq on a map; 83% of our citizens do not have a passport, and 50% of those who do are either over 60 or under 5 years of age; 70% of Americans today can neither name the president of Russia nor identify the job that Kofi Annan holds; 60% believe we have a fully-functioning anti-missile shield that is protecting us as we speak from terrorists and rough states; 3 out of 300 of the world’s smartest freshmen (at the Fletcher School), can pass a world geography placement test, and those 3 tend not to be US citizens.(p.198); Can the US “globalize” the world without “globalizing” itself? In order to look for an answer to this question, one should start from the following research questions: 1. What do US companies need to operate successfully in global economy?  2. How is academia addressing these business needs?  3. What is the role of study-abroad programs?  

 

The Introduction of Urboun Call Option (UCO)

Nuradli Ridzwan Shah Bin Mohd Dali, Islamic University College of Malaysia, Negeri Sembilan, Malaysia

 

ABSTRACT

Derivatives are complex instruments since its value derived from underlying assets. Options is a type of derivatives that gives rights to buyer or seller to exercise their rights based on the price movement of an underlying assets. However, options is not acceptable according to many scholars due to its speculative nature and premium fee charge and not because of its promise.  This is a proposal to the Muslims scholars to accept options developed using Urboun or deposits as a replacement to premium fee charged in conventional options. The need for reevaluating the currency derivative market for the benefits of maslahah, and exploring the option currency market using Urboun or deposits would enrich the Islamic economics literature. Currency or money is an important aspect in our life because it facilitates trade activities, payments of debts and zakah, and measures of values or units of account and as storage of values. The purpose of currency trading is for three reasons which namely sale and purchases of currency, a) to settle international payments, b) to hedge against market volatility and c) to make profits (Saiful Azhar, 2005, pg 565).The evolution of the economic system from barter trading to the uses of bimetallic and fiat money (paper money) as a medium of exchange shows that the process of civilization, modernization and the fallen of a society do have strong connections with monetary stability.  The Origins of Money as stressed by Glyn Davies (2002) are:-Money did not have a single origin but developed independently in many different parts of the world.  Many factors contributed to its development and if evidence of what anthropologists have learned about primitive money is anything to go by economic factors were not the most important.  Money performs a variety of functions and the functions performed by the earliest types were probably fairly restricted initially and would NOT necessarily have been the same in all societies.  Money is fungible: there is a tendency for older forms to take on new roles and for new forms to be developed which take on old roles.

 

Consumer Perceptions of Foreign Products: An Analysis of Product-Country Images and Ethnocentrism in Guatemala

Dr. John E. Spillan, Pennsylvania State University at DuBois, PA

Dr. Orsay Kucukemiroglu, Pennsylvania State University at York, PA

Dr. Talha Harcar, Pennsylvania State University at Beaver, PA

 

ABSTRACT

Throughout the world consumers are connected with a myriad of products and services from all over the world.  The advent of ever changing and rapid communication, has given consumers far more knowledge about products than any time in history. The consequence of this information availability allows the consumer to examine the product’s country-of- images more closely. As such, their information and perceptions about the country and product has an impact on consumer behavior and is a major concern of marketers. The goal of this paper is to present the results of a study that was conducted to analyze the perceptions of Guatemalan consumers regarding products-country of origin images. In addition, Guatemalan ethnocentrism and life styles were analyzed to develop a perspective on what other factors may be influencing their buying patterns. The findings of the study revealed that several lifestyle dimensions exist among Guatemalan consumers which have an influence on their ethnocentric buying tendencies. Over the last four decades, the country-of-origin (COO) concept has been studied, discussed and evaluated as an important dimension in understanding how consumers purchase products and how companies market products in foreign countries. The effects of a product’s country of origin on buyers’ perceptions and evaluation has been one of the most widely studied phenomena in the international business, marketing and consumer behavior literature (Tan and Farley, 1987; Papadopoulos and Heslop, 1993). Studies have found that consumers have significantly different country images or general perceptions about products made in different countries (Bilkey and Nes, 1982; Kaynak and Kara, 2000; Roth and Romeo, 1992).  As the manufacture of products and the quest for consumers become increasingly global activities, international marketing research becomes much more important. The COO idea reflects the global marketplace’s increasing complexity. The real question is why does COO influence purchase decisions. Some have noted that product category, knowledge of a particular country and patriotism are major factors affecting the purchase decisions (Roth and Romeo, 1992).

 

Value-at-Risk Analysis for Korean Stock Market: Asymmetry and Fat-tails in Return Innovations

Dr. Sang Hoon Kang, .University of South Australia, Adelaide, Australia

Dr. Seong-Min Yoon, Pukyong National University, Busan, Korea

 

ABSTRACT

The correct assumption of return distribution might improve the estimated performance of the Value-at-Risk models in financial markets. In this study, we investigate the VaR of Korean stock market using the APARCH model with normal and Student-t distribution. The APARCH model can capture clustering and asymmetry in volatility, and the assumption of Student-t distribution can reflect the fat-tail innovations. Form the empirical results of diagnostic statistics, the in-sample analysis and the out-of-sample analysis, we can find that the Student-t APARCH VaR models for long and short positions predict critical loss more accurate than the models with normal innovations.  In recent years, the financial regulators and supervisory committee of financial intuitions have paid great attention to effective risk management or investment in the markets. Indeed, most financial institutions seek to avoid their exposure losses or minimize possible investment risk. In this purpose, financial institutions have put great emphasis for the development and adoption of accurate measures of market risk (Duffie and Pan, 1997).  Some quantitative techniques have been introduced to appraise possible losses that financial institutions can incur. Of these techniques, the Value-at-Risk (VaR) is one of most popular technique for measuring market risk that has been widely used in banking and securities sectors. As far as economics and finance are concerned, VaR calculates the maximum loss (or worst case scenario) on an investment, over a given time period (normally 1-day or 10-day) and a given probability . More specifically, the VaR at level  means that in a given time the possible maximum loss for a sample of returns on asset and portfolio will not exceed VaR at a conditional level . From the empirical purpose, the implementation of VaR must require the computation of the empirical quantile at level of the distribution of the returns of asset and portfolio (Giot and Laurent, 2003).  The RiskMetrics model proposed by the J.P. Morgan financial group measures the market risk under the assumption of normality (RiskMetrics Group, 1996). However, the main problem with the RiskMetrics model is that it does not capture non-normality in the residuals. Generally, the residual of a financial time series suffers from excess skewness and kurtosis, implying that assumption of Gaussian error innovation is inappropriate for explaining the asymmetric and fat-tail characteristics of residuals.

 

FedEx: Leveraging IT for a Competitive Advantage

Dr. Nabil Alghalith, Truman State University, Kirksville, MO

 

CASE SYNOPSIS

The primary subject matter of this case is to examine the strategic and operational impacts of information technology on FedEx. Secondary issues examined include IT architecture, and the impact of IT on business model evolution. FedEx Corporation is the premier global provider of transportation, package delivery, e-commerce, and supply chain management services.  The company offers integrated transportation and logistics solutions through a network of subsidiary companies that collectively compete under the worldwide FedEx name. The family of companies includes FedEx Express, FedEx Ground, FedEx Freight, FedEx Custom Critical, FedEx Trade Networks and FedEx Services.  FedEx handles 3.3 million packages nightly, employs over 200,000 people, and connects customers to 215 countries within 24 to 48 hours.  The case provides a thorough analysis of the strategic and operational impacts of IT implementation on FedEx. The case examines the following aspects of FedEx: 1. History and background 2. Organization structure  3. Business model 4. Competitive environment 5. Information technology architecture 6. IT deployment and assessment 7. Recommendations 8. Lessons learned  The strategic grid (Applegate) and competitive forces model are used to assess the impacts of information systems implementation on corporate competitiveness, organization structure, systems integration, streamlining and automation of operations. FedEx Express was founded in 1973 by Frederick W. Smith.  He believed there was a need for shippers to have a system designed specially for airfreight that could accommodate time-sensitive shipments.  Since speed was crucial, his vision was to ship all packages using a private fleet of aircraft and a single hub.  The single hub would allow tight control of the cargo so that it got to its destination overnight, and the company-owned planes would free the service of commercial airline schedules and shipping regulations.  With 14 small aircrafts, the business was launched from the Memphis International Airport, where the company headquarters were located. Frederick Smith named the company Federal Express to relate the patriotic meaning of “Federal” to the company.  Smith thought the name would help obtain governmental contracts, since it symbolized a national marketplace.  He also believed the name was good for attracting public attention and sustaining name recognition.  At first, FedEx Express struggled to make a profit and remained in the red until July 1975.  The company experienced rapid growth following deregulation of the airline industry, which allowed the company to fly larger aircrafts anywhere at anytime in the United States.  Federal Express was not well established until the first half of the 1980s when the company entered its maturing phase. 

 

Corruption and Its Economic and Business Implications

Dr. Syed Shahabuddin, Central Michigan University, Mount Pleasant, MI

 

INTRODUCTION

Corruption has economic as well as social implications. Both obviously affect society, usually in adverse ways. However, the word corruption means different things to different societies. Some societies accept corruption and others do not. Unfortunately, corruption persists and leads to despair and resignation among those who attempt to control it. The effects of corruption are further complicated by the fact that the reason most political regimes crumble is widespread misconduct among politicians and public officials and the accompanying unlawful practices among business and the public. Such conditions almost always pave the way for dictatorships through coups and the resultant governments which are initially accepted overwhelmingly by the population.  Regardless of whether corruption is acceptable to individual societies or not, corruption needs to be addressed worldwide because of its undesirable economic and social consequences. Therefore, many methods have been developed to measure various types of corruption, including the Business International Index (BI), the World Economic Forum Index (GCR), the Transparency International Index (TI), and the World Bank’s Private Sector Survey.  (A list of countries and their corruption index rankings according to Transparency International is in the Appendix.) All these indices measure levels and types of corruption. These many measurement tools indicate the concern of the world community with corruption and the serious consequences corruption has on people and societies. Many researchers have used these indices to find factors to help explain corruption. The results are encouraging in many cases. As a result, researchers have some idea of the causes of corruption. Thus, many international organizations, such as the World Bank, have decided to find ways to curb or eliminate corruption. The UN has passed many resolutions and has held conventions to urge countries to criminalize and to prevent the bribing of officials.  While many explanations as to the causes of corruption and the steps necessary to eradicate it have been proposed, in fact both the causes and cures are relatively simple.  Corruption has been in existence since time immemorial. Even today, corruption is prevalent in all societies in various forms. This is true even in the so-called “Western civilized societies.” A simple definition of corruption is that it is the abuse of public office for private gain.

 

Relation Between Manufacturing Practices, Flexibility and the Performance in ERP System Firms

Leopoldo Gutierrez Gutierrez, University of Granada, Spain

Javier Tamayo Torres, University of Granada, Spain

 

ABSTRACT

In recent years, the management literature has produced various articles on the importance of flexibility for a company and its performance. This paper focuses on the relationship between flexibility and higher performance in companies with flexible manufacturing planning, such as Enterprise Resource Planning (ERP). This research analyses [JLP5] the literature on manufacturing flexibility and manufacturing practices to explore the performance obtained by companies with the ERP system. The research is based on three basic operating strategies according to the firm’s focus of activities. Today’s manufacturing environment can be characterized by intensified competition, rapid market changes, increased product variety and short product life cycles. To be competitive, manufacturing enterprises must respond rapidly to changes in product demand (Persentili, E. and Alptekin, S., 2000).  The uncertainty of the environment in recent years has forced companies to be flexible in their decisions and structures. Flexibility and company performance have been studied in the academic context, but the relation to strategic planning such as ERP has not.  There is increasing recognition in today’s manufacturing environment of the need for more flexible Manufacturing Planning and Control (MPC) strategies that can respond to rapid changes in product demand.  Our research has two main goals. Firstly, we seek to perform a literature review of manufacturing flexibility and performance in ERP systems firms. Secondly, we seek to establish a model to measure whether more flexible companies achieve better performance.  This research is based on a model by Beach et al. (2000), which shows the relation between manufacturing strategy, required system flexibility and performance measurement.  This is an important subject; our theoretical research establishes the basis for determining whether or not flexible companies capable of adjustment have a competitive advantage over less flexible companies. We also study performance theoretically in ERP system companies, an area in which no research has been published. In the literature, we find different types of MPC strategies. The most commonly used strategies in industry are Just-In-Time (JIT)-pull strategies and Material Requirements Planning (MRP)-push strategies.  JIT is a strategy for inventory management in which raw materials and components are delivered from the supplier immediately before they are needed in the manufacturing process. MRP is as a process to determine material, labour and machine requirements in a manufacturing environment. It is considered a push strategy.

 

Valuation of Callable Convertible Bond with Parisian Feature Using Finite Element Method

Dr. Pu Gong, Huazhong University of Science & Technology, Hubei Province, P.R. China

Jianling Meng, Huazhong University of Science & Technology, Hubei Province, P.R. China

 

ABSTRACT

A valuation model for a callable convertible bond with Parisian feature and notice period requirement is presented here using the arbitrage-free valuation method. Different from the existing works, we analyze the interaction between the optimal call policy and the optimal conversion policy based on the game theory analysis of options. Moreover, the finite element method is adopted to solving the pricing model and the projected successive over-relaxation technique is used to handling the American constraint. Finally, the convertible bond issued by China Merchants Bank is taken for an example to illustrate how the model works. Results show that notice period and Parisian feature have significant effect on the value of convertible bond and the optimal policies, and the so called “delayed call” phenomena has got some explanations here. Most convertible bonds provide the issuer with the right to call back part of or all of their convertible bonds, which would take away the opportunity that the holder can convert the bonds into stocks at higher stock price level. To keep the convertible bond attractive, the so called soft and hard call constraints are designed. The hard call constraint restrains the issuer to initiate the call during the early life of the bond and the soft call constraint further requires the stock price to be above certain trigger price (usually 30% to 50% higher than the conversion price) for a consecutive or cumulative period. The excursion time requirement in the soft call constraint is called the Parisian feature. However, convertible bond may be terminated prematurely either by early voluntary conversion or by call. The interaction between the optimal call policy and the optimal conversion policy has great impact on the convertible bond value by affecting the boundary condition of the pricing model for convertible bond, which makes the valuation for the convertible bond more complicated. In the pioneering theoretical studies on the optimal call policy of convertible bonds, Ingersoll (1977) and Brennan and Schwartz (1977) both argued that a callable convertible security should be called to maximize the value of the issuer’s firm as soon as the conversion value equals the prevailing effective call price. Unfortunately, empirical evidence suggests that convertible bonds are usually called late: the stock price at calling far exceeds the theoretical optimal critical stock price (Mikkelson, 1981; Asquith, 1995).

 

A Method to Advance Mutual Understanding in a Multi Partnership Project

Tapani Ryynänen, Technical Research Centre of Finland, Espoo, Finland

Kim Jansson, Technical Research Centre of Finland, Espoo, Finland

 

ABSTRACT

In group work, especially across organizational borders, it is challenging to transfer and manage information. In a joint research project initiated by several companies the management group has an important role as information and knowledge transferring medium. This role can be supported by using a facilitated systematic method that interconnects the corporate level and the network level (management group level) processes thus reducing the stickiness of the information and supporting participants ability to exploit the information. A group of Finnish maritime industry companies together with the researchers used the method to think up and elaborate the most valid challenges to establishing business in China. The challenges were listed, combined, evaluated, and put through SWOT analysis. Finally the management group considered the possible steps to take both as a group and as a single company. Often we see in real life inefficient communication between partners in R&D projects. In multi-partnership projects the centre of communication is the project team, often in smaller projects acting also as a management team. Communication tasks within and by this group are where efficiency should be improved. Each partner in the project has its own communication and decision processes also on the company level, where often company confidential information is handled. These processes are interconnected via a management group, in such a way that both benefits of sharing information and keeping the confidentiality of information can be achieved. Thus hindrances in communication between management group (network level) and partners’ own organizations (corporate level) as well as within the management team are an important issue. By applying methods fit for this dialog, communication, decision making and documentation of the process can be improved. In this paper, we will describe a method that supports this dialog. A case of networked co-operation is presented, where dialog takes place between individual companies through the management team of a joint research project. Communication has both a technical and social dimension. “The social dimension of an organization is especially crucial in the network organization because the type of coordinated action that is required is rarely routine.” (Nohria and Eccles, 1992). Any extensive method implemented should support both elements. Group work, especially in the context of business networks where several firms are represented often by several individuals, is not an unbroken process, but a series of separate fragments.

 

The Impact of Using Information Technologies on Crisis Management Success in Small and Medium Sized Enterprises

Dr. Muammer Zerenler, University of Selcuk, Konya, Turkey

Dr. F. Atýl Bilge, University of Selcuk, Konya, Turkey

Derya Özilhan, University of Selcuk, Konya, Turkey

 

ABSTRACT

This paper reports the findings of a survey on the use of Information Technology (IT) in crisis management in Turkish small and medium sized. The survey was sent to 241 enterprises with 249 employees or less, resulting in a response rate of 55,6 %. Statistical analysis of the result this study demonstrates that the level of IT use in crisis management is predominantly related to the presence of a member in the crisis management team with an IT background. Crises can take many forms and result from a wide variety of causes. Moreover, every company can and probably will be hit by a crisis in the near or long term future. However, it is not because crises are bound to happen, that a company cannot cope with it. A proper response does not only reduce damage and facilitates the aftermath; it is even often a plain necessity for survival. This becomes clear when examining the alarming results of Ianna (1997) and Wilson (2000), who point out that the majority of firms who experience a severe crisis face failure within the next two years. The term “crisis” has been defined differently by management writers (see, for example, Fink, 1986; Bell, 1971; Pauchant and Mitroff, 1992; Booth, 1993). In layman terms, the Longman Dictionary defines a crisis as ``a turning point in the course of any thing; uncertain time or state of affairs; moment of great danger or difficulty'' (Longman, 1978). Crisis management is therefore crucial for all organisations, because effective crisis management helps to ensure the continuous wellbeing of an organisation. As information technology and information systems today are embedded in all organizational levels and activities, a growing research and development effort has emerged in recent years that focuses on the design, development,use and evaluation of information systems that can help organizations prepare for,and respond to,a crisis (Turoff et al.2004;Van de Walle and Turoff 2006). For example, information systems have been used to understand the possible relationships among threats an organization is facing (Van de Walle and Rutkowski 2006), to make sense of an ongoing crisis (Weick 1988),create awareness and counter threat rigidity (Staw et al.1981; Rice 1990) and information overload, or for planning, training and simulation purposes (Turoff et al.2005).  While corporate crisis planning and preparedness in general is the setting of this research paper,a particular point of interest addressed here are the particular motivations, if any, of managers to use IT in the different stages of crisis management in their company.

 

Marginal Revenue Productivity and Scale Economies

Dr. Yahn-Shir Chen, National Yunlin University of Science and Technology, Taiwan

Chao-Ling Lin, Chang Jung Christian University, Taiwan

 

ABSTRACT

This study investigates marginal revenue productivity and scale economies for different organization structure of audit firms in Taiwan. Empirical results indicate that the contribution to audit firms from practicing certified public accountants is significantly higher than that of from their assistants. Marginal revenue productivity of certified public accountants in partnership firms is significantly lower than that of in proprietorship firms. In the overall sample firms and proprietorship firms, certified public accountant is under-compensated but over-compensated in the partnership firms. Finally, scale economies prevail in the public accounting profession and the degree of scale economies is higher in proprietorship firms. For years, certified public accountants (CPAs) have been regarded as lucrative professionals or so-called "deep pockets" and also face the threat of litigation against them (Menon and Williams, 1994). However, public accounting profession is also a labor-intensive industry and overtime work is a common practice. High compensation of CPA is thus an exchange for long hours of work. As a practical matter, it is reasonable for a member who makes greater contribution to an organization and rewarded with high compensation. In a typical public accounting firm, auditors include practicing CPAs and their assistants. Is the compensation of auditors commensurate with their contribution? To address it, we firstly employ translog function to estimate the contributions of auditors, that is their marginal revenue productivity. Next, the relation between compensation and contribution of the auditors is examined to clarify this question. Audit firms may be organized as either partnerships or proprietorships. Most of the proprietorships are small local firms performing audit and related services primarily for small businesses and not-for-profit entities. Partnership firm operates by multiple owners and is eligible for auditing public companies in Taiwan. Some partnership firms are affiliated with firms in other countries and therefore have an international capability. Accordingly, partnership firm has inherent potential to expand its business and such an organization structure may be essential for long-term development and survivorship. However, the fact that two third of the total audit firms in Taiwan are proprietorships raise the following question: Why are most of the audit firms organized in sole proprietorships if partnerships guarantee a better development potential? In theory, economies of scale exist when the average cost decreases along with the expansion of business.

 

Local-Currency Pricing and Investment Decision under Exchange Rate Changes: A Two-Period Model of International Duopoly

Piriya Pholphirul, The National Institute of Development Administration (NIDA), Bangkok, Thailand

 

ABSTRACT

Changes of Exchange rate affect multinational firms on deciding level of their foreign direct investment. To capture the role of firm to expect exchange rates change before deciding their local-currency pricing, exchange rate movement can be either temporary change or permanent change due to demand-supply of currency as well as the policy implementation toward exchange rate regime. We extend the previous studies of dynamic international duopoly model of Froot and Klemperer (1989) and Tivig (1996).  In the real world, multinational corporations can simultaneously invest in local market and perform the local-currency pricing strategy by observing the exchange rates volatility. The results show that multinational firms will less likely to change their international price-setting as well as degree of foreign direct investment outflows if exchange rates perform temporarily, but will do aggressively if exchange rates are expected to change in the future. Moreover, as found by Tivig (1996), a temporary depreciation of domestic currency induces the foreign firm to “perverse” the pass-through effect by increase in the price in the first period instead of lowering the price. The uncertainty effects are not included in this model to follow the perfect-foresight condition.  Followed the collapse of the Bretton Woods exchange rate system in the 1973, there has been a considerable increase of the studies on relationship between exchange rates and goods prices. Two of the most striking studies are “Exchange Rate Pass-Through” referred to the response of import prices to exchange rates and “Pricing-to-Market” referred to price discrimination across export markets induced by the exchange rate volatility. Therefore, the link between exchange rate pass-through and Pricing-to-Market is obvious in international marketing strategies. Technically, degree of exchange rate pass-through inversely depends on degree of exchange rate pass-through in that PTM = 1-ERPT. A lower degree of pass-through implies that firms can markup a higher price over their marginal cost. Thus, in some case, complete pass-through of exchange rate (ERPT = 1) implies that firms will have a zero market over their marginal cost (PTM =1 or P = MC).  The most obvious marketing variable affecting pass-through is the policy a firm adopts to guide routine export pricing decision.  Firms usually employ different pricing policies by searching from the empirical record. (1)   Because Pricing-to-Market refers to the destination-specific adjustment of markups in response to exchange rate changes, sellers reduce markups to buyers, whose currencies have depreciated against the seller, thereby stabilizing prices in the buyer’s currency relative to a constant markup policy.  This specific constant markup of Pricing-to-Market referred to as “Local-Currency Price Stability” (LCPS). (2)  In the previous pass-through literatures, two questions have been neglected to explain how multinational firms competing in international markets and facing currency fluctuations.

 

The Evaluation of Vendor’s Product Performance

Ville Hinkka, Helsinki University of Technology, Finland

Frank Bescherer, Helsinki University of Technology, Finland

 

ABSTRACT

This paper offers practitioners and academics a novel approach that facilitates important decision evaluations. The presented model can be used to evaluate different quotes for technically challenging tasks or products. The special focus is on considering alternative situations during early innovation phases in high-technology environments with complex tasks. The proposed model can be used to identify possibly gaps between the purchaser’s requirements and given alternatives. The model is constructed to help purchasers evaluate these gaps, compare them, and make a final decision based on the evaluations and price differences.  The approach starts by defining the task and relevant system being studied. Then the analyzing company should define the attributes to be evaluated in the different options. Subsequently, the company needs to get quotes for the required product or service, analyze them and identify critical parameters. It is then possible to arrange them in order from most to least critical. The next step is to identify each critical parameter’s target level. The last parameter to consider is always the price the vendor requires, because a value called ‘deficiency price’ will be added on to that at the end of the procedure. This deficiency price is the value of the margin between the target and offered level. The basis for the evaluation is that if the target and offered performance are the same, there is no effect on price. If the offered level is below the target, the price increases. Exceeding targets may have several effects on price, depending on the circumstances. As this case study shows, the model is suitable for comparing quotes in early phases of innovations in a complex technology environment, where suppliers promise something they will deliver in the future. A limitation of the method is the evaluation of the different parameters. While different evaluation approaches are presented here, a company applying the proposed method still has to spend time on the evaluation of different options. However, the method will facilitate discussions and comparisons, as different concerns can be expressed in value figures.

 

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