The Journal of American Academy of Business, Cambridge

Vol.  24 * Num.. 1 * September 2018

The Library of Congress, Washington, DC   *   ISSN: 1540 – 7780

Online Computer Library Center, OH  *  OCLC: 805078765

National Library of Australia  *  NLA: 42709473

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The primary goal of the journal will be to provide opportunities for business related academicians and professionals from various business related fields in a global realm to publish their paper in one source. The Journal of American Academy of Business, Cambridge will bring together academicians and professionals from all areas related business fields and related fields to interact with members inside and outside their own particular disciplines. The journal will provide opportunities for publishing researcher's paper as well as providing opportunities to view other's work. All submissions are subject to a double blind peer review process.  The Journal of American Academy of Business, Cambridge is a refereed academic journal which  publishes the  scientific research findings in its field with the ISSN 1540-7780 issued by the Library of Congress, Washington, DC.  The journal will meet the quality and integrity requirements of applicable accreditation agencies (AACSB, regional) and journal evaluation organizations to insure our publications provide our authors publication venues that are recognized by their institutions for academic advancement and academically qualified statue.  No Manuscript Will Be Accepted Without the Required Format.  All manuscripts should be professionally proofread / edited before submission. After the manuscript is edited, you must send us the certificate. You can use www.editavenue.com for professional proofreading/editing or other professional editing service etc... The manuscript should be checked through plagiarism detection software (for example, iThenticate/Turnitin / Academic Paradigms, LLC-Check for Plagiarism / Grammarly Plagiarism Checker) and send the certificate with the complete report.

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Copyright 2000-2018. All Rights Reserved

Chick-Fil-A Goes International

Alexandra Crozier, San Houston State University, TX

Dr. Diana Brown, Sam Houston State University, TX

Dr. Joey Robertson, Sam Houston State University, TX

 

ABSTRACT

 The company that brought us those likable illiterate cows is planning to expand internationally and to share their tasty chicken sandwiches with the rest of the world. This paper analyzes the potential markets that Chick-fil-A may enter as it expands globally. This paper examines the cultures, religions, and societal values in these new markets and analyzes whether these factors will serve to hinder or facilitate Chick-fil-A’s global march to market domination.  How will Chick-fil-A successfully navigate the international marketplace and succeed in new markets including Islamic nations and countries like India and China?  In Hapeville, Georgia, Truett Cathy and his brother Ben Cathy started a restaurant in 1946 under the name of Dwarf House. (Bovino, 2011). Eighteen years later, Truett Cathy came up with the now well-known chicken sandwich after having discovered the pressure cooker, which allowed him to fry a chicken breast in just four minutes. (Privco 2014).  Using this innovative method, Truett Cathy opened the first restaurant in a Georgia shopping mall.  This quick preparation approach and intelligent restaurant placement helped to pave the way for the food courts in modern malls all over America.   (Bovino, 2011). Truett Cathy’s vision of Chick-fil-A is embodied in his assertion that “Nearly every moment of every day we have the opportunity to give something to someone else- our time, our love, our resources. I have always found more joy in giving when I did not expect anything in return.” (Cathy, 2011).  In accordance with his beliefs on giving, in 1973, Truett Cathy started a scholarship program for Chick-fil-A employees. In the years to follow, Chick-fil-A became a leading example for fast food restaurants and chains by selling chicken nuggets all over the U.S. (Privco, 2014). Over thirty years after starting the Dwarf House, Truett and Ben Cathy finally opened their first free-standing Chick-fil-A restaurant (i.e., not in a shopping mall food court). (Privco, 2014).   Five years later, Chick-fil-A spread to college campuses which became their “first brand licensing agreement.” (Privco, 2014).  By 1993 Chick-fil-A had extended to 500 different locations. (Privco, 2014).  Two years later the iconic Chick-fil-A cows made their debut promoting Chick-fil-A’s memorable slogan “Eat Mor Chikin.”  With the rolling in of the new millennium, Chick-fil-A hit the billion dollar sales mark. (Privco, 2014). The following year they established their 1,000th restaurant in Georgia. (Privco, 2014).  In 2006, Chick-fil-A hit the two billion dollar sales mark. (Privco, 2014).  A few years later, Chick-fil-A ranked 22nd in the the top 25 “Customer Service Champs.” (Privco, 2014).   Truett Cathy founded Chick-fil-A and instilled his southern roots and strong Christian traditions into his organization. Chick-fil-A's headquarters, which is outside of Atlanta, includes a statue of Jesus washing the feet of a disciple. (Green, 2014).  Other religious artwork is on display in the large atrium at the entrance of the building, including Bible quotes and crosses. (Green, 2014).  Since he opened his restaurant, Truett Cathy has openly incorporated Christianity into his business, from putting Bible quotes on the Styrofoam sweet-tea cups to closing the entire chain on Sundays. (Green, 2014).  Chick-fil-A’s corporate mission statement is, “

 

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Dell Appraisal and the Business Judgement Rule

Dr. Donald G. Margotta, Northeastern University, Boston, MA

 

ABSTRACT

 This paper addresses problems with certain valuation issues in mergers, and “fair value” calculations in appraisal proceedings.  All the variables in valuation models have inherent uncertainties and these are discussed using specific illustrations from the 2016 Dell appraisal decision. The paper shows why these uncertainties are inescapable and why any conclusions based on them must depend on someone’s business judgment. Whose business judgment that should be is the critical question and after considering several alternatives the paper concludes that the judgment of a corporation’s directors should prevail, a well-established principle known as the business judgement rule. Numerous legal proceedings require estimating the financial value of some asset or corporate decision. For example, litigation in merger issues frequently focuses on the value of the target corporation. Appraisal litigation is a related, but different, procedure that requires the calculation of a “fair value” following the completion of a merger. Also, litigation in 10b-5 fraud litigation often focuses on the value of damages resulting from the impact on a company’s value resulting from a fraudulent or misleading statement. Bankruptcy proceedings also involve valuation issues.  After evaluating several methodologies used in establishing the value of financial assets, this paper discusses the financial variables involved in such methodologies with the objective of clarifying why valuation differences exist and why they are inescapable. Among the methodologies examined are discounted cash flow, comparables analysis, and market prices. It shows why absolute answers to most valuation issues using any of these methodologies are impossible and why, therefore, someone’s business judgment must prevail. After discussing several alternatives for that dominance the paper concludes that the judgment of directors should prevail contingent, of course, on directors passing the usual judicial scrutiny of their due diligence, good faith, and loyalty in reaching their decisions.  Estimates of the value of financial assets can vary widely. For example, in the attempt by Paramount Communications in 1990 to take over Time, Inc. the Delaware Supreme Court was presented with values for Time ranging from $208 to $402 per share, a range the Court said “…that a Texan might feel at home on.”1 An even wider range of values was submitted to the Delaware Chancery Court in the 2016 appraisal proceedings following Dell’s going private transaction in 2013. In that case at least 65 different estimates of Dell’s “fair value” were submitted to the Court, ranging from $7.25 to $27.05 per share. The percentage difference between the high and low end of these estimates is approximately 93% in the case of Time, and 270% for Dell.  At the time a management buyout was first proposed to Dell on June 15, 2012 the market price of Dell was $12.18 per share.2 For comparison, the final price agreed to by Dell’s board on August 2, 2013 was $13.75. This price was approved by a 57% majority vote of shareholders (70% of shares voted) on September 12. 2013.3 The “fair value” awarded to dissenting shareholders by the Delaware Chancery Court was $17.62 on May 31, 2016.Understanding why such wide ranging estimates of value exist requires an understanding of valuation models and of the variables that go into them. Such understanding should help decision makers such as judges and legislators see that decisions in valuation litigation ultimately rely more on legal grounds than on financial ones. To be sure, financial analysis is required, but choosing from the inevitably different results from financial analysis requires a legal judgment.  Discounted cash flow (DCF) methodology is generally acknowledged to be the most rigorous and most widely used methodology for evaluating the value of a company.

 

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Process Capability Analysis for Left-Skewed Distributions with Negative Values

Dr. John E. Knight, Professor, The University of Tennessee at Martin, TN

Dr. Daniel L. Tracy, Professor, Beacom School of Business, The University of South Dakota, SD

Dr. Mandie R. Weinandt, Beacom School of Business, The University of South Dakota, SD

 

ABSTRACT

 Process capability measures have gained widespread acceptance for statistical process control in both manufacturing and service organizations.   The calculations apply extremely well for distributions that approach normality.  However, traditional calculations can yield poor results when the data comes from non-normal and/or highly skewed distributions. The primary factor that indicates poor results (when in fact that may not be the case) is the inflated estimate of the standard deviation that results from skewed data.  Although the underlying distribution histogram may indicate few defectives, the process capability index will tend to indicate higher percentages of defectives than the actual data distribution.  Thus, when the distribution is not normal and/or skewed, accurately evaluating process capability requires larger samples, alternative calculations, or data transformations.  Data transformations attempt to convert original data to approximately normal data. Typically, transformations will be applied in a sequence of increasing ability to remove the skewness from the data.  The progression of the square root transformation, the logarithmic transformation and the inverse transformation is applied and usually generates a reasonable normal distribution of transformed data.   These procedures have been extensively applied to a variety of distributions with considerable emphasis on right-skewed distributions with strictly positive values.  This paper addresses a methodology of finding appropriate capability indices when the data are left skewed and contain some negative values from non-normal distributions.  Process capability analysis represents the relative ability of process output to meet the specifications set forth by the customer. The most common capability index is referred to as Cpk. The Cpk has become an industry wide standard for evaluating vendor quality and customer selection.   The higher the Cpk, the greater the probability that the distribution of process output measurements will fall within the specification limits.  Many customers today expect acceptable quality levels associated with reasonably high Cpk values (greater than 1.5).  More discriminating customers are only satisfied with high quality levels associated with even higher Cpk values.  Very high Cpk values generally indicate that inspection of individual parts is unneeded and unwarranted which is attractive from both customer satisfaction and operational cost perspectives. Additionally, the submission of a capability index from each potential supplier provides the customer with a quantitative measure of which customer provides the highest quality, thus moving the concept of quality from a qualitative concept where all customers proport to have the highest quality to a quantitative measure from each supplier where each can be compared to one another.  Additionally, the capability index from a potential supplier can be compared to the internal goal for quality that has been established by the buyer.  A capability index of 1 provides the customer with a 99.73% chance that each production piece will be within specifications.  A Cpk of 1 still leaves 27 parts in 10,000 that are potentially mixed into the production output.  Most companies today require a minimum Cpk of 1.5 and oftentimes 2.  A Cpk of 1.5 indicates that only 7 out of one million will be defective and mixed into the production while a Cpk of 2 indicates that only about 2 out of 1 billion will be mixed into the production output (virtually theoretically non-existent).  The goal is to decrease the units of defective output to zero with 100% confidence.  Once that goal is achieved, the expensive process of 100% inspection to sort the good parts from the defective parts can be eliminated.  Such quality is one of the basic premises of just-in-time production systems since extra parts will not be needed in storage and in inventory.  

 

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  Public-Private Partnership Advantages

Nathaniel Ford, Jacksonville University, FL

Dr. Julius Demps II, Jacksonville University, FL

Dr. Gordon Arbogast, Jacksonville University, FL

 

ABSTRACT

 This paper analyzes infrastructure projects, which were publicly funded versus those using a public private partnership (P3) to determine which funding vehicle provides cost savings and/or quicker project delivery.  The intention is to ascertain if using a public private partnership is a superior way for infrastructure projects to be funded based on either cost, time to delivery or both.  Data was gathered from Canadian projects spanning a timeframe from 2002 until 2013.  The collected data was from multiple sources including Transportation, Health, Utility, and Corrections industries.   Calculations were reviewed and compiled in a sample size excess of 100.  If the project met the VfM criteria to enter into a P3 relationship, the results indicate a strong relationship between projects funded by a public private partnership and cost savings as well as expedited time to delivery.  As a result, the null hypothesis was rejected in favor of accepting the alternative hypothesis i.e. there is a relationship between cost savings and projects funded with a public private partnership.  In the United States, there is one dominant model of execution for public infrastructure projects, which is fully funded and executed by the government; federal, state and local.  Projects such as hospitals, college dormitories, transportation and electrical infrastructure are typically financed through the Public sector.  The U.S., once a global leader in infrastructure competitiveness, no longer ranks in the top 10, and there is a growing need for infrastructure expansion and repair.  Given that we are in an era of limited federal, state and local funding for infrastructure, an alternative model, known as a Public-Private Partnership, or P3, has gained popularity and is being used to bridge the state and local governments’ resource gaps.  Our current fiscal constraints have many, on both sides of the political aisle, adopting legislation and programs that support P3s. PPP Canada, an independent element of the Canadian Government, defines the Public Private Partnership as a long-term, performance-based approach to procuring public infrastructure where the private sector assumes a major share of the risks, in terms of financing and construction and ensuring effective performance. This mechanism is viewed as an enhancement to the financial attractiveness of projects and one that increases the likelihood that public infrastructure projects can be executed in a faster time frame with less cost to the Public.   (Deye, 2015), indicated that from 2005 to 2014, forty-eight infrastructure P3 transactions with an aggregate value of $61 billion reach the formal announce phase and of those, forty transactions or over 83% successfully closed.  (Deye, 2015), also indicated though many of these projects are in the northeast, the country is showing an enhanced adoption rate of the P3 model.  The Canadian Council for Public-Private Partnerships (2011) demonstrates the effectiveness of the P3 delivery method.  The intention of this research is to show P3 delivery modifies the aspects of a public infrastructure project compared to the traditional delivery, known as Public Sector Comparator, or PSC. Much has been written about the state of public infrastructure in the United States.  President Donald Trump has signaled that infrastructure will be a top priority in his administration.  His policy documents indicate a focus on pursuing public/private partnerships, and other prudent funding opportunities to put “America’s Infrastructure First”.  In the United States, P3 projects are evaluated and completed on an ad-hoc basis.

 

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Evolution of the Cluster Concept and its Application to Tourism

Antonia Canto, University of the Azores, Portugal

Dr. Joao Couto, University of the Azores, Portugal

 

ABSTRACT

The cluster concept evolved over time and can be applied to various industries as it allows companies to reduce transaction costs, improve the quality of their products, and, thus, enhance the brand of the business group. Due to differences in economic and cultural progress, regional attractiveness, competitiveness, and the quality of life of the population, the tourism cluster differs from other clusters of companies and institutions. It is noted that this is made up of tourist-attraction companies, infrastructure companies, and all government entities. The present article seeks to contribute methodologically to the existing literature, since it focuses its analysis on the evolution of the cluster concept and its applicability to tourism, and pays particular attention to this business organization in the case of Portugal. The concept of clusters can be defined in different ways; however, Porter (1998) identified it as a geographical concentration of companies or institutions, contiguous to each other, connected by similar and complementary factors. These are essential to regional development because they manifest positive externalities, in particular, they contribute to productivity growth, business performance, innovation, and competitiveness (Kachniewska, 2014). All companies that constitute the cluster conduct their duties in the same area of activity, eventually representing it as a value-added production chain. It creates an environment of trust between companies, reducing transaction costs, and increasing the competitive advantages of the group (Iordache et al., 2010).  The organization of clusters can be applied to numerous branches of economic activity, particularly in tourism, distinguishing itself from the others as the conditions considered are focused on economic and cultural progress, on attractiveness, competitiveness, and the quality of life of, not only tourists, but of the inhabitants of a certain geographical region (Cunha and Cunha, 2005).  In this context, this article contributes theoretically with a methodological definition for analyzing a cluster, bridging the lack of information that exists between the relationship of tourism and its organization by clusters.  The article is divided as follows. Section 2 describes the literature review of the cluster concept, of the various forms of action, and the respective advantages and disadvantages. Additionally, it clarifies the definition of a tourism cluster, such as its structure and its procedure.

 

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The Impact of the SEC’s Indecision Regarding IFRS Migration on the Readiness Efforts of U.S. Issuers and Accounting Faculty

Donald Buzinkai, Fairleigh Dickinson University, NJ

Dr. Chunyan Li, Pace University, NY

 

ABSTRACT

  The final SEC IFRS work plan staff report issued in July 2012 was essentially silent regarding the path forward for the use of IFRS in the U.S. Utilizing new survey data, this study investigates what impact the SEC’s indecision has had on the readiness efforts of U.S. issuers and faculty. Our results highlight that, despite some initial progress and a continued belief that the SEC will eventually mandate IFRS, issuers are delaying their readiness efforts until the SEC is more definitive with an IFRS migration plan and time line. Conversely, our research highlights that despite an increase in U.S. faculty uncertainty regarding IFRS, faculty behavior surrounding IFRS has not changed significantly. We also find that issuers whose auditors are Big 4 firms are more prepared for IFRS than issuers whose auditors are non-Big 4 firms. While  convergence efforts by the IASB and the FASB have resulted in modified standards on both sides that have reduced differences (Langmead & Soroosh, 2010), some convergence efforts have been discontinued or have resulted in different standards because the IASB and FASB could not agree (Pacter, 2013), and some have been delayed in their implementation. A November 2011 SEC staff paper confirmed general observations that despite convergence efforts, many differences between U.S. GAAP and IFRS remain (Poon, 2012).  In July 2012 the SEC issued its final work plan staff report noting that the IASB has made substantial progress in improving the comprehensiveness of IFRS, but that gaps remain such as the development of industry-specific accounting standards and the global application and enforcement of IFRS, and that questions remain on how the U.S. regulatory environment will be impacted. The report stated that “it became apparent to the Staff that pursuing the designation of the standards of the IASB as authoritative was, among other things, not supported by the vast majority of participants in the U.S. capital markets (Kaya & Pillhofer, 2013, p. 278).”  Notably, the final report did not provide a recommendation for a U.S. adoption of IFRS (Kaya & Pillhofer, 2013) leaving an unclear view of a potential U.S. adoption. The objectives of our paper are to examine the impact of the SEC's indecision on U.S. issuer and faculty IFRS readiness efforts, and to assess whether audit firm size influences issuer readiness.  The 2012 SEC report highlighted that issuers generally support the idea of a single set of high-quality global accounting standards but expressed concern about how much change the U.S. financial reporting system could absorb. A 2012 survey of U.S. accounting firms showed that the majority of survey participants support the movement towards IFRS and 48% recognize the benefit of IFRS in increasing global investors’ confidence (Jurkowski, Sen, & Starnawska, 2014). However, support for IFRS is outweighed by the concerns of a low rate of U.S. companies being ready for an IFRS migration (Jurkowski et al., 2014). The 2012 SEC report highlighted that of approximately 10,000 issuers, most have little knowledge of IFRS requirements and many would prefer a managed transition by which the FASB would incorporate IFRS into U.S. GAAP (Tysiac, 2012). Consistently, in response to a 2011 AICPA member survey asking whether their company was prepared to adopt or support IFRS adoption, 0% of members working for U.S. public companies responded “ready,” and only 9% responded “active;” the remaining majority were in “evaluating,” “adopting not begun,” “in preliminary discussion” or “N/A” categories. Additionally, a 2011 PwC study asked issuers how long they thought it would take their companies to transition to IFRS. Thirty-eight percent responded "three to five years" or "greater than five years" while 41% responded "one to two years" or "less than one year." The remaining 21% selected “Not sure or N/A.”

 

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The Relationship between Environmental Strategies and Environmental Performance: The Role of Green Intellectual Capital

Dr. Ming-Jian Shen, Takming University of Science and Technology, Taiwan (R.O.C.)

 

ABSTRACT

 The public concern of environmental issues poses enormous challenges on firms, calling for more active involvement in environmental protection. Although the influence of environmental strategies on environmental performance has been documented, the mediating mechanisms are largely unexplored. This study proposes and examines an intervening model that explores if proactive environmental strategies enhance environmental performance by accumulating green intellectual capital. This study collected data from top management team members in 123 firms of the Top 5000 enterprises in Taiwan. Results of structural equation modeling showed that proactive environmental strategies were positively related to green intellectual capital, which in turn leaded to better environmental performance. More importantly, the relationship between environmental strategies and environmental performance was partially mediated by green intellectual capital.  In the past several decades, large-scale production and the overuse of natural resources result in global ecological and environmental crises (Shrivastava, 1995). The deteriorating natural environment threatens mankind development and sustainability, increasing global awareness of environmental protection. The public concern of environmental issues poses a specific challenge on firms, calling for the active involvement of managers to adapt their strategies and management practices toward environmental protection (e.g., Buysse and Verbeke, 2003; Hart, 1995; Henriques and Sadorsky, 1999; Murillo-Luna et al., 2008; Porter and van der Linde, 1995; Sharma and Henriques, 2005). Firms can reduce their negative impacts on the natural environment and further gain competitive advantages by addressing environmental sustainability (Hart 1995; Porter and van der Linde 1995). Meeting demands from various stakeholder groups such as legislators, environmental organizations, customers, and communities (Gadenne, Kennedy and McKeiver, 2009; Murillo-Luna, Garces-Ayerbe and Rivera-Torres, 2008) and pursuing superior economic results (Judge and Douglas, 1998), firms may adopt proactive environmental strategies to promote good environmental performance; in many cases, however, enormous effort results in limited success. It is arguable appropriate to attribute the gap between environmental strategies and environmental performance to the firm’s inability to accumulate intellectual capital. Being responsive to the demands of environmental protection and further becoming environmental sustainable, firms need intellectual capital on the path of greening (Chen, 2008). In the knowledge-based economy, firms should shift from acquisition of physical resources to accumulation of intangible resources for environmental sustainability. Proactive environmental management practices help firms institutionalize knowledge and codify experience to reduce their “footprint” on the natural environment (Berry and Rondinelli, 1998; Hart, 1995; Murillo-Luna et al., 2008).

 

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