Great Northern American Case Study Essay

The textbook defines perception as the process by which the individual selects, organizes, interprets, and responds to information. The Oxford dictionary defines perception as the ability to see, hear, or become aware of something through the senses; the way in which something is regarded, understood, or interpreted. Your perception is your reality, therefore statements such as, â€Å"the customer is always right,† hold true to a certain extent. What people perceive is what they believe, based on what they see, hear, and think. Perception affects decision making and the choices people make. This is why it is imperative not only for the salespeople of Great Northern American to understand how people form perceptions, but this is important for any person looking to build business relationships and loyal customers. Customer satisfaction is crucial to create business relationships and repeat customers. To be successful, salespeople must quickly identify opportunities and predict t he changing needs and wants of customers. â€Å"Recent advances in customer equity research have rekindled the importance of understanding how customers form perceptions of satisfaction and quality (Blattberg and Deighton, 1996).† It is also essential for Joe Salatino’s sales force to understand that the drivers of customer satisfaction may shift over time. Things happen gradually and people’s perception may change. Why do consumers choose certain products to purchase over others? According to Don Shapiro, President and Founder of First Concepts Consultants, Inc, â€Å"People say yes because they see a high perceived value in what is offered for sale.† If perceptions of value are high, the more likely the sale will be made. â€Å"Closing the sale is primarily about raising the customers’ perceptions of value as high as possible (Shapiro, 2012).† This is where things like subscribing to prospects’ local newspapers and researching things they value come into play. â€Å"The ave rage experienced and trained sales person does not go far enough in developing these things with their prospects. They do enough to be a good producer but  lose sales they could have closed had they just done a bit more. They simply do not fully understand what is going on inside their prospects’ minds, everything that might affect the prospects’ decisions and what would increase the prospects’ perceptions of value the most (Shapiro, 2012).† Some statistics say the top ten percent of salespeople comprehend what goes on inside a perspective client’s mind, their understanding of how people form perceptions gives them a competitive advantage. Attribution is the method in which people use information to make conclusions about the causes of behavior or events. The ability to determine how people make attributions is a tremendous positive for the salespeople of Great Northern American. This element gives them an opportunity to take the information in order to convince perspective clients to make the purchase. The 30-person sales force of the Great Northern American Telemarketing Company works on commission and bonuses, therefore I believe the expectancy theory would be most appropriate for Joe Salatino to apply. â€Å"In the inquiry of behavioral issues related to sales force compensation, expectancy theory has enjoyed substantial popularity. The expectancy theory suggests that both the desirability of the reward or compensation (referred to as valance) and an individual’s estimate of the likelihood of attaining that reward (referred to as expectancy) are important determinants of a salesperson’s behavior. In the context of sales compensation issues, expectancy theory suggests that any method of compensation should (1) tie reward to performance, and (2) strengthen the salesperson’s perceived connection between performance and the reward received (Chowdhury and Massad, 1997).† Motivational strategies are necessary for the expectancy theory, â€Å"motivation and performance are positively correlated. An increase in the level of motivation should correspond to an increase in the amount of effort expended in selling tasks, which in turn should improve performance (Chowdhury and Massad, 1997).† According to the case study, the Great Northern American salesroom features all kinds of motivational devices such as rotating blues lights along with noise and a fast pace, all which create a perfect environment for the expectancy theory. Executing the expectancy theory can prove to be a challenging, yet purposeful task that goes beyond an annual review. Six implementations Joe Salatino could use to apply the expectancy theory include: 1) to make expectations clear, 2) provide continuous feedback, 3)  use corrective actions privately, 4) believe in your employees, 5) use praise tactics publicly, and 6) make rewards achievable. According to David Burkus, the editor of LDRLB, employees without goals will be naturally aimless. Joe Salatino should provide his sales team with clear achiev able goals and make sure there are measurable standards in place to evaluate their performance. Giving immediate, continuous feedback allows an employee to know that their actions affect not just them, but the company as well. Joe should keep in mind that employees are motivated by setting goals and by receiving continuous feedback on where they stand relative to those goals. Recent research shows how rewarding it can be when employees are aware they are making progress. Most people are discouraged by negative feedback, especially if they feel it’s embarrassing. Therefore, the most adequate place to discuss an ongoing, performance-related issue or correcting a recent, specific error is in an office, with the door closed. Joe should also believe in his employees; the perception of a leaders’ trust is the key factor of revolutionary leadership. Make announcements of praise publicly, make everyone aware when an employee has made a particularly outstanding presentation, sale, or any other notable achievement. Even though competition at Great Northern American is stiff for the sales force due to the internet users, it is still important to make bonuses and rewards achievable. Vary the basis for the awards, for example, top sales might be one category, but other categories can include top research or most diligent. Distinguish that numerous types of merits can motivate your employees to focus on additional areas of their performance. Other ways Mr. Salatino can help improve employees’ performance is by helping employees to experience the mastery of their work and then add challenges as their mastery starts to unfold. Leverage social persuasion by igniting faith in employees while simultaneously arranging situations for their success. Highlight realistic models of engagement. Help employees develop endurance while reducing anxiety and depression so they know they can do what is necessary to produce a certain outcome. Self-efficacy refers to people’s belief in their ability to muster up what is necessary to exercise control over life’s challenges. â€Å"People with stronger self-efficacious beliefs tend to set higher personal goals and remain committed to those goals in the face of adversity. They also view challenges as tasks to be mastered  and recover quickly from setbacks. Self-efficacy is particularly relevant to success in sales where adversities such as rejection, stress, and competition are unavoidable aspects of the profession. When salespeople hold strong self efficacious beliefs, they are better able to adjust to adversity and more likely to remain committed to assisting customers, making sales, and meeting quotas. In contrast, for salespeople who lack confidence in their professional abilities, these adversities increase their sense of helplessness and decrease their commitment toward goal achievement, often leading to withdrawal from clients, the organization, or the profession (Lewin and Sager, 2010).† Joe Salatino can leverage an understanding of the value of self-efficacy to ensure he hires the most successful salespeople in a number of different ways. He needs to be sure not to confuse self-esteem, which is having a good view of yourself with self-efficacy, which is belief about your ability and capacity to accomplish a task or to deal with the challenges of life. By keeping these two things distinct, Joe can choose better qualified candidates for Great Northern American. There is a major variation in the degree to which salespeople perceive job conditions as stressful. Research has shown there are huge differences in the way individual salespeople respond to job stressors and view workloads. Self-efficacy is one of the determining factors. You can give identical sales situations to two people and it will be viewed very differently depending on the level of self-efficacy. A salesperson with low self-efficacy may find the assignment intolerable and extremely stressful, whereas an individual with high self-efficacy may perceive it as practical and not stressful at all. Concluding that low self-efficacy can make people believe that tasks are harder than they actually are; and may view job expectations as contrasting and confusing. Individuals with higher levels of self-efficacy are more capable of dealing with higher job demands and possess the ability to view difficult situations as a challenge rather than seeing them as a threat. Social cognitive theory suggests that individuals form beliefs about what they can and cannot do. Those beliefs are used to set individual goals, to predict consequences of behaviors, and to initiate actions required for goal achievement. Self-efficacy is the central mechanism of self-regulation. People’s beliefs in their efficacy influence the choices they make, their aspirations, how much effort they mobilize in a  given endeavor, how long they persevere in the face of difficulties and setbacks, whether their thought patterns are self-hindering or self-aiding, the amount of stress they experience in coping with taxing environmental demands, and their vulnerability to depression. Sales research views self-efficacy as a critical variable that can influence salespeople’s perceptions and responses to challenges and negative situations on the job. People with higher self-efficacy believe in their ability to handle their work well and are more likely to become successful in their careers. Self-efficacy enhances employees’ willingness to exert effort and master a challenge and thus, plays an important role in increasing work effectiveness, job satisfaction, and productivity. Because salespeople are monitored on their individual performance, experience high rates of rejection, and practice more autonomy, it is imperative for Mr. Salatino to select highly self-efficacious individuals. In addition to searching for individuals with excellent communication skills, those that possess an upbeat attitude and are highly self-motivated, it would be to Great Northern American’s advantage for Joe to search for individuals who also possess conscientiousness and extraversion. Having the knowledge that self-efficacy is derived from mastery experiences, social persuasion, and stress resilience will also aid in selecting the most successful salespeople to help build an even more successful company now and in the years to come. References Chowdhury, J., & Massad, V.J. (1997). An eclectic paradigm of salesperson compensation: toward a comprehensive framework of the determinants of sales compensation modes. Journal of Marketing Management (10711988), 7(1), 61-80. Learning Theories Knowledgebase (2012, November). Attribution Theory (Weiner) at Learning-Theories.com. Retrieved November 1st, 2012 from http://www.learning-theories.com/weiners-attribution-theory.html Lewin, J. E., & Sager, J. K. (2010). The Influence of Personal Characteristics and Coping Strategies on Salespersons’ Turnover Intentions. Journal Of Personal Selling & Sales Management, 30(4), 355-370. Shapiro, D. Why people buy: conclusions from 30 years studying prospects and salespeople. July 30, 2012. Retrieved on November 1, 2012 from http://www.marketingexecutives.biz/why-people-buy-conclusions-30-years-studying-prospects-and-salespeople

Las Vegas Case Study

Overview of Las Vegas & LVCVA Most people might not even think of Las Vegas as a â€Å"product†, or even they think of it as a brand. Places are included in the concept of product. Places could be cities, states, regions, or entire nations. Place marketing involves marketing strategies which contribute to create, maintain and change attitudes and behavior towards particular places. Behind the scenes, the image of Las Vegas is created and maintained by LVCVA, Las Vegas Convention and Visitors Authority.LVCVA is a private-public agency with the mission statement of â€Å"To attract visitors by promoting Las Vegas as the world’s most desirable destination for leisure and business travel. † Las Vegas has a perception in people’s minds as â€Å"Sin City† for long time, a town full of smoke-filled casinos, bawdy all-girl revues and no-wait weddings. LVCVA wants to broaden the segment of their tourists and reposition the image of Vegas. Some family oriente d facilities were added in the 1990s. However, this family image did not seem to accomplish LVCVA’s purpose.While they are still struggling with a better positioning, the dramatic decline of tourism due to the 9/11 attack forced them to proclaim Las Vegas as a destination of adults. The new Vegas has reinvented itself as a luxury and gaming destination with classy resort hotels & casinos, shopping malls with luxury goods, first-run entertainment & world-renowned restaurants. LVCVA figured that Vegas is more than an assortment of facilities and amenities and what truly attracts tourists is the â€Å"Las Vegas experience† – the adult freedom.The phase â€Å"What happens here, stays here† was created to capture the essence of the Las Vegas experience. The campaign went very well and the tourism industry rose dramatically. Moreover, this thoughtful brand image has been well established because Las Vegas was named as the number two hottest brand by brand consu ltancy Landor Associate. Unfortunately, the recent recession hit Las Vegas tourism industry badly. The natured, naughty, indulgent image of Las Vegas has had a negative impact during the recession.Especially followed by President Obama’s statement, Las Vegas became a less attractive destination for business and leisure travelers. LVCVA made attempts to reposition Vegas as â€Å"affordable† and â€Å"well-desired† to target hard working Americans. But this positioning is less convincing to people with the perception of the well-established image of Vegas. Although a slow recovery has appeared in the past year, the figures are not the same compared to the time before the recession. SWOT Analysis Strengths:Las Vegas has well positioned itself as a destination of adult freedom which differentiates itself from other states around the nation. Moreover, LVCVA concentrates on the total experiences of the tourists and promote Las Vegas as the best place to travel where t ourists would do things that they don’t normally do at their home town. The world-wide brand image of Las Vegas strengthens its position in the tourism industry. The presence of Las Vegas in the global tourism industry is still growing.Especially, Las Vegas was established by various consumption-oriented industries where gaming, tourism, business convention and luxury retailing take place. Also, many illegal activities within the nation are legal in Las Vegas such as gambling and prostitution. The â€Å"luxury† image attracts many affluent parties to visit Las Vegas which contributes to a big part of the revenue. Weaknesses: Although the large consumption-oriented industry provides huge profits for Las Vegas, it has also made the state more susceptible to extreme volatility and recession.During the recession, leisure travelers are aware of their spending as well as reducing their travel expenses. The naughty and indulgent image of Las Vegas does not play very well to a ttract business travelers. In addition, the city has neglected the importance of technology and knowledge-based business companies or factories in which other states are well established. The consumption-oriented industries concentration makes Las Vegas less competitive to attract these business companies. Opportunities: The excellent global presence of Las Vegas is a great opportunity to attract tourists outside of the nation.Most importantly, international travelers are most likely to stay longer than travelers from other states. Longer stays would involve more spending and activities; Thus, revenues for the state. Moreover, the income and activities in China are growing rapidly in recent years. As the income of the Chinese increase, they will want to travel outside of China. Therefore, Chinese travelers would be a great target segment for Vegas. In addition, many companies now use social media and apps to create customer relationships and solutions to better serve their customers .Innovation in technology for the casino business would be another opportunity to attract tourists or gamers. Threats: The existing image will be an issue to project a full recovery after the recession. The buying pattern has changed since the recession, the glamour and luxury image of Las Vegas does not fit the current economic situation and the current consumers’ desired perception. Moreover, unstable oil prices are a threat to Las Vegas which depends majorly on the tourism industry. Rising oil prices will result in higher airfare which reduces both business and leisure travelers.In addition, many states are considering legalize gambling to increase their revenue and that could pose a threat to Las Vegas’s privilege. Case Analysis The most important factor in the tourism industry is the tourists’ travelling experience. It is the experiences that travelers gain while they are travelling. LVCVA understands that they are not just selling Las Vegas; they are selli ng the â€Å"Las Vegas Experience† – the adult freedom. By talking to their old and potential customers, they learned the core customer value. The Vegas visitors want to feel a little naughtier and less inhibited and that is what their customers are buying.To accommodate the benefits the customers are seeking, the actual services and products are provided to the satisfaction of the visitors. Various product features of Las Vegas were produced to target the adult such as casinos, luxury retailers, world-renowned restaurants and five-star hotels. Branding is another strategy LVCVA used to deliver the core customer value. By spending $75 million for ad campaigns, LVCVA successfully boosted the brand message educating consumers of the â€Å"products† Vegas are selling. â€Å"Only Vegas: What happens here, stay here† became the now-familiar catchphrase of Las Vegas.This image has replaced the long pervasive image of â€Å"Sin City† to a luxury and indul gent image. Although this image has been adjusted to â€Å"affordable† and â€Å"well-deserved† during the recession, but the â€Å"Las Vegas Experience† brand image still maintains a consistent meaning to consumers. As research indicated, people still demand the same Vegas they’ve known and loved will still be there during hard economic times. This proves the strength of the Vegas brand image which provides its consumers a consistent meaning and helps them identify the products that benefits them.On the other hand, to manage the brand image, LVCVA also built an augmented product by constantly surveying their previous and potential customers of their Vegas travel experiences. Support service was designed to periodically assess the value of their products offering and brand experiences to obtain feedback and new ideas for future offerings. Because of the constant research and surveys, LVCVA was able to react quickly with their repositioning as well as main tain product benefits to the customers. The most powerful brand positioning builds around strong consumer beliefs and values.However, one-sided brand positioning became a detriment as Las Vegas moves forward. Although the strong brand experience has boosted the presence of Vegas around the world, it also destroys other economic opportunities for the city and makes the city difficult to react during economic changes. When marketing a city, a diverse objective would be beneficial. And it will create flexibility in the city when facing economic changes. A diverse objective is not just concentrating on developing the global tourist and business visitor industries; it will work on attracting different types of companies and businesses.It is because the ever changing external environment makes place marketing a most challenging task. To compete effectively in this current rapidly changing environment, a flexible and proactive real marketing approach must be developed. As a result, the one -sided marketing approach for Las Vegas will have a negative impact when the city moves forward. A real marketing approach must be constantly evaluated and reacts to the current environment. Also, fresh ideas and attractions are needed to maintain the current and potential customers.Therefore, the most recent efforts by the LVCVA will not continue to work since the consumers’ buying habits have changed and the revenue figures will not recover back to the 2007 peak time based on their recent efforts. Most importantly, the efforts are not contributing to the long-term strategy which should be created to adapt to the rapidly changing environment. A diverse marketing approach would require LVCVA to attract international and local companies to their offices in Las Vegas. These companies will provide ob growth and business travelers to Vegas. By diversify its industrial base; the city will find it easier to undergo economic downturn compared to just concentrating on consumption-ori ented industries. LVCVA should create a set of marketing tools to increase the percentage of international visitors. Spending from international visitors will contribute to a big part of revenues in the future if the city can gain support from the government policies to ease travel restrictions and make getting a visa more easily available for foreigners.Opening the door for international visitors will create more job opportunities to immigrants who speak other languages besides English. Also, the city should encourage their citizens to learn a second language and that could possibly create a business opportunity for private language schools. In addition, LVCVA could attract parties to hold international trade shows and conventions in the city. Innovative ideas are also needed to maintain the current products and services offered in Las Vegas. Smartphones are widely used by individuals.Therefore, a technology wise city could be very favorable for modern citizens. Casinos could creat e apps to better serve their customers while they are gambling or offer free Wi-Fi in Casinos. The â€Å"Las Vegas Experiences† provide a great brand experience to the consumers. However, branding is pervasive but functional products and services are not. Las Vegas should provide a consistent image as well as consistent innovative products and services offerings for their consumers. Just like Disneyland will produce new rides or re-decorate the theme parks for holidays.Products and services could be renewed or add new ones to recapture the return of previous visitors and attract potential visitors. As Ralenkotter mentioned â€Å"History has shown that new properties increase visitation across the board†. Although CityCenter might affect the image of Las Vegas, it is one of the attempts to renew the appearance of this place. Las Vegas is still down from the 2007 peak but their brand image is still strong in consumers’ minds. And that represents its ability to fac e the upcoming challenges and changes.

Test Bank Ch8 3616 Butler

PART IV Managing the Risks of Multinational Operations Chapter 9 The Rationale for Hedging Currency Risk True/False 1. In a perfect financial market, financial contracts are zero-NPV investments. ANS: True. 2. If hedging currency risk is to add value to the stakeholders of the firm, then hedging must impact either expected future cash flows or the cost of capital or both. ANS: True. 3. If financial markets are informationally efficient, then corporate financial policy is irrelevant. ANS: False. Don’t confuse informational efficiency with a perfect market.Although the perfect market conditions ensure informational efficiency, informationally efficient markets can be imperfect. 4. Perfect financial markets are a necessary condition for corporate risk hedging to have value. ANS: False. Market imperfections are necessary conditions. 5. In perfect financial markets, corporate financial policy is irrelevant. ANS: True. 6. In a perfect financial market, the law of one price holds. AN S: True. 7. Equal access to perfect financial markets ensures that individual investors can replicate any financial action that the firm can take. ANS: True. 8.In perfect financial markets, corporate hedging policy has no value. ANS: True. 9. In perfect financial markets, corporate investment policy is irrelevant. ANS: False. Firm value depends entirely on the firm’s investments in a perfect financial market. 10. If corporate financial policy is to have value, then at least one of the perfect market assumptions cannot hold. ANS: True. 11. Real-world financial markets are perfect markets. ANS: False. Perfect markets are a theoretical ideal and not a practical reality. 12. Market imperfections are greater across national boundaries than within national boundaries.ANS: True. 13. In perfect financial markets, multinational corporations have an advantage over domestic firms in financing their investments. ANS: False. The law of one price holds in perfect financial markets. 14. Mul tinationals have a comparative advantage over domestic firms in exploiting cross-border differences in financial markets. ANS: True. 15. Progressive taxation is a system in which larger taxable incomes receive a higher tax rate. ANS: True. 16. Tax preference items are goods that are sold on a tax-free basis. ANS: False.Tax preference items are items such as tax loss carryforwards and carrybacks and investment tax credits that are used to shield corporate taxable income from taxes. 17. A call option is an option to buy an underlying asset at a predetermined price. ANS: True. 18. A call option is an option to â€Å"call in† or demand payment on a loan. ANS: False. A call option is an option to buy an underlying asset at a predetermined price. 19. Indirect financial distress costs are relatively unimportant for firms selling products for which quality and after-sale service are important.ANS: False. Reputation is easily eroded in these instances. 20. Managerial gamesmanship is l east prevalent during financial distress. ANS: False. Gamesmanship is more prevalent during hard times. 21. Option values increase with an increase in the volatility of the underlying asset. ANS: True. 22. A decrease in the variability of firm value is good news for debt and bad news for the equity call option, other things held constant. ANS: True. 23. Corporate hedging of business risk unambiguously increases shareholder wealth when the firm is in financial distress. ANS: False.Because debtholders have first claim on corporate assets, corporate hedging of business risk helps debtholders first and may or may not help equityholders. 24. In the real world, corporate hedging policy can change expected future cash flows but is unlikely to reduce the cost of debt. ANS: False. Hedging policy can decrease the variability of firm value and can thus reduce the risk of debt and the required return charged by debtholders. 25. Direct costs of financial distress are far more important to corpor ate hedging decisions than are indirect costs. ANS: False.The indirect costs of financial distress influence the activities of firms not just in bankruptcy but prior to bankruptcy as well. 26. Underinvestment occurs when debtholders refuse to invest additional capital into the firm during financial distress. ANS: False. Underinvestment occurs when equity foregoes positive-NPV investments. 27. In financial distress, equity has an incentive to take on large risks in order to increase the value of the equity call option. ANS: True. 28. In Miller-Modigliani’s perfect world, the firm’s optimal investment criterion is â€Å"Accept all positive-NPV projects. ANS: True. 29. In practice, management’s objective is to maximize shareholder wealth. ANS: False. Managers act nominally as equity’s agents but, in actuality, in their own best interests. 30. Managers have little incentive to hedge company-specific risks. ANS: False. As undiversified stakeholders, managers are concerned with both systematic and unsystematic risk. 31. Managers have an incentive to hedge their unit’s transaction exposure to currency risk. ANS: True. 32. Hedging can increase firm value by reducing the costs of agency conflicts between managers and shareholders.ANS: True. 33. Exchange-traded options and futures contracts have a fixed cost per contract so that costs are proportional to the number of contracts traded. ANS: True. 34. The costs of hedging through operations are likely to be less burdensome for a large multinational corporation with diversified operations than for a small, less-diversified firm. ANS: True. Multiple Choice 1. The perfect market assumptions include each of the following except ____. a. equal access to market prices b. equal access to costless information c. frictionless markets d. rational investors e. table governments ANS: E 2. Frictionless financial markets could have which of the following? a. agency costs b. bid-ask spreads c. broker age fees d. government intervention e. irrational investors ANS: E 3. Which risk management guidelines in a) through d) is not recommended by the Group of Thirty Global Derivatives Study Group? a. assess the credit risk arising from derivatives activities b. combine authority over trading and bookkeeping functions into a single department c. quantify market risk under adverse market conditions and perform stress tests d. alue derivatives positions at market e. all of the above are recommended ANS: B 4. Which of a) through d) is unlikely to result in a decision to hedge currency risk? a. bid-ask spreads on foreign exchange b. costs of financial distress c. differential taxes on income from different tax jurisdictions d. stakeholder game-playing e. all of the above are incentives to hedge ANS:A 5. Which of the following factors does not contribute to tax schedule convexity? a. Alternative Minimum Tax (AMT) rules in the United States b. progressive taxation c. sales taxes d. ax prefere nce items e. all of the above contribute to tax schedule convexity ANS: C 6. Indirect costs of financial distress impact the firm in each of the following ways except ____. a. higher financial costs b. higher legal costs in bankruptcy c. higher operating costs d. lower revenues e. stakeholder gamesmanship ANS: B 7. Which of statements a) through c) regarding costs of financial distress is false? a. Both debt and equity unambiguously benefit from corporate risk hedging. b. Hedging can increase expected cash flows by reducing the costs of financial distress. c.Hedging can reduce debtholders’ required return and hence the cost of capital to the firm. d. All of the above are ANS: True. e. None of the above are ANS: True. ANS: A 8. Which of the following was most responsible for the collapse of Barings Bank? a. bankruptcy proceedings b. failure to monitor the activities of its traders c. index arbitrage d. index futures and options trading e. the 1991 fall in share prices on the T okyo stock exchange ANS: B 9. Management has an incentive to hedge which of the following exposures? a. operating exposure b. transaction exposure c. ranslation (accounting) exposure d. all of the above e. none of the above ANS: D 10. Tax schedules are said to be progressive when ____. a. the effective tax rate is greater at high levels of taxable income than at low levels b. the effective tax rate is greater at low levels of taxable income than at high levels c. they do not discriminate on the basis of race, creed, or color d. when tax rates vary by the age of the taxpayer e. none of the above ANS: A Problems 1. In what way is equity a call option on firm value? Tax schedule convexity: progressive taxation 2.Suppose corporate income up to $250,000 is taxed at a rate of 25 percent. Income over $250,000 is taxed at 40 percent. The taxable income of Quack Poultry will be either $200,000 or $300,000 with equal probability. Quack’s income variability arises entirely from an expos ure to currency risk. a. Draw a graph like Figure 9. 2 depicting tax schedule convexity in the United States. b. What is Quack’s expected tax liability if it does not hedge its currency risk? c. What is Quack’s expected tax liability if it is able to completely hedge its currency risk exposure and lock in taxable income of $250,000 with certainty? . In what way does hedging have value for Quack Poultry? Direct and indirect costs of financial distress 3. A firm based in the United Kingdom has promised to pay bondholders ? 10,000 in one year. The firm will be worth either ? 9,000 or ? 19,000 with equal probability at that time depending on the value of the dollar. The firm will be worth ? 14,000 if it hedges against currency risk. a. Identify the values of debt and equity under unhedged and hedged scenarios assuming there are no costs of financial distress. b. Suppose the firm will incur direct bankruptcy costs of ? ,000 in bankruptcy. Identify the value of debt and of e quity under both unhedged and hedged scenarios. c. In addition to the ? 1,000 direct bankruptcy cost, suppose indirect costs reduce the asset value of the firm to either ? 6,000 or ? 18,000 (before the ? 1,000 direct bankruptcy cost) with equal probability. Hedging results in firm value of ? 12,000 with certainty. Identify the value of debt and of equity under both unhedged and hedged scenarios. d. Can hedging add value to shareholders in this problem? Problem Solutions 1.If the firm’s assets are worth more than that promised to debtholders, equity will exercise its option to buy the assets of the firm from the debtholders at the exercise price. If firm assets are worth less than the promised claim, equity will not exercise its option and debt assumes control of the firm. Tax schedule convexity: progressive taxation 2. a. [pic] b. Expected taxes with no hedging: (? )[($200,000)(0. 25)] + (? )[($250,000)(0. 25)+($50,000)(0. 40)] = (? )($50,000) + (? )($82,500) = $66,250. c. Ex pected taxes with hedging: ($250,000)(0. 5) = $62,500 < $66,250. d. Hedging allows Quack to minimize its expected tax liability. This increase in expected future cash flows to equity results in an increase in equity value. 3. a. If firm value is ? 9,000, equity will not exercise its option to buy the firm at a price of ? 10,000. In this case, equity receives nothing and debt receives ? 9,000. If the firm is worth ? 19,000, equity pays the bondholders ? 10,000 and retains the residual ? 9,000. Firm value can be broken down into E[VFIRM] = E[VBONDS] + E[STOCK] = [(? )(? 9,000)+(? )(? 10,000)] + [(? )(? 0)+(? (? 9,000)] = ? 9,500 + ? 4,500 = ? 14,000. Hedged, firm value can be broken down into VFIRM = VBONDS + VSTOCK = ? 10,000 + ? 14,000 = ? 14,000. In the absence of costs of financial distress, the reduction in the variability of firm value results in a reduction in call option value and a ?500 shift in value from equity to debt. b. Unhedged, firm value is decomposed as: E[VFIRM] = E [VBONDS] + E[STOCK] = [(? )(? 9,000 1,000)+(? )(? 10,000)] + [(? )(? 0)+(? )(? 9,000)] = ? 9,000 + ? 4,500 = ? 13,500. With hedging, VFIRM = VBONDS + VSTOCK = ? 10,000 + ? 4,000 = ? 14,000.As in the previous example, the reduction in the variability of firm value is accompanied by a ? 500 transfer of wealth from equity to debt. Hedging also avoids the deadweight ? 1,000 bankruptcy cost and yields an expected gain of (? )(? 1,000) = ? 500. In this example, debt captures the expected gain of ? 500. Equity will capture some of the gain if hedging results in lower interest payments on the next round of debt. c. Unhedged, firm value is E[VFIRM] = E[VBONDS] + E[STOCK] = [(? )(? 6,000 1,000) + (? )(? 10,000)] + [(? )(? 0)+(? )(? 8,000)] = ? 7,500 + ? 4,000 = ? 11,500.If the firm hedges, then VFIRM = VBONDS + VSTOCK = ? 10,000 + ? 2,000 = ? 12,000. This is the same as b) after including indirect costs of financial distress with an expected value of [(? )(? 9,000 6,000)+(? )(? 19,000 18,000) ] = ? 1,500+? 500 = ? 2,000. d. Hedging can add value to shareholders if they can negotiate lower interest payments on debt because of their hedging policies. Even in financial distress, equity could offer to renegotiate the bond contract to more evenly share the gain in firm value from hedging. In this way, they can share in any gain from reducing the probability and costs of financial distress.

Business Ethics Essay Example | Topics and Well Written Essays - 1500 words - 5

Business Ethics - Essay Example Besides financial losses for the business, other problems such as lawsuits and market share decrease may be witnessed (Baumhart, R. 1968). Ethical Problems Worldwide Corporate ethical issues have not been confined to the United States. 80% of companies worldwide suffered business fraud in the years between 2004 and 2007. Parmalat, a dairy company in Italy filed for bankruptcy in 2003 because of fraudulent accounting issues. Founder Calisto Tanzi was found guilty of fraud in 2010 and sentenced to prison for eighteen years. The company reported earnings every year but never earned any earnings. Conrad Black, a former chairman of Hollinger International, was found guilty in the 2007 of embezzling funds of the media company’s shareholders by back-dating stock options (Baumhart, R. 1968). Millions of dollars was stolen through falsified documents. In Sweden top management of the insurance business Skandia engaged in corruption awarding themselves large bonuses in excess of $350 mil lion, some of which were never disclosed. This action made Shareholders to be extremely unhappy with the losses and executive corruption. The prices of shares in the company dropped drastically (Helin and Sandstrom2007). The fines levied against investment banks and brokerage firms in 2003 did not stop investment banks such as Lehman Brothers from closure five years later over undervalued mortgage-backed securities. Banks got into a new part of finance that escaped banking rules through bundling bad mortgages into securities (Lewis2010). The United States experienced the largest financial disaster since the great depression was felt around the world. Even though Lehman Brothers assets exceeded $600 billion, it collapsed due to their deep connection with derivatives, this enabled investment banks to shift money from one company to another. The Ethics of U.S. Bankers The ethics of banks have been measured frequently by the Gallup Polls. Though in 1988 polls that was conducted during t he savings and loan crisis, there was a drop in number of people rating the banker’s ethics as high or very high by 12%. There was a further drop from 23 % in the poll taken in 2008 to 19 % in the following year. This was the lowest record for the profession in the banking industry. In 2009 polls, 33 % of respondents rated the ethics of bankers as ‘low or very low’. This indicated a level of distrust and also poor ethics in the US banking industry. From the figures, it is a clear indication that the blame was pointed to the bankers for the financial crises. The public felt that the financial problems were due to bad ethics in the banking sector. Bankers have been criticized for issuing risky loans but according to (Lewis 2010), he argues that it is too crude to blame the financial crisis on ethics of bankers. According to Graafland and van deVen (2011) the three areas where of U.S. government has failed include encouraging the credit extension in the real estate market, failure by the government to keep a strong financial policy, and finally failure to regulate and monitor the markets. According to Graafland and van deVen there should be an improved sense of professionalism and duty to the public is needed. When an organization or industry loses its authenticity, the benefit of doubt is also lost. This is according to Kopeck Berenbeim, R. (1987). The Corruption Perception Index The corruption perception index (CPI) can also be used to

Cultural Barries in Global Business Research Paper

Cultural Barries in Global Business - Research Paper Example Such reasons include an enabling business environment, which is a prerequisite for any business startup or venture. On the other hand, a business will face challenges related to the culture, which may act as a barrier on business. Furthermore, there are other challenges like leadership barriers, which affect business operations. Nevertheless, it is incumbent upon the business to deal with these challenges and use the best leadership methods. The United States is one of the countries that appeal to business ventures for obvious reasons. In this regard, a business will succeed in an environment that is politically stable and not volatile. In effect, the United States offers such an environment for business. Known as the free world, the United States is a model of democracy that is free from autocratic rule, which makes business operations conducive. As a result, a democratic state is one of the main reasons the United States appeals to setting up of businesses since the political clima te ensures effective economic legislations, which are essential for business. In effect, the lack of economic uncertainties such as unexpected takeovers due to lack of clear economic policies and legislations is important for business. Despite the creation of an environment whereby there is economic regulation of businesses in the United States, the country is the largest economy in the world in terms of GDP. In effect, it is common knowledge that economic strength translates to a higher per capita income amongst the citizens. Therefore, there is an available market for goods and services a business will produce for since the consumers have a high marginal propensity to purchase and consume. In effect, this feature of the economy of the United States appeals to businesses since the average consumer has a high purchasing power. The contemporary business world witnesses business increasingly committed to reaching global markets. Barkema, Bell, and Pennings (1996) noted, â€Å"Globali zation confers access to foreign markets, cheap labor, and other advantages† (p. 151). Nevertheless, a few firms do not realize the existent of these cultural differences. Nevertheless, businesses that identify cultural barriers will find approaches of dealing with the barriers in order to establish a competitive edge over their competitors. According to Leung, Bhagat, Buchan, Erez, and Gibson (2005), broadly defined as â€Å"values, beliefs, norms, and behavior patterns of a national group,† established cultures have an effect on the business activities and performance of individuals (p. 357). In the American society, one cultural belief that may affect business is the individuality amongst the Americans. According to E. Hall and M. Hall (1990), the American culture's biggest concern is â€Å"their own careers and their personal success than about the welfare of the organization or group† (p. 147). Americans will often come out as individuals who like to â€Å" handle their own problems and chafe at authority† (E. Hall & M. Hall, 1990, p. 148). As a result, this character trait may pose a big challenge to the leadership of a business since they may think that the average American worker was rebellious to the leadership in a firm. On the other hand, individualism, which is one of the most important aspects in the American culture, is a barrier to leadership. In this case, individualism works against teamwork in a business entity. In this case, since success in a business is a team task, the

Change and Development in the English Language Essay

Change and Development in the English Language - Essay Example In an analysis of the linguistic features of the Early Modern English in connection with the language of Shakespearean plays, it becomes obvious that the language used by Shakespeare belongs to the early years of Modern English and there is nothing standard about the orthography in Shakespearean English, a feature he shared with the Early Modern English.   An analysis of the two extracts from Shakespeare’s plays – King Lear, Act IV, Scene 6 and Henry V, Act III, Scene 2 – confirms that Shakespearean English illustrates the features of Early Modern English.One of the most essential examples of the change and development of the English language through the modern period is provided by the Shakespearean plays are and his plays are frequently termed as ‘modern’. Significantly, the English language has developed through various ages and the growth of the language during the early modern period can be best comprehended in a profound analysis of Shakespearean plays. Although there is an essential issue concerning Shakespeare’s connections with modernity as it is difficult to determine precisely when modernity began, the plays by Shakespeare provide the best example of modern English in its earliest times. In an analysis of the linguistic features of the Early Modern English in connection with the langu age of Shakespearean plays, it becomes obvious that the language used by Shakespeare belongs to the early years of Modern English and there is nothing standard about the orthography in Shakespearean English, a feature he shared with the Early Modern English.

Physical Activity and Academic Performance Essay

Physical Activity and Academic Performance - Essay Example As social psychology is the study of human behaviour in social contexts, much of the investigation into the factors that contribute to exercise and sport behavior, and the understanding of the relationships among these factors have been conducted by applying theoretical approaches from social psychology (Biddle and Nigg, 2000). This sociological approach to social psychology examines the effects of personal experience, meanings, language, culture, ideology, and the material or physical environment on the 'lived experience' of individuals in those contexts and, in particular, their relationships with others. The key unit of analysis in this approach tends to be representations, stereotypes, and cultural images and how they relate to people's construction and interpretation of the meaning they attribute to themselves and others on the basis of these broad social influences (Biddle and Mutrie, 2001). Many prominent athletes and coaches believe that although sport is played with the body, it is won in the mind. If psychological intervention improves physical performance, there can also be possibility that physical activity could also improve mental performance. This gives rise to the question as to whether regular physical activity improves mental performance and related academic achievements in academic settings including those for young learners. This question has validity from the social perspectives since if relevant evidence can be gleaned from the research articles; this can generate a means to improve academic achievement through promotion of regular physical activities including sports in the academic settings (Bodin and Hartig, 2003). Research Hypotheses In recent years, a great deal of research evidence has accumulated to show that regular physical activity is associated with a range of physical and mental health benefits (Mutrie, 2002). Despite this suggestion and many circumspective evidences, there is reluctance to take up physical activity in the academic settings and even of started, there are problems in maintaining it. Data suggest most adult populations do not engage themselves in regular physical activities, and even if they begin, they do not continue or pursue exercise on a regular basis. These suggest not only that lack of physical inactivity is a growing concern for many communities but also that intervention campaigns are required to promote exercise initiation and adherence (Marcus and Forsyth, 2003). It has been observed that interventions of this magnitude present with formidable barriers. Implementation of these need behavior changes, since it is frequent finding that despite feeling refreshed or invigorated follow ing exercise, many fail to continue to it. On the contrary their effects on young school going population had been inadequately researched. It is pertinent to consider that behavioral interventions can best be begun early on, and thus it would be worthwhile to find evidence whether physical exercise could be