Comparative Analysis Of Fair Value And Historical Cost...

Title: Comparative Analysis Of Fair Value And Historical Cost Accounting On Reported Profit: A Study Of Selected Manufacturing Companies In Nigeria. (BESSONG, 2012) Study the importance of historical value and fair value cost accounting on reported profit. The study discussed how fair value accounting and historical cost accounting will have effect on the reported profit. However it is said that key objective of any business is to earn profit and it is also equally important to report the profit. Especially it is more important to record profit carefully during inflationary period. However they have study the reported profit and effects of fair and historical value by collecting data from both primary and secondary source. Therefore it is found that historical and fair value both is equally important and both have significant effect on the reported profit. Therefore operating profit of the company is influenced by the amount that is paid for taxes, dividend and depreciation. Therefore accounting methods are very much important in measuring the profit of the company and company must prepare their finical report by using the fair value and historical cost method simultaneously. However, true financial position of the company or business can be easily calculated by using the accounting methods that are more reliable and accurate. Therefore companies must use both historical and fairly value method to know the actual financial position of the company. However accountingShow MoreRelatedEvaluation Of The Co Operative Bank2647 Words   |  11 Pagesbetween Historical Cost and Fair Value with Impairment X Reference X â€Æ' Part 1 Impairment Review for Tin Plc (a) Tin Plc cash generating unit and impairment loss on the 31 December 2013. Notice: CGU=cash generating unit; VIU=value in use; Net selling price ( £Ã¢â‚¬â„¢000) =3,250,000-250,000=3,000,000 Carrying value ( £Ã¢â‚¬â„¢000) =4,000,000-440,000=3,560,000 (b) Allocation of the impairment loss between the relevant components of the net assets of Tin Plc. Calculation of impairment and revised values ( £Ã¢â‚¬â„¢000):Read MoreDifference Entre Ifrs Us Gaap Swiss Gaap Fer6026 Words   |  25 Pagescommonly found in practice. When applying the individual accounting frameworks, readers should consult all the relevant accounting standards and, where applicable, their national law. Listed companies should also follow relevant securities regulations. IFRS and US GAAP are globally acknowledged accounting standards for which a broad range of theoretical background, interpretations and literature is available. Swiss GAAP FER focuses on accounting for small and medium sized organisations and groups basedRead MoreSimilarities and Differences. a Comparison of Ifrs and Us Gaap33264 Words   |  134 PagesIFRS technical publications IFRS Manual of Accounting 2008 Provides expert practical guidance on how groups should prepare their consolidated financial statements in accordance with IFRS. Comprehensive publication including hundreds of worked examples, extracts from company reports and model financial statements. IFRS News Monthly newsletter focusing on the business implications of the IASBs proposals and new standards. Acquisitions – Accounting and transparency under IFRS 3 Assesses the impactRead MoreAnswers To Assignment 2 1 2996 Words   |  12 Pagesquestions. (a)  Ã‚   What type of income statement format does PG use? Indicate why this format might be used to present income statement information. (b)  Ã‚   What are PGs primary revenue sources? (c)  Ã‚   Compute PGs gross profit for each of the years 2009-2011. Explain why gross profit decreased in 2011. (d)  Ã‚   Why does PG make a distinction between operating and nonoperating revenue? (e)  Ã‚   What financial ratios did PG choose to report in its â€Å"Financial Summary† section covering the years 2001-2011Read MoreThe Effects of Ifrs on Financial Ratios12681 Words   |  51 PagesCGA-Canada Elena Simonova, MA (Economics), MPA Research and Standards, CGA-Canada About the Authors Michel Blanchette, FCMA, CA is a professor of Accounting with Università © du Quà ©bec en Outaouais. Franà §ois-Éric Racicot is a Professor of Business with Università © du Quà ©bec en Outaouais, and Jean-Yves Girard, CMA, is an Industrial Analysis and Development Officer at Industry Canada, Government of Canada. The authors thank Diane Bigras, Denis Cormier and Thà ©rà ¨se Roy for their comments on an earlierRead MoreWhat Is Balance Sheet And Its Legal Form2107 Words   |  9 PagesProducing financial accounting statement is very crucial for business because it should adequately provide a picture of the financial performance of a business. To concern this issue businesses produce financial statements on regular basis adhering to one common standard. On of these documents is the statement of financial position, also known as a balance sheet. It basically shows business’s assets or resources that it holds against its obligations or claims to other parties (McLaney a nd AtrillRead MoreIntermediate Accounting Chapter 2 Essay18490 Words   |  74 PagesASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics 1. 2. 3. 4. 5. 6. Conceptual framework– general. Objectives of financial reporting. Qualitative characteristics of accounting. Elements of financial statements. Basic assumptions. Basic principles: a. Measurement. b. Revenue recognition. c. Expense recognition. d. Full disclosure. Accounting principles– comprehensive. Constraints. Assumptions, principles, and constraints. 28, 29, 30 10 11 Questions 1, 7 2 3, 4, 5, 6, 8 9, 10, 11 12, 13, 14 15, 16, 17Read MoreFinancial Accounting and Reporting12396 Words   |  50 PagesFINANCIAL ACCOUNTING AND REPORTING Module 9: Basic Theory and Financial Reporting Module 10: Inventory Module 11: Fixed Assets Module 12: Monetary Current Assets and Current Liabilities Module 13: Present Value Module 14: Deferred Taxes Module 15: Stockholders’ Equity Module 16: Investments Module 17: Statement of Cash Flows Module 18: Business Combinations and Consolidations Module 19: Derivative Instruments and Hedging Activities Module 20: Miscellaneous Module 21: Governmental (StateRead MoreBorland Software Corporation-goodwill and other intangible assets16413 Words   |  66 PagesChapter 02 - Financial Reporting and Analysis Chapter 2 Financial Reporting and Analysis REVIEW Financial statements are the most visible products of a company‘s financial reporting process. The financial reporting process is governed by accounting rules and standards, managerial incentives, and enforcement and monitoring mechanisms. It is important for a user of financial information to understand the financial reporting environment along with the accounting information presented in financialRead MoreFinancial Reporting(Measurement Bases for Financial Accounting-Measurement on Initial Recognition)3071 Words   |  13 PagesMEASUREMENT BASES FOR FINANCIAL ACCOUNTNG-MEASUREMENT ON INITIAL RECOGNITION. BY: NAME: MIR THASEEN ALI MBA INNOVATIVE MANAGEMENT GROUP: C STUDENT ID NO: 39231 PRESENTED TO: DR OMER MASOOD. Measurement Bases for Financial Accounting — Measurement on Initial Recognition Contents Pages Introduction Summary Title Background 2.1 Aim 3. Preliminary review of literature 4. Research

Success Is All Successful People Happy - 1887 Words

Success and happiness are two terms that follow each other around in life. If you find one then the other is typically close by. Judging by that fact it seems the obvious answer to â€Å"Is success synonymous with happiness?† is a resounding YES! Most would agree, but after researching people in happy and successful situations, the answer becomes more unclear and difficult, down to the point where a reasonable answer might be â€Å"I don’t know†. To find the answer, we must first define the terms, and from there we can analyze real life situations where people are happy, successful, or even both. Is everyone who is happy successful? Are all successful people happy? Success and happiness are not easy terms to define, though a definition of the former is easier to find than the latter. Success is typically defined by someone’s achievements and therefore requires goals and ambitions. With no goals and nothing to aim for you have nothing you can achieve, meaning you cannot be successful. A person can successfully do nothing, but even then they still have the goal of doing nothing. Success is different for nearly everyone, since most people have their own set of goals unique to them that differ in importance and relative size. Someone’s goal for the day might be to simply get out of bed, while someone else’s might be to convince a large client to sign with their company. They might both achieve their goal, and therefore both be successful, however their accomplishments are on completelyShow MoreRelatedtiger mother essay663 Words   |  3 Pagesï » ¿ Mother Inferior? Being a mother is to support your children all the way even if they choose to take the road you don’t want them too. Mother’s play a responsible role in children’s health, education and complete wellbeing. In the article, Mother Inferior? Hanna Rosin, the author talks about her mothering style, which is the complete opposite of Amy Chua from The Battle Hymn of The Tiger Mother. Hanna Rosin would allow everything that Amy Chua wouldn’t allow for her children. Her idea of raisingRead MoreExamples Of The American Dream In The Great Gatsby951 Words   |  4 Pageswilling to work.† (American Dream Quotes). This quote is reminiscent of what most people think of the American Dream as. Usually, their thoughts entail hard work leading to success and happiness. In the book The Great Gatsby by F. Scott Fitzgerald, there are many examples of the American Dream. Fitzgerald expresses the American Dream through his characters and makes a specific point about how t he American Dream isn’t all that it seems. The narrator of The Great Gatsby is the character Nick CarrawayRead MoreEssay On Happiness And Success864 Words   |  4 PagesAlthough happiness is not merely associated with success, truly successful individuals first find happiness and passion for their life and career. Being successful does not necessarily mean that one has saved a lot of money or lives a luxurious life. It may mean that one has talented children, good spouse, attained high academic performance, has promising career, for example. The fact that success brings satisfaction in life makes a person feel happier because he/she can experience joy from manyRead MoreDefinition Essay. Defining Success644 Words   |  3 PagesDefining Success The definition of success is in the eye of the beholder. More than three-fourths of your life is spent working to become successful. People are told during childhood to work as hard as they can so they can grow up and make lots of money. But the word success can be taken in many different ways. Everyone has a different understanding of what success means to them. Generally, success means fulfilling the goals that you set for yourself. For some, success is measured by popularityRead MoreShort Note On Success And Success1100 Words   |  5 PagesSuccess is considered to be a term that describes two things. The first one is achievement of a certain major or minor goal. This could be succeeding in making a delicious dinner, or a more global thing succeeding in a career or job. The second definition of success is more broad and subjective. Most people define succession in life as wealth, a brilliant career, achievement of family/relationship goals etc. Some may find that success comes al ong with fame and big amounts of money. However, we seeRead MoreProtagonists looking for Happiness in Death of a Salesman†, â€Å"The Great Gatsby†, and â€Å"The Devil’s Advocate1129 Words   |  5 Pagesthe ability to make one’s life full of joy and success. In the â€Å"Death of a Salesman†, â€Å"The Great Gatsby†, and â€Å"The Devil’s Advocate†, the protagonists in the movies seem to yearn for happiness and success in their lives. Although success may be the ultimate goal to achieving happiness, it does not always lead us there. There are many obstacles people have to overcome, and sometimes happiness is not enough for some people. It is why I believe more people should enjoy life and live it to the fullestRead MoreSuccess Is Within The Individual Mind And Expectations907 Words   |  4 PagesSuccess Success is within the individual mind and expectations. The definition of success differs from just one person’s interpretation of what success means. A large block of life is spent working to become successful: acquiring an education, being able to take care of family, achieving a life’s ambition, or making money. People are told throughout childhood to work hard so they can grow up and make lots of money. Everyone aspires to be successful at whatever we are doing: starting a new businessRead MoreComparative Essay; Things Fall Apart1664 Words   |  7 Pagesand the play Death of a Salesman by Arthur Miller, both explore the dynamic of many parent-child relationships. Death of a Salesman regarded the troubling relationship that Willy Loman, an unsuccessful Salesman, had with his two children Biff and Happy. Similarly, in Things Fall Apart it described the life of a man named Okonkwo who had much controversy when it came to his relationship with his two sons Nwoye and I kemefuna.  In these two works, the relationship between father and son plays a largeRead MoreWhat Does Success Mean For Success?941 Words   |  4 PagesWhat Does Success Mean To You? Albert Schweitzer once stated, â€Å"Success is not the key to happiness. Happiness is the key to success. If you love what you are doing, you will be successful†. If you ask different people what success is to them, you would most likely get a variety of definitions. Some might say that success has commenced when one has finally gotten that $200,000 dream car in one’s garage. Others might say that their belief of success has established when one has found true happinessRead More Analysis of Norman Rockwell’s Painting The Catch Essay1110 Words   |  5 Pagesto be happy? Is it a nice car? Maybe its a new pair of shoes? What about success? What defines success and what does one need to be successful? The truth is, it depends on ones definition. Success can be defined in different ways. Success could be defined as being financially stable, or it could be something as simple as feeling accomplished with achieved goals. Norman Rockwell’s painting â€Å"The Catch† offers refreshing ideas on what it means to be happy and what one needs to be successful. At

Dostoevsky Essay Research Paper In Dostoevsky free essay sample

Dostoevsky Essay, Research Paper In Dostoevsky # 8217 ; s book # 8220 ; The Grand Inquisitor # 8221 ; he develops two versions of Chrisitianity. One is the Roman Catholic version which is represented by the G.I. or Grand Inquisitor and the other is the Protestant version represented by the Christ-like figure. The whole duologue begins when the GI has thrown the Christ-like figure or CLF in prison after watching him make a few miracles ( pg. 24 ) . He so begins to barraage him with inquiries that he answers himself. And From this comes the statement of freedom. The GI so claims that because the CLF refused the 3 enticements ( chiefly the turning of the rock into staff of life ) ( pg27 ) he placed the load of freedom on adult male. Harmonizing to the GI if the CLF had merely turned the rock into staff of life he would hold # 8220 ; satisfied the universal and everlasting craving of humanity # 8211 ; to fing person to idolize # 8221 ; ( pg. 27 ) . Alternatively the CLF rejected it for the interest of freedom. The GI goes on to state that alternatively of taking adult males freedom from them ( # 8220 ; by giving them bread # 8221 ; ) when you had the opportunity you alternatively take to do it stronger than of all time ( pg28 ) . The Gi sees freedom as being the chief job in adult male, its about like a disease. He says that adult male wants felicity in life non freedom. By making this # 8220 ; free # 8221 ; society the CLF has placed the load of duty on adult male. Now if you think about it what he says here makes a batch of sense. Because we have the power to choose, the freedom to take. We besides have to take the duty of our picks. We are forced to cover with the effects of our actions. Now you might state that # 8217 ; s ticket merely do good picks and you # 8217 ; ll be all right. Well harmonizing to the GI work forces are weak and are incapable of accepting such a duty as the on the CLF has placed on them. The GI so goes on to state the CLF that he is no longer needed that he ( GI ) has finisehd his ( CLF ) work. He said that the work forces have given up their freedom to the church. And therefore the duty is non laid on adult male himself but on the community or church as a whole. He says that you ( CLF ) would non give them # 8216 ; heavenly # 8217 ; staff of life but I ( GI ) have given them # 8216 ; earthly # 8217 ; staff of life, which is what they truly want. The Gi believes that adult male # 8217 ; s end in life is to prosecute felicity and good being. And that if they would give there freedom up to the church, so they can travel on and prosecute that. The chief subject here is the battle for freedom. Christ gave adult male free-will. To choose between right and incorrect. So adult male has the right to take. The GI says that adult male can neer be free because he is weak corrupt worthless and restless. The GI says that by giving them freedom # 8230 ; .. you showed that you didnt love them at all. The G I says that you desired there free love, that they should follow you freely. But because you merely gave yourself as a usher. they rejected you and your image. So alternatively of salvaging them you left them in more confusion and agony. By making so you layed down the foundation for the devastation of your ain land. ( pg28 ) The Gi so goes on to deescribe the three powers in which the CLF had at his disposal to utilize in order bring people into his land. Miracle, enigma, and authorization are the three powers he chose non to utilize. When he was tempted to leap off the edifice and have angels come down nd catch him from Eden he refused stating that one should non prove the Lord.The Gi so says what if it were adult male that were placed in the same state of affairs would they hold done the same? Of class non the would hold jumped. Because adult male does non seek so much God as he does the marvelous. Mystery falls into topographic point when he describes why people follow the CLF its becaue of enigma something that they don # 8217 ; T cognize that is why they follow. The Gi goes onto say that they have corrected his work by establishing it on miracle, enigma and authorization. and work forces rejoiced because they were once more led like sheep and the load of freedom that caused them so much agony was lifted from there Black Marias. ( pg.30 ) The Gi so goes on to talk of how better off adult male will be for wholly subjecting. How they cant be genuinely happy until they do. He talks about what life would be like one time wholly submissed, # 8220 ; we shall let or prohibit them to populate with there married womans # 8221 ; , # 8220 ; Peacefully they will decease, peacefully they will run out in your name, and beyond the grave they will happen noting but decease # 8221 ; . ( pg.33 ) He says that one twenty-four hours you will return with your choosen, the pround and the strong. But he will state that you have merely saved yourselves but we have saved all. ( pg.33 ) In the terminal a basic inquiry arises # 8230 ; .Freedom or felicity? In the last chapter of # 8220 ; The Grand Inquisitor # 8221 ; we meet father Zossima, who is a Russian monastic. Father Zossima pleads for a unitary brotherhood of adult male. He says that the redemption of Russia comes from the people ( pg.70 ) . He besides says that work forces should love as God loved, non for the minute but for all infinity. He talks of monastics halting the whipping of kids, lifting up and learning them. He says that redemption will come from the people from ther religion and there submission ( pg.71 ) . He says that male parents are to watch over the people # 8217 ; s religion and this will non be a dream. He talks about the importance of humbleness. He negotiations about the importance of sincere supplication every bit good. He talks of religion and forgivness, all of these he says are the manner to redemption.

Business Strategy Chapter free essay sample

In the specific instance of the car industry in the 1960s and 1970s, Western producers were operating with a relatively high cost base compared with Japanese entrants from what was then a low-cost producer nation. The result was that the Japanese did not face markedly higher quality competition, but they could readily compete on price. Trading up through routes 2 and 3, as the Japanese did, is an interesting phenomenon. Why did the market leaders not respond? Was this solely a function of the Japanese cost structure? Was it to do with the speed of innovation in Japanese firms? Or the inertia of existing market leaders? Entering through route 5 and moving elsewhere is discussed explicitly at the end of section 5. 3. 4. As is pointed out there, this entails a lowering of price, and therefore cost, while maintaining differentiating features. It also means moving from a focused approach to a less focused approach. Neither of these moves is easy, usually because the competences of the firm have become attuned to more focus and less emphasis on cost; but also because the market may well regard such a firm as segment specific and therefore be wary of such a move. Nissan was driven into position 8 from which it needed to re-position.. For example, if it tried to move to the hybrid position – differentiated but at lower prices (and, therefore, lower costs) – this requires the organisation to be very clear about the critical success factors with consumers, and the competences required to deliver these features. †¢ †¢ †¢ Illustration 5. 2 The ‘no frills’ strategy easyJet is a good example of a no frills strategy. The questions require students to consider the basis of such a strategy and also the extent to which it is imitable. Many of these are laid out in the illustration. Clearly easyJet’s strategy is not based on its being 78  © Pearson Education Limited 2005 Instructor’s Manual lowest cost in the marketplace if this is dependent on market share in the overall market for air travel. There are obviously other bigger players. The more relevant comparison, however, is by market segment. To what extent is the early entry of easyJet into the budget travel segment and its establishing of a substantial market share sufficient basis, in itself, to achieve lowest cost? Could actual and potential competitors, seeing the success of easyJet, imitate and overtake it in delivering such services? Does easyJet’s experience in all this, and its undoubted entrepreneurial culture, provide lasting advantage? Certainly British Airways found it uncomfortable to compete with its GO Operation, and decided this was better sold off. But other competitors such as Ryanair and BMIBaby had entered the market and engaged in fierce price competition on some routes. So the keys to success were skilful pricing between routes, when people book and capacity fill. And what if the most experienced low-cost operator of all, South West Airlines in the US, decided to enter Europe? Illustration 5. 3 Questionable bases of differentiation Question 1 challenges students to consider what would be appropriate bases of differentiation in the biscuit business. The principles outlined in (a), (b) and (c) may be applied: (a) Who is the most important customer in strategic terms? Of course the end consumer is important, but strategically the retailer is vital. (b) The question then becomes: What do retailers especially value in manufacturers of fast-moving consumer goods? Students may suggest, for example, branding, reliable and fast delivery of goods, advertising support, sharing of market and customer information, etc. If this is the case, then the differentiation strategy needs to be based around fulfilling such expectations. (c) The question then becomes whether there are bases of sustainability here. Again this would take the discussion into issues of underlying competences and resources. For example, a strong brand image is difficult to imitate, but a logistics system may be much easier. Advertising support is common amongst fastmoving consumer goods companies, but it may be more difficult to establish close and trusting working relationships between the retailer and the manufacturer. Question 2 asks students whether the Australian wine illustration (5. 5) overcomes the shortcomings illustrated here. Arguably: †¢ Value-for-money (a) has been correctly assessed in terms of the appropriate customers, since both the retailers and end users appreciate the benefits of Australian wine. 79  © Pearson Education Limited 2005 Instructor’s Manual †¢ †¢ We know little about the research (b) undertaken that the benefits seem to be real enough. The real question is whether the bases of advantage are sustainable (c). Comments on illustration 5. 5 address this. Illustration 5. 4 The hybrid strategy The IKEA illustration shows how this business has successfully followed a hybrid strategy, not only by keeping its costs down but also by finding a different way of operating from other retailers. Students may point out that this is a more likely way of being able to follow a hybrid strategy than simply cutting costs. They might point to other examples to make the point. For example: †¢ Historically, supermarket retailing offered lower prices and a differentiated customer experience, but it was a fundamentally different way of retailing from that of traditional smaller high street shops. Arguably the more recent trend towards direct marketing of, for example, banking, insurance and travel (at least when it is done well) offers more convenience for customers, often at lower prices: but again this is a different way of trading than would have been traditional in such fields. †¢ Ask students to think of other examples of changes in ways of operating that allow for a hybrid strategy. A successful hybrid strategy also requires organisations to be clear about the competences underpinning their basis of differentiation, and then to reduce the costs in areas that do not critically underpin that basis of differentiation. By so doing they may be able to reduce cost below that of competitors without jeopardising their basis of differentiation. Illustration 5. 5 Differentiation This illustration provides the opportunity to bring together three different perspectives on differentiation: a customer-based perspective, a market gap perspective, and a competence/resource-based perspective. The illustration tends to emphasise the first two. It suggests that Australian wines are successful because customers are looking for simplicity and consistency, and find French wine, for example, neither simple to understand nor consistent in quality. Moreover, the traditional approach of French wine producers has exacerbated the problem and therefore provided a market gap. 80  © Pearson Education Limited 2005 Instructor’s Manual The example should promote discussion about whether there are any other reasons for the success of Australian wine. Arguably there are if a resource-based view is taken – a reason for success might be the application of more advanced scientific techniques in the Australian wine industry as a means of catching up with old world wine producers. The success of this is indicated by the fact that French producers are now trying to imitate Australian wine-producing techniques. Arguably this is capable of being copied or imitated by the French, therefore. However, the French industry remains very fragmented with traditional ways of doing things: so the question is to what extent new ways of wine production are likely to be adopted within such a traditional approach. Illustration 5. 6 Lock-in Using the criteria in sections 5. 4. 2 and 5. 4. 3, the table below summarises the ways in which Dolby and Visa attempt to sustain competitive advantage. Basis of sustainability †¢ Difficulties of imitation – Complexity – Causal ambiguity – Culturally embedded †¢ Imperfect mobility – Intangible assets – Switching costs – Co-specialisation †¢ Lock-in – Dominance – Early setting of standards – Self re-inforcing escalation – Rigorous preservation Dolby has a dominant position Set standards early Showed that this was possible Visa share dominant position with MasterCard Standards were set early Dominance built this way historically Dolby has well-established brand and reputation Dolby has established a reliance by users in its systems Brand is still strong Large penalties for retailer exit Complex bases of licensing and No longer complex patent protection Basis of relationship building in Most competitors have now networks imitated Dolby has long-established ‘ways of Possibly still an advantage doing things’ Dolby Visa Joint development with licences Joint development part of the system Rigorous policy of conformity to Large penalties for change in standards brand by retailer 81  © Pearson Education Limited 2005 Instructor’s Manual The comparison is a stark one. It should lead students to conclude that Visa is protecting its dominant position at any costs – the ‘market-based’ advantages are actually being eroded. In contrast Dolby’s dominant position is probably still based on a truly differentiated position from competitors. Illustration 5. 7 Competition and collaboration This illustration allows students to test out the issues from section 5. 6 and exhibit 5. 5. This uses the five-forces model to classify the various ways in which collaboration might improve competitiveness. This can be done for each of the stakeholders involved in a collaborative arrangement. For example, in illustration 5. 7 the potential benefits of collaboration to an individual (small) creative sector business are: †¢ †¢ †¢ †¢ †¢ Knowledge sharing with other businesses Knowledge transfer from universities Infrastructure, services and ‘business know-how’ support Funding Swapping/sharing professional/creative staff Against this needs to be weighed the risks: †¢ †¢ Commercial exclusivity (patents, copyright) Stifled creative process (conformity to get money/help ) Illustration 5. 8 Key Debate: To be different or the same? The emphasis on conformity in institutional theory (see also section 4. 5. 2) provides a useful counter to the perspectives favouring differentiation, as in this chapter and in the resource based view, introduced in chapter 3. It is worth pushing students to consider just how much ‘real’ differentiation companies actually use. Students may well vary in responding to the questions. With regard to universities, in the UK at least but to a large extent internationally as well, there does seem to be increasing homogeneity. Universities are converging in terms of degree length, subject matter, teaching methods and accommodation and student support. In the UK, this is attributable to government funding and regulation, but also relates both to students’ risk averseness with regard to a large, uncertain and hard-to-reverse investment and to their 82  © Pearson Education Limited 2005 Instructor’s Manual desire for international mobility during degrees and portability of qualifications afterwards (note European Union pressures). In the MBA market, the EQUIS and AMBA standards, and the Financial Times rankings, also provide strong pressures for conformity. All this conforms to institutionalist expectations. Car manufacturers do appear to be more differentiated, with a wide variety in brands and images. However, under the surface there are strong pressure too for conformity. These come from government safety and environmental regulators and suppliers of key components, as well as from the desire to reap economies of scale through sharing platforms. Assignment 5. 1 Understanding competitive strategies Assignment 5. 1 requires students to give examples of organisations according to the routes identified in exhibit 5. 2 in the text, and to explain reasons for doing this. For example: †¢ Route 1, the low price, low added value route is often overlooked. There are successful organisations following such a strategy. For example, the grocery retail outlet Netto is cited in the text, and easyJet is provided as an illustration of a no frills, low price service. As markets open up, new entrants may choose to follow this strategic route. Route 2 is the low price strategy. It is often followed by small businesses competing against larger companies. They use their lower cost base to provide products or services that are very similar to those of the large organisations, but at a lower price. Route 3: The Japanese in the car industry (illustration 5. 1) had used their cost advantages not only to deliver low price but also to re-invest in high quality and reliability. In many respects they were following route 3 or much of the 1980s and early 1990s. IKEA is another example (see illustration 5. 4) of an organisation successfully combining both low prices and perceived added value to the customer. Route 4 is a broad differentiation strategy: the sort of strategy followed by a company such as Kellogg’ s in seeking to provide quality in terms of product, delivery, service, brand image, market support and product development superior to those of competitors. Other organisations claim to be following a differentiation strategy, but the bases of differentiation in terms of added value to the customer may not be clear. Firms may claim to be different but on a spurious basis (see illustration 5. ), for example. Route 5 is focused differentiation: examples of this might be a focus on clear demographic groups. For example, Saga specialises in insurance and holidays for the over-50s (see illustration 2. 8); fashion retailers and manufacturers seek to 83  © Pearson Education Limited 2005 †¢ †¢ †¢ †¢ †¢ Instructor’s Manual identify customers with particular tastes in fashion; industrial product companies may focus on particular industries or particular process needs. Assignment 5. 2 Clarity of competitive strategy Assignment 5. 2 may raise questions about t he clarity of competitive strategies. The sort of issues which may be surfaced are these. For most of its existence MS was successful because it provided a clearly differentiated offering for a mass market; and arguably this was also the basis of Barclaycard’s success. But both organisations now face competition that has eroded such advantages, and they are finding it difficult to recover a position of differentiation across a broad market. The difficulty they face is how they might reposition themselves in a more focused way (focused differentiation) without reducing their market potential. They are also reluctant to be associated with a strategy of reduced prices, not necessarily because of their inability to drive down costs but more, perhaps, because of their concern that it might damage their market image. This raises questions about the viability of hybrid strategy. Arguably it is easier to move to a hybrid strategy from a low price strategy than it is from a non-price-based differentiation strategy; the latter may be perceived as a reduction in quality. There may also be a useful debate here about whether cost reduction is a viable competitive strategy. Recall that this is a strategy advocated by Michael Porter. Many organisations claim to concentrate on cost reduction as a strategy. The problem is that cost levels are not, in themselves, visible in the marketplace. What matters is whether the cost base allows delivery of lower prices (which are visible) or the maintenance of higher profit margins than those of competitors. To do either, cost advantages have to be sustainable and sufficient to ensure that competitors cannot match them. This is no easy matter. It would not be for Marks Spencer or for Barclaycard, for example. †¢ †¢ Assignment 5. 3 Differentiation The purpose of this assignment is to establish whether students are able to explain the concept of differentiation, not only in terms of ‘being different’ or by citing the importance of route 4 in exhibit 5. 2, but rather in terms of, for example: †¢ That differentiation means both providing products or services valued by customers/users, and doing this in ways that are difficult to imitate. 84  © Pearson Education Limited 2005 Instructor’s Manual †¢ This is likely to be achieved by building on core competences of the organisation. However, the more perceptive students may point out that this is difficult to achieve and difficult to manage. So organisations may not be able to create bases of nonimitability readily. For other organisations differentiation may be achieved by being flexible or faster to respond in markets than competitors, but that this, too, is a function of the culture of the organisation. Students should therefore be able to make linkages between the concepts and differentiation explained in chapter 5 and linkages in the value chain (chapter 4) and organisational culture (chapter 5). Overall, however, perhaps the most important basis of successful differentiation is the ability of an organisation to understand customer needs and what is valued by the customer better than competitors: that there is a danger that differentiation is driven on technical grounds rather than by an awareness of customer needs. †¢ Assignment 5. 4 Competitive strategies in the public sector Care needs to be taken around terminology here, particularly because an explicit price mechanism may not exist in some public services. So, referring to exhibit 5. 2 in the text, in public services price may equate to unit cost since performance will be judged against the input of resources to supply the service. Bearing this in mind, the routes can be described as follows: †¢ Route 1, low cost/low value: this is the outcome that many claim has been inevitable with public spending cuts leading to the unattractive positioning of many public services as a service of last resort. Route 2: this is the real challenge for many public services, i. e. the need to maintain quality while achieving progressive efficiency gains and lower unit costs. It is what governments expect public sector services to achieve: hence ‘best value’ initiatives and the extensive use of benchmarking. Routes 4 and 5 are an alternative for some parts of public services, and would be described as a centre of excellence strategy. Indeed in some parts of the NHS (e. g. specialist units in hospitals or some hospitals themselves) it is the strategy pursued by managers and clinicians as a way of retaining talent and increasing their resource base in the face of cuts in unit costs from government. †¢ †¢ Of course there is an argument from some critics that the reason why route 1 occurs rather than route 2 in mainstream public services is because routes 4 and 5 take away resources and funding to elite parts (or geographical locations) of the service and jeopardise the resource base of more standard services. This has been called the ‘twotier’ public service. 85  © Pearson Education Limited 2005 Instructor’s Manual Assignment 5. 5 Sustainability The students should be encouraged to use the same principles of sustainability as were described in the commentary on illustration 5. 6. To take the examples of the organisations cited here students may be able to identify the following: †¢ Ryanair is following a low price strategy: the extent to which this is sustainable is very dependent on the way in which the low cost base is culturally embedded and maintained over time through a complex set of cost minimisation programmes and strategies. In fact, on the face of it, this may not be difficult to understand; but the experience gained in so doing may make it difficult to imitate. Ryanair has also built a reputation amongst a loyal set of customers, and this may also be a sustainable benefit, provided it is nurtured and not eroded. Thorntons has followed a differentiation strategy based on product features (ingredients, recipes, freshness), strong branding and packaging and control of its own outlets. Students should be asked to rate these features against the criteria for sustainability applied in illustration 5. 6. For example, can consumers really discern and measure ‘freshness’? †¢ Students should be encouraged to search for other examples in which they can provide explanations of sustainability, but also to question whether what they identify are truly sustainable bases. Assignment 5. 6 The limits of hypercompetitive strategies This assignment invites students to consider the extent to which the principles described in section 5. 5 on hypercompetition are relevant to only a few industries, or not at all. The conventional argument would be that sustainable competitive advantage is achievable provided the sort of factors that determine sustainability can be met. So, again, students may wish to refer back to section 5. 4 for a discussion of the basis of sustainability. Students may readily identify some markets in which these factors do not appear to pertain. However, they may also identify others in which such factors apparently should pertain, yet in which hypercompetition seems to prevail. For example, presumably hightechnology companies could claim the benefits of complexity, perhaps causal ambiguity, and potentially embedded competences as intangible assets and cospecialisation. Yet the evidence is that hypercompetition prevails in such industries. Students may therefore recognise that the explanations given in section 5. 5 – i. e. that firms are able to overcome traditional bases of competitive advantage – seem to hold true even when there may be apparent bases of sustainability. If this is so, to what extent 86  © Pearson Education Limited 2005 Instructor’s Manual does it potentially apply to all industries? This is the claim made by Richard D’Aveni: that we are moving into hypercompetitive times, and that the old principles of sustainability may not hold. Assignment 5. 7 Hypercompetition in context This assignment invites students to examine a particular industry that might not normally be associated with hypercompetition, to consider the extent to which the conditions of hypercompetition may be becoming more and more evident. Banking is given as an example here. Others could be accountancy, car manufacturing, insurance, etc. The main points that might be drawn out could include: †¢ †¢ †¢ the extent to which cycles of competition seem to be speeding up, with shorter and shorter life cycles of products and services the difficulties of sustaining bases of advantage on price or differentiation the difficulties of sustaining first mover advantage or first entry into new markets as competitors find ways of overcoming or circumventing scale and experience curve benefits the difficulties of holding on to strongholds or reliance ‘deep pockets’ in the face of strategies and tactics of erosion by competition the deliberate search by companies to attack the competitive position of competitors in markets that were once too ‘gentlemanly’ to do so. †¢ †¢ Assignment 5. 8 Cooperation rather than competition Students should draw on the general principles explained in section 5. , which point to the circumstances in which cooperative strategies make sense. For example: â⠂¬ ¢ †¢ †¢ Buyer-seller collaboration is a key element of Formula 1, where manufacturers see motor racing as a way of developing their own technologies. Collaboration of buyers of pharmaceutical goods to increase buying power. There are many examples of competitors who collaborate to increase their market or competitive power. Not least is this the case in lobbying governments for changes 87  © Pearson Education Limited 2005 Instructor’s Manual that facilitate entry and power in markets. This would be applicable within both the pharmaceutical and Formula 1 industries. Co-production with customers is beginning to happen in markets such as pharmaceuticals, where pharmaceutical firms faced with increased buying power are finding ways of working with government buying agencies and doctors to increase efficiency or reduce cost of treatment. Collaboration in Formula 1 also includes one team providing services for another (e. g. McLaren providing marketing services for T yrrell); collaboration over shared suppliers (Jaguar, Benetton and Williams all use Michelin tyres and share data); and engineers and mechanics all know each other and informally help each other out in particular circumstances. †¢ Assignment 5. 9 Game theory The purpose of this assignment is to encourage students to read more extensively on the principles of game theory (e. g. by reading Dixit and Nalebuff in the key readings). Students should be encouraged to think through how some of the examples and situations discussed in that book (or other books on game theory) could be applied to issues of competitive strategy of organisations. Specific references are made to sections of the Dixit and Nalebuff book in exhibits 5. 6 and 5. 7. Integrative assignment 5. 10 This assignment is designed to ensure that students see the connection between the issues of sustainable competitive advantage (sections 5. 4. 1 and 5. 4. 2) and the concept of core competences (section 3. 2. 3). It also makes a further connection with the impact of IT on core competences, and hence on sustainable competitive advantage, as discussed in section 9. 3. 1. For example: †¢ A low price strategy might be sustained by core competences in managing cost efficiency in the distribution chain. But this advantage could be destroyed by competitors who develop new IT-based business models selling directly to final consumers over the internet at much reduced prices (made possible by considerably lower costs). Similarly a differentiation strategy might be underpinned by core competences such as professional knowledge. But this is undermined as customers start to gain this knowledge themselves from the internet. So a new relationship needs to be forged with customers to take advantage of the professional knowledge. The relationship needs to ‘move up a gear’ so that the more knowledgeable customer starts to seek advice rather than just information. †¢ 88 Pearson Education Limited 2005 Instructor’s Manual Integrative assignment 5. 11 This assignment requires students to apply the key requirements for lock-in (exhibit 5. 3) to an international development strategy (section 6. 3). Specifically students need to understand how that particular basis for an inte rnational strategy would be achieved in terms of both directions and methods of development (sections 7. 2 and 7. 3). Here are some points against the four bullet points of exhibit 5. 3: †¢ Size and market dominance. If this is to be achieved internationally it is necessary to understand the nature of the market in terms of the degree of globalisation that exists. So for globalised markets (like computer software) Microsoft has had to create coverage in all major markets of the world. In contrast, in less globalised markets lock-in could be achieved region-by-region. In these circumstances decisions on the sequence of market entry would need to be guided by the issues discussed in section 6. 3. A requirement for dominance would favour internal development of new markets and/or ruthless acquisition of competitors to gain sufficient market share. First mover advantages. This clearly dictates the need for product development internally to be ahead of competitors. Alternatively if partners are used the relationships will need to be exclusive – to deny competitors access. Reinforcement. The creation of an industry standard needs conditions to be created where it is in the interests of all competitors to adopt the standard rather than compete with it. Strategies of heavily funded product development may do this as competitors become unable to match the RD spend. For international development it is clearly important to establish an international standard – undermining regional differences. So the development method must reinforce the standard – for example by creating ‘registered users’. Rigorous enforcement. This would have a strong influence on the choice of markets – favouring those where legal protections of intellectual property are strong and respected. Similarly choice of partners is absolutely crucial – again the idea of ‘registered users’ might apply. †¢ †¢ †¢ Case example Madonna: The reign of the queen of pop (notes prepared by Phyl Johnson, University of Strathclyde) This case study was chosen as a way of getting students to explore the principles of both sustainability and hypercompetition. It is useful to focus initially on the question of her sustained high profile and success as a performer over so many years. However, her recent success is questionable; this allows for a focus on the long-term sustainability of strategies themselves and a debate as to viability hypercompetitive strategies. 89  © Pearson Education Limited 2005 Instructor’s Manual The main points that might be emphasised are these in terms of the questions asked: Question 1 The strategy pursued by Madonna can be explained both in terms of a generic competitive strategy and in terms of principles of hypercompetitive strategies. Clearly she has sought to differentiate herself throughout her career. This has taken different forms, as the case explains, but there has been an underlying theme of the ‘independent woman’ throughout. What has varied has been the different personas within this. Students could debate whether or not these have been pitched at particular ‘market segments’ and in this sense represent focused differentiation; or the extent to which they are simply tactical bases of differentiating herself from imitators and followers. Another interpretation would fit with explanations of hypercompetitive strategies. Many of the principles outlined in section 5. 5. 4 seem to apply. Each persona is temporary; each one is very different from the last; she seems to move on to a different image even while being successful in her last one; they are not predictable changes; they can be surprising, even shocking. Her latest persona as children’s author and spiritual follower challenges this in that it has in fact been sustained over a period and is far from shocking. At one stage in the press (June 2004) it was even reported she was changing her name to Esther as part of her Kabbalah faith. †¢ The Madonna case therefore illustrates that the idea of hypercompetition is not necessarily contradictory to the idea of generic basis of competition. It might be possible to be differentiated in a hypercompetitive way. Think about links to questions 2 and 3 here, that is, the most recent events allow for the questioning of the long-term sustainability of hypercompetition itself. Question 2 This question invites students to consider the basis of sustainability in this context. Students might wish to ask which principles of sustainability hold. They should see that a number do: †¢ †¢ Madonna appears to have capabilities and competences (intangible assets) of innovation and flexibility. The pop industry has learned to work with her, and in this sense they have developed a mutual co-specialised dependence; so it looks to promote her interests given her track record. Certainly it is difficult to predict where she will move next, or how she is successful (causal ambiguity). †¢ 90  © Pearson Education Limited 2005 Instructor’s Manual Question 3 This question invites students to question these bases of sustainability. The strategy does not seem to be vulnerable to others imitating it since it is difficult for them to understand or predict what they would be imitating. But students might argue that it is surely a risky strategy as she seeks to second-guess the nature of the market and make so many changes to her image. They are likely to argue that the risk is market acceptance. If so, how would they explain the continued success given so many changes over so many years? Has the formula for success run out of steam? And if so why? 91  © Pearson Education Limited 2005