Chief Financial Officer

Joe and Marge form a corporation and that each owns 50% of the corporate shares. Marge is the president and Chief Financial Officer and Joe is the Secretary. Both are on the board of directors. Six months after the corporation is started, there was a cash flow problem and it is necessary for Joe to lend $50,000 to the business to enable it to cover its operating expenses. Four months later they hire, Helmut, as Vice President of Sales & Marketing. During the next few years, the business did well. Vircon, however, never obtained liability insurance.

Joe and Marge keep meticulous records of receipts and payments, but did not document certain corporate transactions, such as salaries and shareholder meetings. In one year the corporation paid six of Marge’s monthly mortgage payments because she was having severe personal financial problems and also paid for her daughter’s college tuition for her first semester. There are now five persons on the board of directors, Joe, Marge, and three outside directors, Harry, Susan and Marvin and 50 shareholders.

A few month later, the corporate Secretary of Vircon borrowed $60,000 from Nice Bank on behalf of Vircon, executing a promissory note in the corporation’s name. The corporation’s chief financial officer later sent a letter to Nice Bank confirming the promissory note and the receipt of the loan proceeds. Thereafter, the board of directors, with knowledge of the loan, authorized the use of the proceeds to acquire new equipment.

Nice Bank presented the loan for payment, but the corporation refuses payment arguing that the bylaws do not authorize its Secretary to borrow money. A few months later, Marge wishes to obtain a personal loan from her bank for $100,000, but the bank requires someone to co-sign the note. Marge co-signed the note in the name of the corporation and signs as the president. Later Marge defaults on the note, and the bank sues the corporation for payment.

At the board of directors regular meeting held on December 20th, the Board properly voted in favor of filing a petition for a Chapter 7 under the Bankruptcy Code. At that meeting the directors invited outside legal counsel and its accountant to answer any questions regarding a Chapter 7 . The Petition was filed on December 30th. 10. Is Vircon (Corporation) liable to Marge’s bank for the $100,000 personal loan?? 1st possible answer: A corporation may act through its board of directors or its corporate officers who may be authorized either expressly or implied.

Express powers can easily be found in corporation’s articles of incorporation, in the law of the state of incorporation, and in the state and federal constitutions. Resolution of the board of directors and corporate bylaws also ratify or restrict such powers. Implied powers usually include all acts reasonably appropriate to achieve its corporate purposes. For example, a corporate officer such as president has the implied power to bind the corporation in matters concerning the usual course of the corporation’s business.

If the president had been in the habit of acting in similar matters on behalf of the corporation, and that the corporation had authorized him so to act, and had recognized and ratified his former and similar actions, such actions are deemed as implied powers of the president. In this case, Marge’s act of obtaining personal loan by co-signing the note in the name of the corporation and as president is not a matter concerning the ordinary business affairs of the corporation, not benefiting corporation, and not a formerly ratified act by the corporation.

Therefore, Vircon, the corporation can not be held liable to Marge’s bank note. Alternative answer: (Editing required) Because a corporation is a legal entity and can only act through its board of directors or corporate officers. A corporation and corporate officers have the principal-agent relationship. The agent has the duty to act solely for the benefit of his/her principal and not in the interest of the agent or a third party. Marge is the President and Chief Financial Officer as well as one of board of directors of Vircon.

However, in this case, she was the president (agent) of Vircon (principal). In the note, identity of the principal was disclosed and Marge was identified as president of Vircon. Under those circumstances, Vircon, not Marge, is liable to the Marge’s bank for the $100,000 personal loan. Although the note binded Vircon to liability, since Marge, too, signed the note as an individual, both Vircon and Marge are liable for the $100,000 personal loan Marge obtained.

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Farmers are at the mercy of corporations

Adoption of buying beans has become problematic due to low capacity of market value. This obviously is more of a corporate trick to reduce the coffee price equity and force a stifled price on the seller while in the export market the price is favourable. Due to zero access capabilities of the lower chain level in the market negotiating on the price is out place and the gains made cannot be debated nor subjected to further division for the farmer. Companies have found it easier since slowly they will cut on the free trade infrastructure and play down any implication and regulatory contexts that would apply on their export interests.

This makes the farmer under such operating conditions to be at the mercy of these corporations. The cooperatives have no choice but to accept the offered prices and defer some gains while the farmer receives a very minimal gain due to the capitalization on sales effect at the cooperative position. This has beaten the value of coffee to the farmer and forced him to crack economic gains through a diversified lack within his abilities frame. The farmer suffers and builds is confidence through extensive borrowing and banking on hope that prices might be favourable he will pay and provide for his family or so.

The value and pressure by the free and fair trade inception Although free trade brought regulation of market price equity to the farmers it is only applying to the first worlds, it no longer works to the benefit of most people, and it needs to be hybrid injected with fair trade values. Through evaluation and strategic planning at the cooperative level and inclusion of market practices gains can be transferred more attractively to the farmers and transform the facade of the coffee trade. Consumer awareness has begun applying pressure on coffee farmers to have an insight on the coffee corporate scene.

The inception of free and fair trade has played a key role in initiating this aspect and it is bringing benefits to the diverse coffee farmer interests. According to market prices and the market demographics, indicators of growth in franchising in coffee are growing at a tremendous rate and the gains should apply on all angles of coffee production beginning with the farmers. No wonder coffee consumption is greatly becoming popular but the consumers have begun to have prolific insights on growing coffee.

Fair trade values In contrast it to free trade consequences fair trade values has positive implications while flaws have been identified within. The farmers have constraints which apply on the gains made from coffee and according to analysts; simplified marketing often fails to convey how much benefits can vary treating workers fairly is really more beneficial. This aspect of the market offers the cyclical aspect of coffee trade and the problematic implication based on farmer constrains deferring gains.

Increase on value of the market price equity doesn’t seem to apply on the gains and this has been examined and addressed through forecasting and informing the farmers of market performance to give them an insight. Cooperatives efficiency and market prices fluctuation are too complex for the farmers to understand and this free trade policy is less consequential in terms of enlightening and instigating participation of coffee growers hardly offer much solution to appeasing the market situation I terms of relations between sellers and the growers in the price issue.

Oakland Ross: A bitter brew for coffee farmers: Framers struggle even as prices soar. The Toronto Star. 2002. Toronto. The notions that should be embraced are that the growers through extensive compensation and better prices will be motivated to have a better impact in increasing the production level and quality. Typical aspects of management point out that there is more to gain through integration of grower’s interests as investments than applying convectional pressure on the growers will dilapidates input gains on quality hence less production of quality.

Quality, cost, and the real cost Quality is the insulation against impeding storms in the diverse market. Consistency of quality coffee is based on extensive approach to paying the growers and attractive production. The cost of growing coffee has become high in comparison to the payment coming from the sales of coffee. Coffee prices have significantly rose and created apertures of better approach to reimbursement of coffee growers which is now the interest of major players in the coffee industry. Consumers should care about this coffee business

The coffee is eating into our heads and learning more about it is becoming essential. The effects of coffee on the economies of various developing countries are important. Peter S Cohan: Net Profit: Web consulting and the net profit retriever. [pp 42] Jossey Bass Inc. Publishers. 350 Sansome Street, San Francisco-California 94104. 1999 Consumer awareness will lobby for equal standards on the market to each player. The recognition of brands and their manufacturers will promote the consumer to identify which company has been violating the grower’s rights and heavily ripping off the growers.

This will obviously promote regulation and harmonisation of prices so as to help the market respect and offer the coffee grower his share concisely. Sources 1 Chris Kenning: The coffee connection: Published by Courier Journal September 2007 (www. couorier-journal. com) 1. Oakland Ross: A bitter brew for coffee farmers: Framers struggle even as prices soar. The Toronto Star. 2002. Toronto. 2. Peter S Cohan: Net Profit: Web consulting and the net profit retriever. [pp 42] Jossey Bass Inc. Publishers. 350 Sansom

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SWOT sample for Panasonic Corporation

Table of contents

Panasonic Corporation is a worldwide leader in the development and manufacture of electronic products in three business fields: consumer, components & devices, and solutions.

STRENGTHS

Wide product diversification With its four major business domains, Panasonic boats a wide variety of products and services ranging from but not limited to household appliances to PVC (audio, visual and communications) devices.

Well established and reputable company identity The Panasonic Corporation was founded in 1918 and has since been providing excellent products and services to its consumers. Its reputation rests on its high- standards of manufacturing. Highly recognizable and marketable brand name and image The Panasonic brand has achieved global stature and has become a familiar and trusted brand locally and internationally. Emphasis on product innovation Panasonic has strives to become one of the leading innovators of electronics.

The brand itself has become associated with high-technology and excellent performance. Echo-friendly solutions and Energy conservation The company is a leading example of contributing proactive and extensive approach to the development of the natural environment by introducing their cutting edge energy-management technologies.

WEAKNESSES

Unstable financial performance The corporation as a whole is often prone to escalating business costs due to frequent restructuring and losses in net sales.

Struggling TV and semiconductors sector Panasonic has experienced a drop in performance in the TV marker as evidenced Strata SWOT sample By Domestication’s Poor marketing approach Panasonic is lacking with marketing approach, where they should put more efforts n promoting their products like in media such as social networking, radio, billboards etc. And sponsoring some events which results to low trust and turning new lifestyle to other brand. Drastic reduction of manpower due to personnel cuts Just last year, the company reported that it has reduced the number of workers in its headquarters by 50% due to restructuring operations.

OPPORTUNITIES

Growing global and local consumer and industrial electronics market With the advent and progress of newer technologies, the electronics industry is always rapidly growing. Panasonic can exploit this and reach wider markets by utilizing its highly diversified product business segments. Rapidly increasing demand for echo-friendly devices With energy conservation a major issue in today’s societies, Panasonic can use their technologies to contribute to the development and progress of the natural environment.

Fast-rising local economy The Philippines is now one of the fastest-growing economies in SE Asia and this simply means good business for Panasonic Philippines. The local economic environment provides a suitable condition for local and foreign investments and business partnerships. Strategic alliances and Joint ventures with other electronics firms With an agreement between Panasonic to other firm they are able to share resources or knowledge, to be beneficial to all parties involved.

In this way the Panasonic will have supplement to internal assets, capabilities and activities, with access to needed resources or processes from outside players such as suppliers, customers, competitors, companies in different industries.

THREATS

Panasonic is always experiencing constant and stiff competition within the electronics industry that can have damaging effects on a company however big or mall. These include cutting down prices to attract more consumers and cost-cutting which is a company’s mechanism for coping with losses in revenues.

Cost-cutting often results in employee lay-offs and even shutting down whole branches. Maturing or near obsolete technologies, products or services. Panasonic endeavors to provide its customer with the highest quality and most technologically advanced components currently available in the commercial marketplace. As technology advances, it sometimes becomes unfeasible to continue production of outdated or older technology components. This phenomenon leads to continuation on some of its products, some of which includes some types of its capacitors, switches, relays, audio, components, etc.

Potential economic slowdown Naturally, the local economy has a major effect on any firm. If the growth of the Philippines’ rising economy suddenly starts declining or even grinds to a halt, the whole consumer base will have their purchasing power reduced. People will have to live with tight budgets. If this scenario occurs, Panasonic Philippines will start seeing a gradual decline in patronage from its customers and significant losses in sales.

CHAPTER V ALTERNATIVE COURSES OF ACTION

  • Improve struggling TV sector with echo-friendly and energy saving solutions by strengthening its marketing approach.

As stated earlier in this study, Panasonic Philippines has reported a fairly sizeable decline in net sales in the TV market. One of the probable reasons behind this is a lackluster marketing strategy. Panasonic should put an emphasis on its advertising and public relations to gain an even wider customer base. The strategy can focus on utilizing more effective media vehicles such as the internet by promoting energy saving solutions and echo friendly. This, together with the rising popularity of surfing the web on portable devices, means more people are aware of their plasma and LCD highways.

Advantages: Newer and improved marketing schemes can reach a wider audience and exponentially increase Panasonic customer base.
Disadvantages: This can lead to increased spending on advertising, personal selling programs, sales promotions and public relations or endorsements.

  • Stabilize company financial performance and devise new pricing policies and strategies to maintain longevity and position within the competitive electronics industry. To cope with the losses in sales and decline in performance, Panasonic should consider in devising and implementing new pricing strategies.

Changing prices on their products to break even is simply not enough, especially in the midst of stiff competition and unpredictable market demands. Market Orientation is particularly suitable in this scenario. Panasonic conducts research from the target market and then set prices based on the compiled information. The company can also use Dynamic Pricing which employs information technology to respond to market fluctuations and large amounts of data gathered from customers. This allows Panasonic to adjust prices of goods to correspond to a customer’s willingness to pay.

It also has the basis of time wherein the company can charge different rates according to peak and low seasons (holidays, summer vacations, etc. By gaining some measure of financial stability, Panasonic can better expect long- term success in the near future. This can be done through improvement on some financial initiatives: identification and discontinuation of obsolete inventory (controllers), outlining strategies for identifying and selling idle/non-core assets, ND maximum utilization of existing assets or resources.

Advantages: If done correctly, these methods can help the company out-price and outcome competitors and eventually win over more consumers.
Disadvantages: New pricing policies and financial strategies typically involve corporation-wide restructuring and, thus, require time and organization. It also involves high risk-taking and potential backfires.

  • Use product innovation to replace obsolete products or services and improve maturing technologies. One of the issues facing the company is ever-mounting operating costs.

This is due to a frequent need of restructuring to correspond with certain losses in performance aspects. Seeking and implementing newer, more effective and efficient production methods will guarantee that the company will recuperate from drops in sales and even increase and improve output. The other issue, having its TV sector beaten by more aggressive competitors, is also a cause for concern. One of market. Introducing newer types of television with better capabilities and quality will attract new customers and regain the support of loyal ones.

These improvements in technology may be in the form of more energy-efficient TV’s, TV’s with enhanced internet and wireless capabilities or even simply thinner and wider flat screens.
Advantages: Radical improvements in technology, more often than not, determine which product or service leads the market. Improvements in production technology can exponentially improve a firm’s output and efficiency.
Disadvantages: This requires increased spending on Research and Development which typically involves hiring people with the needed expertise and acquiring new materials.

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Case 1.1 – Enron Corporation

The auditor has the responsibility to evaluate the risk of material fraud, including:  Incentives and motives for fraud : Enron was a fast growing company with many start-ups projects, such as the Energy Wholesale Services (a B2B electronic marketplace for the energy industries) or the Enron Broadband Services (an operating unit serving as intermediary between users and suppliers of broadband services,) that constantly needed huge amount of money to succeed.  The opportunity to commit fraud: Enron internal controls were weak and the management was promoting a culture that encouraged fraud rather than honesty. Rationalizations that might allow someone to commit fraud: the management at Enron believed that they were only trying to grow the company and increase their stock price by misrepresenting their financial statements. Once their new ventures would succeed, they would be able to cover the losses previously incurred. All the ingredients were present for Anderson to uncover the fraud. Moreover, the auditors have a responsibility to disclose material fraud and illegal client acts to the audit committee and the Board of Directors.

If the financial statements are not restated, the auditor should issue a qualified, an adverse opinion or consider withdrawing from the engagement. The team auditing Enron should have followed the guidance when the management acted with scienter. As mentioned in the case, Arthur Andersen was being paid exorbitant amounts of money to audit Enron and attest to the validity of its financial statements. The firm failed on every front to catch any of the fraudulent accounting transpiring and many critics questioned whether Anderson was involved with “cooking the books”.

Given the scale of the compensation and how entrenched the firm was in Enron’s financial operations, it is hard to believe that the Andersen auditors, CPAs, failed to notice such obviously illegal accounting treatments of transactions. As so well said by the auditor of Accounting Today, “if a firm accepts and collects the audit fee, then it should be prepared to accept the blame, otherwise it is not part of the solution, but part of the problem”. The fault not only goes to the auditors, but to the company’s management as well.

Enron’s management Kenneth Lay turned a blind eye to anything that could obstruct Enron’s growth. He said that his ultimate goal was to make Enron “the world’s greatest company. ” This is a great goal for any CEO to have; however, in his attempts to reach this goal, he developed a case of tunnel vision that led to unexpected consequences. When Sherron Watkins wrote him a letter questioning the treatment of certain accounting transactions and puzzled disclosures, he ignored her and stated that “he’d rather not see it”.

Kenneth Lay even failed to acknowledge or address the issues after most of the Enron scandal had fully unraveled by refusing to testify before Congress in 2002. Jeffrey Skilling basically followed in the footsteps of Kenneth Lay and brought with him a similar approach to running a business. Skilling shared the same tunnel vision approach as Lay as evidenced by their “laser-focus on earnings per share”. They both were willing to ignore any wrongdoing in the company as long as earnings per share continued to increase.

Skilling also developed a certain level of arrogance after being singled out as the number one CEO in the country. He would make “brassy and tacky” comments regarding Enron’s competitors and critics. This arrogance likely aided in his ability to shield out the negative aspects of Enron’s operations and to only see the positives. He was the “best CEO in America”, so Enron couldn’t possibly do anything terribly wrong under his watch. When being questioned by Congressional investigators regarding the scandal, he simply passed the blame by stating that “he is not an accountant. Andrew Fastow was the CFO and created the financial infrastructure for Enron. He, like Skilling, was hailed as one of the top executives in the country as evidenced by his Excellence in Capital Structure Management award presented to him by CFO Magazine. As the CFO of Enron, Fastow should have known better than to do what he did with the creation and operation of the SPEs. His brass was at such a high level that he even named several of them after his children.

He, like Kenneth Lay, refused to take any accountability by refusing to testify before Congress in 2002. SEC and FASB The SEC and FASB also share the responsibility for the fraud scandal that took place. The organisms should have passed stronger accounting standards to regulate auditing. Both organizations were in favor of the 3% rule for SPEs. This rule stated that a SPE needed only a 3% investment from an outside investor to be considered independent. This rule allowed Enron to discharge all its unprofitable businesses in SPEs to avoid consolidating losses.

That is, the SEC and FASB endorsed a law that allowed companies to dump considerable losses in off-balance entities. A case of fraud was bound to happen. The Auditors, the SEC, and the FASB made it easy for Enron’s management to commit one of the biggest frauds in the history of accounting.

Discussion

Andersen’s involvement in Enron’s accounting and financial reporting decisions violated the following professional auditing standards: AU 220, Independence, SAS 1) – this standard requires the auditor to be independent. Auditors issue an audit opinion that will serve as a reliable source of information on the company to external parties (investors). Thus, it is necessary for the auditor to be unbiased when reporting his findings to the public. The lack of independence of the team auditing Enron can be derived from the fact that Andersen was providing consulting services as well as auditing services to Enron, with consulting work accounting for more than 50% of the total yearly revenue received from Enron.

This situation led Andersen to be at the same time external auditor and internal auditor to Enron. AU 316, Consideration of Fraud in a Financial Statement Audit (SAS 99) – this standard concerns “fraudulent acts that cause a material misstatement of the financial statements. ” Andersen helped Enron misrepresent significant information in the financial statements. The team auditing Enron intentional misapplied accounting principles relating to the classification, the manner of presentation, and the disclosure of the financial statements. To clarify, Enron would use the mark-to-market ccounting method on long-term accounting contract, which immediately recognizes earnings when contracts are secured rather than when services are rendered. That accounting method results in financial statements being materially misstated and at the same time, it considerably increased the compensation of Executives at Enron that was based on earnings. AU 317. 05, Illegal Acts by Clients (SAS 54) – this standard indicates that the auditor’s responsibility for misstatements resulting from “illegal acts having a direct and material effect on the determination of financial statement amounts” is the same as that for errors or fraud.

Enron would issue stocks to different SPEs in exchange for notes receivable; however, US GAAP does not allow for the recording of receivables in exchange of stocks issued. These misstatements led to a reduction of $1. 2 billion in Owners’ Equity after the reversal of previously recorded transactions as assets. In addition, Enron had investments in companies (not SPEs) that it consolidated, but when the investments began to show losses, they were transferred to SPEs so that it would not have to reflect these losses on the financial statements.

AU 334, Related Party Transactions, SAS 45 – this standard requires auditors to follow GAAS established procedures when auditing financial statements in order “to identify related party relationships and transactions” and to estimate whether or not the required financial statement accounting and disclosure had been followed. This standard was also violated as Executives of Enron were managing some SPEs (p. 13. ) Andrew Fastow, Enron’s CFO, earned a profit amounting to $30 million on one of his investment in an SPE that he was managing.

Furthermore, “Fastow’s friends realized a profit $1 million on investment of $5,800 in 60 days in the same SPE. ” AU 319, Consideration of Internal Controls in a Financial Statement audits – The auditor’s report on internal control over financial reporting that goes to the public must report material weaknesses in internal control. Andersen audit team in charge of Enron auditing failed to provide an unbiased opinion on the effectiveness of the system of internal control over financial reporting.

After Enron and other fraud scandals, we see a shift from the self-oversight of public accounting firms to an independent oversight of accounting firms auditing public companies by government bodies such as the PCAOB. Congress passed the Sarbanes-Oxley Act (SOX) in 2002 which goal was to strengthen the financial reporting rules for public companies. It also forced public companies to prepare reports on the quality of their internal controls as well as limit the types of consulting services that an accounting firm is allowed to provide to its clients in concurrence with audit services provided.

Fraud scandals also led to the establishment of the regulation requiring management of public companies to provide a letter asserting that the financial statements are fairly stated. Most recently, the SEC voted to adopt whistleblower rules mandated by Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). “The rules implement the Act’s requirement that the Commission pay an award to whistleblowers who voluntarily provide original information to the SEC that leads to a successful enforcement action with sanctions of over $1 million. Professionalism in public accounting has changed over the past decades for a variety of reasons from the advances in technology to the globalization of the economy. One of the ways professionalism has changed is that independence has become a major component for public accountants. Independence confirmations before the audit and during the audit are major parts of being professional in today’s definition. Ethics are another major part of professionalism. Being ethical in your decisions is stressed more now than ever before. Being courteous of others cultures, beliefs, and religions are a new addition to being professional.

With everything becoming global and information quickly being spread by technology, being conscientious of what is said and done is very important for accountants for one bad thing can have severe implications. Being professional is more than just how you act in the business place for since you represent the company, your actions are watched on and off the job. With the increasing numbers of investors in the market it becomes more pressing to have reforms to regulate the circulation of information and assure investors that they are using the highest quality of financial statements.

The SEC has required public companies to have their quarterly financial statements audited before filing of theirs quarterly report on Form 10-Q. Therefore, audit firms will need to follow all the audit standards set out, from establishing an understanding with the client to performing analytical procedures, inquiries and other review procedures to prepare an audit report on the review of interim financial information. It is our opinion that quarterly financial statements should be audited because they will be more reliable and credible to the investors.

Auditing quarterly financial statements will also shade lights on questionable management’s earnings. At the same time, a continuous (quarterly) audit will allow for less restatement at the end of the year; that is less surprise for investors. The auditor will be required to follow the clients’ financial situation more closely and address any material issues sooner. Quarterly audited financial statements will give investors confidence in relying on the company’s financial information.

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Multinational corporation: red bull

MULTINATIONAL CORPORATION: RED BULL

Introduction

One of the most successful multinational companies in the international market, Red Bull GmbH has been maintaining a good market performance for the past 24 years of its operation. With its flag-product, Red Bull Energy Drink, Red Bull GmbH included itself to top producing energy drink companies in Northern American and Europe, with significant market shares on Asia. Most people claims that Red Bull GmbH’s corporate values are made from the West-East Cultural integration which enables the said company easily cope up to new cultures and corporate values. Every year, Red Bull GmbH can sell billion cans of energy drinks in nearly 100 countries with emphasis on the American and European countries.

Furthermore, more than 70 percent of the total world market for energy drinks belongs to Red Bull GmbH with sales equal to around $1.3 billion in 2002 which strongly supports the volume of its sales and extent of its operation on the world market (Fundinguniverse.com 2008) & (Ingram 2003).

One of the main reasons behind the successful operation of Red Bull GmbH in the international market is rooted on the fact that it has an efficient production scheme and strategically located manufacturing firms across the globe. Meaning, Red Bull GmbH has been investing to different countries that can provide them with competitive advantages over their competitors in the market. Business environment could also provide comparative advantages to many multinational companies just like Red Bull GmbH aside from the factors of production like labor and technology. In essence, there are allot of potential sources of competitive advantages in a given country and a few of them will be tackled by this paper as the discussion proceeds, while considering the case of Red Bull GmbH.

Therefore, this paper aims to determine the various market entry strategy of Red Bull in penetrating different global market as well as on how the said company it changed its management structure just to penetrate new markets. The thorough analysis of Red Bull will be done through the use of two main models in explaining multinational company corporation, specifically the Dunning’s Eclectic Paradigm & Global Integration and the Integration Responsiveness.

Dunning’s Eclectic Paradigm

Red Bull GmbH, being one of the most successful energy drink producer in the international market, proud itself for being knowledgeable on caffeine due to its significant amounts of investments that it allot on its research and development program (St. Pierre 2000). Given the tight market competition, Red Bull GmbH has able to maintain good position in the global market through allotting significant amount of its resources to research and development considering the its line of products are energy drinks. Bulk of the foreign investment of Red Bull GmbH is concentrated on American and European Region since these regions has been the forerunner of research and development studies due to the availability of facilities and technologies needed for the development and innovation of product line of Red Bull GmbH. Keeping in mind that most of the developed nations belongs mostly to the European and American Region, Red Bull GmbH has been able to utilize the technological advancement in these regions and incorporate them on its production processes to further improve its product lines in the market.

In other words, the concentration of investment of Red Bull GmbH in European and American Region aims to further develop their competitive advantage in research and development. Red Bull GmbH uses the technological advances of European and American Region as part of its production inputs, which later one would transform to a more attractive product line especially to health conscious target customers in the market. Between the European and American Region, Red Bull GmbH is relatively more successful in the former than the latter considering that it is an Austrian-based company and it is already familiar with the European market, though there is only a small margin between the level of success of Red Bull GmbH on Europe and American Region.

On the other hand, Red Bull GmbH is still on its preliminary stage of penetrating the Asian market. Red Bull GmbH saw the potential contribution of cheaper labor cost in most Asian countries and turn it into one of the sources of competitive advantages of the company against its competitors.

As the present trend nowadays, consumers are not just quality-conscious customers; rather, they are now both quantity and quality-conscious customers. Given a tight budget constraint, consumers nowadays opted to buy cheaper yet high quality products in the market; and existence of cheaper products in the market means that they can buy more of that product as compared before when its prices are relatively expensive.

In other words, Red Bull wants to expand its target market by including price-conscious-customers/quantity-conscious-customers through lowering down their production cost to give them enough room to cut down their market prices. By investing into Asian countries with cheaper laborer such as in China, India, Philippines and Indonesia, Red Bull GmbH has already the capability of offering their product lines in the market on a much cheaper price relative to their competitors.

For many years, Red Bull GmbH finds it more comfortable on using direct investment as a medium for entering a given market. It has provided Red Bull GmbH with enough market opportunities to gain more competitive advantages or further improve the competitive advantages of its existing product lines. In addition to this, Red Bull GmbH has able to internalize the market of its host country through direct investment. Meaning, Red Bull GmbH has able to successfully penetrate, exploit, and dominate a foreign market on itself compared to making joint business venture with a foreign company.

Therefore, this case of Red Bull GmbH conforms on Dunning Eclectic Paradigm since Red Bull GmbH has considered the major conditions such as availability of resources that will provide the company with comparative advantage, and market internalization to name a few, in making decisions on whether or not to invest in a foreign market through direct investment (Gray 2003:5).

Integration-Responsiveness Model

Considering the fact that most of the developing countries are situated in Asia, another source of competitive advantage of Red Bull GmbH, aside from its significant investment in research and development studies, would be the political stability in the European Region compared to the American and Asian Region. Since most of the investment of Red Bull GmbH is concentrated in European Region, while Red Bull GmbH is relatively more successful in the European than in the American Region, it has been able to enjoy large amounts of political benefits in terms of government policies and regulations.

The establishment of the European Union provided an avenue towards the strengthening of political conditions in the European Region as compared to the United States wherein it has been experiencing series of political issues and instabilities that eventually adversely affected the profitability of foreign investors operating on the said region.

The political stability of the European Region has been successfully utilized by Red Bull GmbH to operate in the market efficiently relative to those energy drink companies that operates in Asian and American countries that, in the recent years, has been experiencing political issues and instability. Having a stable political condition would be tantamount to having fewer cases of bureaucratic rent, graft and corruption, and optimal policies and regulations, which eventually provided Red Bull GmbH enough avenues to minimize its production/operation cost. In addition to this, infrastructure development in Europe, which is vital for foreign investment to earn higher profit, is relatively higher compared to Asian countries due to stable political conditions of European countries as compared to Asian countries.

Furthermore, in terms of culture and social environments, since most European countries are member of the European Union, it has provided Red Bull GmbH with enough flexibility which eventually led on its efficient operation in the market. The cultural and social differences of member countries of the European Union enable Red Bull to generate more productive ideas and market strategies that in turn led Red Bull GmbH in having competitive advantage over its competitors in the market. Like for instance, Red Bull GmbH, has been one of the multinational firms in Europe that spends allot of capital for advertisements since it covers different and large scope of customers from various member countries of the European Union. Red Bull GmbH has been extensively sponsoring different sports events or competition that successfully developed its product name in the market (Hein 2001).

Just recently, Red Bull GmbH is already making collaborations with gaming developers and start providing “Red Bull Games” in the market to further boost the publicity of the said company (Ivan 2007) & (Radd 2007). Yet, despite of the high budget allotment of Red Bull GmbH on advertisement, almost all of its advertisements successfully attracted more customers to the said company.

Moreover, like any multinational companies on the international market, Red Bull GmbH has been able to maintain a centralized management flow which made it allot easier on the part of the said company to make deals with other people on a fast and efficient way. Most of the investors at present firmly believe that a centralized management flow is relatively more efficient and effective compared to a decentralized one. In addition to this, the centralized management of Red Bull GmbH enables it to easily manage its international branches (Todd 2003). It also caused the minimization of ambiguity on the roles and responsibilities of every employees working in Red Bull GmbH which positively affects the level of quality of each employee’s performance.

In this regard, it is therefore clear that centralization, cultural and social differences, and political stability in Europe provided enough market influence on Red Bull GmbH to have comparative advantage against its competitors and further gain larger share on the international market. To make thing simpler, Red Bull GmbH does not only  consider the availability of resources that could provide comparative advantage before directly investing in a given country, rather, it also consider the political, social, cultural environment of a given country as stated under the Integration-Responsiveness Model. At the end of the day, Red Bull GmbH remains formidable amidst to the tightening market competitions and liquidity of the international market which makes it one of the successful and influencing multinational companies across the globe.

Conclusion

Given the above discussion on how Red Bull GmbH decides on whether or not to pursue direct investment in a given country or market, it is therefore clear that the main factor that influences the decision process of Red Bull GmbH would be the existence of resources that would provide them with comparative advantage or could at least further improve their existing comparative advantage as well as the political, social, cultural environment of a given country. The centralization of its management structure, provision of cheaper products in the market, knowledge on the uses of caffeine, has provided Red Bull GmbH enough comparative advantage over its competitors and gain significant market share improvement in the global market.

Considering the multinational companies as a whole, given the said identified models above, MNC’s made decisions regarding their foreign investments depending on how much comparative advantage that they could get from investing on a given country. At present times, most of the reasons behind the influx foreign investment on many countries are rooted on the availability of sources of comparative advantages, e.g. technology, cheaper labor. The race towards the attainment of comparative advantage over their respective competitors in the market has been fueling the volume of foreign direct investment that moves from one country to another. Therefore, it is not just the existence of potential market that is presently important to foreign investors when considering a country to invest with, rather, they now also consider the comparative advantages that they can generate from investing on that given country.

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Corporate governance at Toyota Motor Corporation

Names and details of those who receive, in aggregate, consolidated remuneration of one hundred million Japanese yen or more will be disclosed on an individual basis in annual securities reports. Annual securities reports and business reports are also made available for public inspection on TMC’s Internet website. Existence of guidelines for the amount and calculation method of remuneration Yes Information regarding guidelines for the amount and calculation method of remuneration Director remuneration was set at 130 million yen or less per month, pursuant to the resolution of the 107th scheduled Meeting of Shareholders held on June 17, 2011.

In addition, the amount of auditor remuneration was set at 30 million yen or less per month, pursuant to the resolution of the 104th scheduled Meeting of Shareholders, held on June 24, 2008. [Support System for Outside Directors (Outside Corporate Auditors)] Full-time Corporate Auditors and Directors disclose adequate information to Outside Corporate Auditors, such as by giving prior explanations on agenda items to be proposed to the Board of Directors.

In addition, a Corporate Auditors Department has been established as a specialized independent organization to assist the Corporate Auditors. 2. Matters pertaining to functions relating to the execution of duties, audit and supervision, appointment and decisions regarding remuneration, etc. (Outline of the current corporate governance system) TMC formulated and announced the Toyota Global Vision in March 2011, based on what it has learned from the deterioration of the business environment

following the Lehman Shock and a series of quality problems. The Toyota Global Vision, based on Toyota’s values that have guided Toyota since its founding, such as “Guiding Principles of Toyota” and “Toyota Way,” aims to exceed customer expectations by the development of ever-better cars and enriching lives of societies, and to be rewarded with a smile which ultimately leads to the stable base of business. Toyota is to keep this -6- virtuous cycle by focusing on making ever-better cars.

To fulfill the Toyota Global Vision, Toyota made some changes to its management structure in 2011, such as reducing the Board of Directors and decision-making layers. Toyota will continue to offer products and services that will satisfy evolving needs in every region. In addition TMC headquarters is to provide overall direction and furnish support for the initiatives undertaken by the regional operations. Specifically, with the aim of faster decision-making, TMC drastically reduced the number of Directors and abolished the position of Senior Managing Director.

Furthermore, TMC will replace the current three-layer arrangement – Executive Vice President, Chief Officer, and Executive responsible for the operations involved – with two layers, eliminating the executive immediately below the Chief Officer. Moving forward with this new structure will support a swifter flow of information from the divisional general managers, who are intimately familiar with their operations, to senior management.

TMC enhanced clarity in organizational responsibilities: the Board of Directors decides what Toyota will do as global Toyota, and Chief Officers decide how to implement that decision as chief executives for day-to-day operations, etc. The post of Chief Officer will be filled either by a “Senior Managing Officer” or “Managing Officer” in a flexible manner. Chief Officers responsible for the region or function conduct local operations basically at respective sites under the Executive Vice President responsible for each operational sector and vigorously reflect the voices of local customers in functions of R&D, production, and sales.

TMC has an “International Advisory Board” consisting of advisors from each region overseas, and, as appropriate, receives advice on a wide range of management issues from a global perspective. In addition, TMC has a wide variety of conferences and committees for deliberations and the monitoring of management and corporate activities that reflect the views of various stakeholders, including the “Labor-Management Council, the Joint Labor-Management Round Table Conference”, and the “Toyota Environment Committee.

” In order to manage and implement important activities for fulfilling social responsibilities, TMC has established the “CSR Committee” consisting of directors at the executive vice president level and above as well as representatives of corporate auditors, to review important issues relating to corporate ethics, legal compliance, risk management and social contribution, and also to develop action plans concerning these issues.

TMC has also created a number of facilities for employees to make inquiries concerning compliance matters, including the Compliance Hotline, which enables them to consult with an outside attorney, and takes measures to ensure that TMC is aware of significant information concerning legal compliance as quickly as possible. TMC will continue to promote the “Toyota Code of Conduct” which is a guideline for employees’ behavior and conduct for employees of TMC and its consolidated subsidiaries (together “Toyota”) all around the world.

TMC will work to advance corporate ethics through training and education at all levels and in all departments. TMC has adopted an auditor system. Seven Corporate Auditors including four Outside Corporate Auditors play a role in TMC’s corporate governance efforts by undertaking audits in accordance with the audit policies and plans determined by the Board of Corporate Auditors. In addition, TMC has secured the personnel and framework supporting the audit by Corporate Auditors.

The Outside Corporate Auditors advise TMC from a fair and neutral perspective, based on their broad experiences and insight in their respective fields of expertise. While TMC currently does not have its own standard or policy on independence in appointing Outside Corporate Auditors, TMC believes that such appointments are appropriate since various rules on independence, such as stock exchange regulations, are used as references in making such appointments. The state of internal controls and internal audits are reported to Corporate Auditors (including Outside Corporate Auditors) through the Board of Corporate Auditors and the “CSR Committee”, and the status of accounting audits is reported by independent External Auditors to the Corporate Auditors (including Outside Corporate Auditors) through the Board of Corporate Auditors.

To enhance the system for internal audits, a specialized organization made independent of direct control by the management evaluates the effectiveness of the system to secure the appropriateness of documents regarding financial calculation and other information in accordance with Section 404 of the U. S. Sarbanes Oxley Act and Article 24-4-4 (1) of the Financial Instruments and Exchange Law of Japan. In order to enhance the reliability of the financial reporting of TMC, the three auditing functions — audit by Corporate Auditors, internal audit, and accounting audit by Independent External Auditors — aid in conducting an effective and efficient audit through -7- meetings held periodically and as necessary to share information and come to understandings through discussion on audit plans and results. 3. Reason for the selection of the current corporate governance system.

With respect to our system regarding directors, we believe that it is important to elect individuals that comprehend and engage in TMC’s strengths, including commitment to manufacturing, with an emphasis on frontline operations and problem solving based on the actual situation on the site (Genchi Genbutsu). While TMC currently does not have its own standard or policy on independence in appointing outside directors and currently does not have an outside director, TMC intends to use various rules on independence such as stock exchange regulations as references and consider such appointments should there be suitable individuals.

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Business Ethics Case study on Sunbeam Corporation

Table of contents

Abstract

This paper is about the business ethical issues as applied to the Sunbeam Company that enables it to attain greater profits. The processes discussed being the choosing of right management team, making extreme cuts in the operation areas referred to us cost cutting strategy. Then there is focusing on the company’s core business through definition of what it deals with. Then finally it touches on the development and implementation of real strategies including the balancing of finances that improves company’s production.

Introduction

The sunbeam company is a well known company that deals with designing manufacturing, and marketing of consumer products used for cooking, Health care, and personal care. The company applied the four rules of business ethics to maintain their profitability especially during the times of relatively high inflation and interest rates when the corporations were going through acquisitions, mergers, restructurings and closings.

The company has indeed exchanged hands and by the time of Albert Dunlap in 1996 it had more than twelve thousand stock keeping units, or individual variations of its product lines. It had twelve thousand employees, twenty six factories worldwide, sixty-one warehouses, and six headquarters (Sunbeam Corporation, 1998, pp. 370-378).

Dunlap through the application of business philosophy and reputation turned businesses around financially. One of the principles was making extreme cuts in all operation areas, including extensive layoffs and stressed the fact that the most important goal of any business is making money for shareholders. The other very important aspect is to get the right management team. Another method as applied by Dunlap is cutting back to the lowest costs by reducing the number of stock keeping units (Sunbeam Corporation, 1998, pp. 370-378).

1. How Sunbeam’s financial performance pressure were manipulated to influence investors

After sometime of the reconstruction of Sunbeam by Dunlap and the purchase of the company, Sunbeam faced tough times. Sunbeam had a financial culture of using the bill-and-hold strategy to attract more shareholders. This strategy caused a lot of financial pressure that contributed to Sunbeam’s culture of using quarterly sales to manipulate the way the shareholders were investing in the company’s share.  The tough times were not caused by excessive costs or lack of strategies but it was caused by increased three purchases that were believed to have been mad to disguise losses through write-offs.

The financial statements and report for every quarter were unusual for some items. It was noted that the sale of electric blankets and grills were unusual in some quarters. Dunlap was using a bill-and-hold strategy with retailers which boosted Sunbeam’s revenues. This strategy entails selling products at large discounts to retailers and holding them in third party warehouses to be delivered at a later date.

The strategy shifted sales from future quarters to the current one. Even though the strategy is not illegal because it follows the Generally Accepted Accounting Principles (GAAP), many shareholders filed lawsuits alleging that the company had made misleading statements about its finances and deceived them into buying the artificially inflated stock (Osemeyer, 2002).

A class-action lawsuit was filed on April 23, 1998 alleging that Sunbeam and Dunlap were violating the Security and Exchange Act of 1934 by misrepresenting and omitting material information concerning business operation. The lawsuit also alleged that the motivation for artificially inflating the price of the common stock was to enable Sunbeam to complete millions of dollars of dept financing in order to acquire Coleman, First Alert and signature Brands. But still after the lawsuit, Dunlap continued with the strategy like nothing happened trying to reassure two hundred major investors and Wall Street analysts that the mistake will never happen (Osemeyer, 2002).

2. The contributions of Dunlap to the financial and public relations embarrassments at Sunbeam that caused investors and the public to question Sunbeam’s Integrity

Dunlaps’ governance in many ways tampered with the Integrity of Sunbeam financially. In less than four months after his employment, Dunlap eliminated 60% of the Sunbeam staff. The staff included both from secretarial and organization positions. This raised a big question and concern to the labor secretary in the US who believed that Dunlap was treating employees like parts of equipment which there for the company’s’ disposal (Byrene, 1998).

Dunlap also trimmed down the number of SKUs from 12,000 to 1,500.He also reduced sixty-one factories to eighteen worldwide. Since the number of employees were been drastically cut down, the SKUs, factories and warehouses, the locations of the headquarters needed to be reduced. Therefore, the six headquarters were brought down into one (Byrene, 1998). On quarterly basis, Dunlap did some scrutiny on the financial statements for sunbeam. This brought about high quarterly losses to Sunbeam that lead to the reduction of the stock prices.

There was course for worry that the company was using and holding scheme that only applied on the balance sheet. Whereby sales were booked months earlier head of actual consignment. This scheme was because of goods getting sold at large price cuts to retailers and then keeping them held in intermediary warehouses and get late delivery. Due to this, there was a boost in revenue. This created misunderstandings amongst Sunbeams’ shareholders due to the misleading financial statements, which they received from the company (Byrene, 1998)

3.  Ethical issues by Dunlap’s Management

The management of Dunlap could have several ethical issues as they attempted to focus on created by focusing on short term financial performance. The implication here is that the management of the company had laid too much emphasis on the short-term financial performance at the expense of the other ethical business practices. This means therefore that management of the company was not following the correct business practices by focusing only on the short-term financial performance of the corporation rather that putting in place measures aimed at achieving the overall productivity and growth of the business in the long-term (Schifrin, 1998).

The major ethical issues raised by the management of Dunlop concerned the questionable accounting practices. On the surface, the organization was posting high revenues. This was however not the exact situation on the actual sense given the fact that neither the shareholders’ wealth grew nor the board of directors became satisfied (Schifrin, 1998).

The implication was that some ethical business practices were not being practiced. Indeed the organization was using the so called bill-and- hold strategy in its financial statements preparation. The bill-and- hold strategy was a financial practice which involved making company product sales on large discount basis to the retailers. In this case, the bulk sales would be held in third subsidiary warehouses in a bid to make deliveries of the same goods some time in the future (Fortune, 1998).

This was bad ethical business practice.  Well, it could be argued that the practice is actually not illegal given that it actually is a GAAP of reporting financial statements. However in this case, Dunlap’s management was booking sales in advance before the actual deliveries or even billing were actually made. The result of this unethical practice was that the financial statements presented high revenues more so in the receivables accounts of the organization (Fortune, 1998). The resultant consequences were inflated earnings for each of the quarters of the financial year of the company.

In the final analysis however, all the accounting malpractices were eventually discovered thanks to the analyst Andrew Shore. With the eventual discovery of theses unethical practices, of course the chief executive , Dunlap together with his major management team members were fired and had to repay the money they had defrauded the corporation (Fortune, 1998). The company equally lost her reputation and not only did it requite a whole new management to turn around the company image, but it equally took a long time. The lesson learned here is that it is a good thing to always practice good business ethics as opposed to engaging in unethical business practices just to gain short-term business gains whose consequences could be detrimental.

Conclusion

Drastic efforts based on the four rules of Dunlap’s business ethics, are sometimes necessary to turn around companies by increasing stock prices and profits. However the reputation for the lay offs as applied by Dunlap leaves many employees insecure. The implementation of the cost cutting strategies makes the company trade on higher profits but at the same time, leaves many jobless.

In addition of the strategies the accounting practices must be of prime concern for any business company to succeed. Also the strategies must focus on delivering quality products and service to the customers. The business companies must always be committed to choose employees and managers based on core values like integrity, community service and entrepreneurship. (Sunbeam Corporation, 1998, pp. 375-378)

Reference

Byrene .J .A, (1998)“How Al Dunlap Self-Destructed,” Business Weekly, July 6, ,58-65

Fortune, (1998). First: Sunbeams Investors Draw Their Knives-Exit for Chainsaw?

Osemeyer, A. (2002, November 27). Sunbeam’s Bankruptcy Protection Plan Ok’d. Joplin [Missouri] Globe. Retrieved October 16th, 2008, from www.joplinglobe.com/archives/2002/021127/regional/story2.html

Schifrin, M. (1998). The Sunbeam Soap Opera: Chapter 6, Forbes, 44-45

Sunbeam Corporation. (1998). Chainsaw Al and the Creed. In chainsaw. New York.

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