GDP Growth and Supply Side Policy in Buhtan

GDP or Gross Domestic Product is the method used to measure a country’s economy and it is the entire cost of production by all the companies, manufacturers, and the citizens of that country.  When a foreign company produces goods in the country that production is accounted for a part of its GDP.

The fastest growing countries aren’t always the largest, or highest on the most developed list, and Bhutan, a primarily Buddhist empire in Asia mostly known for its monasteries and vast green landscapes that range from subtropical plains to steep mountains and valleys is one such nation whose GDP has seen strong growth rates over the past ten years and is considered amongst one of the fastest growing economies in the world, although, Bhutan measures its well-being by looking at results of the country’s Gross National Happiness (GNH) which is a philosophy that guides the government and measures the collective happiness and well-being of the population.

Typically when Asia is discussed, people tend to think of India and China whose economies have strongly grown in the past as well, however, in the recent years compared to their past track record they have lost the momentum, but Bhutan, a small nation in the middle of these two countries grew 17.9 percent in 2008, slowing down in between 2010 and 2014 after the shortage of the Indian rupee in 2012, but since then has seen an upward trajectory, after recovering in 2016 to 6.7 percent and is now expected to grow around 11 percent each year between 2018 and 2020.

The most important areas which have contributed to Bhutan’s GDP growth are hydroelectricity, tourism and agriculture. Because of its geographical location among the mountains, it has been difficult for the country to develop its infrastructure therefore the government has instead planned to generate revenues by utilizing its natural resources, and has strategically focused on quality tourism as a major revenue stream, but at the same time, it is also controlling the number of people it allows as tourists to protect its environment and lessen foreign influence on its citizens to guard its culture and way of living.  Also because of its mountainous terrain and its ability to produce hydroelectricity, Bhutan sells majority of its energy power to India, who is not only its closest ally but also their largest source for earnings (90 percent).

Bhutan however has high labor costs compared to its neighboring countries, and that is because it is much smaller in size in the form of land mass and population.  Bhutan was said to lack an educated and skilled workforce needed to support its hydroelectricity production plan, which was an obstacle in creating higher productivity needed to remain competitive with neighboring Asian countries.  The government however in recent years, has identified and begun to address these issues by enabling an environment friendly for businesses, by launching its Economic Development Policy in 2010 (www.moea.gov.bt).  This policy’s purpose is to improve productivity in the economy and provide strategic direction through 2020.

The government is also currently promoting the private sector after a heavy focus on the public sector for years, which is creating jobs by encouraging local hiring to bring the youth unemployment rates down versus sourcing cheaper labor from neighboring countries.

Accelerated investments in hydropower and good agriculture yields have created a growth in the country’s capital along with macroeconomic stability, which have allowed the fiscal and monetary policies to continue to support various economic activities.  Bhutan has made great strides in modernizing its economic structure and has a record of reducing extreme poverty down to 2 percent, which is among the lowest rates in Asia.

The already low unemployment rate is at 2.5 percent today compared to 2.9 percent in 2013 and the country is at a moderate external debt risk.  Under the country’s 11th 5-year plan “goals of promoting green-socio economic development and achieving self-reliance are a focus”, (www.worldbank.org).  This policy has a plan to endorse fiscal discipline, increase access to finance for enterprises, and improve the climate for foreign business entry and investment in the country.

The Royal Monetary Authority (RMA) entrusted by RMA Act of 1982, creates and regulates all monetary policies in the country, which include achieving and maintaining price stability, laws that oversee brokers, insurance companies and bankruptcies.

Along with the local currency the Ngultrum, the Indian rupee is also in circulation and widely accepted.  “In the pursuit of price stability, the cornerstone of Bhutan’s monetary policy is that of Exchange Rate targeting”, (www.rma.org), therefore the national currency is made sure (pegged) to be at the same rate as the Indian rupee since majority of Bhutan’s transactional activity is with India.  Inflation was high reaching 13.53 percent between 2012 and 2014 coinciding with low GDP during the same time, due to shortage of the Indian Rupee, however since then it has trended downward and currently at 4 percent.  The interest rate decisions are also taken by the Royal Monetary Authority of Bhutan and the official interest rate is a policy rate and is benchmarked at 6 percent.

The portion of foreign direct investment (FDI) in the GDP of Bhutan remains rather low compared to other developing countries.  If we look at stock, FDI represents less than 10 percent of GDP and because of the country’s geographical location and it being a land-locked mountainous region, it has been difficult for foreign investors to come in and invest in infrastructure. But regardless of location, FDI investment in general has been discouraged in the past due to a controlled system and lack of policy in areas of industrial license and trade.

In 2015, the government declared to relax the rules associated with foreign investment and therefore is now allowing foreigners to buy land” (www.santandertrade.com), however, the government of Bhutan clearly speaks to continue restricting FDI in other sectors in order to avoid competition with local traders.

Bhutan is ranked 73rd out of 190 countries in the World Bank’s 2017 Doing Business Report. For a small interior country, this ranking is nonetheless satisfactory and the country has been most active in South Asia in relation to leading reforms and simplifying procedures for the betterment of the country and its people. This country that measures its progress by measuring the its populations gross national happiness, has all the right cards in place to continue to grow its GDP, and advance along with its neighboring countries.

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What was life before Inventions of Science

Table of contents

Introduction

With the aggressive transformations in communication technologies. Videoconferencing is finding its application in every segment of the economy. Becoming a frequent instrument in collaborative communication. Organizations, businesses, and other entities face the challenge of effectively operating distributed offices with short-staffed and overworked IT departments. Tight budgets are also a concern. Despite these concerns, entities strive to expand. And reach new markets without increasing overhead by relying on effective communication technology. Morley & Parker (2010) define video conferencing.

As “the utilization of communications technology to initiate face-to-face and real- time meetings involving individuals located in physically different locations.” The advancement of the video conferencing technology software. And online services has been employed by businesses to significantly improve sales. Minimize travel and meeting expenses. As well as reduce teleconferencing expenses linked to recurring inter-office meetings (Rayler, 2010). Morley & Parker (2009) also highlight that video conferencing. And other web technologies are the increasing part of the communication technology power. It is employed by most entities to help them profit from outsourcing opportunities, globalization. And fairly compete with other entities in the respective industries.

Background Information

All inventions in communication technology must have evolved with room for improvement. The first documented face-to-face video conferencing system. Was the Picture Phone by AT&T. This was presented at a New York’s fair in the 1960s (Barney, 2011). This technology did not get widespread application since it was too expensive for average clients. Even those who could afford were disappointed due to poor picture quality and ineffective video compression techniques (Shelly. Vermaat, & Quasney, 2013).

Since then, video conferencing technology and allied systems have consistently failed to achieve the high hopes offered for their intended function in communication. In early 1960s, it was predicted that people would be able to seamlessly have meetings on their phones or mobile devices. Despite technological advancements in digital communications, these earliest efforts gained widespread application either in working life or at home. The first improvement was registered in 1976 by introduction of network Video Protocol.

Further advancement occured in 1980s, when digital transmission. And ISDN (Integrated Services Digital Network) was available (Packetizer, 2013). High procurement cost and bulkiness of the video conferencing equipment rendered the technology uneconomical in its application in areas such as telemedicine, business meetings, and distance education. In early 90s, several video conferencing systems were available, but the turning point was the introduction of CU-SeeMe system by Macintosh (Packetizer, 2013). This gave a leeway for Microsoft NetMeeting software in 1996.

Other advancements include improvement of signal transmission quality. Speed as well as reliability of networks. Improved integration. And interoperability between various hardware and software components has also played. A role in increasing the use of video conferencing technology. The first HD video conferencing system was produced in May 2005 by Life Size Communications in a trade show in Nevada (Telework Research Network, 2012).

As of the March, 2013, developments in HD videoconferencing systems had become popular in the market of videoconferencing. Some of the renowned video conference equipment manufactures include LifeSize, Cisco, Tandberg, Polycom, Sony, and Aethra (Telework Research Network, 2012). These manufacturers are all working using the same protocols; therefore, the systems are able to link various brands. Recently, aggressive developments introduced by video conferencing systems developers directed their attention to hand- held mobile devices. Aspects, such as audio, video and on-screen drawing, have been integrated in mobile devices.

Security of real-time transmissions has also been enhanced irrespective of location. Application of video conferencing technology has expanded beyond office meeting environments (Shelly, Vermaat, & Quasney, 2013). A demand for collaboration tools and converged infrastructure has catalyzed development. And usage of this technology. Video conferencing is gaining popularity in tactical and non-tactical environments.

The Concept of Video Conferencing Technology

Video conferencing is an audiovisual communication technology. That allows people or teams of users to communicate via synchronized broadcasts of audio and visual data. It utilizes audio and video telecommunications to link people at different locations together. Video conferencing systems transmit bidirectional data, audio and video streams during a session. Compression is performed by a software or hardware known as a codec. This leads to a stream of digital data which is divided into packets. Then packets are transmitted to endpoints through the digital network such as ISDN or Internet Protocol (Barney, 2011). Endpoints need a gateway for a link to exist.

Video conferencing can take place via computer and the Internet or via dedicated video conference setup (Enrica & Vladimir, 2012). Dedicated video conferencing systems are those. That have all required components incorporated in a single unit. typically a high quality remote video camera connected to a console.Desktop video conferencing systems are the peripherals attached to normal computers to transform them into videoconferencing devices. These add-ons include cameras and microphones having the necessary codec and transmission interfaces.

There are two major types of videoconferencing systems available on the market. They include point- to-point and multipoint videoconferencing. Point-to-point (or P2P) video conferencing is a simple communication limited to two participants or teams in the private offices. It easily implemented, hence being the cheapest type of video conferencing technology (Enrica & Vladimir, 2012). The quality of P2P video conferencing broadcast is superior to multipoint. P2P is also characterized by less chances of lag in signal transmission.

Despite this, P2P video conferencing requires that the involved parties use the same type of communication protocol such as an Internet Protocol (IP) or Integrated Services Digital Network (ISDN) one. Multipoint video conferencing involves several locations in large rooms at multiple sites. Real-time transmission of meeting activities. Also involves related video conferencing technologies to display shared documents on whiteboards. The most essential device in this type is multipoint control unit (or MCU). Which is located at a node of a Local Area Network (LAN) and consists of a multipoint controller (MC) and multipoint processors (MPs).

Current Development/Technology& Industry

Delivery of high quality video conferencing to any business environment. Is attributed to advanced off- the-shelf webcams, multi-core processors, and transmission technologies. Major video conferencing system developers, such as Cisco, Polycom, and Sony, are reported to conduct experiments in videoconferencing. And allied technologies intended to determine the best possible. Way of using new technology and its vitality at various development stages (Telework Research Network, 2012).

Some of the emerging trends are application of videoconferencing. And related communication technologies exist in. Such fields as telemedicine, tele-surgery, and psychologists conducting online sessions. Other application includes making contact with inmates incarcerated in penitentiaries, astronauts, and resolving airline engineering issues maintenance. As of 2013, the state of this technology could not seamlessly give both image and sound. It was an exchange, and which translates to sacrificing sound to get a good video quality (Telework Research Network, 2012).

Significance of Video Conferencing

Video conferencing technology delivers a number of benefits to most organizations. Technology analysts, customers, and value-added resellers (VARS) indicate that it increases productivity among distributed workforces and project teams. This is the most tangible effect of using video conferencing. If it is well panned and effectively implanted, this technology has significant impact on the way people manage business and the productivity gains they can derive.

Video conferencing systems provide a platform for sharing easily any kind of information, thus fostering fast decision making, which is a critical success factor in this knowledge driven economy. This translates to availing products or services to the market quicker, consequently enabling an entity to stay ahead of competitors in current dynamic markets.

In addition, video conferencing helps to save money. Despite the fact that productivity increases as a result of implementing this technology, actual savings are realized when travel costs are reduced. Video conferencing has become a prerequisite for leveraging new market opportunities, thereby eliminating frequent travels as today’s globalized market dictates.

In the current business environment, where the safety and time-related issues with traveling are a concern to many employees, video conferencing technology eliminates such concerns. Travel related issues include insurance policies, security threat in volatile airspaces or war torn environments. Furthermore, this technology can help increase the profits of organizations, while reducing the cost of physical conferences. A study entitled “Benchmarking the Benefits of Videoconferencing Deployments” by.

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Finance and Management

“The nexus between economic and environmental problems is clearly evident in the widespread and serious social and economic impacts associated with soil erosion, desertification, deforestation, urban congestion and squalor and excessive and unmanaged emissions of pesticides, heavy metals, air pollutants, and solid and liquid industrial and residental waste (Long, 1990 cited by Daniels, 2005, p.454).

From restrictions forced through politics on Chlorofluorocarbon (CFC) in 1987, the restriction on the emission of CO2 of the “Kyoto Protocol” in 1997 to the “Restriction of the Use of Certain Hazardous Substances in EEE” (RoHS) and “Waste Electronics and Electronical Equipment (WEEE) in 2008, the rise of international environmental regulations and popular environmental consciousness of consumers would bring significant impacts to industries in the world (Chen et al., 2006). In the past 150 years where about the industrial revolution had its birth, economic growth seemed to undermine any other aspect of social or environmental considerations.

Through the rising environmental issues undeniable by corporations and obvious for almost every citizen in the world at least through news and television, the importance of sustainable development processes cannot be neglected. Achieving sustainability is the real issue for humanity, and it is our need to learn to live sustainably, within the bounds of the global ecosystem, and moreover signs of dramatic sustainablility problems through growing economies, such as China or India, is threatening an ecological meltdown and its already affecting people’s livelihoods and health.

In China the life expectancy is now declining again due to air and water pollution (Borland et al., 2011). And moreover “less dependence upon fossil fuels would help ameliorate this major source of global conflict and instability that seems to be undermining the peace and understanding necessary for sustainable societies (Daniels, 2005). One first step towards achieving the goal for sustainability for the coming generations would be reducing the energy demand throughout the world. This can be achieved by endorsing, supporting and fostering renewable energy supply. The EIA, U.S. Energy Information Administration, defines renewable energy as “Energy sources that are naturally replenishing but flow limited. They are virtually inexhaustible in duration but limited in the amount of energy that is available per unit of time.

Renewable energy sources include: biomass, geothermal, solar, wind, ocean, thermal, wave action and tidal action”(U.S. EIA, 2007). As mentioned before through several citations green energy supply, whereby in this elaboration I will give green energy and renewable energy the same denotation, is not only reducing C02 emissions. In the further paragraphs I will investigate other positive effects of green energy to environment and society and this paper will end up in giving ideas to companies, nations and non-governmental organizations how this sustainable development approaches can be effective and well reveived.

Renewable energy supply and reducing the energy and raw material demand is a global issue, therefore a collaborations between nations, especially between governments through regulations, laws and policies are needed to make restrictions to decrease harmful developments. But more information about this topic will be given later on. First, different positive aspects relating to society and environment concerning the reduction of C02 emissions are taken into account.

Looking at this circle diagram it is obvious that the world’s energy supply highly depends on Crude Oil, Natural Gas and Coal. More than 75% of the supplied energy depends on these 3 factors. The abbreviation NGPL stands for Natural Gas Plant Liquids, and therefore doesn’t belong to renewable energies. Hydro power which can be included to renewable energies( i.e. hydro electric power plants are inexhaustible in duration), and differ to other renewables,such as solar by its stable energy supply. Together with Geothermal & Other (i.e. solar, wind) these green energies are not reaching one-tenth of the world’s enery supply. Exact numbers are in this case not relevant only the energy allocation and distribution are important and centered in this elaboration.

The most obvious and evident reason for supporting green energy is reducing C02 emissions and the demand for oil, coal and natural gas which are all exhaustible raw materials. Therefore green energy contributes to decrease global warming through the greenhouse effect. But using renewables for power supply do have more differs aftereffects for the environment and societies around the world. Non-renewable energies, besides nuclear power, are using raw materials, to supply energy and therefore it endangers sustainability for future generations. Through the further development of new renewable energy plants and increasing efficiency sustainability approaches can be fostered. Moreover especially oil is used in various products and the demand for oil will never be down to zero. Apparently this can’t be stated for sure, but the list of products made from oil is enormous.

First, a figure illustrates products, the major diversification, made from a barrel of crude oil and then a distinctive list of products is shown to clarify the importance of supporting renewable energy: Figure 2: Source: In close restrospect to : Products Made from a Barrel of Crude Oil (Gallons) (2008) Photo : U.S. Energy Information Administratition (Howard, 2010) Short excerpt of products made from oil : Antiseptics, Aspirin, Carpets, Clothing, Creams, Cutlery, CD`s and DVD`s, Deodorant, Dishes, Film, Footballs, Glasses, Ink, Guitar strings, Ink, Nylon, Plastics, Shoes, Soap, Toothpaste, Tires, Toys, Vitamin capsules (http://www.ranken-energy.com/Products%20from%20Petroleum.htm)

These references clearly show the need to reduce energy demand, especially reducing the demand for oil. The neediness is evident and cannot be neglected. Short-term strategies by nations and cooperations undermine the sustainability approaches and therefore threatens the future of coming generations. Moreover the greater importance of oil compared to coal is hereby well-defined. Now by looking closer on the effects of non-renewables ( coal is a minor effect in this aspect ) to society and environment, I will mention 5 different positive aftereffects if the dependence and demand for oil will be reduced in the future.

These positive effects are : sustainability for future generations, reducing dependance and regional concentrations, reducing the risk of transportation and exploration, decrease global warming and stimulate new innovations. In this report especially energy resources are considered, and the usage of raw materials, f.e. gold, lithium,diamonds etc. are not taken into account. Sustainability for future generations : The risk of finite resources Non-renewable resources are finite and in the future the citizens of our world will be faced with the scarcity of non-renewables. Due to the fact that our transport system highly depends on oil and will be for future generations the risk of finite resources is obvious. Through the rising scarcity of these raw materials and rising demand as a result of the immense economic growth in China, India and many other countries prices will rise consecutively.

Economic growth is hooked on the conveyance and transportation of oil, seen through the massive decrease in the oil price in recessions, and the scarcity and rising prices will determine future growth possibilities. According to the “Bundesanstalt Geowissenschaften und Rohstoffe (BGR)” in Germany, an national department in favor of geoscience and raw materials, the peak-oil will be reached not later than 2035 (Pieprzyk und Kortltke, 2011).

Peak-oil and peak-coal describe the point in time at which the maximum global production rate of these raw materials is reached and the rate of production will enter to decline. Other scientific studies estimate that oil will peak sometime between now and 2040 and evidently the world discovery of oil fields is declining since 40 years (GAO, 2007). The peak-oil production depends on uncertain factors, especially how quickly the remaining oil is used, including the amount of oil not yet explored and future oil demand. Whereby more than 60 percent of world oil reserves are in countries with unstable political conditions (GAO, 2007).

But this will be closer scrutinized in the third positive aftereffect of reducing the oil ( partly coal and gas ) demand, the reduction of regional concentration. Looking at the future demand of oil it is estimated that an annual growth rate of 3 percent is followed by an increase in 1,3 percent per year (Aleklett et al, 2009). Raising growth rates due to the massive dependence of oil in our transport system always result in an higher demand of oil as mentioned before, and these figures give evidence to it.

Therefore it is just a matter of time until every oil reserve will be exploited. The seeking of non-conventional oil, which is defined by the IEA (International Energy Agency) as oil sands, extra-heavy oil, gas-to-liquids, coal-to-liquids, and chemical additives with an annual growth rate of 8 percent, shows that conventional oil fields are already declining in furtherance. For closer information about non-conventional oil fields Aleklett et al. (2009) and GAO (2007) can be suggested. The risk taken by companies to flow oil and explore new oil fields are increasingly threaten the environment and sustainability approaches.

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Main Lines

  1. Should Main Lines maximum and minimum lost profit amounts be revised downward for the following? Why?The domestic distribution revenues of $3 million because the deal had not been finalized
  2. Even if the deal on the projected domestic sales of $3 million had not been materialized, it is not proper to reduce the maximum and minimum lost profit of Main Line. Though the domestic deal was not finalized when Basinger withdrew from the contract, it does not mean that it will not have domestic sales. In fact, one of the partners had advanced to Main Line Pictures, Inc. the amount of $1.7 million against domestic revenues to help cover production costs on the Fenn film.

The $800,000 of foreign pre-sales because they were ‘probable’ not actual.

No, the foreign pre-sales should not be lowered down by $800,000 because they were probable not actual. As testified by Mr. Wilde, the foreign pre-sales market has greater market efficiency.

2.The loss of $2.1 million on the ‘Without Basinger’ film.

No. It is because the film without Basinger did not suffer a loss. Based on the gross revenue from foreign pre-sales alone of P2.7 million less costs and expenses of $2 million resulted to a gross profit of $0.7 million. The estimated cost and expenses was computed by deducting $2.8 million on the total budget for costs and expenses of $4.8 million of the film with Basinger. Carl Mazzocone had stated under oath the $2.8 million difference between the two productions budgets for the film, ‘Boxing Helena’ with or without Basinger.

  1. Are the following relevant to the determination of lost profits to Main Line? Why?
  1. Basinger’s $3million salary for ‘Final Analysis’.

No. the $3 million salary of Ms. Kim Basinger for ‘Final Analysis’ has nothing to do with the determination of lost profits to Main Line. It is because it could not be part of the budgeted costs and expenses to the projected total sales of ‘Boxing Helena’ with Basinger as the main actress. Had Basinger demanded for a raise on her fee with Main Line from $1million to $3million before she withdrew from the contract then it would be different. Then $3million salary demanded by Basinger could be an opportunity cost for Main Line. However, the situation was different. Main Line was not given by Basinger the option to choose to pay her the $3million salary. Ms. Basinger simply cancelled the contract.

  1. The comparison of revenue for Basinger films with revenues for Fenn films.

Yes, because if there is no comparison of revenue for Basinger films with revenues for Fenn films, Main Line could not support its allegation that Kim Basinger had caused the failure on their targeted gross sales.

  1. Is plaintiff’s expert correct in not attempting to estimate revenues for ‘Boxing Helena’ beyond pre-sale amounts? Why?

The plaintiff’s expert, Prof. Louis L. Wilde, Ph.D. professor of economics and consultant was right in not attempting to estimate revenues for ‘Boxing Helena’ beyond pre-sale amounts. It is just right and easier to compare the expected sales of Main Line with Basinger to what Main Line had made on the same package with out Basinger. The projected sales of the films with Basinger are limited to the revenue on pre-sales only. Therefore, it is just realistic to compare it with the proceeds of the ‘Boxing Helena’ films with out Basinger on the same criteria.

  1. Should Main Lines lost profits be adjusted downward to include an estimate of domestic revenues for the ‘Without Basinger’ film? Would it have been valid to use the $1.7 million advance against domestic revenues as the estimate? Explain.

The lost profits should be adjusted downward to include an estimate of domestic revenues for the ‘Without Basinger’ film. It is certain that the film without Basinger will have domestic sales and that would contribute to the realization of its projected profits. It is also valid to use the amount of $1.7 million advance against domestic revenues as the estimate because at the time when Basinger withdrew from the contract, the domestic distribution sale was not yet concluded. We could use the amount of $1.7 million because we could consider that as the amount for domestic sales.

  1. Suppose Basinger had remained with the film and assume the $3 million profit shown in the plaintiff experts minimum damage calculation was correct. Is it reasonable to assume that Main Lines pretax cash position would have increased by $3million or would some part of this have been paid to others? Why?

It would be more reasonable to assume that some part of this $3 million

increase to Main Lines cash position would be paid to others. It is not unusual that there would be contractual arrangements that would require for the producer to distribute net profits or revenues with main talents, directors and others. Common overhead costs also will be allocated to the individual film projects. There would be no problem for producer who may only make not more than two films a year than those who come up with several films..

  1. If you disagree with the jury’s lost profit assessment, briefly prepare one of your own.
WITH WITHOUT
BASINGER BASINGER VARIANCE
In Million $ In Million $ In Million $
Potential domestic sales           7.60           1.70            5.90
Foreign pre-sale           7.60           2.70            4.90
Total sales         15.20           4.40          10.80
Less: Costs & Expenses           4.80           2.00            2.80
Gross Profit         10.40           2.40            8.00

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Wells Fargo Horrific Downfall

A huge bank in the United States headquartered in San Francisco, California is known as Wells Fargo and Company. The founders would be Henry Wells and William Fargo in 1852 which was a decent time ago. Wells Fargo is just like any other bank as they operate the same way giving customers the chance to open checking’s or savings accounts, loans and other financial services. Being one of the largest banks in America that also deals with businesses as well as customers. A study had shown that “One in 10 small businesses does business with Wells Fargo” (Maxfield, John) which is a great percentage of their customers. They give a great deal to their customers as far as the mangers and CEOs, but the employees have their own minds. Nobody knows what goes on behind the scenes at the bank of Wells Fargo until 2016. An incident that happened in 2016 could have broken the Wells Fargo company for good that involved their employees. A few scandals that have been going on for years that none of their customers knew about. They have broken laws that could cost the company everything they have.

This scandal was not only hurting the Wells Fargo company but their customers as well. The main parties involved in this sandal were Wells Fargo and company, former CEO John Stumpf, current CEO Tim Sloan, former head of retail operations Carrie Tolsedt, the employees and customers of Well Fargo. It was released on September 8th, 2016 “Federal regulators reveal Wells Fargo employees secretly created millions of unauthorized bank and credit card accounts without their customers knowing it”( Investors are pushing proposals to rein in Wells Fargo). This concludes that the employees have been going on for a while now making these accounts behind everyone. The employees main focus is the saying “Eight is Great” by John Stumpf which means in order for them to earn commissions and avoid termination they would have to get eight accounts per customer (Comrie, Harley). If employees failed to do what they were told, then managers would yell and threaten them until the sales were reached which lead them to the fake accounts.

A few days after the public found out they have announced Wells Fargo of committing fraud. John Stumpf the CEO at the time testified in front of the US House of Representatives Financial Services Committee on behalf of Wells Fargo. This case was taken to the Financial Services Committee of the House because they oversea anything due to financial services in this case would be fraud. The company was breaking a criminal law and will be faced with a penalty. The Wells Fargo Company was fined for the customer fraud $185 million from the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, and the City and County of Los Angeles (Wolff-Mann, Ethan). This was the end of Stumpf’s career of being the CEO has he resigns in October 2016. The new CEO to take over his place will be Tim Sloan. With this scandal a couple thousand employees that had been involved were let go. Although the company had suffered very harsh consequences the customers were affected too. Most have their credit scores damaged from opening up all kinds of credit card accounts they did not know about. This is the company’s big fall from being one of the top profitable banks in the United States.

Occurring in the same year as the fake accounts scandal something else has come up involving Well Fargo that violates the law. On September 28th, 2016 the are accused of illegally repossessing 413 service members cars leading them with another $24 million to settle charges (Wattles, Jackie, et al). This case was well handled by The Justice Department after they have violated another federal law. It was first heard from an army guardsman in North Carolina when the bank seized his car then auctioned it off (Wattles, Jackie). Refunds from this will be given by the company and an apology was made concerning what had happened. They are also providing everyone concerned with lost equity and attempting to fix their credit scores.

Over the years till 2017 it had gradually gotten worse. They were sued for ripping off small businesses, more fake accounts had been found and then more service cars were illegally repossessed. The bank admitted to these allegations also making decisions for customers auto insurance. There was an increase in the amount of fake accounts that now reached 3.5 million (Wattles, Jackie, et al). These cases went to trial again with The Justice Department for violating the same federal law. Wells Fargo bank will pay back millions of dollars to all customers involved with the fake accounts scandal and service cars. The Federal Reserve got involved and punishes the bank saying they will not be able to grow until they clean up their act (Wattles, Jackie, et al). With all this happening in two years and many employees getting fired Wells Fargo was living in a company’s disaster.

The results of these scandals lead to serious consequences to the Wells Fargo Company. Many employees were let off during this time with higher position employees being downgraded. No one was said to be arrested which would have been the worst case for the bank. They did have to pay a ton on money in fines and refund all customers that were involved in the scandals. Customers in the future years will remember what happen and may reconsider if they want to still proceed with their bank. Any business should learn from their experience as they are still dealing with these consequences now and will be for the rest of their time in business.

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The Evolving Finance Function

The finance department provided a wide range of financial services to them. * The forecasting & analytics department was merged with the finance department. * Recruitment in the finance department were higher than the other departments, which consisted of Mamba’s from good B- schools in USA. * There was no rigidity ; the finance department was constantly re-structured. Pre-conditions that enabled Mercer’s finance group to develop its capabilities: * The company was constantly rated amongst the best in the U. S. A. They had a vision to grow, which was evident from their financial figures.

Exhibit 1} * To cater to the growth they formed several alliances, in the form of Joint Ventures, which led to an increase in their market capitalization. In order to maintain and increase their market capitalization in the future they felt the need to come up with a model which can help them to effectively analyses the returns on their investments in future. * They faced immense competition from the local players in generic drugs and to maintain an edge over them they came up with this model. * As they focused on Innovation, they had huge R&D expenditure which kept Increasing year after year.

They did not have a suitable model to classify the expenditure as capital or revenue, nor could they ascertain the profitability from a given product or venture. * Owing to the currency fluctuations and to manage their foreign exchange hedging castles, they came up with a suitable long term revenue hedging model. * They came up a long way under the effective leadership of Ms. Judy Lent, who kept taking Annihilative In carrying out various tasks outside her domain. Her Job Included 25% assignments and 75% Initiative. * Her effective decision making also played an Important role In eloping Merck develop its capabilities.

Can other companies develop similar capabilities? * Merck had a highly effective but complex model and improper execution of which could lead to a total chaos. * Their strength was Research and Development, which was ten earlier AT tenet pronto TTY. I en same need not De ten case wilt toner companies. * Therefore, if Merck did, other companies too can come up with a similar model. All it needs is being systematic and have efficient leadership. However, organizations can come up with their own models capitalizing on their own strengths and catering to their own needs.

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Palate-Able Delights: New Modes of Trade Finance

Consideration was to be given to the applicability of non-traditional online and offline moment and trade finance methods (such as those offered by Papal and UPS), open account terms and more stringent, traditional finance methods such as documentary letters of credit. After careful analysis of the circumstances in the case, it is recommended that PAD adopt a flexible payment system adopting a combination of methods. This is dues (due) to the variability In customers It plans to serve, ranging from small, retail orders to orders up to $150,000.

Specifically, for orders up (to) or less than $2,000 PAD should employ a flexible, online method such as that offered by Papal, or the services offered by UPS, which include insurance, collections and financing solutions. For larger orders, a documentary collection method of payment provides PAD with the flexibility it needs in order to sell the goods to an alternate customer should a dispute arise before the products perish, while providing the customer with much less complexity and expense relative to a documentary letter of credit.

Introduction and Case Summary

The purpose of this report, commissioned by Mr. Jim Dick, Is to analyses the case ‘New Modes of Trade Finance’ and answer all discussion questions attached. The case in question describes the situation of Palate-Able Delights (PAD), a niche retailer of high-end food products such as caviar, truffles and French champagnes, who (which) is In the process of assessing several markets for export of their numerous, highly perishable products. PAD Is attempting to determine Its best suited (best- suited) methods of payment, and is intrigued by non-traditional, online payment options such as Papal.

However, impacting on the decision process are a number of important considerations. These are:

  • While largely focused on small, retail sales, PAD Is also considering larger orders of up to $150,000 In value.
  • PAD Is aware of the trend towards open account terms, and Is Interested In the benefits of conducting transactions on such terms.
  • Explicitly stated by PAD’s SCOFF is that the trade finance solutions offered by UPS be assessed.
  • Given the perishable nature of PAD’s products, speed of settlement must be Incorporated into the evaluation, as do the various cash flow and financing issues affecting both PAD and Its customers.

Firstly, the nature of PAD’s product, being highly perishable, means that both PAD and its customers face a unique risk which calls for a substantial level of importance placed on transit insurance, such as that offered by UPS Capital or Export Development Canada, to mitigate the risk of loss from product spoilage as a result of detrimental shipping issues (such as delays, mishandling, etc. Given PAD’s high margins and position in a luxury, niche market, the cost of insurance is one that should be absorbed in exchange for the requisite security. In terms of trade payment, the risk of non-payment is significant, given a potential order size of up to $150,000. Important here, however, are the substantially varied sizes of customer PAD plans to serve. From the relatively small (single consumer, perhaps) to the very large (up to $150,000).

This suggests that differing payment systems and, hence, levels of security and costs are warranted. Furthermore, along with the level of broad-based risk (I. E. Country, commercial and foreign exchange – where these are significant, high security methods such as L/CSS or confirmed L/CSS may be necessary, he costs of which should undoubtedly be absorbed), the type of payment system is dependent on the level of demand for PAD’s product in a given market, and its objectives for that market.

Although PAD is interested in trading on open account terms – by far the riskiest for exporters (FIT, 2008), presumably for the potential of greater sales, the risks are somewhat difficult to Justify. Specifically, PAD’s a niche business offering high-end, gourmet products – not a commodity-type product attempting to enter a saturated market. As such, while open terms, given their reverence, may be necessary in markets where competition is high and entry to them is deemed strategically significant, PAD likely commands some level of market pull (demand) in most markets.

This suggests that PAD’s assumption of the substantial risks associated with open account terms is somewhat unnecessary and, given its high margins and assumed ability to absorb some additional costs, it should opt for a greater level of security. This is especially so for small, perhaps one-time customers, with order values of say, under $2,000. Here, non-traditional payment systems such as Papal or credit card facilities are more appropriate than the employ and time-consuming traditional payment types. Furthermore, these methods would typically involve payment-in-advance, providing PAD with a high level of security.

Alternatively, the services provided by non-bank providers such as UPS Capital, and their Receivables Management Services, which provides credit insurance and collection services amongst others (UPS, 2010), may be appropriate for established, credible accounts who require a more flexible payment method. For large orders, however, the scale of risk increases – especially for those up to $150,000. Here, the security provided by traditional payment types – most appropriately a documents against payment method – and the subsequent absorption of their costs would be recommended.

In all, PAD should absorb some incremental costs in exchange for added security. However, traditional trade payment and financing systems may not always provide the best way to garner this security, as ten practically AT sun mentors varies according to ten size AT P orders, the market it’s selling in, and the relationship with the customer. In response to the latter component of the question, a confirmed documentary letter of credit after review of PAD’s needs is not the best option. Confirmed Documentary Letters of Credit are expensive and time consuming and thus not effective when dealing with the purchasing and shipment of perishable foods. The use of Documentary Collections is more tailored to the needs of PAD as the documents arrive with the product. This means that if there is a disagreement or PAD’s customer does not provide payment the documents are already with the product and quick resale is possible cutting down the spoilage of goods and ultimately profit.

  • How well suited is Papal, or some variation of online payment solutions to the PAD business model?

PAD can offer an all-in-one online service which can be easy, fast and reliable to customers to improve its business. Papal is one such option PAD can use to improve its business online. Papal is customer friendly, with ease of access providing customers with various account types with multiple log-INS and, also, most importantly it’s secure. It accepts almost all the major credit cards as well as debit cards which allow customers to make payments for small orders online relatively easily.

Papal is the cheapest option available in terms of a Business Merchant account – for customers outside of the states there is no membership fee (residents of U. S pay $1. 90 or 2. 9% of the order depending on the company’s purchase).. With regards to PAD ‘s customers, Papal can be time-consuming as it requires the customers to verify funds deposited by Papal into their account. Even though Papal is secure, it involves risks of fraud which, while generally not affecting the customer (as they are covered by Papal and can be reimbursed up to $2,000), may affect PAD via the losses associated with fraud.

Merchant/ Business accounts are provided by banks which allow the acceptance of credit cards, debit cards or any other form of online payments. The payment is received and updated immediately through automated systems once the order is placed, confirmed and completed. This allows PAD to have direct access and control over the payment processing system and also by using a trade platform to manage open accounts in a manner that provides better payment visibility to suppliers. Also, the use of debit cards can be encouraged as they’re easy for customers to use, and possibly less expensive than credit cards.

Through this, PAD will gain more direct control over the payment processing system. Although, this additional control means that they will have to deal with credit card fraud directly as well as maintain the functionality of the website as a whole which ay not be possible depending on the understanding and experience employees have dealing with online payment methods. From the customers point of view there are less steps needed when making purchases online as well as there is no need to set up a customer account (unless for business specific reasons stated by PAD).

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