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The impact of innovation jobs and high tech industries on the american economy presented in enrico morettis the new geography of jobs

Just fifty years ago, manufacturing was the driving force behind the American economy. The automobile industry was thriving, and so were cities like Detroit that relied heavily on the automobile industry.

Today though, Detroit is a crumbled empire whose economy is in ruin. As the way people think has evolved, so has the economy and its primary sectors. The real money is not in manufacturing; it is the idea that rakes in revenue. Innovation jobs in the traded-sector are revolutionizing the way the economy works and determining how well a city’s economy fares. High-tech industries are creating jobs across the country, leading economists to predict increased prosperity.

In The New Geography of Jobs, Enrico Moretti argues that innovation is reshaping the economy, and the traded sector will continue to grow and increase prosperity in America. In the 1980’s and 90’s, the world issued 400,000 patents annually. In 2010, 800,000 patents were issued worldwide, a testament to how much the sector had grown (Moretti, 47). Manufacturing jobs have fallen from prominence in the 21st century, and now engineers, designers, and marketers are transforming the job sector.

For example, the computer industry has seen a 634% increase in jobs in the last ten years. Similar sectors such as R&D, life sciences, and pharmaceuticals have also experienced enormous job growth. Moretti claims that these new jobs in the traded-sector result in more jobs for doctors, lawyers, waiters, and other local professions. Thus, the ripple effect caused by the increase of innovation jobs raises output and employment in other sectors.

However, innovation and its impact occur unevenly across cities. Some metropolitan cities are hot-spots that host hundreds of start-ups in the innovation sector. Take Silicon Valley for example. This area in California is inhabited by a plethora of high-tech companies that employ workers who specialize in creativity. Silicon Valley and Seattle are among the areas that develop clusters of innovation jobs. These cities are hubs for promising employees with a skillset that can be best fit to a particular firm’s needs.

Because firms and workers locate in one concentrated area, labor markets are thick. In these markets, employers can easily find capable workers in their field and the workers can find a suitable employer who values their unique skillset. The high concentration of innovative thinkers in such close proximity leads to knowledge spillovers. Unplanned interactions with smart, creative people aid the spillover of knowledge (141).

New ideas create new start-ups, and new start-ups create more jobs for the entire community. Based on his analysis of eleven million American workers, Moretti concludes that every new job in the high-tech sector indirectly creates five new local jobs in the non-traded sector over the long run (60). To harness this growth, cities must adapt to the ever-changing economy. Innovation jobs are the sparkplug that now drives our economy forward, and according to Moretti, it will be the cause for America’s prosperity in the future.

Moretti contends that the number of jobs in the traded-sector will continue to rise. Recent data from the U.S. Bureau of Labor Statistics claims that over 306,000 engineers were employed in 2012. That number has continued to grow; employers in America searching for engineers planned to hire 9.6% more college graduates with engineering degrees in 2015. A majority of these engineers, specifically ones hired in the high-tech sectors like San Francisco and San Jose, are trained in computer and software engineering.

In the United Kingdom, engineer employment rose by 17.7%. The sector has witnessed the sustained growth Moretti predicted, and the salaries for new employees has also risen. Computer engineers were offered starting salaries of up to $69,250 (Patel, 21). IT and software engineers have many job opportunities due to the increasing demand for their services.

Growth in R&D is an additional reflection of the shift toward high-tech industries. Pharmaceutical companies are making major shifts to invest more in their R&D departments. In 2015, Bristol-Myers cut one hundred jobs while deciding to refocus their research away from virology.

The job cuts are directly related to new changes stemming from R&D. The company is currently renovating their location in San Francisco, likely due to the competitive nature of the area. Bristol-Myers has ongoing research in fields such as immuno-oncology, heart failure, fibrosis, and other genetically defined diseases.

In this case, innovation has a negative effect on the job market. While Bristol-Myers is focusing on R&D, well-trained people are losing employment, contrary to Moretti’s predictions. These layoffs occur because innovation causes technological changes. Thus, new equipment can ultimately result in the loss of jobs, suggesting Moretti is overly optimistic regarding job growth from technological advance.

Moretti also fails to capture the nature of competitiveness in the field of innovation. The United States maintains an edge in innovation and traded jobs, but Moretti does not seem to understand how other nations are beginning to reap the rewards of innovation. In a 2010 study evaluating the forty most industrialized nations in the world, the United States ranked dead last in “rate of change in innovation capacity”.

Essentially, the study shows that America’s growth in the innovation sector is the worst among economically productive countries. Some elements that determined the rankings in the study included education and investment in development with considerations for the ability to innovate down the road (Lechleiter).

As John Lechleiter argues in his Wall Street Journal article, innovation requires a three-pronged ecosystem in order to thrive. One of the necessary elements in this ecosystem is free markets that enable inventors and innovators alike to reap rewards for their creativity. While America’s markets enable innovators and start-ups to succeed, American legislation restricts investments in innovation.

Unlike many other nations, the United States’ tax system hurts our economy and the number of jobs it produces. The government must provide the innovation sector with “nutrients” as Lechleiter says, so that the sector can grow sufficiently. The final branch of the ecosystem is the talent and creativity that spawns new ideas.

As America falls behind in education, so does the ability for its citizens to formulate original innovations. Lechleiter points out that the level of proficiency of math and science must rise among children in grade school. He also suggests that America should allow more immigration of talented scientists. Science also needs suitable funding in to improve research and develop new ideas, specifically in divisions such as pharmaceuticals. Once the United States embraces the ecosystem required to increase innovation growth, the economy will see serious improvements.

Another fallacy in Moretti’s main argument regards innovation jobs and their status as catalysts for the economy. According to Moretti, each new job in the traded-sector results in five new local jobs in the long term. Evidence from the International Monetary Fund suggest otherwise. IMF statistics show that unemployment in the United States has been slightly rising in the past year. From May to June 2016, unemployment rose from 4.7 percent to 5.1.

The statistics compiled show unemployment increases by sector, so it is possible that innovation jobs are rising. Nevertheless, Moretti claims that more high-tech jobs produce more jobs for the entire economy. The numbers in Patel’s article are evidence that high-tech jobs are on the rise, so where are all of the new jobs that Moretti claimed would come with them?

In light of the doubts that innovation produces job growth, economists have created theoretical models to determine whether or not predictions like Moretti’s are accurate. David Ricardo shows innovation can result in decreased labor while increasing revenue. In his model, Ricardo visualizes how changing capital buys new technology and slices the demand curve for labor in half. Still, the innovation expands the price frontier, resulting in higher profits.

One hundred years later, Knut Wicksell reformed Ricardo’s model to reflect more modern working standards. The only significant alteration is that Wicksell made the supply curve for labor perfectly inelastic whereas Ricardo’s curve was perfectly elastic. Now, the demand for labor determines wages, not employment rate (Humphrey, 19-21). Wages may end up decreasing, but the working class is not left unemployed as they were in Ricardo’s model. Wicksell’s model also allows for revenue to increase, supporting Moretti’s claim.

So whose model is correct? Ricardo’s assumptions of a horizontal supply curve, and a minimum wage determined by the demand for labor are completely uncharacteristic of a labor market that would emerge today. His belief that innovation destroys more jobs than it creates are based on these factors that are unrealistic in modern economies. Wicksell’s model is much more accurate, and there is evidence to prove that innovation has raised both labor markets and profits in the past. As Humphrey states, innovation is beneficial for American economic growth and it will create a higher demand for labor over time.

Based on varying research, determining the accuracy Moretti’s arguments is very difficult. Throughout The New Geography of Jobs, Moretti makes compelling points that have some validity, but he does not account for all factors. For example, since the book was published, unemployment has fallen, but there have been episodes where unemployment has surged.

Moretti contends innovation will guide the economy to prosperity, but he fails to discuss the three-pronged ecosystem that is necessary for innovation to succeed on a larger scale. Moretti did correctly predict further growth in the high-tech labor market, and his theory that these jobs increase local jobs in the non-traded sector has traction based on Wicksell’s model.

Works Cited

• Humphrey, Thomas M. “Ricardo Versus Wicksell On Job Losses And Technological Change.” Federal Reserve Bank Of Richmond Economic Quarterly 90.4 (2004): 5-24. EconLit. Web. 17 Oct. 2016.
• Jaramillo, Cassandra. “Bristol-Myers to Close Sites, Cut 100 Jobs; Pharmaceutical Company, Adjusting its R&D Efforts, Will Discontinue Discovery-Research Efforts in Virology.” Wall Street Journal (Online), New York, N.Y., 2015. http://search.proquest.com/docview/1691062223?accountid=10216.
• Lechleiter, John C. “America’s Growing Innovation Gap.” Wall Street Journal, New York, N.Y., 2010. http://search.proquest.com/docview/596502754?accountid=10216.
• Moretti, Enrico. The New Geography of Jobs. New York: Mariner Books, 2013. Print.
• Patel, Prachi. “Where The Jobs Are: 2015 [Resources].” IEEE Spectrum 52.7 (2015): 21-22. Academic Search Premier. Web. 13 Oct. 2016.

Fraud is not a new topic in the insurance industry. Much has been said about fraud. Fraud in recent times has become more complex and widespread in a variety of forms. Statistics show that fraud accounts for about 10 percent of the all the total losses recorded in the property industry. In the early 1980s, the insurance industry grew massively to a point where organized crime in the industry surpassed efforts to combat crime as provided for by the antifraud laws and this raised concerns over the spread of fraud (Insurance Information Institute, 2007).

Fraud can be of two types, hard or soft. At the instance where a person tampers with claims or stages an inexistent accident, it amounts to hard fraud. On the other hand, altering the provisions of legitimate complaints to evade payment of taxes or premiums amounts to soft fraud (Wood, 2014). In the insurance industry, fraudsters may range from insurers, policy takers, third-party claimants, consultants as well as the policymakers. One interesting fact from the article was the means by which fraud is propagated.

Usually, fraudsters may overstate the actual figures of the claims, state nonexistent injuries and claims, fail to deliver products and services, stage manages accidents, fake documents, misrepresent data as well as tamper with evidence. Over time, the healthcare, labor unions, as well as the motor industry, have been found to be the most affect industries with insurance fraud.

How fraud is propagated in the present times is quite sophisticated mainly because of the immense influence of technology. While reading through the article, it surprised me to realize the fact that many insurers have adopted the use of antifraud technology primarily meant to evade fraud.

It is impossible for enterprises at present to conduct operations without taking into account measures to mitigate fraud risks. Given this, a good number of businesses have employed predictive modeling (Insurance Information Institute (2007). However, many organizations have not yet adopted the technology while many of them have not found a suitable technology to mitigate fraud losses. The lack of sufficient technique to maintain and cove fraud instances exhaustively is still a gruesome challenge to many organizations.

Keep in mind that even as technology keeps changing, fraud keeps changing and advancing too (Kurvinen, Ilkka & Murthy, 2016). A survey conducted by Property Casualty Insurers Association of America and the FICO shows that about five to ten percent of the total claim costs are enshrined in fraud cases. However, many still believe that fraud cases are more than what the statistics state.

The takeaway message from the article is that fighting insurance fraud is dependent on the weight with which the legislators, regulators and law enforcers place on the fraud mitigation as well as the allocation of the appropriate fraud mitigation resources in the insurance industry. In my opinion, there is need to embrace the new technology moves such as data mining programs to combat fraud. Over 30 percent of the business failures and bankruptcy claims are out of deception (Power & Power, 2015).

When fraud is propagated, everybody suffers. The nation, businesses, retailers, society and innocent people suffer when insurance fraud is spread. When insurance companies pass the cost of fraud to a policyholder, premiums rise thereby hurting consumers. The exciting bit is that data analysis is only able to flag cases but cannot prove fraud.

Increased surveillance, stakeouts as well as the social media can help spot and unearth fraudsters. In severe cases, hands-on investigations especially private investigation be used. The management should improve on the method of collection of data and ensure that it only collects quality information.

Robust anti-fraud processes and procedures should be incorporated as part of the risk management strategies adopted by the company (Kenyon & Eloff, 2017). Ethical standards should be utilized in the organization. It starts with the top management and trickles down to the middle and junior level management.

References

• Insurance Information Institute (2007, November 6). Background on: Insurance Fraud. Retrieved from https://www.iii.org/article/background-on-insurance-fraud. Accessed on [4 Feb, 2018].
• Kenyon, D., & Eloff, J. H. P. (2017, August). Big data science for predicting insurance claims
• Kurvinen, M., Ilkka, T. Ã., & Murthy, D. P. (2016). Warranty fraud management: reducing fraud and other excess costs in warranty and service operations. John Wiley & Sons.
• Power, D. J., & Power, M. L. (2015, May). Sharing and Analyzing Data to Reduce Insurance Fraud. In Proceedings of the 10th Annual MWAIS Conference (MWAIS 2015), Pittsburg, KS, USA.
• Wood, S. (2014). Fraud Facts: The real cost of insurance fraud – and what we can do.[online]. Retrieved from http://nydailyrecord.com/2014/05/11/fraud-facts-the-real-cost-of-insurance-fraud-and-what-we-can-do/.Accessed [Feb 5, 2018].

In an Abstract industry as complicated as that of financial Applies the critical success factor intermediation, no simple formula can pre(SF) approach to identify the appropriate CIFS underlying three dolt winners and users from the surrounding types of strategy In the banking environment. Instead of guessing winners industry. The empirical results of and losers, we try to identify the principal this paper show that the various factors that determine a bank’s success. Traceries adopted have a significant effect on factors determining Today’s banking industry is characterized by success and that the mean intensifying global competition and rapid importance of CIFS varies among advancements in the liberalizing of the the various strategies. The result banking market. This Is specially true of of a factor analysis suggests four Twain’s banking market, which has become composite CIFS: bank operation management ability, developing increasingly international and deregulated bank trademarks ability, bank in the asses.

In 1991, the government propitiating ability, and financial emulated the Promote Commercial Bank market management ability. Establishment Decree in order to open up the Further discussions and management Implications are also banking market further, and It Invited presented. Foreign Investors to participate In Twain’s banking industry; these moves have made the banking market In Taiwan ore competitive. Under these circumstances, a bank has to put in much more than an ‘ ‘average” performance by not trying to be all things to all people.

Management must emphasize the strengths that will give the bank competitive advantage, and these may be defined as the capabilities or circumstances which give it an edge over its rivals. Longer term, the success of a bank requires that Its competitive advantage be sustainable. CIFS and the firm’s competitive ability are the two mall components of the competitive advantage of a firm (Bamberger, 1989). Appropriately identifying ankhs’ CIFS can provide for banks a means of assessing and building up their competitive advantage. In this paper, CIFS are identified from the various business strategies adopted.

Because the quest for competitive advantage from International Journal of Bank CIFS is the essence of the business level, as Marketing 17/2 [1999] 83В±91 opposed to that of the corporate level, the # MAC university Press business strategy Is teen ten Touch AT attendees effective ] tool. Business strategy Is an management tool and it obviously affects resource allocation and competitive advantage in an enterprise (Hoofer and Ascended, 1978). An appropriate strategy can lead a bank’s resources in the desired direction and can effectively enhance a bank’s competitive edge while intense competition is at play in the marketplace.

The sustainable execution of business strategies can affect the composition and formation of CIFS. It is for these reasons that we address the role of the marketing strategy, which has been adopted, when we report on the CIFS. The SF approach represents an accepted top-down methodology for corporate strategic planning, and while it identifies few success factors, it can highlight the key information acquirement of top management (Byers and Blame, 1994; Orchard, 1979). In addition, if the critical success factors are identified and controllable, management can take certain steps to improve its potential for success.

Prior research concerning CIFS has been undertaken in the banking industry. However, the specific strategy underlying bank success has not been detailed. This paper fills that void by combining a study of both CIFS and different types of adopted strategies. Note that we employ the ‘ ‘industry-level” analysis approach, rather than the approach adopted in company- bevel studies, and stress the factors in the basic structure of the banking industry that significantly impact a bank’s operational performance.

In sections two and three, we first review the related literature, and then discuss the strategy setting and the CIFS. Section four discusses the survey framework of the study. The empirical results are presented in section five, and the sixth section comprises final discussions and conclusions. 2. The critical success factors approach Orchard, in 1979, was first to define the concept of critical success factors. He defined [ 83 ]

Test-yeti Chin Critical success factors for various strategies in the banking industry International Journal of Bank Marketing 17/2 [1999] 83В±91 them as ‘the limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organization”. He indicated that SF is a useful approach for identifying management’s information requirements because it can focus attention on areas where ‘things must go right”. Boonton and Smug (1984) also defined SF as the ‘ ‘few things that must go well to ensure success for a manager or an organization”.

They recognized the SF approach as an appropriate planning instrument. Lieder and Bruno (1984) identified the few critical success factors, often as few as six in a successful firm, while Summaries (1984) attempted to rank CIFS based on their relative importance. Martin (1990) then pointed out that CIFS combined with computers could effectively translate business strategy planning. Crag and Grant (1993) highlighted the contexts of competitive resources Ana Illustrated ten relations Detente competitive resources Ana critical success factors.

Kay et al. (1995) identified several CIFS applicable to insurance agency sales in high performance and low performance groups. With regard to the banking industry, Johnson and Johnson (1985) proposed that the width and depth of the product and service line, low operating costs, and a good bank reputation can be considered as the three critical success factors in a competitive market in the banking industry. Canals (1993) recognized that the concepts of value chain and bank configuration could be employed to develop a bank’s competitive advantage.

He identified four sources of a bank’s competitive advantage, namely: 1 manpower; 2 financial management; 3 asset base; and 4 intangible assets. Wiled and Singer (1993) singled out three critical success factors for banks and insurers, that is, lower cost, product differentiation, and financial strength. In our study, we highlight the role of business strategy when we identify CIFS in the banking industry. Our research results contribute to the current literature and provide some useful insights concerning the CIFS associated with bank management and business strategy. ND functional area strategies and found that there were obvious differences between the organizational structure, management function and competitive resource/advantage. Next, Lieder and Bruno (1984) identified competitive resources in four semi-conductor companies, which operated with different business strategies. They found that when the companies utilized different business strategies, it clearly affected their resource utilization and the business goals emphasized. David and Sheehan (1990) further stated that firms based the selection of their business strategy primarily on technological levels and financial situation.

They proposed that one could identify a firm’s competitive advantages by its technological level and financial situation. Moreover, a set of business strategies is applicable to nominative firms’ quest for a niche; this is described by Porter (1985). Porter (1985) suggested that business strategies could be categorized as: . Cost leadership; . Differentiation; . Specialization; and . Stuck in the middle. Miles and Snow (1985) also identified parallel business strategies in firms which will condition organizational development.

In their study, they categorized four types of business strategy, that is: 1 prospector; 2 analyzer; 3 defender; and 4 reactor. A prospector usually attempts to enter a new market and adjusts his/her products and services in a timely manner. An analyzer is identified as a cost saver and/or efficiency promoter, especially in risk and innovative businesses and is always the second company to enter a new market. A defender is an expert on managing an experienced task in a stable market, with stability and security as key principles.

Finally, a reactor is a contingency player and typically lacks a consistent strategy. This study uses Miles and Snow’s (1985) four types of strategy as one of the ‘ ‘best known” and most widely accepted models for bank growth and market analysis. In a study of various types of business strategy, Shortest and Jack (1990), McDaniel and Solaria (1990), and Seven (1991) illustrate business operations and refer to Miles and Snow’s (1985) descriptions of the four types of business strategy for organizational development. Table I presents the details of these four types of strategies.

As stated above, we find that if we conduct a SF study in the banking industry and obtain some applicable CIFS, consideration 3 1 en strategy setting Ana Much empirical research has attempted to verify the relationship between competitive advantages and business strategies. First, Shaker (1979) discussed corporate, business 84] Table I The four types of business strategy for banks 1 . Prospector A prospector always maintains a wide product line and market field and monitors his/her business environment as related to new market opportunities based on a macro point of view.

A prospector desires to become a first market opener, even when this market is uncertain and high-risk. Prospectors quickly respond to signals in the economic environment, usually resulting in renewed competition. Certainly, it cannot be guaranteed that the prospector will hold his competitive strengths in all the new markets that he/she enters 2. Analyzer An analyzer usually tries to hold stable and limited product and service items. Before he/she enters a new market, he/she makes a considered evaluation in advance. An analyzer can become an initiator of a new product or new service, but will try to lower costs or be more efficient.

Analyzers will be the second (or third) company to enter a field. An analyzer usually obtains market share by imitating a new product and through marketing; production and research departments play an important role in analyzers’ business activities given this type of strategy A defender emphasizes his resources in experienced tasks in a stable raked. A defender tries to hold on to his/her niche in a relatively stable product line. He/ she usually provides higher quality service at a lower price in order to maintain market share and manages his/her business in the current, limited product line and service items.

A defender tends to ignore reforms in the industry and makes efforts on current development in a limited business field, rather than becoming a pioneer A reactor does not have a consistent business direction to follow. He/she does not try to maintain current competition status and is never willing to undertake business risk eke other competitors. A reactor usually lacks a consistent business strategy and that may be the reason why reactors seldom perform well. In general, a reactor does not have a clear strategy and always makes decisions under pressure from the environment 3.

Defender 4. Reactor Sources: Modified from McDaniel and Solaria (1987), Seven (1987) and Shortest and jack (1990) AT ten erects stemming Trot ten Dustless strategies Walt wanly Dank operate may be needed. In considering the business strategy, we need to consider whether different business strategies result in different CIFS. We then put forward two repositions, which need to be tested: 1 Business strategy is an important factor in establishing CIFS. 2 CIFS differ within banks when banks adopt different business strategies. Thus, the following hypothesis tests can be included: . N overall test (AY) based on the null hypothesis that there are no significant differences in the mean values of the composite CIFS for strategy groups; . An individual test (81) that there are no differences in the mean values of the specific SF for the strategy groups; . A pair-wise test (82) that there are no significant differences through all the possible airs of factors of CIFS and across three kinds of strategy. 4. The survey framework The target population for this cross-sectional survey consisted of 375 local bank managers in Taipei City.

Of these, nine-tenths (336) were domestic investor-owned banks and only one-tenth (39) were foreign inventoried banks. We used a questionnaire to collect the necessary data from bank branch managers. The questionnaire was persisted twice and incorporated changes as recommended by the respondents. Respondents were asked to indicate the importance of each of 25 items which could contribute to success on a five-point Liker scale ranging from very low” to ‘very high” (Aria et al. , 1996). The Liker measurement examined the respondent’s perceptions of each item’s function and importance.

The questionnaire, and an official cover letter explaining the purpose of the study, were mailed in 1997. Of the 375 surveyed, the reply rate was 38. 1 per cent (143 respondents), which is typical of surveys of banks. Among the responses, 138 [ 85 ] were usable; this number constitutes the effective sample size for this study. The literature provides an applicable list of applicable success items and CIFS in the banking industry. Based on these studies, we collectively identify a total of 22 success items relevant to commercial banks.

Three items obtained from a pretest of the questionnaire used in this study are also attached (see Table II). The 25 success items are listed as in the questionnaire and the sources of the success items are presented in parentheses. In addition, a comprehensive description of the four types of strategy was given in the questionnaire and a self-reporting process was used to identify bank strategy. Of the 138 respondents who indicated their business strategy, 26 (18. 8 per cent) were prospectors, 74 (53. 6 per cent) were analyzers, 34 (24. Per cent) were defenders, and 4 (2. Per cent) were reactors. The mean business years was 9. 3 years for the 138 banks; the 26 prospector banks had 7. 4 business years, which was smaller than that of the analyzers (9. 8 business years) and that of the defenders (12. 9 Dustless years). I en prospectors are categorize as ten youngest Dank, Wendell ten defender banks are categorized the oldest, an arrangement which seems to fit with Miles and Snow’s analysis. Note that only four of the respondents were reactors; therefore, we omit the reactor strategy in our empirical analysis and view this as a limitation of he study. 5.

Empirical results The results are presented as follows. First, the mean rating on variables of interest was computed. Second, a factor analysis of the 25 success items was conducted to identify composite CIFS. Third, to test whether the importance of the composite CIFS is different with specific attributes, we undertake a multivariate analysis of variance (NOVA) in the dimension of the various business strategies adopted. The result of this analysis is rather important for the commercial bank manager in guiding sales decisions and for the analyst in cross-checking results obtained in related studies.

1. Discuss the trends in the golf equipment industry and how it may impact a company’s strategy. Ans: According to new the United States Golf Association (USGA), Golf equipment manufacturers are forced to launch the equipment within the limitation. Therefore, the product differentiation is not quite high while recreational golfers do not enjoy playing due to lack of innovational equipment. Also, the USGA states that there are various factors that result in the declining of golfers such as: Game difficulty: Golf equipment manufacturers are forced to follow the new USGA rules, thus, recreational golfers are suffered from the limitation of golf equipments. They cannot enjoy playing golf as much as before while new golfers face the difficulty of playing. – Time consuming for practice: According to the limited innovation of golf equipment, golfers need lots of time to practice while they also have take responsibility to their job and spend time with their families. – High golf fee: Some golfers realize that golf fee is high, as a result, they cannot practice frequently. . Discuss the importance of innovation, brand, performance, and price in the golf equipment industry. Ans: Good reputation and image can lead to brand loyalty. That’s why many brands use lots of advertising expenditure to promote their brands. As the leading sports brand in the world, Nike has a clear marketing advantage over its competitors. Nike spends some of their annual revenues on advertising to build strong brands by using celebrity endorsements aim to grow the market share in the golf segment. Golf product brand equity depends on the performance of its endorsed players.

The performances of the professional golfers sponsored by each brand strongly relates to sales. Innovation in the golf industry is an important part of equipment adoption. Because of the fleeting life p of golf clubs, adoption of new drivers and putters is critical to any golf equipment manufacturer’s strategy. Performance in golf equipment is closely tied to PGA professionals and well known amateurs who use certain clubs and brands to help promote the value of the equipment. Counterfeit golf equipment has continued to impact pricing of golf equipment by being sold worldwide which s a threat to the golf industry because the counterfeits can be sold much less than the originals. Callaway’s strength has been its line of Big Bertha drivers and the acquisition of the Top-Flite Golf company which allowed Callaway to manufacturer popular golf ball equipment. The weakness has been the golf club business which has lost money according to third quarter reporting. The financial report shows a 28% of net sales in the third quarter of 2010 as compared to 31% of net sales in 2009 third quarter.

TaylorMade’s strength has been its improvement to the drivers namely the r5 and r7 series which supplanted Callaway’s Big Bertha as the driver of choice for many golfers. The weakness of TaylorMade Golf has been in putters, irons and golf balls. Never really gaining in these fields over Callaway, much of this business was sold or minimized. Titleist’s strength is its golf ball market share. Its weakness has been its golf club line which has been targeted to elite golfers, though not adopted widely by many golfers. Ping Golf’s strength has been in the iron segment in 2008.

Its weakness has been poor wedge sales (Strickland III, Thompson, & Gamble, 2010, pp. C-95 – C-96). Nike’s strength is the marketability of its primary endorsement, Tiger Woods, along with its popular golf ball line. Its weakness has been a quality issue with product that was sold at less than suggested retail due to this issue. 3. Identify the strengths and weakness of Callaway, TaylorMade, Titleist, Ping, and Nike. Determine which company has a competitive advantage in the marketplace and state why you believe this to be true.

Ans: Overall the best golf company in my opinion is definetly, Titleist. Also, below, I listed the best product for each category of golf equipment. Driver: Taylor Made super quad Irons: Titleist AP2 (leading irons on tour); Woods: 906F4’s; Hybrid: adams hybrids (leading hybrid on tour) Wedges: Titleist Vokey spin milled or 200 series (leading wedge on tour) Putter: any Titleist Scotty Cameron that fits you (leading putter on tour) Balls: Titleist Pro V1 or Pro V1x (leading ball on tour and my personal favorites) Bag: Ping (they have outstanding long lasting quality bags! Glove: Titleist Yardage device: Bushnell Shoes: Footjoy (particularly Dry Joys) Grips: Lampkins or Golf Pride ( especially the dual density lamkin grips) 4. Based on the company selected in the previous discussion, recommend how the company can ensure that its competitive advantage is sustained. a. Strong research and Innovation: The technology industry is one of the leading industries with respect to strong research and innovation.

And when it comes to setting the pace using innovation as leverage; Apple and Sony are the two companies that have held their leadership position using innovation as a competitive advantage. b. Brand Popularity: Being recognized all over the world as a respected brand is a sustained competitive advantage that companies such as Virgin, Apple and Coca cola have used as leverage to hold the market sway for years. Virgin is a company that has used its brand name as leverage to break into new markets in completely new territories. . Corporate reputation: Corporate reputation is a form of sustained competitive advantage that companies such as Price Waterhouse and Berkshire Hathaway have leveraged to become world class entities. d. Strategic assets: Holding strategic assets such as patents is a strong source of sustained competitive advantage and General Electric has stood the test of time because of the several patents held. Mind you that possession of these strategic assets has made General Electric one of the most powerful companies in the world. e.

High volume production: Dangote Group of companies became one of the leading conglomerates in Africa because of its ability to produce goods on high volume and ensure a uniform price throughout Nigeria. f. Access to working Capital: Generally, public liability companies (quoted companies) have a sustained competitive advantage over private companies because of their infinite capacity to raise capital from the public. Take a look at how Oracle acquired 57 companies in a space of five years and Reliance Industries investing a billion dollars in a single swoop to open a chain of retail stores. . Superior Product or customer support: IKEA has become a market leader in the furniture industry because of its ability to provide superior product at an affordable rate; backed by a strong customer support system. h. Flexibility: The ability to change swiftly is a strength and source of sustained competitive advantage that Microsoft leveraged upon to become the largest software company in the world. i. Low pricing: Wal-Mart as at the time of this writing is the most capitalized company in the world. Thanks to its low pricing strategy that became its strong source of competitive advantage.

After a heat discussion, our team chose the smart phone industry for the following two reasons. Firstly, telephone is a significant communicating instrument around the world today. International Telecommunication Union predicts that the number of cell phones would exceed the number of human beings in 2014. Secondly, with the increasingly functions of smart phone, it plays a vital role in the relevant industries. The flourishing development of smart phone industry also accelerates the development of other industries such as the cell phone battery industry and cell phone game industry. . 1 Industry Analysis We are talking about smart phone industry specifically. The newly formed competitive market includes hardware manufacturing, operating systems and content. Looking back on the history, leaders of those fields have changed a lot, as Monika, Motorola and RIM have been transcended by Apple, Samsung and other brands. Apply Porter’s five force analysis to smart phone industry. Starting from threat of entry, software faces this more because of open platforms. Floods of capitals are required for R and operation levels, thus this threat is moderately high.

Substitutes like Pads, Notebook and laptops have entered the market causing the threat. Threat also comes from suppliers, fragmented supply and the difficulty of vertical integration have impeded company profiting. But the threat is low overall. Meanwhile, buyers also impact threat by various demands and higher bargaining power. All these four threats result in a high threat of rivalry. Brand and concentrated market also matter. For the industry status, in 2011, the smart phone application market was about USED 6. 7 billion which is expected to be USED 1 55 billion with CARR of almost 55% from 2011 to 2017.

In addition, worldwide sales of smart phones to end users totaled 968 million units in 2013, an increase of 42. Percent from 2012. Sales of smart phones accounted for 53. 6 percent of overall mobile phone sales in 2013 which accounts for 75. 8% of the overall mobile handset revenue. 1. 3 Firm description We choose six companies in smart phone industry to do some analysis. They are Sony, Apple, Samsung, ETC, Black Berry and Monika. The firms we choose represent different level of performance in the industry. Apple and Samsung are outstanding firms with higher net income and greater profitability.

MONIKA, SONY and Blackberry are firms once created brilliant achievements but suffer from ailing business in the past 3 years. ETC is a newly brought-in competitor with advanced technology in developing smart phones. The six firms experienced different types of history. Samsung struggled with poor quality and inferior products in its earlier times. Apple seemed to grow gradually since it was established. On the contrary, Blackberry and MONIKA were once outstanding in the industry. SONY (SONY Ericson) left behind when transforming from mobile phones to smart phones.

ETC has a short history. Most of the firms experienced several important mergers or acquisition in the past 5 years. Badly-performed firms shrink while well-performed ones expand their equines by proper selling plans or acquisitions. Some important events are as follows. Microsoft declared to acquire Ionians mobile business and large amounts of patent portfolios with 7. 17 billion dollars. Blackberry made an announcement that the corporation agreed to be acquired by Fairfax Financial Holdings at the price of 47 billion, though the selling plan turns out to be failed.

SONY and Ericson were incorporated into Sony Mobile Communications. 2. Past performance analysis Note: Risk free rate: US. Government bond rate for 5 years Expected market return: historical industry return for 5 years 2. 1 Samsung 013 is a fancy year for Samsung, possessing the biggest market share in smart phone for 31. 5% ahead of 15. 5% for Apple. For the first sq in 2013, PEE ratio decreased from 9. 09% to 6. 99% and it rose to 7. 30% in SQ. For the capital structure, 93. 2% was financed by equity and bond took up 6. 7%. Stock return for 2013 is -3. 7%. Move to past areas. PIE ratio experienced biggest decrease from 1 1. 88% to 7. 04%. Stock return is waving from 2. 98% to 28. 53%. Now focus on past areas. PEE ratio as 1 1. 88% peaked in 2011 standing out from a general downward trend. Besides, the releasing of GALAXY Tab 3 and GALAXY Note 10. Drove inventory turnover ratio higher. The peak for debt to equity ratio appeared in 2011 which is 0. 1446 and the trend is downward. Stock return in 2009 is highest for 64. 42%. The cost of equity for Samsung is 27. 63% given its current beta is 1. 12.

For the dividend policy, the payout ratios are 12. 3%, 9. 3%, 6. 0%, 5. 1% and 7. 11%respectively since 2009. The most recent dividend pay date is on August 26, painting out 75. 4 million USED. On July 17 2012, Samsung acquired the handset operations of CARS Pl, and invested a 4. 9% stake in the company later. It is the largest acquisition case for Samsung since the 1997 uncial crisis. Actually, Samsung completed 5 acquisitions in 2012 which is more frequent than before. Acquisitions progress appears in net income rising from in 2011 to and to in 2012 and 2013.

Inventions also declined from 3,859,994 to 2,918,234 until 2013. Samsung sold a record 86 million smart phones in Quaff 2013 and widened its lead over Apple selling 51 million for phone 5. 2. 2 Monika In 2013, Monika had a negative PEPS, showing that Monika didn’t do well in 2013. The inventory turnover was about 6. 0, lower than the industry average (about). ROE was negative. The debt/asset ratio was 72. 59%. The dividend per share was O in 2013. The stock return was 97% in 2013 and the cost of equity for Monika is 8. 66%, given its current beta is 1. 3. Looking at the past 3 years, we find Debt/Equity ratio of Monika was increasing constantly. The ROE ratio was always negative over the past three years, decreasing from 2011 to 2012 and increasing from 2012 to 2013. The dividend per share decreased from 0. 33 in 2011 to 0. 13 in 2012, then too in 2013. The stock return increased from -55% in 2011 to -23% in 2012, then to 97% in 2013. Considering the past five years performance, we find that Monika did quite a good Job in 2009 and 010 because its PIE ratios were positive and really high.

The dividend per share decreased from 0. 41 in 2009 to 0. 31 in 2010. The trend of dividend per share from 2009 to 2013 is declining. The stock return increased from 2009 to 2013 while it was negative from 2009 to 2012. As for important events, on September 3rd, 2013, Microsoft declared to acquire Ionians mobile business and a large amount of patent portfolios with 7. 17 billion dollars. The stock price of Monika soared from about 3 dollars per share to about 8 dollars per share from August 29th, 2013 to November 18th, 2013.

We compare the financial performance of the third quarter and fourth quarter of 2013 and find that net income increased a lot from -91 millions to -millions of dollars. 2. 3 Apple In 2013, Apple had a perfect performance. The ROE (about 0. 3064) and PIE ratio (about 15. 21) are both three times higher than the industry average, Besides, the inventory turnover of Apple is about 83, Apple is already well-known for its supply chain. The company’s 40. 31% of assets came from debt and 59. 69% of assets came from equity. The of PAPAL in 2013 is 0. 74, and the cost of capital for PAPAL is 22. 3 percent in 2013.

In the past 3 years, the current ratio and price-earnings ratio did not change a lot, but ROE decrease sharply in 2013, and the debt/equity decreased in 2012 and increased in 2013, meaning that the company issued more stocks than bonds in 2012. The annual stock return 0. 013 in 2013, 0. Tent 2012, and 0. 243 in 2011. Looking back over 5 years, the ROE increased from 2009 to 2012 and decreased in 2013. The inventory turnover went up sharply from 2012 and went down a little in 2013, which is partially because of the phone ass’s huge success. In addition, PAPAL began giving shareholders a quarterly dividend of $2. Per share in 2012. This dividend yield is about 1. 2% higher than the industry average. Apple’s business philosophy is to acquire small companies that can be easily integrated into existing company projects, so Apple did more than 60 small acquisitions in the last decades. Apple merged plenty of software makers including Sir. After the acquisition, Sir has been an intelligent personal assistant and was introduced as a feature of the phone AS. This technical innovation has been a huge success so that more than 50% profit of Apple company came from phone in 2012. 2. ETC 013 is a struggling year for ETC, we can see that most of the key ratios of the company are under the industry average, profitability measures are almost all negative, and ROE are -1. 67, indicating that ETC failed to earn enough profit to even cover its expense. The high Debt/equity ratio (1. 22) makes its stock risky. The of ETC in 2013 is 1. 88, while the industry average is only 1. 12. High makes the cost to raise capital high too. The cost of capital for ETC is 10. 13 percent in 2013. Looking back over 3 years, we found that Itch’s profit has been declining since 2011, inventory turnover declined from 12. 8 to 7. 0 due to the poor sale and management problem. The annual stock return -0. 525 in 2013, 0. 064 2012, and -0. 392 in 2011. Looking back over 5 years, it is clear that the business boomed during 2009 and 2011, and started to fall behind since then. The sale increased by about 1 11% from 2009 to 2010, but stock price has fallen by 90 percent since then. Besides, the company prescribed at least 50% of the total dividend be distributed as cash dividend, it pay dividend in July or August every year. ETC believe that acquisitions are the key to help ETC quickly grow to compete with its competitors.

So ETC spent more than $700 lions on acquisition in 2010 and 2011 trying to gain market share. Major mergers include SO Graphics, Beats Electronics LLC, and etc. However, Itch’s acquisition strategy didn’t work well as expected. Those deals neither helped ETC to boost its brand image or to win the law suit, the sale have also been decreasing since the requested of 2011. 2. 5 Sony From 2009 to 2013, Sony had gone through a road of difficult and twists. In 2013, Sony didn’t have a well performance. Its current ratio, ROE and inventory turnover ratio is under industry average.

To be specific, its inventory turnover ratio is the lowest. Through its PEE ratio is strangely high, I think it mostly related to the small profit number. Looking back over 3 years, we can see most ratio, including ROE and inventory turnover ratio, had a peak in 2012. Especially ROE had a soaring from 2011 to 2012. There are four reasons. First, Sony Corp. acquired the remaining 50% stake from ELM Ericson Telethon ABA on February 15, 2012, which made mobile phone sales increased a lot. Last, the yen devalued. Looking back over 5 years, the current ratio and ROE had a drop until 2011.

The inventory turnover ratio had a peak in 2010 while he debt-equity ratio increased until 2012. Actually, Sony had negative net income for consecutive four years. Not only it is a result of disasters such as JP Tsunami, but also it is because the yen appreciate and digital products from Japan were shocked by other goods. The stock return ratio of Sony from 2009 to 2011 has dropped from 0. 5 to -0. 47. However, it began to increase then. The ratio in 2013 is about 0. 15. It is consistent with what ROE shows. The cost of equity is 52. 72%. It is large due to the high Arm (29. 64%) and high risk (beta-?I . 2). 2. 6 Blackberry 2013 is not a pleasant year for Blackberry. The ability to generate profit is far behind its peer competitors. PEPS and ROE of the firm are -1. 23 and -6. 61% due to the negative net income. However, the current ratio highly above the industry average (about 1. 09). Stocks risk of Blackberry is low, measured in of 0. 48. Based on p, the cost of capital is 3. 70%. On account of the bad performance over the year, annual stock return in 2013 is -0. 426. Looking back to the past three-year performance, Blackberry dropped from its recent peak in 2011 to historical worst.

Blackberry experienced a terrible service interrupt in Cot, 2011, which severely damaged the rim reputation and directly caused the following bad performances. Business declined sharply in 2012, with falling ROE and PEE ratio. In retrospect the performance in last five years, we could see that even under unpleasant financial crisis, Blackberry still could hold itself. PEE ratio was 17. 1 in 2009 and 10. 0 in 2012, both showing a good prospect, however, the ratio then began to decrease sharply after 2010. Annual stock return was at first positive in 2009(0. 19), but it has fallen below zero ever since. Inventory turnover is quite stable during the whole period. No dividend has been strutted during recent five years because of the disappointing performance. Most important series of restructuring events in Blackberry’s history appeared in the year 2013. BlackBerry first announced to have reached a potential acquisition agreement with its biggest shareholder Fairfax Financial on Seep 23rd, after this good news, the stock price of BlackBerry shot up 0. 6 dollars. But the potential acquisition plan didn’t last for a long time.

In Novena, 2013 BlackBerry declared the breakdown of the selling plan. By pm Novo 4th, the stock price of BlackBerry has dropped 1. 44 dollars (18. 53%). 3. Future performance analysis . 1 Pro formal Pro formal of Cash Flow Pro formal of Balance Sheet & Income Statement Note: Erg (regression) W-M (weighted-moving-average method) Final (final forecast) We complete the pro formal by three steps. First step is to do an autoregressive analysis to forecast the data of 2014 and 201 5 through the historical data from 2009 to 2013. Then, we computed the weighted average by giving the weight of 0. 5, 0. 1, 0. 15, 0. 3, and 0. 4. Finally, we find some forward looking data predicted by economic forecasters on the internet and use moving weighted average method to get final data which are more efficient. What is more, if there is no forward looking data, we use weighted average on the regressive result and average result. We combined two different methods to do the forecast. Because every method has it is own drawback. For the regression method, it cannot show that the latest data, which indicates the trends more accurately, is more vital than the previous one.

And the weighted average can overcome this drawback by giving the latest data more weights. But for some items like income, we think the result of regression method is more accurately. So we combined these two methods by using weighted average. 3. 2 Recommendation We divided the analysis of future performance of PAPAL into two parts: The analysis of data and the analysis of reality. Firstly, Let us focus on the forecast data. We analyze three kinds of vital data measuring the performance of PAPAL. The first one is earnings per share (PEPS), which reflects the ability of company to generating profit.

We forecast this data by regression, which is to estimate the net income and shares and do a Multivariate regression. The result is around 45. Then, there are five websites give out the PEPS estimate around 47. 9. We give them weights and get the final data of 47. . PEPS is the dollar value of earnings per each outstanding share of a company’s common stock. Higher PEPS means that the company can generate more net income by each share and it can use less capital to get higher profit. Besides, the dividend may be high because of the high PEPS. The forecast data 47. In 201 5 is higher than today’s data and it is reliable, because the net income and the shares are both increasing and the increasing speed of shares is slowly. So the performance of PAPAL will be better in the future. The second one is PIE ratio. We use the weighted average method to get PIE in 201 5, which is 13. 2, and we also use the regression method to get it, which is 13. 44. We find that the forecast PIE ratio in Yahoo is 13. 07, which is not a high one. Theoretically speaking, a stock with low PIE ratio is a good one to investment, because the purchase cost is low.

Besides, we think the value of PAPAL is underestimated now because of the high PEPS and the low PIE ratio. The price of stock will go up in the future. The third one is ROE, which shows how well PAPAL uses investment funds to earnings growth. We use the weighted average method to get ROE in 201 5, which is 36. 34%, and we also use the regression method to get it, which is 38. 6%. The average number is 37. 6%. ROE measures the rate of return on the shareholders’ equity of the stock owners, which measures a firm’s ability of generating profits from every unit of shareholders’ equity.

Generally speaking, ROES more than 10% are considered good. Besides, the ROE of PAPAL is a reliable one, because the debt asset ratio is not high. In conclusion, we recommend that stockholders could hold Pal’s stock for a long time because of the low PIE ratio and the high ROE. Performance we forecasted originates from two reality parts, one is expected increase based on past and current situations and the other is unexpected hangs including systematic and unsystematic risks align with future. The anticipated two opportunities for Apple are analyzed as following.

The global market for smart phone will grow in few years based on GIG prediction and the annual sale is expected to increase from 1 billion in 2013 to 1 . Billion in 2017. Until the end of 2013, the SIS system accounted for 41. 2% and Android is 51. 9% comparatively. This intense rising user trend will amplify the market pie. The other is the cooperation with China Mobile. Above million regular customers of China Mobile will assist the sales rise for Apple. Unexpected systematic risk consists of interest rate risk and foreign currency risk. The company typically invests in highly-rated securities and changes in U.

S. Interest rates affect the interest earned on the company’s cash, cash equivalents and marketable securities, the fair value of those securities, as well as costs associated with hedging. In the third quarter of 2013, the company issued $17. 0 billion of long-term debt, which included $3. 0 billion of floating-rate notes. In addition, Apple is a net receiver of foreign currencies and changes in exchange rates, particularly strengthening of U. S. Lars will negatively affect its net sales and gross margins expressed as U. S. Dollars originally. Unsystematic risk involves Apple’s internal specific performance.

New products release like will be a main source. The attraction of next generation Apple phone is controversial and based on past dissatisfying sales of phone and pad, their growth rate nearly held constant. Some people concern its innovation without Jobs but some analysts note that the bigger size for phones will eliminate advantage of Android system brands like Samsung. Charm of wearing new product which is twitch concretely is also worth anticipating ND we may get some indicts from the coming WAD held in Los Angels. Beyond this, Apple will increase repurchase of stocks and issuance of dividends.

According to Sanford C. Bernstein prediction, Apple will issue BIB dollars dividends in 2015. This will increase the value of stocks held on shareholders if the PEE ratio increased after the issuance. 4. Relative Performance According to the comparison of 5 key ratios, the underperforming corporations are SONY, Blackberry, ETC and MONIKA. Most of the firm shared common problems in several aspects as lack of innovative products and inventory management, while mom have critical faults in designing strategies. Relative performance and recommendations are as follows.

According to the lowest inventory turnover ratio of Sony among its industry peers, one recommendation for Sony is to turn over its inventory quickly. It can improve its supply chain, manage efficiently to product appropriately. Due to the fast update of digital products, long inventory turnover period will enlarge the risk and the cost. Besides, 3. 1% of the market share is so small compared with Samsung and Apple that its ROE can’t increase smoothly. The key to increase its market share is to launch the new production. Only by creating great mobile phones like phone, can Sony rebuild its Sony Time.

Similar problems appeared in Blackberry and Monika. Most of Blackberry’s profitability ratios as PEE, ROE and PEPS are under industry average due to firm’s negative net income. The reasons are lack of attractive application programs and disappointing new product. Apple’s phone and Google’s Android squeezed the market share of Blackberry smart phone. The newly launched table PC was also not satisfying with simple functions but high selling price. Blackberry should not only depend on its good reputation in E-mail recessing system, but focus more on user’s entertainment experience like fancy interface and programs.

Besides, Blackberry is the only one who ignores the prospect in China. To recover from declining tendency, a competitive product is required to open its Chinese market. The negative ROE and low inventory turnover ratio indicates that MONIKA is losing money . The reason is that the product of Monika is not as popular as that of other leading companies like Apple and considered to be lack of innovation, and its Simian operating system (until 2013) is not advocated by developers. So Monika should increase funding for research and develop products that appeal the consumers.

Given that the mobile phone business of Monika was acquired by Microsoft on April 5th, 2014 (the acquisition was started on September 3rd, 2013), Microsoft should learn a lesson from the failure of Monika. ETC has been struggling in China due to price competition and limited distribution. Many people think the wrong high-end market strategy got ETC into trouble. To get out of woods, ETC may need to forget its strategy on high-end market and consider a partnership (merger) with another smart phone company that could provide synergy.

Chinese smart phone makers sell products domestically because they have weak brand awareness in other regions, but ETC has established solid brand awareness in the United States and Europe, which Chinese handset makers could capitalize on. And ETC could get resources to get through this situation and look for new chances for development. So a merger with Chinese films could be a win-win. 5. Conclusion From the perspective of companies in the smart phone industry: Considering the fast speed of development of Asia-Pacific market, each company should strive to evolve Asia-Pacific market.

Moreover, the target market of the company must be effective. As for products, companies should develop the products that satisfy consumers’ preference. From the perspective of investors: The smart phone industry has a great development potential, so investors have substantial investment opportunities in this industry. But investors should cautiously determine the invested companies. We recommend selecting invested companies according to their past and future financial performance, the fitness between their products and the preference f the market, the market strategies and so on.

Impact of looming oil crisis on global trade The availability of OLL Is taken for granted every day by businesses, governments and individuals alike. However, an oil crisis Is looming and could feasibly hit at any point. This brings back memories of the oil shortages during the asses, which had a major impact on the economic growth, particularly In major Industrial countries such as united States. During the 1973 oil crisis – an embargo initiated by the Organization of Petroleum

Exporting Countries (OPEC) to protest against some of the American trade practices. As a result of this embargo, the price of oil increased by 300%, causing widespread oil shortages and in some cases forcing petrol stations to close. Experts have warned that similar crisis may be Imminent, with Western countries’ presence In the middle east causing friction with some of the countries who are members of OPEC. 011 prices have been Increased In many areas in an attempt to reduce consumption levels and protect our natural resources.

However, research has indicated that despite these measures the consumption of 011 continues to Increase, with an estimated 89 million barrels of oil being used globally every day. Should a crisis like this hit, the effect on the global economy will be huge – importing materials and goods has become an essential practice for larger organizations, but any increase in oil price would dramatically increase the transportation costs of importing and exporting.

As a result, companies would need to either seek cheaper alternatives, or more likely raise the cost of their end product, something which will slow the growth of the economy and prolong the recession. Travel has become a major source of expenditure for large firms, with employees often flying to business meetings Internationally as well as domestically. Budget airlines’ turnover has grown throughout the recession as a result of the increase in business travel, however any increase in the cost of oil would force these airlines to pass the costs onto their customers in the form of increased air fares.

In the event of another oil crisis, businesses which currently have large travel expenses would suddenly find themselves with vastly increased overheads, and have a sudden need to explore cheaper alternatives which may not suit their business plan. Transportation is by far the biggest cause of oil consumption, with this sector estimated to account for more than half of all consumption worldwide, and more than two thirds of consumption within the US.

As well as Increased transportation costs, the costs of operating machinery would also Increase during an OLL crisis, leading to Increases In the cost of many essential items, including foodstuffs. As with the rising cost of transportation, any increase in Experts are unsure when another oil crisis might hit, but most experts agree that a crisis of some sort is likely to occur soon. While the exact effect it will have on the world economy can’t be accurately predicted, there is no doubt that businesses of all sizes will need to adapt very quickly to continue trading.

PEST ANALYSIS OF TIRE INDUSTRY Tire Market in India is growing strongly and their production increasing from every year. In 2005, there were 40 tire manufacturing companies working in India which was consisted of major big brands in tire industry such as Good year, MRF, Falcon Tires and Bridge stones etc. we apply pest analysis on this market to check at what extent political, economical, technological and social factors are affecting this tire industry in India. POLITICAL:

The government policy is much favored too local manufactures as said by the managing director of Goodyear India in 2005 that the tire market in India was almost exclusively dominated by local players and 90% of all tires on the Indian market were made and sold by the local Indian companies so Big companies like Good year, Michelin etc are hardly visible in India Tire Industry “Indianized” Government is providing more leverage to the local market that the foreign tire companies coming towards India.

In 1926, when big giants in tire manufacturing like Dunlop, American firestone, Goodyear and Italian Ceat had much capital started their production plant in India than this had been a big treat for the local tire market. So Indian Government Immediately took an action and made a policy that if any foreign tire manufacturing company wanted to start their tire business in India than they had to act as locally and their names also seemed like locally such as Dunlop changed into Dunlop India and from Goodyear to Goodyear India.

This “Indianized” process speeded up with the acquisition of most of the subsidiaries of foreign companies that operated in India: Firestone was bought by Modis in the early 1980s and Ceat and Dunlop were taken oven by RPG. Agreements with other foreign companies: There are many contracts and agreement of Indian companies with other foreigner companies which are as follows: * Under the Bangkok agreement, car and two wheelers tires were imported from china and South Korea at 10 percent custom duty.

These imported tires had an average price 30 percent lower than tires sold by Indian companies. Some Indian companies like Apollo and JK tires tried to collaborate with Chinese companies in order to jointly produce cross ply tires. * In 1984, there was a agreement between the Indian and Japanese companies to get the model of Maruti 800 from Japanese company. * Ford and Dacia Logan are soon to be manufacture under the agreement by the Indian company with the foreign companies.

ECONOMICAL: Growth of tire industry: The tire industry is growing in India day by day. In 1926, first tires were made by British company Dunlop. This gave rise to flourish of tire industry in India. When Cross ply tires were first introduced than 65 % of tire sales in India were covered by cross ply tires. But with the introduction of radial tire, radial tires represented 85% of car tire sales by volume.

All the tire manufacturing companies are increasing their shares because tire industry in India is grooming with every year. In 2005, MRF, Apollo and JK tires had a tough competition and had a tough competition between them. Increases price of raw material: The prices of natural rubber and petroleum, which are essential components for the manufacturing of tires, becoming higher and higher which is badly effecting the tire manufacturing industry. TECHNOLOGY: SOCIAL: