Manufacturing

Generally, mergers occur for the purpose of improving financial performance or shareholders – making the likelihood of this potential merger ideal. Angela has offered to sell ML to John for the book value of equity, based on the 2014 year. MUMS financial Statements are in accordance with FIRS. John has asked for our help as professional accountants with the firm of Label and Liana ALP (L&L) to assist in determining an estimate of the purchase price. In order to do so we must first address the accounting issues with Mil’s current financial statements.

It should be noted that Mil’s financial statements were prepared for internal purposes and have not been audited. John will want Mil’s financial statements to be accurate before agreeing to Angel’s suggested purchase price so that he is not overpaying. He will also want accurate financial statements to accurately determine Mil’s debt/equity ratio, going concern, and other important ratios/factors. Angela may be biased towards keeping her current balance sheet numbers as they most likely overvalue assets and undervalue liabilities, making the sale of her ownership a better deal for her, but not necessarily a better deal for John.

As John’s accountants we must approach this conservatively in order to ensure that he is not overpaying for the company, focusing primarily on the book value of equity which is to be the selling price. Analysis and Recommendations Issue: $500,000 loss ML experienced a loss of $500,000 during the year which could be due to problems with operations or Accounts Receivable collection. This may have encouraged Angela to bias the numbers to make ML look better to potential buyers. This loss should be kept in mind when reviewing the following issues.

While this is a one-time event, working capital, inventory turnover, and debt ratios should be considered when determining the company’s future sustainability. This loss will decrease or has decreased shareholders equity by $500,000. The loss may be a positive for John as he will be able to carry forward the loss to a positive net income in the next twenty years, which can potentially reduce Mil’s future taxable income. Should John decide to carry forward this loss, the journal entry should kick like the following: 1) Dry. Deferred tax asset 500,000 Cry.

Income tax benefit Issue: How to account for the new lease agreement Capital Lease Operating Lease Under FIRS, one of four classification criteria must be met in order to be lassie as a Capital Lease: 1) Reasonably assured that ownership will transfer to lessee at end of lease term 2) Lessee gets substantially all economic benefits from using the leased asset over the lease term 3) Lesser recovers substantially all investment, and earns a rate of return 4) Leased asset is specialized and can only be used by lessee According to the terms of Mil’s new lease agreement: 1) Yes, under the assumption that the Bargain Purchase Option of $4,500 will be exercised 2) No, lessee only uses 50% of economic life – not considered substantial as there is still 50% of its life left for economic benefits to be aimed 3) Yes, because the IV of Minimum Lease Payments (where 1=9%, N=5, and is equal to $88,000, which is 100% of the IV of the asset at January 1 , 2014 4) NINA.

Information was not provided to answer this The lease meets both the first and third classification criteria Capital Leases must record the asset and liability, depreciation of the asset, and interest expense following the effective interest method Under FIRS, one will account for a lease as operating if the risk and benefits of ownership of the leased asset are not transferred to the lessee If a lease does not meet any of the criteria necessary for a Capital Lease, then it will be ported as an Operating Lease Operating Leases are accounted for as a rental expense After considering the two alternatives, it is clear that the new lease agreement must be recorded in Mil’s books as a Capital Lease. This is due to two of the four Capital Lease classification criteria being met, which do not allow for the company to record it as an Operating Lease. The following journal entries should have been entered throughout 2014: 01/01/14: 1) Dry. Lease Equipment Obligation 88,000 88,000 2) or. Lease Obligation Cry. Lease 24,066. 26 Cry. Cash 12/31/14: 3) Dry. Interest Expense 3,057. 02 4) Dry. Amortization Expense Cry. Accumulated Amortization 3,057. 02 Cry.

Interest payable 4,400 While there are more incentives to classifying a lease as operating such as tax incentives, higher return on asset, and better solvency ratios, the lease must be classified as a Capital Lease so as to stay in accordance with FIRS. However, a Capital Lease does provide a company with a higher operating cash flow, and reduces Net Income, which potentially reduces income taxes. A lower Net Income will result in a lower shareholder’s equity. Issue: Entries to reflect changes in the plan asset and liability for current year FIRS ASPS FIRS requires that the same discount rate is used for plan asset and liability and the immediate recognition approach must be used.

Therefore, using the Projected Benefit Obligation method, and using a 10% discount rate, the Plan Liability would be: $ 694,969 + 35,000 + 69,497 – 40,000 = $759,466 And the Plan Asset, using the 10% actual return on plan assets, would be: $ 525,000 + 52,500 = $537,500 Making the Defined Benefit Obligation: $ 537,500 – 759,466 ($221,966) The Pension Expense: $ 35,000 – 52,500 = $ 51 ,997 And the Net Defined Benefit Liability: – (169,969) = ($ 51 ,997) ASPS allows for either the immediate recognition approach or the deferral and amortization approach ASPS also allows for the expected return on plan assets to be different from the discount rate used for the Accrued Benefit Obligation No calculations are necessary for the ASPS alternative of this issue, as they would not be in accordance with FIRS with which ML must follow. Therefore, in accordance with FIRS, we will account for the changes in the plan asset and liability as stated above.

Please note that the Accrued Benefit Obligation (ABA) will be referred to as the Defined Benefit Obligation (DB), s we are working under FIRS rather than ASPS. Following the restriction that the same discount rate (1 0% in this case) be used for both plan asset and liability, the following journal entries should be made to account for the changes for the current year: 12/31/14: 1) Dry. Pension Expense Cry. Net Defined Benefit Liability 51,997 51 ,997 This increase in Net Defined Liability will decrease Shareholder’s Equity. Issue: Depreciation of Capital Assets The depreciation of capital assets must be taken out of the provision for income taxes included in the financial statements for the current period.

This depreciation is to be included in taxable income, not accounting income and will incorrectly state Mil’s provision for income taxes if not removed. The CA amount needed to be removed is equal to x 30% $1 this amount will be deducted from the taxable income. The removal of $1 from the provision for income taxes will increase net income, subsequently increasing shareholders equity. Issue: How to account for the Super Shopper Account Receivable Estimate Unconvertible Receivables Writing Off Accounts Receivable There are two methods to estimate unconvertible receivables: 1) Balance Sheet Method – uses past collection experiences to estimate unconvertible amounts.

ML could estimate the amount required for Allowance for Doubtful Accounts as a percentage of the balance in Accounts Receivable. Using an aged receivables analysis, ML could forecast a percentage of estimated unconvertible Accounts Receivables accounts over 90 days old. The journal entry would look similar to the following: Dry. Bad Debts Expense Cry. Allowance for Doubtful Accounts xx 2) Income Statement Method – estimates cost of bad debts as a percentage of Sales. Mil’s journal entry using this method would look the same as the Balance Sheet Method journal entry. If ML determines Super Shoppers account specifically to be unconvertible, they may use the Allowance Method for writing off accounts.

The following journal entry would be made: Dry. Allowance for Doubtful Cry. Accounts Receivable -? Super Shopper Should the payment be received after the write – off, the account can be reinstated using the following journal entries: 1) Dry. Accounts Receivable 2) Dry. Cash Cry. Accounts Receivable If the amount is immaterial, ML may also use the Direct Write – Off Method, where no allowance account is used. The journal entry would be as follows: or. Bad Debt Expense Due to the age of Accounts Receivable -? Super Shopper (90 days old) and the financial difficulties that Super Shopper is currently facing, it is unlikely that the account will be paid off and should there for be written off.

ML should follow the Allowance Method of writing off journal entries stated above to record the write – off of the Accounts Receivable. This method would be preferred as it allows for the account to be restated should Super Shopper pay off their debt. The Direct Write -? Off Method would not suffice for this account as the amount of $200,000 is not considered immaterial. This Bad Debt Expense needs to be considered as it will impact Mil’s assets, and an increase in bad debts is a decrease in the value of the firm (shareholders equity) of the firm for John. This might not be as substantial to consider should ML have already had a bad debt reserve, meaning that the net income would not have been so greatly affected.

Issue: How to account for the Tech Outerwear Lawsuit Recognize lawsuit as a provision Recognize lawsuit as a contingent liability Under FIRS, ML should recognize the lawsuit as a provision if: 1) The company has a present legal obligation as a result of a past event 2) It is rabble – “more likely than not” – that an outflow of resources will be required to settle the obligation 3) A reliable estimate can be made of the amount of the obligation If the lawsuit meets these conditions, it should be recognized in the financial statements Under FIRS, ML should recognize the lawsuit as a contingent liability if either: 1) There is a possible legal obligation as a result of a past event, which will be confirmed on the occurrence of an uncertain future event, not within the reporting individual’s control; or 2) There is a legal obligation from past events, which is not recognized as it is to probable that an outflow of resources will be required to settle the obligation or a reliable estimate cannot be made of the amount of the obligation If the lawsuit meets these conditions, it should be disclosed in the notes of the financial statements. The notes should include the following: 1) Estimate of its financial effect 2) Uncertainties related to the amount and timing of any outflow of resources 3) Possibility of any an outflow of resources The lawsuit by Tech Outerwear for patent infringement has not been properly assessed by Mil’s lawyers yet, and therefore they have not determined the likelihood of losing the suit. This information allows us to determine that at this time the lawsuit should be recognized as a contingent liability in accordance with FIRS, as we are unable to meet the conditions to recognize it as a provision on the financial statements.

This lawsuit meets the criteria that there is a possible legal obligation that cannot be confirmed until Mil’s lawyers assess the lawsuit, and the probability of the outflow of resources and a reliable estimate of the obligation cannot be made. The numbers ($200,000 to $700,000) on past lawsuit settlements are not reliable information. The required disclosed notes stated above should be included in he financial statements. Determining the probability of the lawsuit and the estimated loss should be completed as soon as possible, as a loss could result in a going concern policy. This information will be very important to John as the company has already experienced a loss of $500,000 during the year. This note has no effect on equity; only when the lawsuit is official will it have an effect on equity.

Issue: Retractable Preferred Shares ML also has $50,000 of retractable preferred shares included in their capital stock. These shares a retractable if there is a change in the ownership of cuisines. This will be of concern to John, as the $500,000 loss incurred during the year does not leave the company with the funds available to pay the shareholders should they decide to sell their shares; John must consider day to – day cash requirements for the company’s expenditures that are not included in current liabilities. While it was not stated, which might have been done on purpose by ML, it is unclear if dividends were declared during the year for the preferred shares, which may affect John’s decision greatly.

Cash dividends should not have been declared unless the current and future uncial position justify it; the current loss of $500,000 does not suggest that they should have declared any. Cash dividends would have reduced shareholder’s equity. If stock dividends were distributed, then there would have been no effect on the balance of shareholder’s equity. On the other hand, non -? payment of dividends can also affect the company as the preferred shareholders may choose to sell their shares if they stop receiving dividends; receiving dividends is usually what attracts investors to preferred stock. John should examine the debt/equity ratio to determine if these referred shares were issued because the ratio became too high and they wanted the company to look more desirable to investors and buyers.

Issue: Accounting for Employee Stock Options Recognizing stock options While Compensatory Stock Option plans (COOP) do not involve a transfer of cash when first issued, they still must be recognizes in the financial statements and measured at fair value Coops are usually given instead of salary or a bonus, and the economic value lies in the prospective future gains when the options are exercised The Compensation Expense will be recognized as the services are being provided by the employees. Therefore, Total compensation expense is calculated on the day the options are granted and is equal to the fair value of the options. The first journal entry for Mil’s stock options should look like the following: 1 2/31 /14: 1) Dry. Compensation Expense XX,XX Cry. Contributed Surplus – Stock Options XX,XX If/when the options are exercised, ML should record the entry as such: XX/XX/1 5: 2) or. Cash XX,XX Dry. Contributed Surplus – Stock Options CALYX Cry.

Common Shares XX,XX If the options expire by the end of the three years, then the journal entries for the remaining balance should be the following: 3) Dry. Contributed Surplus – Stock Options Contributed Surplus – Expired Stock Options XX,XX cry. XX,XX Mil’s disclosures on the stock options should include the following: 1) Accounting policy 2) Description of plan 3) Details on numbers and values Of options issued, exercised, and expired 4) Assumptions and methods used to determine fair values 5) Total Compensation Expense and Contributed Surplus The recognition of these stock options is required under both ASPS and FIRS, and ML has no option but to record them as such.

The first journal entry that records the total Compensation Expense and Contributed Surplus must be made in order for ML to have accurate financial statements. The following journal entries are to be used in the future when options are exercised or expired. As no further information on dates and values were provided, the reporting individual is not able to provide completely finished journal entries. The Compensation Expense will lower the net income, which will subsequently lower shareholder’s equity. As well, if there is a large amount of option redemption’s, this will cause the share price to quickly drop. Investors who sell their shares during this time will incur capital losses, and these losses may be carried forward to reduce tax liabilities.

Michellee Marie B. Chavez 2004-39460 BM 220 – Management Accounting 1) BROWNING MANUFACTURING COMPANY T-Accounts Cash Accounts Receivable Notes Payable 2,604,000. 00 144,000. 00 2,562,000. 00 49,200. 00 288,840. 00 118,440. 00 78,000. 00 311,760. 00 19,200. 00 264,000. 00 264,000. 00 492,000. 00 2,604,000. 00 552,840. 00 198,000. 00 2,873,760. 00 2,672,400. 00 49,200. 00 201,360. 00 Interest Expense 135,600. 00 38,400. 00 522,000. 00 Finished Goods 38,400. 00 38,400. 00 257,040. 00 1,806,624. 00 788,400. 00 1,901,952. 00 Indirect Manufacturing Labor 9,000. 00 2,158,992. 00 1,806,624. 0 198,000. 00 36,000. 00 352,368. 00 198,000. 00 52,200. 00 2,986,440. 00 2,542,800. 00 Manufacturing plant and equipment Direct Manufacturing Labor 443,640. 00 2,678,400. 00 492,000. 00 144,000. 00 492,000. 00 Prepaid taxes and insurances 2,822,400. 00 66,720. 00 52,800. 00 Materials 78,000. 00 Accounts Payable 110,520. 00 811,000. 00 144,720. 00 52,800. 00 788,400. 00 825,000. 00 825,000. 00 91,920. 00 66,000. 00 935,520. 00 811,000. 00 185,760. 00 124,520. 00 788,400. 00 1,076,760. 00 Income Taxes Payable 288,360. 00 Work in Process 9,000. 00 9,000. 00 172,200. 00 1,901,952. 00 5,800. 0 Selling and Administrative Expense 811,000. 00 9,000. 00 14,800. 00 522,000. 00 1,129,200. 00 5,800. 00 522,000. 00 2,112,400. 00 1,901,952. 00 210,448. 00 Supplies Depreciation :: 17,280. 00 61,200. 00 140,400. 00 492,000. 00 66,000. 00 907,200. 00 198,000. 00 83,280. 00 61,200. 00 1,047,600. 00 49,200. 00 22,080. 00 135,600. 00 52,800. 00 Capital Stock Income Tax Expense 61,200. 00 1,512,000. 00 58,000. 00 140,400. 00 1,512,000. 00 58,000. 00 1,129,200. 00 Sales Cost of Goods Sold Power, Heat and Light 2,562,000. 00 1,806,624. 00 135,600. 00 2,562,000. 00 1,806,624. 00 135,600. 00

Sales Returns and Allowances Sales Discounts Social Security Taxes 19,200. 00 49,200. 00 49,200. 00 19,200. 00 49,200. 00 49,200. 00 Retained Earnings 829,560. 00 36,000. 00 68,576. 00 36,000. 00 898,136. 00 862,136. 00 Statement of Retained Earnings Retained earnings, 12/31/09 $829,560. 00 Add net income 68,576. 00 898,136. 00 Less dividends 36,000. 00 Retained earnings, 12/31/10 $862,136. 00 BROWNING MANUFACTURING COMPANY Projected 2010 Statement of Cost of Goods Sold Finished Goods Inventory, 1/1/10 $257,040. 00 Work in process inventory, 1/1/10 $172,200. 00 Materials used 811,000. 00 Plus: Factory expenses

Direct manufacturing labor 492,000. 00 Factory Overhead: Indirect manufacturing labor $198,000. 00 Power, heat and light 135,600. 00 Depreciation of plant 140,400. 00 Social security taxes 49,200. 00 Taxes and insurance, factory 52,800. 00 Supplies 61,200. 00 637,200. 00 2,112,400. 00 Less: Work in process inventory, 12/31/10 210,448. 00 Cost of goods manufactured 1,901,952. 00 2,158,992. 00 Less: Finished goods inventory, 12/31/10 352,368. 00 Cost of goods sold $1,806,624. 00 2) BROWNING MANUFACTURING COMPANY Projected 2010 Income Statement Sales 2,562,000. 00 Less: Sales returns and allowances 19,200. 00

Sales discounts allowed 49,200. 00 68,400. 00 Net Sales 2,493,600. 00 Less: Cost of Goods Sold 1,806,624. 00 Gross margin 686,976. 00 Less: Selling and administrative expense 522,000. 00 Operating Income 164,976. 00 Less: Interest Expense 38,400. 00 Income before federal and state income tax 126,576. 00 Less: Estimated income tax expense 58,000. 00 Net Income 68,576. 00 BROWNING MANUFACTURING COMPANY Projected 2010 Balance Sheet Assets Current Assets: Cash and marketable securities $443,640. 00 Accounts receivable (net of allowance for doubtful accounts) 201,360. 00 Inventories: Materials $124,520. 00

Work in process 210,448. 00 Finished goods 352,368. 00 Supplies 22,080. 00 709,416. 00 Prepaid taxes and insurance 91,920. 00 Total current assets 1,446,336. 00 Other Assets: Manufacturing plant at cost 2,822,400. 00 Less: Accumulated depreciation 1,047,600. 00 1,774,800. 00 Total Assets $3,221,136. 00 Liabilities and Shareholders’ Equity Current liabilities: Accounts Payable $288,360. 00 Notes Payable 552,840. 00 Income Taxes payable 5,800. 00 Total current liabilities $847,000. 00 Shareholders’ equity: Capital stock 1,512,000. 00 Retained earnings 862,136. 00 Total Liabilities and Shareholders’ Equity $3,221,136. 00

Comparative Statement of Cost of Goods Sold, Projected 2010 vs. 2009 20092010% change Finished Goods Inventory, 1/1/10 218,820. 00 257,040. 00 17. 47% Work in process inventory, 1/1/10 137,760. 00 172,200. 00 25. 00% Materials used 663,120. 00 811,000. 00 22. 30% Direct manufacturing labor 419,040. 00 492,000. 00 17. 41% Indirect manufacturing labor 170,640. 00 198,000. 00 16. 03% Power, heat and light 116,760. 00 135,600. 00 16. 14% Depreciation of plant 126,600. 00 140,400. 00 10. 90% Social security taxes 42,120. 00 49,200. 00 16. 81% Taxes and insurance, factory 46,320. 00 52,800. 00 13. 99% Supplies 56,880. 00 61,200. 00 7. 9% Work in process inventory, 12/31/10 172,200. 00 210,448. 00 22. 21% Finished goods inventory, 12/31/10 257,040. 00 352,368. 00 37. 09% Comparative Income Statement, Projected 2010 vs. 2009 2009 2010 % change Sales 2,295,600. 00 2,562,000. 00 11. 60% Sales returns and allowances 17,640. 00 19,200. 00 8. 84% Sales discounts allowed 43,920. 00 49,200. 00 12. 02% Cost of Goods Sold 1,568,280. 00 1,806,624. 00 15. 20% Selling and administrative expense 437,160. 00 522,000. 00 19. 41% Interest Expense 34,080. 00 38,400. 00 12. 68% Estimated income tax expense 89,520. 00 58,000. 00 -35. 21% Net Income 105,000. 00 68,576. 0 -34. 69% Comparative Balance Sheet, Projected 2010 vs. 2009 2009 2010 % change Cash and marketable securities 118,440. 00 443,640. 00 274. 57% Accounts receivable 311,760. 00 201,360. 00 -35. 41% Materials 110,520. 00 124,520. 00 12. 67% Work in process 172,200. 00 210,448. 00 22. 21% Finished goods 257,040. 00 352,368. 00 37. 09% Supplies 17,280. 00 22,080. 00 27. 78% Prepaid taxes and insurance 66,720. 00 91,920. 00 37. 77% Manufacturing plant at cost 2,678,400. 00 2,822,400. 00 5. 38% Accumulated depreciation 907,200. 00 1,047,600. 00 15. 48% Accounts Payable 185,760. 00 288,360. 00 55. 23% Notes Payable 288,840. 0 552,840. 00 91. 40% Income Taxes payable 9,000. 00 5,800. 00 -35. 56% Capital stock 1,512,000. 00 1,512,000. 00 0. 00% Retained earnings 829,560. 00 862,136. 00 3. 93% The comparison shows that in 2010, it is projected that there will be a significant increase by 274. 57% in the company’s cash and marketable securities. It can also be noted that accounts receivables for 2010 is expected to go down by 35. 41%, meaning the company will have more and faster collections of receivables, thus, increase in cash can be expected. On the other hand, notes payable and accounts payable is projected to increase by 91. 40% and 55. 3% respectively, which indicates that the company will not be able to pay its financial obligations in due time. Their credit standing as a company will worsen, because the company’s expenses will be higher in 2010. They may have faster collections of receivables, however, payables and expenses increases, resulting to the inability of the company to become liquid. Aside from this, inventory turnover is expected to be low, meaning; the company will not be able to utilize its resources efficiently. It can also be attributed to the slight increase in sales which shows that the company is having a hard time disposing / using its resources.

Due to these projections, net income is also expected to decrease in 2010. 3) The company will fail to achieve its notes payable repayment goal of a year-end cash balance of $150,000. 00 after paying off at least $350,000. 00 of the notes payable, because after repaying $350,000, year-end cash balance will decrease to $93,640, which is short of its $150,000 year-end cash balance. In order to achieve its minimum objective, the company should be able to increase its sales, and lessen the expenses as well as the payables. ) Management’s inventory turnover goal will not be achieved in 2010. Inventory turnover can be computed as: Cost of Goods Sold / Average Inventory 20091,568,280. 00/ [(218,820. 00+257,040. 00)/2] = 6. 59 20101,806,624. 00/ [(257,040. 00+352,368. 00)/2] = 5. 93 As shown in the above computation, inventory turnover in 2010 is lower than that of 2009. In the budget, inventory turnover goal is not indicated to be achieved. The company should analyze its market and demand of the people in order to evaluate how many of the goods should be prepared and ordered by them.

They should be aware of the average number of products that they should have and it will be determined based on the demand. They should also strategize by having effective marketing and selling techniques. 5) The budget shows that the company will have a poor credit trade standing due to its higher payables. This shows that the company is not able to pay its obligations in time, primarily because of its inability to monitor and control their expenses. Eventually, the company will have a hard time borrowing if there will have continuous past dues, thus, operations might soon be affected and eventually will not be sustained.

In the experiment of distillation we separated two miscible liquids. The purpose of distillation is to identify and purify compounds. We began our experiment by setting up an apparatus for macroscale simple distillation. We used 60 ml of Cyclohexane/ Toluene. We began with the temperature at 50 degrees Celsius. Unfortunately, we reached an error when the compounds evaporated too rapidly. The compounds evaporated so quickly that we lost data from 2 ml to 13 ml.

The heat was lowered and as a result we started to see a constant rate. From 14 ml to 18 ml it stayed at the rate of 90 degrees Celsius, from 19ml to 25 ml it was at 93 from 26ml to 38ml it stayed in the 90’s for several minutes. When it reached the 50ml mark our temperature was at 108 degrees Celsius. Next we conducted the fractional distillation experiment. We tightly packed the fractionating column with a copper metal sponge, poured our mixture into the 100 ml flask and waited for the mixture to reach boiling point.

The boiling point temperature started at 83 degrees Celsius we then decreased the temperature until we reached 25ml which was 82 degrees Celsius. Our results for the Toluene were 1. 4810 and 1. 4350 for the Cyclohexane. Unfortunately in the experiment for simple distillation, we reached an error when the compounds evaporated too rapidly. This was one source of error that disarrayed our data. The compounds evaporated so quickly that we lost data from 2 ml to 13 ml.

Even though the data was not recorded it still was a successful experiment. This mistake has taught me to always keep a close eye on experiments no matter how slow the rate is. In the experiment of fractional distillation our results were reasonable but I believe that if we would have placed the aluminum foil around the fractionating column we could have minimized the temperature fluctuation during distillation.

The purpose of this report is to analyse the Dell’s strategy over the period of case, which directly affects its competitive advantage, market growth and development. Further it explains that how Dell is forming its strategic alliances for further development and growth. The report also deals with the impact of HP/Compaq merger on Dell. Dell’s main competitive advantage in the PC manufacturing market is of its supply chain shortened cycle which reduces its cost and maximizes its revenues.

The absence of wholesaler and distributor in the supply chain of Dell has generated unique competitive advantage for its vendors as well which has resulted in economies of scale and has developed a continuous stream of profits for its suppliers as well. The integration of HP and Compaq faces many obstacles in the initial phases of the merger but it yield to success by the end of year 2004. This merger affected all the big giants of PC manufacturers and especially Dell which was leading the market from the top.

1. Introduction

Dell is one of the leading manufacturers of computer products and services in USA. The organization was founded by Michael Dell in 1984 based on the simply concept of direct selling model i. e. the products are being sold to customers without any intermediaries. Dell has made a strong portfolio of its computer products over the period of time and achieved top position in the computer market by the end of year 2002, in the presence of close rivals HP and Gateway.

The products of Dell are not only confined to desktop computers, notebook, computer peripherals but have extended to other field of businesses as well, which include servers, storage products, switches and workstations. Indeed, it is a US based company but presently its operations have been oriented in the global market and are being manufactured in six different locations worldwide.

2. Dell’s Strategy

In the market of IT and computer science every organization is continuing its effort to promote their strategies in such way that not only capture higher profits from the market but can also yield such competitive advantage that gives dignified worth to the organization. Dell is the organization which is known worldwide for its strategy of direct selling to the consumers and business customers due to which it has acquired greater revenues and has grabbed big market share from its competitors.

As the organization grows with the period of time its overall enterprise strategy is becoming stronger, complicated and mature.

2. 1 Dell’s Strategic Business Model

Build to order is a business model that Dell follows. In this model there is no confusion of wholesaler and distributor. Customers directly contact the manufacturer and place the customized order according to their desires, requirements and affordability. Manufacturer takes the order online or through telephone and place the order for raw material to suppliers at the same time (Bhatt, website).

The suppliers are located near the manufacturing firm so that in the less transportation cost, high effectiveness with respect to response time is achieved. As soon as the material is provided to the operation department, they start manufacturing the product and after complete production process, the finished good product is then shipped directly to customer having no finished goods inventory cost. This is how Dell maintains its business operation due to which it has achieved a unique competitive advantage over its competitors.

This type of business model is based upon “Pull Marketing” on which manufacturing firms produce according to the customer actual demand rather than customer anticipated demand. Due to this pull marketing strategy Dell has achieved a strong marketplace in the presence of big rival companies like IBM, HP, and Gateway.

2. 2 Dell’s Value Chain Creation

In the 21st century, marketers have soon recognized the fact that just understanding the customer need and then creating the demand for that is not only the way to captivate market leadership.

Just creating value at the customer end is not going to enhance the company’s business. Hence, strategy of the business is to create value at the end of each stage of the chain to maximize the surplus of overall supply chain, which directly or indirectly gives benefits to the customer at the end (Spulber, 2009). Dell has created a value at each stage of its chain starting from the customer to the supplier. Dell online storefront website is the place where customer customizes its order online through different available options of software and hardware.

This gives value to the customer that instead of going into the market searching the product in the hectic environment and then buying a product is such a long, time wasting and tiring process of shopping. But Dell has created value for the customer in the sense that just click on the screen will make you buy a product and will be shipped directly to its home instead of undergoing above mentioned shopping process. Dell also defines the visibility of the product through Customer Relationship Management software by means of which customer is able to know that in which stage its product is undergoing.

This sort of value creation creates a competitive advantage for Dell over its competitors. As soon as the order is placed online on the Dell’s website, the same order is placed to the supplier and by getting the demand from the customer, it directly transmits it material flow. It has created a value to the supplier that without involvement and demand draft from manufacturer, it is receiving demand directly from the customer which makes the supplier cost efficient and in this stage, the value is being created by Dell.

Hence, value creation of Dell is the main source of competitive advantage through which it has achieved higher profits and market growth.

2. 3 Cost Efficient

Reduced inventory made the Dell cost efficient in the market. Since, the business model of the Dell is such that it manages lowest possible finished goods inventory and other operating expenses due to which its overall cost is reduced which resulted in low cost of the computer products and services (Dell deck V. 5, website).

The customers are more likely to inclined towards Dell products who are price conscious and it specially give competitive advantage in the business customers market. Indeed the transportation cost tends to become high in order to become responsive but Dell has managed in a very efficient way that it keeps the supplier close to the vicinity of its manufacturing site. The transportation cost to ship the product is high due to package delivery but it is not as high as compared to the cost of including retailers and wholesalers.

Since, Dell is located in six different locations worldwide, it appears that its cost will tends to rise but strategically this facility cost is less than the transportation cost to deliver the products of worldwide customers from single location. Similarly, outsourcing is also done to reduce the overall cost because in some regions the labour and manufacturing cost is less than the existing facility location. Same is the case with Dell because when they decided to go beyond their geographical boundaries of USA, it was necessary to bear facility cost by outsourcing their manufacturing operations.

China is one the best country in which the manufacturing cost is low with efficient labour. Many organizations are outsourcing their operations to China to become cost efficient, so same was the decision taken by the Dell management in order to fulfil their diversified customers in a cost efficient manner. Hence, cost efficiency was the main source of competitive advantage for Dell which not only ignites its performance to the optimum level but also shoots up its strategic growth in the market.

2.4 Strategic Growth and Performance

Dell has made significant growth in the field of computer products and services due to its stated strategies which become its sources of competitive advantage over its competitors. It is magnified by its progress in 18 year that in the presence of big well established rivals, it was able to get number 1 position in the market. The failure of dot com in the beginning of 2002 indeed affects Dell Inc. But not to the great extent, they were still managed to obtain high market share.

3. Strategic Alliances of Dell

A long-term relationship in the mask of partnership is an agreement between two or more companies to work on a strategic goal while remaining independent in their other organizational goals and objectives. (www. scribd. com, website) But before making an agreement of strategic alliance, the goals are well defined by the strategic partners that how they are going to fulfil each other’s requirements with respect to tackiness, specificity, and complexity resources (Parise and Henderson, 2001).

Dell has shaken hands with many organizations as its alliances like it becomes the worldwide providers of Intel-based servers, desktop computers, and notebooks, of EDS in October 2002, as per given case study of Dell. EDS has selected Dell as its strategic partner because Dell was well equipped with standardized products of computer hardware and software at low cost in order to meet the requirement of hundred thousand employees in 60 countries worldwide. Similarly, in the same period of time according to the given case study Dell has made strategic alliances with Cox Communication Inc., and that agreement leads Dell to serve 6. 3 million customers indirectly by installing eight Dell/EMC storage area networks all over the country. In the same way Dell extended its relationship with Paul, Hastings, Janofsky & Walker LLP and Dorsey & Whitney LLP, NBA, WNBA, etc. These were the appliances that Dell has made over that period of time.

3. 1 Dell’s Growth and Development

Due to these strategic alliances, Dell has made a tremendous success in the market. It was a wide variety of business customers starting from broad brand communication to super stores.

It had opened the new dimensions for the company to enter because it diversified its operation from typical desktop manufacturing to EMC storage area networks. With this new diversified business operations, the dot com failure did not affects the Dell business operations badly. The performance of the employees was increased due to company’s progress in every field of computer. Indeed the companies like IBM and Apple did exist in the market on that time but the Dell performance were highly remarkable from all its directions due to its partnership with diversified computer field.

The business customer’s reliability was increased due to its flexible and visible system. The rapid usage of Dell components and services generated elevated revenue which is crystal defined that Dell, performance was admired in the market of year 2002 and then onwards as well. Even now Dell is significantly improving its operations to captivate more and more consumers as well as business customers. The relationship management with the business customers is highlighting the very fact that marketing management is highly focused in the corporation due to which Dell is able to make a tremendous growth in the market.

Dell’s continuous improvement and efficiency lead the facts that it is going to hold top position in the enterprise customers leaving behind IBM, HP, EMC and Sun. (Madden, 2005). Since, Dell has already acquired small and medium businesses from HP. So, the expectation of growth and performance of Dell can be well imagined. Indeed, Dell was emerging in that era as an enterprise business but now it has really captured the market to the great extent.

Becoming the official notebook, desktop, servers’ provider of NBA and WNBA can considered as an amazing achievement for Dell to become their alliance partners and it is due to its high performance and market credibility of its growth.

4. HP/Compaq Mergers

In September 2001, the world’s largest merger of two corporate organizations in the realm of IT was occurred. The merger was of U. S. companies, Hewlett Packard and Compaq, when HP announced that it would take over Compaq with all of its stocks in U. S. 25 billion dollars. This merger brought revenue of 90 billion U.S. dollars to HP which was in comparison with IBM and operating income of almost 4 billion U. S dollars. HP and Compaq were not having a strong market position in the market of information and technology before merger. This seems merger was seemed to be highly risky on that time because IT acquisitions were not expected to be successful based on the past experiences. The critics enlisted a long list of problems that were going to be expected from that merger as many say that the merger will not result in a big company but will yield a company with lot of problems.

So, the merger was critical and challenging for both of the companies. The main regions of the management which were highly affected was the human resource layoff that was around 15000 employees as per indicated in the case study. The traditions, working environment, culture and management was typically different of both the companies so their integration was the hard part to resolve. But in spite of all these critical problems, the new management of HP was quite sure that this merger will support them to compete against their biggest rivals, IBM and Dell.

The leading month after the announcement was very critical for new HP because industry analyst predicted it as a failed acquisition due to which its market share fell considerably down. But the CEO of new HP, Carly Fiorina was quite confident about the success of this merger because she thought that, this merger will be the most efficient step to lead rather than struggling on its own. But she worked hard on its believe and travelled all around the country to convince the stakeholders of the organization about its success. Eventually, her decision was proved to be true when this merger of both companies generated sales revenue equal to IBM. Also learn Dell human resources management

4. 1 Impact on Dell

Indeed the merger was expected to be failure in the beginning but gradually it start appearing that the decision of going into one company was quite successful which gives a big threat to Dell, which was its traditional rival. No doubt Dell has captured a vast market area of IT market but the generation of a big company can cause considerable loss of customers due to the emerging competition in the market. The future impact of Dell could be such that it has to restrain its market strategies in such manner that its unique competitive advantage would not be diminished by market offering and strategies of new HP.

As far as small medium businesses are concerned, Dell was doing well but HP is standing parallel to its quality and efficiency. 5. Conclusions In a nutshell can say that Dell Inc. is one of the leading examples of unique competitive strategies due to which it is ruling the market in its own way. Its performance and growth are well reflected by its successful strategic alliances. The merger in the IT industry is not considered as successful but HP/COMPAQ merger proved it wrong because of their efficient marketing decisions and operation management that the sinking ship reached the shore with flying colours.

This merger was having a great impact on Dell Inc. as well and has generated revenue comparable with IBM.

References

Bhatt, Vasanthkumar, (n. d), ‘What makes Dell Business model superior? ’ Available from <http://www. pace. edu/emplibrary/Bhat_Dell. doc> [Accessed 10 August,2010]

Dell deck v15, 2002, ‘HP/Compaq/Dell’s Business model’, Hindustan Times, Available from <http://www. hindustantimes. com/news/specials/hpcompaq/Dells_Business_Model. pdf> [Accessed 10 August, 2010]

Madden, John, 2005, ‘Can Professional Services Drives Dell’s Scalable Enterprise Vision?’ (n. d), Available from <www. dell. com/downloads/global/corporate/iar/20050301_summit. pdf> [Accessed 9 August,2010]

Parise, S. and Henderson, 2001, ‘Knowledge resource exchange in strategic alliances’, IBM System Journals, Vol. 40(4), [Online], Available from <http://www. studies. hec. fr/object/SEC/file/A/… /KMalliances. pdf > [Accessed 9 August 2010]

Spulber, Daniel, 2009, ‘Competitive Advantage and Value Creation’, Economics and Management of Competitive Strategy, Northwestern University, USA, Imperial College Press

Customers place orders and purchase phones through authorized dealers/ retailers. 2. Dealers/retailers such as Singlet, epicenter etc runs low in stock and require replenishment from distributors. 3. Various distribution centers runs low in inventories, this triggers manufacturer (Foxing) for more ‘phones to be manufactured and shipped. 4. Manufacturer Foxing starts production schedule planning, procurement of raw materials are done prior to manufacturing actively. Figure 1. 2 To competitive strategy consists of all functions that exist in Apple’s phone value Hahn.

Below shows an example of how an ‘phone’s value chain will look like. Components Design Build SO / Lull APS Branding Marketing Sales Billing Network Figure 1. 3 Primarily Outsourced Primarily Apple Looking at the above figure 1. 3, strategy of apple is to outsource functions such as network, billing, components and build. In this case, contracting manufacturer that handles the build function will be Foxing in China. Apple by engaging contract manufacturers such as Foxing, utilizes their economies of scale with high volume and low manufacturing cost as a result of low labor cost in China.

The supply chain strategy here involves long-term partnership with contract manufacturer Foxing, apple enjoys various advantages which includes cost savings, improving operations and gaining of outside technologies and expertise. All these advantages helps Apple to remain competitive in the mobile phone manufacturing market in providing consumers with a product of high level technology at an affordable price. Figure 1. 4 The above figure 1. 4 illustrates the component level outsourcing of Apple phone, the plan here is using the contract manufacturer to procure raw components that are

Apple specific suppliers. These components from different countries, however the supply chain strategy from apple is to purchase most or all of the components from Taiwan. This approach can help to cut short the logistics required to deliver the components to Foxing in China, Taiwan also enjoys and relatively short distance from China which in terms helps in saving logistics transportation costs. However it has one serious disadvantage, if Taiwan were to get into an economical decline or become politically unstable then it could actually destroy Apple phone’s industry.

The supply chain network design often puts one firm in control of it’s long term supply chain strategy. Apple utilizes technology, marketing and efficient distribution and distributes different weight age to each category to achieve strategic fit. The phone’s vast distribution channels by various network providers as well as resellers such as Challenger and Catchy, also though official retail stores and online stores all around the world. In this case Apple is capable of meeting high demand and reaches out to as many customers as possible using that vast network of distribution.

Apple phone’s supply chain strategy involves making use of an effective network design: 1 . Competing in the global smart phone market by providing the latest technology, innovation and product design. 2. Meeting global demand by setting up various regional distribution channels such as retail storage with consumer pickup and manufacturer storage with direct shipping. 3. Tapping onto expertise of contract manufacturers (Foxing Sheen), taking advantage of lower labor cost. 4. Making use of efficient raw component sourcing from various regions, cutting short logistics cost by consolidating sourcing to one region (Taiwan).

The strategic fit of Ezra is related to the consistent demand from consumers with how Ezra respond to the ever changing preferences and needs. The supply chain strategy of Ezra is to construct consistency across consumers and company supply chain, it starts with customer’s priorities to getting onto the competitive edge. Ezra utilizes a vertically integrated supply chain that response efficiently to consumers, strategic fit is therefore achieved by sustaining this form of high responsiveness to customer needs. Deposit Margin Distribution Purchase supplies

Operations competitive strategy of Ezra will consists of all functions in the below Sara’s value chain (figure 1. 5). Figure 1. 5 As you notice, Ezra utilizes in-house production, which Ezra in this case is able to harness the flexibility in variety, quantity and frequency of new styles of products. Thus Ezra is able to constantly provide customers with the most updated products, this cuts short the response time on meeting various customer demands. By doing this, Ezra is able to achieve competitive strategy by offering cutting edge fashion with time during different seasons and trends of markets.

Kaizen is actually a Japanese term, which means “continuous improvement”. Thus, Kaizen redesigning involves the search of ways or methods to improve the manufacturing process occurring in an industrial plant.

If one will observe a road crew at work, there are certain times that you will observe situations where workers were idle while others are working diligently. This usually causes a low-quality product since the team is not actually working as a team. Instead, the team is like a ship where the other end is already sinking. Such problems in the production process can be easily seen especially if a person examines the production process from an outsider’s view.

Thus, an outsider can best suggest what can be done in the production process, just like what Sharma does. Automating such measures can be possible. Automation will actually reduce the time in accomplishing a specific task and decrease the quantity of resources needed in the process. By doing so, the plant is continuously improved.

It is important that manufacturing plant workers have breaks during their jobs. Breaks can refresh and remove stress that workers may get from long hours of work. If workers are not able to get breaks throughout the day, most likely, mistakes will happen during the manufacturing process; or as in the example given, others may work in a slower pace than the others due to exhaustion. By designing an automated system wherein the machines do all the hard labor as in the case of Toyota in Japan, workers can take shifts and so will get the breaks that they need. Workers can become operators and supervisors, which demand less energy and so, prevent exhaustion.

Everyone can improve the way they live their lives everyday. As the famous maxim states, “There’s always room for improvement.” Improvements can start from simple things like how you do the laundry, clean the house, or commute to work. Every day, a person should always find the easier less strenuous way in doing things.

Manufacturing Beauty Manufacturing Beauty Cindy Jackson in my opinion has major issues. She thinks beauty is on the outside and does whatever she can to make herself look like an imaginary person. It seems to me that she is doing all this to try to make money. Her website is all about selling cosmetics. In which I am betting she doesn’t even use herself, because if there is a flaw in her mind she corrects it with surgery, so why does she need cosmetics? I think that her self-esteem is still extremely low even after all the surgeries and it has been from the start.

The physical attractiveness of a person influences every individual throughout every community, across the United States and around the world. All people inherit and alter their physical attractiveness, which is determined by complex, interdependent, physical, and non-physical factors. Hidden and not-hidden values drive thoughts and actions with significant effects and realities whereby higher physical attractiveness is beneficial, lower physical attractiveness is detrimental and associated pursuits are relentless.

Physical attractiveness may look skin-deep as a surface aspect of appearance, but looks can be deceiving. Researchers throughout the world collect empirical data complemented with anecdotal data to probe beyond the surfaces. Through investigations that meet meticulous scientific methodological procedures, acute observations reveal previously undetected dimensions that advance understanding about physical attractiveness (Patzer, 2006). I think the mass media has a huge influence on her.

Even according her, she wants to look like Barbie “I looked at a Barbie doll when I was 6 and said, ‘This is what I want to look like. ’ She spent $100,000 on the operations because she ‘wanted to look better’, “Barbie was the blank canvas I filled in all those years ago. It was still my role model. ” Cindy believed she was being ‘held back by her looks’ and that with surgery to make her more like her idol, she believes she is happier and has a better quality in life.

Although this example is both rare and extreme, it is interesting to observe a woman’s behavior later in life, which so blatantly and clearly links her desire of appearance to a prototype presented to her as a child. (2009) I my opinion the theme of “Manufacturing Beauty” can mean several things. I think that for one and the main theme is that a person is doing everything they can to try to make themselves beautiful in everybody else’s eyes. This is impossible, because everybody sees beauty a different why.

For instance, I might be attracted to a woman at first sight but after I get to know, I may not find her beautiful; because I think, beauty is on the inside and not the physical appearance. In conclusion, I do not approve of what she is doing but then I do not have to. I think she is giving young women a very bad influence. I wish young women would see that being different is a great thing and that looking like everybody else is very boring. References (2009). Living Doll. Retrieved from http://blamingthemedia. blogspot. com/2009_09_01_archive. html Patzer, G. (2006). The Power and Paradox of Physical Attractiveness