Aramco Supply Chain Managment

Table of Contents Page Number Introduction3 Background of the Company8 The Dilemma in Saudi Aramco Supply Chain Management10 Analysis of the operation of the Company’s Supply Chain Management12 Conclusion16 References17 Introduction: Several company managers are continuously searching for the best possible way of reducing cost and utilizing their inventories so that the company can implement cost reduction strategy. With all prices of prime commodities are accelerating for increases to maintain the business, the challenge for manufacturing companies nowadays is to come up with a management strategy that could lessen the burden of imposing additional prices to the consumer’s purchases. Yet seemingly, it seems impossible to achieve due to the domino effect in the market offering. Starting from the raw materials to the manufacturing plant then to the manufacturing plant to its distribution centers and from the distribution centers to the consumers, the process entails expenditures either from the supplier or from the manufacturing plant. Once transporting raw materials is affected by the movement in the prices of gasoline and oil, salary increases of its work force and additional price for the vehicle’s spare parts suppliers cannot but face the reality that they must charge additional cost to their buyers. So goes the trend. The usual thinking about a supply chain is a vertical flow of the entire materials for production that is fully integrated because it is owned by a single firm although its channels are operating independently. Hence, an efficient coordination among the managers of its channels is demanded for the success of the supply chain. However, a supply chain need not only be limited to a single ownership of the entire process. By its definition, according to the paper of B. B. Arntzen, G. G. Brown, T. P. Harrison, and L. Trafton (1993) a supply chain is a network of facilities and distribution alternatives that begins from the procurement of materials, converting the materials into mid-way and finished products, then the distribution of the products to customers. Supply chain is not limited to manufacturing alone but also in the service industry. There may also be expected difficulties along the entire chain due to the varying approaches from industry to industry or from firm to firm but the process proceeds as planned. Company A Company B DistributorCustomers Raw Materials manufacturing plant Finished Product Company This may sound simple but a realistic supply chain actually embraces several finished products with shared components, facilities, and capacities. Materials flow does not come only from one single network but from other networks also. At times, different modes of transportation are considered and usually the bills of materials for the finished products are both costly and enormous. R. H. Ballou, (1992) believes that traditional supply chain still operate along this pattern but on this case the supply chain deviates from the old practice of supply chain and paved the way to another model of creating an effective cost reduction strategy. In the supply chain, according to M. C. Cooper and L. M. Ellram (1993) the main focus lies on the mistake of materials, unnecessary information and unpredictable finances as they move from their supplier, to the respective manufacturer then to the wholesaler passed on the retailer before finally reaching the consumer. However, another view was presented by J. B. Houlihan (1985) because his notion of supply chain is involved in coordinating and integrating these flows for inside the company and its relation with other companies. The ultimate goal of all effective supply chain management is to reduce inventory but available when needed hence, minimize the cost of production. The product flow consists of the progress of goods from supplier to customer. Information flow is the transmittal of orders and keeping posted the status of the delivery. The financial flow covers the credit terms, payment schedules, and consignment title of ownership arrangement. As Cohen, et al. (1989) noted supply chain also consists of strategic decisions and operational decision levels. Strategic decisions usually entail longer time to observe its effect on the company. It requires close monitoring of the corporate strategy, but oftentimes, in many companies, it is already the firm’s business strategy. Setting aside, operational level decisions are shorter period and concentrates mainly on the day to day basis of inventory, production, and packaging. The main objective on this level is maintaining an effective and efficient product flow from the strategically planned supply chain. Houlihan (1985) reiterates that supply chain management operates according to four major decision areas namely; business location, production input and output, materials inventory, and distribution including transportation and channels. It should be noted that on these decision areas the elements of strategic planning and operational procedures are inclusive. It is because strategic decisions include what products to produce, and which plants to produce them in, allocation of suppliers to plants, plants to Distribution Channels, and Distribution Channels to customer markets Business location refers to the place where production facilities, warehouse, and source point are easily accessible both by the suppliers and other stakeholders of the company. Location facilities cover an assurance of resources for a longer period due to the long term plan of the business. Considered also for an effective supply chain location are the size, number, and the possible paths by which the product flows through to the customers. This decision is important because it represents the main strategy for accessing customer markets which definitely have effect on revenue, cost, and level of service. It is determined by employing a routine check on production costs, taxes, duties and duty drawback, tariff, local content, distribution costs, production limitation and many others. Production decision is also a critical concern in supply chain management because it entails the capacity of the manufacturing facilities to handle the production process. It is focused on detailed production scheduling. It includes the construction of the master production plan, time table on the machines, and maintenance of equipments. The elements of workload balancing and quality control that are being measured on this facility are seriously considered. Materials inventory are managed properly in the supply chain management levels of decision. Inventories could either be raw materials, semi-finished or already finished merchandize. These materials may also be in the process between locations or in other place as in the case of outsourcing activity. The purpose of managing the inventories is to safeguard against any uncertainties that might exists in the supply chain. Holding inventories can cost as much as one half of the product’s value. Too much inventories of raw materials means slow return of investment and large inventories of finished products can cause lower prices due to overflowing supplies. The aspect of transportation viewed according to the context of H. L. Lee and C. Billington (1992) is also another element in the supply chain management issues because it is closely associated with the inventory due to its mode of moving the raw materials or the finished products. The best mode of trading off the cost is to transport with the indirect cost of inventory associated with the type of transportation. While using air is fast, reliable, and warrant lesser safety stock, it is very expensive. Shipping by sea or by train may be cheaper but they take longer time and consumed large amount of inventories to buffer against the uncertainties associated with it. Hence, shipment sizes, routing, and scheduling of equipments are the main factors operating in the Supply Chain Management. Another point was raised by J. M. Masters, (1993) as he discussed on the process of supply chain management and the level of decisions that have to be made on these models are enormous and require considerable amount of data. Due to the huge data requirement and the broad scope of decisions, each supply chain decision models provide approximate solutions. The operational decisions, meanwhile, address the day to day operation of the supply chain. Therefore the models that describe them are often very specific in nature. Due to their narrow perspective, these models often consider great detail and provide very good, if not optimal, solutions to the operational decisions. As a solution for successful supply chain management, Saudi Aramco employed a sophisticated software systems, with Web interfaces and has already been in competition with the Web-based Service Application Providers or the SAP, that provide part or all of the SCM service for the company. Saudi Aramco must have been blest to be able to implement supply chain management on its production process and updated it with the use of modern day Information Technology. In spite of the global financial problem that oil producing countries are suffering at present, Saudi Aramco still stands tall amidst financial chaos. Supply chain management is at its best at Saudi Aramco that is why there is less worry even if the prices of oil and crude went down in the global landscape. At Saudi Aramco, the corporate policies guide the supply chain to a particular and specific objective that the firm hopes to achieve (http://www. saudiaramco. com. sa/html/). 11. Background of the Company State-owned Saudi Arabian Oil Co. (Saudi Aramco) is the king of oil. It is the world's number one oil producer, supplying more than 10% of the world's oil demand. The company controls proved oil reserves of about 259. 8 billion barrels. It extracts 9. 1 million barrels a day, operates refineries, markets oil internationally, and distributes it domestically. Saudi Aramco owns a fleet of oil tankers and invests in refineries and distribution networks in other countries; it also owns 239. 5 trillion cu. ft. of natural gas reserves. The company dates back to 1933, when Saudi Arabia agreed to open up a large area for exploration by Standard Oil of California now known as Chevron. From its headquarters in Dhahran on the eastern shores of the Arabian Peninsula, Saudi Aramco manages virtually all of Saudi Arabia's enormous hydrocarbon enterprise. From the giant Ghawar and Safaniya oil fields, the world's largest onshore and offshore fields, to the leading-edge technology at the Exploration and Petroleum Engineering Center, and from one of the largest and most modern fleets of supertankers to refining and marketing joint ventures around the globe, Saudi Aramco is positioned to continue to play its leading role in meeting the world's demand for oil. Saudi Aramco revenue is estimated between 150 billion and 350 billion dollars. It varies greatly year to year due to high dependency upon hydrocarbon prices. Saudi Aramco is responsible for 99 percent of the Kingdom's proven crude oil reserves of 259 billion barrels (41. 2 1010m? ) about a quarter of the world's total. That is more than double the total of Iraq, the country with the world's second largest reserves, and nearly 12 times the reserves of the United States. Saudi Aramco produces and exports more crude oil than any other company. Recent production has averaged some 8 million barrels (1,300,000 m? ) per day. That is more than twice the output of the next highest producer and nearly five times greater than the largest U. S. oil company. Saudi Aramco maintains a maximum sustained crude production capacity of 8. 5 million barrels per day. Saudi Aramco ranks among the top ten companies in gas production worldwide. The company is also a leader in both the production and export of natural gas liquids (NGL), and a major producer of refined products. The company produces natural gas in association with crude oil and non associated gas from deep, independent gas fields. This gas is used as fuel and feedstock for the Kingdom's backbone industries and utilities, and for export and domestic consumption as NGL. A vigorous program is currently under way to expand gas production and processing capabilities to meet increasing demand for gas at home to power the Kingdom's robust domestic economic growth. Saudi Aramco's oil operations encompass the Kingdom of Saudi Arabia, including territorial waters in the Persian Gulf and the Red Sea. Totaling more than 1. 5 million square kilometers, this area is larger than the combined areas of Texas, California, Oklahoma and Utah, or of France, Spain and Germany. Most production comes from fields in the coastal plains of the Eastern Province in an area extending 300 kilometers north and south of Dhahran. Saudi Aramco VP announced Aramco's plans to build projects worth about 487. 5 billion Saudi Riyals (US $130 billion) in the next 5 years. Due to the unprecedented global demand for oil, Aramco announced that the number of its oil rigs will double by the end of 2006 (http://www. saudiaramco. om) Governed with its vision and holistic mission, the company is striving to make perfect its management concept and practices in order to build solid human resource foundation and company culture that would serve its competitive against other banking institutions in the entire Kingdom within the next couple of years (http://www. saudiaramco. com. sa/html/). 111. The Dilemma in Saudi Aramc o Supply Chain Management Saudi Aramco is the world leader in the oil industry and it possesses the huge deposit of oil and mineral resources. It built strong and reliable ties with its market all over the world while continuously harnessing its rogressive communication with its entire supplier from manpower, facilities, equipments, construction, development projects, and community services. At present Saudi Aramco remains stable and assured of the relentless efforts of its entire people in making the company a world leader in the oil industry and a good example to follow. The entire materials and needed machineries for the oil drilling, processing, plant treatment, transportation and distribution of petroleum are provided by the supply chain from all private industrial suppliers around the Kingdom belonging to the Saudi nationals. No imported materials are used aside from those that are not available in the kingdom. The ongoing calls for localization of Aramco’s production materials are contained in the company’s oath to support local industries and private industrial businesses in the Kingdom. One particular project that the company listed on an indefinite postponement is the envisioned 40 hectares plant facilities and accommodations at Rastanura. In the middle of 2008, Saudi Aramco invited bidders and quotations from several constructing firm around the Kingdom and to some well known companies the Gulf. Toward the end of year, the project was awarded to Foster Wheeler Group of Companies Middle East. The said project was divided into four phases and phase one would start by March 2009. However, Foster Wheeler received a notice from the company on mid February 2009 stating that the Rastanura project would be postponed indefinitely. Foster Wheeler through its resources found out that the main reason for the postponement is the company supplier and sub contractors were heavily affected by the global financial crisis (Thajudeen, 2009). Saudi Aramco suppliers of equipments and high quality standard materials could not meet the requirements needed by the company for the construction of its project. The cost of delivering the materials to Saudi Arabia from the place of origin almost tripled. The high price of raw materials plus low supply prompted Aramco suppliers to increase its prices too but since everything was stipulated in the contract, Saudi Aramco would not accept the new price schedule. The problem begins. Due to the company’s adherence to the Saudization program an option to change suppliers and seek foreign assistance cannot be implemented. France and Great Britain are rich suppliers of equipments needed to continue the construction of drilling plants and community accommodations of its people. The prospect of getting from these countries will destroy the supply chain which Aramco have been protecting and preserving all those years. Japan’s Sumimoto Industry’s offered Saudi Aramco well defined and structured supply chain that could even generate a healthy foreign relation between the government of the Kingdom of Saudi Arabia and the people of Japan. The offer was shelved temporarily and for further consideration and study. While the present economic crisis continuously spreading in some major industries in the Kingdom, Saudi Aramco remains financially firm and liquid. There is no question whether the company can provide the necessary funds for the completion of the project. There is also no doubt in the capacity of Foster Wheeler to deliver the project on time. It is only a matter of the availability of supplies that Saudi Aramco encountered some critical problems. 1V. Analysis of the operation of the Company’s Supply Chain Management For the past several years, Saudi Aramco perfectly managed its supply chain and it can be proven by the smooth development and completion of all existing projects the company have ever made. The fact is that starting 2008 up to the present the global financial crunch created havocs and collapsed of several industries in the world. Included in this chaotic situation are some suppliers of Saudi Aramco. The law of supply and demands in Economics is pretty much at work at this time. There seems to be a blank solution to this perennial problem at present. If this is the case, the postponement of Saudi Aramco project in Rastanura would be justified. On the second thought, there could be another better solution that could be worked on without jeopardizing the effort exerted by Foster Wheeler to win the project. An excerpt from the speech of Abdallah S. Jum'ah, President and CEO of Saudi Aramco (2002), he said â€Å"The greatest share of our investments as oil and gas producers goes to assuring that we maintain the ability to supply our products without interruption. While such costs are burdensome, they nevertheless are critical to the sustainability of energy supply. No one can long afford to be without this lifeline. † This was also reiterated in the speech delivered by Ali I. Al-Naimi (2002), Saudi Arabia's Minister of Petroleum and Mineral Resources, in Washington D. C. as he claimed â€Å"we have invested billions of dollars to build production capacity and to construct diverse export routes. The importance of the excess production capacity of Saudi Arabia has been demonstrated in more than one supply crisis in the past two decades such as the Iranian Revolution of 1978-1979, the Iran-Iraq war in 1980, the invasion of Kuwait in 1990 and the supply infrastructure crisis of 2000†. Granted that the chain of supply has a domino effect and a disruption in one unit of the chain may result to the interruption of operation of the entire system, Saudi Aramco with its huge resources could help solve the problem in terms of loan assistance to the ailing unit of the chain. Saudi Aramco management could serve as mediator between suppliers of materials to the members of its supply chain to retain its old price schedule which would be compensated by Saudi Aramco in terms of supply of oil with no extra charges and at its lowest price. The problem is rooted in the availability of funds and not on mismanagement of the supply chain. The remedy to this kind of situation is by capital assistance. Another possible option to maintain the flow of the supply chain is by acquisition of the units in the chain that is experiencing a hard blow from the economic crisis. Aramco could temporarily take over the financing of its production so that the unit may continue to operate and the employee would not lose their jobs. Unemployment would create additional burden to the ongoing financial crisis. Saudi Aramco has the capacity to generate production of its supply chain unless it is willing to suspend indefinitely its project with Foster Wheeler. The movement of Saudi Aramco supply is vital to its operation in distribution and expansion in order to accommodate the growing demand for oil in the world. Saudi Aramco is also part of another supply chain and the disruption on its supply would create stoppage of production to it end user. In the same manner, the stoppage of supply from the company supply chain might also result to a decease or worst, stoppage of the company production in the long run. For as long there is still the chance to save the continuous decline of financially able company in the supply chain of Saudi Aramco, it is the best opportunity for Aramco to show its goodwill to all its allies and to the world in general. The management team of Saudi Aramco is determined to continue to play its role in meeting the world's demand for oil exploration & producing, refining, distribution, shipping, marketing as the leading producer of the energy that powers the world's economies and empowers its people, committed to fulfill the kingdom development goals including developing the Kingdom’s industrial base and diversifying economy, helping creates jobs for Saudi nationals and maximizing the value of the Kingdom’s natural resources. Much more so, the Company cannot afford to create possible problems in its supply chain. Saudi Aramco is a government owned company and it does not depend on any political pressures or compromises from any person in the country except to the King due to the monarchial form of government that Saudi Arabia has. The company structure of Aramco is bureaucratic and hierarchical that is why there is absence of threat coming from the labor sector or any human rights advocates in the international scene. Saudi Arabia law is based on Shari’ a law and its legal implications. In this case, the Company has the power to take control temporarily of its suppliers who are experiencing financial downturn. At Saudi Aramco, there is no other power aside from the monarch and the top management level of the company. Stakeholders are not a major threat nor can they pose any threat at all. Aramco’s investment is more of partnership with other big oil producing countries and not on the individual share of investments. What can be considered to have power over the company is the presence of foreign partners as distributors and international oil producing companies that accepted Aramco’s partnership strategy in producing enough supply of world’s fuel and oil needs. Saudi Aramco also uses Management Information and Decision Support System that delivers information to support many of its day-to-day management’s decision-making needs and supply chain operation processes. Reports, display, and responses produced by such systems provide wide range of information that the Aramco management has specified in advance to meet adequately their information needs. Such predefined information satisfies the need for awareness and updated situation of the organization in relation to its supply chain performance, financial situation and production apabilities (http://www. saudiaramco. com. sa). Saudi Aramco MIDSS provides the needed information to the Aramco’s decision makers at the operational and tactical level of the organization. Based on the data generated from the program Saudi Aramco management can determine how and when to entertain an increase of oil production, price, cost of operation, wages and purchasing ability of the company. The in formation takes the form of periodic, exception, and demand reports and immediate responses to inquiry. Saudi Aramco’s web browsers, application programs, and data-base-management-software provide access to information in the intranet and other operational database of the organization. These databases are maintained by transaction processing system. The data about the business environment are gathered from the Internet or intranet when necessary and when greatly demanded. (http://www. aramco. com) Based on this technological competencies, the company is able to secure all the necessary information its suppliers might be needed at the moment so as to continue their production. V. Conclusion The plight of Saudi Aramco supply chain management definitely lies on the hand of the company. We have learned from Saudi Aramco that the company’s supply chain has been operating perfectly without interruption. The company was able to manage its supplier’s time scheduling, processing, manufacturing, delivering, and stocking. There were minor problems along the way especially in transporting the supplies needed by the company but the problem was resolved immediately before it can cause damage to the company’s oil production. By becoming the world leader in the oil industry the company’s long term plan must not sacrificed due to financial difficulties of its suppliers. Small problem that is left unattended became big and too difficult to solve in the near future. The same occurrence is happening to the supply chain process of the Saudi Aramco high quality materials and equipments for its development and expansionary project at Rastanura. The delay in the start of the project would lead to the extension of its completion, late performance, and finally slow production which would be advantageous to competitors. Supply chain management assures the end ompany an uninterrupted production and a continuous flow of resources from the suppliers’ supplier to the manufacturer to the consumer then back to the supplier’s supplier. The cycle goes on and on for as long as the chain remains consistent and stable. Saudi Aramco with vast resources and technological capabilities can easily detect any di sruptive factor along its supply chain. Now is the time for Saudi Aramco to divert momentarily a portion of its focus to the financial status of its suppliers. V1. References: Al-Naimi, A. I. (2002) Saudi Arabia's Minister of Petroleum and Mineral Resources, Washington, D. C. April 22. http://www. saudiaramco. com/html/speeches (access June 5, 2009) Al-Naimi, A. I. (2002) Saudi Arabia's Approach to Oil Market Stability and Energy Security, Expanding Energy Frontiers – The Institute of Energy Economics of Japan, Osaka, Japan http://www. saudiaramco. com/html/speeches (access June 5, 2009) Arntzen, B. C. , G. G. Brown, T. P. Harrison, and L. Trafton (1995) Global Supply Chain Management at Digital Equipment Corporation, Interfaces, Journal of Operation Management, No. 231, p. 112 Ballou, R. H. (1992) Business Logistics Management, 3rd Edition, Prentice Hall, Englewood Cliffs, NJ, p. 1 – 23 Cohen, M. A. and H. L. Lee (1989) Resource Deployment Analysis of Global Manufactu ring and Distribution Networks, Journal of Manufacturing and Operations Management, No. 7, pp. 81-84 Cooper, M. C. , and L. M. Ellram (1993) Characteristics of Supply Chain Management and the Implications for Purchasing and Logistics Strategy. The International Journal of Logistics Management, No. 23 pp. 4, 2, 13-24. Jum'ah, A. S. (2002) President and CEO Saudi Aramco, Calgary, Canada, June 11. http://www. saudiaramco. com/html/speeches (access June 5, 2009) Lee, H. L. , and C. Billington (1992) Supply Chain Management: Pitfalls and Opportunities, Sloan Management Review, No. 33, Spring, pp. 65-73. Lee, H. L. , and C. Billington (1993) Material Management in Decentralized Supply Chains, Operations Research, No. 41 pp. 35-47 Masters, J. M. (1993) Determination of Near-Optimal Stock Levels for Multi-Echelon Distribution Inventories, Journal of Business Logistics, No. 14, pp. 165-195. Thajudeen, S. M. (2009) Foster Wheeler Group of Companies Middle East Region, Al Khobar, Saudi Arabia, February 15. http://www. saudiaramco. com. sa/homepage/projects (access June 5, 2009)

Differentiate between free market economy and mixed economy Essay

Economics Introduction Differentiate between free market economy and mixed economy            Economics is part of business that deals with the production, distribution and consumption of goods or services in the society (Paul, 2008). Economics contains many aspects that helps define different markets, which attribute to the applying of goods and services and also deal with individual needs and some economic issues. Free market economy has free reign on production and distribution of goods or services. In this market, they can take their own decisions on what to purchase and produce. According to Paul (2008) free market economy is also called capitalist economy. Each exchange is done between two people or between two groups represented by agents. Each party undertakes the exchange because they expect to benefit from another. The market economy enforces its own private contacts and ownership. The government only plays a neutral role in its legislation economy and administration. However, the buyers and sellers in this market do not pressurize each other in c ase of obtaining each other’s property rights without the use of force, threat or fraud. Their laws of demand and supply regulate the production of their goods.            This kind of economy is practiced by many countries but is mostly initiated by the United States economy. Their own agents do however, the concerns like maintenance of employment. Mixed economy on the other hand has a combination of communist, market and traditional economics. The mixed economy has both private and owned companies. The government plays the key role in their market (Paul, 2008). They are also limited to free decision since the government and private organizations are the only ones who intervene. The mixed economy is responsible for paying taxes that they get back as s benefit through infrastructure, social programs and government services. However, the government is involved in the planning and even the resources. It is involved in the concerns such as maintenance of employments standards environmental protection and competition. The mixed economy does not define its own policies, laws and limit power by the government. Explanation of joint demand and joint supply            Joint supply is whereby goods are produced or supplied together (Daniel-Kagbare, 2014). The products are produced in a fixed proportion since they cannot be varied. This shows that the quantity of one product can be increased with the expense of the other. An example can be that of a cow. One can breed a cow for either meat or hide. This shows the product can yield two or even more outputs. If the supply of the product increases, the output they produce will definitely also increase. The rise of productions is in response to increase in demand. The joint supply affects demand differently. Decrease in supply depreciates demand while increase in supply increases the demand of goods. However, joint demand on the other hand refers to products or commodities that are complement in production and in use.            The commodities produced are used together to satisfy the needs and wants of consumers. One commodity cannot be used the expense of the other. According Daniel-Kagbare (2014) increase in demand for one commodity increases the demand for the other. The commodities are designed to design to satisfy the same want. An example is sugar, milk and coffee. They work as complements. If there is decline in the supply of sugar in the market, then the demand for milk and coffee is likely to decline. However, price affects joint demands differently. A rise in one commodity leads to fall of price in the other product. A good example is; increase in price of milk decrease the price of sugar and coffee while the decrease of the price leads to increase in the price of sugar and coffee in the market. A clear explanation of relationship between price elasticity of demand and consumer expenditure            Price elasticity of demand is the relative responsiveness of changes in demand to changes price (Banerjee, 2014). There is inverse relationship between price and demand. When the demand increases the price increases and when demand increases the price decreases. It is calculated by dividing change in quantity of demand proportionate to change in price. There two types of elasticity demand that is elastic and inelastic demand. Elastic demand is whereby change in price alters demand. This means rice in price decreases total revenue while fall in price will increase total revenue. The elastic demand occurs when percentage change in quantity demanded when there is percentage change in price. Inelastic demand is whereby increase in price will increase total revenue and decrease in price will result in decrease in revenue. The price elasticity of demand goes hand in hand with consumer expenditure.            According to Banerjee (2014), they are very important to managers since they provide a rough thumb. That is, if the price is inelastic, raising price slightly raises consumer expenditure which attributes to a higher revenue. However, if the price is elastic, lowering of its price slightly alters consumer expenditure by raising it leading to firmness in revenue. According to Barnejee (2014), there is two other price elasticity of demand. That is the income elasticity demand and cross- price elasticity demand. Thee income elasticity demand is whereby impact of change in income level on the demanded quantity keeps the price of a product fixed. Cross- price elasticity is used to measure the effects or influences of change in price of another good on the demand of a particular product. Explanation of difference between positive and negative externalities            Externalists are produced when social costs and benefits differ from private costs and benefits. Negative externality reduces the well-being of others (Besanko et al, 2011). In negative externalist, the third party suffers from loss, which comes because of not having the third party involvement between a buyer and seller. An example of negative externality is an organization burning fuels, realizing poisonous fumes, which in turn result in health problems in the society. In the negative externality, a consumer does not necessarily pay the cost of his or her actions that she or he imposed on people. According to Besanko et al (2011), negative externality occurs or involves common properties. If the social cost is greater than private cost then the negative externality is initiated.            However, positive externality takes place when the private marginal enjoyed from consumption or production of goods or services exceeded by benefits as a whole to the society (Besanko et al, 2011). In this case, the third party apart from the buyer and the seller is included in receiving a benefit because of transaction. An example of positive externality is education and training provided to employees in an organization. This is because, the education and training reduces expenses that an organization needs to encounter or bear in training individuals to make them efficient and productive. Increasing productivity attributes to more efficient use of products such as raw materials in an organization raising the living standards benefiting a greater society. Apart from that, innovation in technologies is also part of positive externality. Having knowledge in technology help, lower production cost, result in better standards that benefit producers and consumers leadin g to better qualification. Explanation of difference between diminishing marginal returns and return to scale            Diminishing marginal return is whereby a firm or organization needs to combine variable input with a fixed input. It is based on the short-run production of a firm. When productivity variable is more used in a short-run production; variable input declines. When productivity of variable input decreases, high cost of productivity rises and also a high supply of price is needed. According to Basenko et al (2011), usage of one input increases the quantity of other inputs such as land and capital that are held fixed. These decrease the input of marginal product. However, rate of technical substitution of labor is equal to the ratio of product of labor to marginal product of capital. This shows capital can be reduced for every increase in every unit in quantity labor and hold output quantity constant.            Return to scale refers to what takes place when all inputs are increased by a certain percentage (Besanko et al, 2011). When all inputs change in the same proportion leads to scale of production. Nevertheless, change in total output due to scale changing results in return scale. When all inputs increase in the same proportion the total product may increase the rate, remain constant rate or diminish the rate. This may occur because the higher efficiency obtaining as a result moving from one level to another; that is from small operation to a large scale operation . Decrease in return may occur if production depreciates as production expands. Also it may occur in a firm or organization expands and it becomes difficult for it to be managed as one single unit. Conclusion            In order for business to expand and economic sector to improve, negative externality need to be taken care of. The government should initiates rules to cut off the behaviors of people or organization after imposing a risk to the society and other organization. A right aspect to take is to punish the organization that pollute environment by taxing them heavily for their consequences. This will help secure other people’s business and even health. The business people should put into consideration aspects like elasticity of demand in other to make sure that the demand or price does not affect the business in a negative way. References Banerjee, S. (2014). Intermediate microeconomics. Routledge Besanko, D., Braeutigam, R. R., & Gibbs, M. (2011). Microeconomics. Hoboken, NJ: John Wiley. Daniel-Kagbere, T.E. (2014). A dictionary of economics and commerce. AuthorHouse Paul, J. (2008). Business environment: Text and cases. New Delhi: Tata McGraw-Hill Publishing. 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Case Study - Strategic Leadership Example | Topics and Well Written Essays - 1250 words - 1

- Strategic Leadership - Case Study Example The Japanese manufacturers of DRAMS had a strategy of investing in manufacturing which gave them a manufacturing cost advantage compared to Intel. Japanese competitors were much faster in developing process technologies and improving yields as compared to Intel and this significantly contributed to its dramatic decline in market share in the DRAM market during the period mentioned above. As an executive leading a DRAMS producer between 1974 and 1984, I would certainly take certain steps as going to be outlined below in response to the changing trends in the industry. First and foremost, I would embark on a drive to combine both memory capacity and single power feature as one entity of the DRAM. The emergency of the Japanese competitors heralded a new trend whereby their DRAMS had a larger memory capacity compared to Intel which gave them a competitive advantage over Intel. However, Intel had a unique single power feature which could not be found on products produced by the other comp etitors. Against this background, I would strive to combine these two features into one component so as to appeal to many customers. This would make the DRAMs manufactured by the company I would be heading more unique compared to the others produced by the Japanese competitors. ... First and foremost, I would embark on market research so as to be better positioned to stay abreast with all the changes taking place in the market. Indeed, the environment in which business operates is dynamic and is subject to change hence I will prioritise market research so as to stay ahead and better positioned to know the changing tastes of the customers. Through conducting market research, I will be better positioned to anticipate the needs of the customers hence manage product development with full knowledge of what will appeal to the customers from different market segments. I will also embark on a drive to improve on production while at the same time retaining uniqueness of the products offered. I would seek to gain a cost advantage through devising means of production that will lower the production costs. Lowering the production cost will greatly help in increasing the revenue generated for the organisation as this will entail that less money will go towards production cos ts. I will also emphasize on maintaining of uniqueness of the products offered so as to appeal to a wide number of customers. This will enable me to lead the organisation to be a low cost producer with high value option. 4. I would definitely pursue branding strategy in DRAMs for different marketing purposes. Basically, branding is mainly concerned with creation of an identity of the product that will distinguish it from the other products offered in the market. In DRAMs, this strategy will definitely give a competitive advantage given that there are many players in the industry and as noted above, the competition is stiff. A brand strategy that is

Obesity Epidemic in America Research Paper Example | Topics and Well Written Essays - 1500 words

Obesity Epidemic in America - Research Paper Example The causative factors of obesity are, lifestyles, eating habits, genes, workplace conditions, hormonal metabolic factors and recreational practices. Consequences of obesity include ailments, mental and emotional disorders, negative psychological outcomes, and hinders individuals’ performance. Obesity prevalence varies significantly across ethnic and racial disparities as well as socioeconomic status in the American population. In conclusion, obesity can be alleviated using pharmacological intervention, energy variation, public education, behavioral therapy, community-based initiatives and political-oriented solution. Introduction Obesity, weight gained or overweight has remained a contingent issue for a considerable time in health care, among scholars, the US Government as well as the community at large. Obesity is one of the most prevalent health care issues, which is causing worries in the United States. Obesity rates have relatively amplified over the years with its effects experienced in various population groups, and states. To offset the ever-increasing rates of obesity, it is important to evaluate the causes and effects of obesity in the American population. In view of this, obesity is associated with a number of negative physical and psychological consequences. It is attributable to several diseases such as diabetes, heart disease, depression, psychological disorders including withdrawal syndrome, and overall personal degradation. On the other hand, obesity is caused by a range of factors, which include eating habit, sedentary work, genetics, inert recreation and individuals lifestyle just to mention but a few. In this paper, obesity is analyzed at length with respect to its prevalence, causes, consequences, and ways of solving the epidemic. Prevalence Several researches conducted on the prevalence of obesity in America indicate that the rates at which individuals are becoming overweight are ever increasing. In the period between 1986 and 2000, s evere obesity prevalence shifted to the proportion of 1 in 50 Americans from former status of 1 in 200. Besides, extreme obesity has greatly increased at an approximate rate of twenty percent in adults. Decades ago, obesity was a significant health issue among adults, but the situation has changed with time to include adolescents and children. Recent researches reveal that fifteen to twenty five percent of adolescents and children in America are obese with about nine million children aged above six years being obese. According to CDC’s data and statistics on obesity in America, obesity has dramatically increased over the past twenty years and rates remain high. In 2010, state based obesity prevalence ranged from twenty-one percent to thirty four percent in Colorado and Mississippi respectively. All states had obesity prevalence above twenty percent. Thirty six states had twenty five percent or more prevalence with states such Arkansas, Missouri, Louisiana Michigan, Kentucky, and Oklahoma having thirty percent or more prevalence. Regional prevalence was a follows; South 29.4 %, Northeast 24.9 %, Midwest 28.7 % and West 24.1 % (CDC, 2012). The findings of the analysis conducted, in 2009-2010 in the US indicate that, approximately forty-one million women and over thirty-seven million men aged twenty years and above were obese. Amidst children and adolescents aged two-nineteen years, about seven million boys and

Authenticity & Socio-econmic Essay Example | Topics and Well Written Essays - 250 words - 2

Authenticity & Socio-econmic - Essay Example He believes that acquiring such material possessions should make individuals to be interested in the manner in which the users fulfill the necessity for service, inside the extensive culture of society. For instance, the leather couch, or the professional player ought to act as some means of bridging the divide between the indigenous and wider cultures. This is similar argument to Jhally views on consumerism, especially in his belief that advertising stresses a world in which desires in form of new materials, are reflected through the emphasizing of social relationships, rather than material possessions (Jhally, 3). This is because Jungen appropriation and remodeling of universal but industrially manufactured consumer goods, reveals how such goods tend to portray an influential identity of desirable global commodity. The most consistent stories told by the whole range of advertising, is consumerism. Whereby more economic growth implies added consumption, as well as more production. The entire range of advertisements insists on individual power, console, desires, appeals and pleasures. The values stressed by the ads include taking desires and then preconceiving them to tie with the universe of commodities (Phillips, 5). Jhally, Congdon and Blandy’s are right in implying that advertising drives individuals away from important human relationships with others within the society, as it reduces their capability to develop happiness. Jhally asserts that advertising takes away normality from the consumers. However, all of these critics of consumerism and advertising, places more emphasis on the issue between needs and wants. Undeniably, Jhally, just like Jungen tends to extend their criticism of advertising on commercialism, to be a disapproval of egalitarianism and marketing. Thus, such assertions that advertising colonizes or dominates contemporary culture are not entirely spot on,

Major Favtors Essay Example | Topics and Well Written Essays - 500 words

Major Favtors - Essay Example In that case, the accounting practices in China focus on both the fair presentation of financial position and a conservative presentation. The reason behind a fair presentation is to meet the various needs and requirements of the stakeholders and the capital market. The conservative approach is targeting the banking sector, which has a direct access to financial information (Central Intelligence Agency). (b): Legal system – the legal system in China is coded. Coded laws seek to, exhaustively, envelop the existing laws and preserve their implication to match that of the time it was coded. For this reason, the Chinese accounting practices are highly, rigid, prescriptive, detailed and procedural. This kind of legal system requires that the national law regulate the accounting practices. For that reason, China engages in the preparation of two sets of financial statement. That is, the rigid and the adaptive type, to comply with different types of legal systems (Central Intelligence Agency). (c): Taxation – the system is linked to reflect the legal system. In China, the national laws regulate the taxation practices. In this case, the accounting and the taxation process are the same (International Federation of Accountants). (d): Political and economic ties - the basis of accounting practices is influenced by the external forces due to international relations. China has strong political and economic ties with Japan, whose legal system is codified. The ties have greatly influenced China’s financial reporting regime (International Federation of Accountants). (e): Inflation – the changes in the rate of inflation affect the commodity prices in countries. The financial figures should reflect the level of inflation in a country. However, in countries with a low rate of inflation, like China, the reported accounting figures rarely reflect the rate of inflation (Central Intelligence Agency). (f): Level of economic development – the economic development in

Prostitution as a Social Problem Research Paper

Prostitution as a Social Problem - Research Paper Example This discussion stresses that  there are three classes of prostitutes.   Those who belong to the top layer are the discreet call-girls for the affluent.   Those in the middle class are the prostitutes who work in strip clubs and massage parlors and who offer backroom services.   Those in the lowest layer are the street walkers which include the harlots, hookers and nightwalkers.   The prostitutes in the lowest layer are the ones beset by most problems.   Because they are not under any supervision, they are prone to violence and at a high healthcare risk due to unsafe sexual contact with unscreened clients.   These are the prostitutes who are in need of much help.This paper discusses that prostitution involves a lot of personalities.   Foremost among the group are the prostitutes.   In the U.S., the average age of entry into prostitution is 14 . This group which takes on the roles of prostitutes includes children or teens, or adults who entered into systems of prosti tution as children or teens.   A vast majority also includes the Third World women and children.   They are the ones who are often targets of traffickers.   These women and children are enslaved and coerced and brought to western nations for use in brothels and massage parlors, or as mail order brides.   In some Third World countries, â€Å"sex tourism† is very rampant because it offers cheap prostitution. The second group involved in prostitution are the pimps.   About 80-90% of prostitution involves a pimp.... Foremost among the group are the prostitutes. In the U.S., the average age of entry into prostitution is 14 (SAGE, n.d.). This group which takes on the roles of prostitutes includes children or teens, or adults who entered into systems of prostitution as children or teens. A vast majority also includes the Third World women and children. They are the ones who are often targets of traffickers. These women and children are enslaved and coerced and brought to western nations for use in brothels and massage parlors, or as mail order brides. In some Third World countries, â€Å"sex tourism† is very rampant because it offers cheap prostitution. The second group involved in prostitution are the pimps. About 80-90% of prostitution involves a pimp. They are either male or female with different ethnic backgrounds and social status. Pimps â€Å"control the people in prostitution through coercion, force, drug addiction, or the exploitation of economic, physical or emotional vulnerability † (SAGE, n.d.). A major group that is involved in the system of prostitution is the â€Å"demand† side, meaning the â€Å"johns†, â€Å"tricks†, customers and child sexual abusers. These are the people who are into pornography and who go to strip clubs. The other groups who are victims of the system of prostitution are the transgender, lesbian, bisexual and gay youth. Because of the discrimination that they experience from their families and communities, they are often the targets of pimps. Since some societies still find this group unacceptable, prostitution becomes their option for economic survival. Law enforcement agencies and legislators have a role to play too in prostitution. They are the group who can control, eradicate or contribute to the problem of prostitution in the