Starting a Business Musical Instrument Dealership Free Essays

string(97) " of importing instruments of various brand had became a lucrative opportunity for entrepreneurs\." The Opportunity Music has power to attract almost all the people. In a country like Bangladesh historically people have practiced music for a long time. That implies that musical industry can get only bigger and bigger in the future which should increase the demand of the musical instruments. We will write a custom essay sample on Starting a Business: Musical Instrument Dealership or any similar topic only for you Order Now And with only a few competitors the opportunity in musical instrument dealership and selling musical instrument can be really huge. In our research we have observed that now day’s people are very brand conscious. Keeping that in mind we are introducing ESP Guitar for the first time in Bangladesh which is a very much renowned brand in the whole world. It is a Japanese brand who makes electronic guitars and basses. It is a very popular brand in many countries right now. ESP is well known for their stylist guitars and basses. Many popular rock and metal bands are using ESP recently and we believe it will be very popular in our country as well because there are number of rock and metal bands in our country now. We are introducing this new brand because according to our analysis it will give us a competitive advantage over our competitors and it will also differentiate our company from all the major players of the industry. Apart from launching ESP in Bangladesh we are also offering installment system which should attract more students who are the main target customers of our company. With the help of the technical and management team of EBS we are also offering free servicing of the musical instruments. Overall we can say that the opportunity in the music industry is huge. We believe we can capitalize this for our benefit. We intend to do that by our creative idea and meeting all the customers’ needs. Products and Services Tune and Play will sell new and used musical instruments and accessories. Our primary items will be electric and acoustic guitars, amplifiers and electronic keyboards, drams and some local instruments like harmonium, tobla and flute. In addition we will have a full service, on-site repair and customization department (band instruments, guitars and electronics). Tune and Play will offer several name brand instruments such as: †¢ Electric and acoustic guitars by ESP. †¢ Bass Guitar †¢ Keyboards †¢ Pianos †¢ Drums †¢ Amps †¢ Mixer †¢ Microphone †¢ Processor †¢ Sound-Card †¢ Foot-Pedal †¢ Violin †¢ Saxophone A very well stocked accessory department to support the above items. In addition to complete repair services for  our products, we will emphasize upgrades and customization items to develop other income streams our competitors have not considered. When carrying a brand name item conflicts with giving the customer the best all-around value, we will always pursue the product that best suits o ur client’s interest. Marketing Analysis Target Market Our main target customers are musicians who are ready to pay anything for their desired instrument. However within that musician customer,  there are  different segments, ranging from professionals, to semi-professionals, to hobbyists and novices. We intend to target musical novices, hobbyists, and semi-professionals. These groups  include the largest percentage of musicians,  with the greatest amount of disposable income. These  market segments  can generally be approached with the same marketing techniques, and can be very loyal when treated properly. We are also targeting the students of those schools where ‘Music’ is offered as a mandatory course to them. Moreover there are many music school are present at Dhaka, and the numbers are in rise. Reasons for Buying our Product We are the only store in Dhaka who will offer ESP brand instruments for which musicians have a high demand. We will also offer the novice to semi-professional musician, the convenience of a wide selection, unique offers, experienced and reliable staff, and an educationally-focused community center; all in one location Again most musicians need support and service. The instruments that we sell can be difficult or impossible for end users to service. Potential clients tend to seek stores that can fulfill these services through word of mouth referrals or by using direct shopping experiences. These musicians come back time after time if they feel they are getting a fair deal. Therefore, we will ensure enough numbers of technicians for them always, so that they can find solution of their instrument’s problems any time. We will also provide one year warranty for the brand items. Analysis of Marketing Data: To know about the customer preferences and needs towards musical instrument, we conducted a market survey. After successfully completing the survey analysis, we had a more clear idea of what a potential buyer or musician desires from a music store. For our survey, we targeted people whose who are above 15 years old. We found that 53% people prefer rock music, 27% people prefer heavy metal and rest of the people like classical and pop music. 47% people like to buy Guitars from a music store, 27% 1ike to buy Keyboards, 13% like to buy Drums and others prefer to buy some local instruments like Harmonium, Flute etc. We found that people want both cash and installment payment available in the store. We found out, almost 40% people usually buy instruments for their learning purpose, 35% people buy because they are in band, and rest of the people buy by following their favorite artist. 80% people want lifetime free servicing if the instrument is not broken and rest of the people prefer stores should give year-end sales with 10%-15% discount. For people, Dhanmondi, Panthapath and Uttara as the most convenient place fir shopping. Industry Analysis Since the inception of Bangladesh, basic musical instruments were being manufactured by some local manufacturer. The department was being run by some minor players and import for marketing for international brands didn’t exist at all. The market of musical instrument grew massively during late 70s and early 80s when many artists bands were emerging. Demand of many international instruments like guitar, drums started to increase along with those regional instruments. From that time the need of importing instruments of various brand had became a lucrative opportunity for entrepreneurs. You read "Starting a Business: Musical Instrument Dealership" in category "Papers" Further, with the technological advancement and immensely growing demand, more and more instrument seller were becoming available but there was not enough legal and economic support to install any authorized dealership or franchising for the provision of brand demand. Though 40 years back from now Melody Co. , one of the musical instrument dealers, started their business in Old Town of Dhaka during the Pakistan era, they were just a dealer of regional instruments like harmonium, Tablas etc. Industry situation: Although enough growth has taken place in the musical instrument sector but most of it can be attributed to the random brand growth. Similarly Value Added Services have grown but are still a drop in the bucket. Now that the competition has been introduced in the instrument sector some very positive impact have been observed on the growth of the sector in a short span of time which is expected to continue to grow for at least next couple of years. Key Success Factors: †¢ Potentiality of music industry: As the music scenario in Bangladesh is improving and getting the touch of western influence, people are also getting interested in western instruments like electric guitars, drums etc. Emerging brand consciousness: Now days, musicians and artists are being more conscious about the brand. They now prefer brand over cost, as brand represent their image, style and quality. †¢ Globalization: Due to globalization the market in Bangladesh is also getting the attention of the rest of the world. MNC’s from different side of the world also want to access this new market before any of their competitors. So int ernational instruments brands will eagerly enter this market to diversify their risk. †¢ Economic stability: Though being a developing country, economic condition in Bangladesh is now days pretty much stable. So the buying power of Bangladeshi people is also healthy enough for these instrument businesses. Trends: Technological: Technologically Bangladesh is about a couple of years back dated from the developed countries. As a result of that technological advancement in musical instrument is not that significant for last few years. Due to lack of proper knowledge and equipments there is no authorized manufacturing sector for instruments, except those handmade instruments. Political: Politically Bangladesh is a very unstable country. But this specific business has no connection with politics at all. But considering the international DFI or Franchising, political assessment is necessary. Due to political corruptions and instability, Bangladesh is sometimes favorable or unfavorable country for MNCs depending on the situation. Considering the political aspect, this instrument business does not have much to care about. Societal: As this is related with culture and art, societal influence has tremendous impact over our business. Most societies of Bangladesh are conservative and they are attached with traditional Bangladeshi culture. These influence traditional Bangladeshi musical instruments like Harmonium, Tablas etc. But guitars drums are more likely considered as western influence which is sometimes considered as a negative aspect by them. So to certain extent societal factors drive the industry. Assessment of Industry: By considering the five forces of an industry, we can assess our musical instrument industry from five different sides. Bargaining Power of Supplier: In this specific business sector, suppliers have enough power to dominate over instrument dealership business in country like ours. Because of the economic sloth advancement, the suppliers (the brands) do not usually that much care about authorizing dealership in our country. †¢ Also the brands that are more popular in Bangladesh will have a higher demand, any musical store will want to be a licensed dealer of them. †¢ Cost of selecting and switching suppliers is quite high. All these factors determine the supplier’s dominance o ver the industry. Bargaining Power of Buyers: †¢ Presence of a few numbers of stores and dealers. †¢ Cost of buying brand products from abroad is quite high and heavily taxable. These factors determine the buyer’s low power over the industry. Threat of new Entrant: †¢ High opportunity of profitable venture. †¢ The market is not saturated yet. †¢ Low burden of government rules and regulations So, the threats from new entrants are high in this industry. Threats of Substitute: †¢ Substitute products are limited and weak. †¢ Substitute products like other recreational products are not completely substitutable. So, threat of substitute products is quite low even do not exist at all. Rivalry among Competitors: †¢ A very few established stores and dealers are present. Most of the other stores are discrete and unstable, which usually sell those regional instruments like Harmoniums, Tablas. †¢ The cost of production is quite high. †¢ Products are rated at fixed price. †¢ Switching between products is costly. So rivalry among the existing competitors is moderate. It is not extreme because of less switching power of customers and fixed price, and also not much less because of the low number of dealers. Competition Analysis After doing some research we have come with some direct, indirect and also some future competitors of our music store. major ones are identified. 1. Existing huge music stores : In Dhaka city, there are 4-5 huge music stores which are OMNI, World music, Golden music and Music melody. They all have an approximate monthly sale of 10-15 lacs. Among our main competitor OMNI is our main concern. OMNI is the dealer of YAMAHA guitars and Pearl drums, which cost them a huge amount. Their initial investment was 2-3 crore, they business is mainly equity based, they didn’t take any loan because OMNI music store is a part of the huge business group. They reached their break even 4. 5 years. Demand for their music instrument is stable but on some special occasions their sales increase like on valentines day, pahela baishakh, independence day etc. Key success factor are commitment, honesty, right price quality and loyal customer. The other huge music stores mentioned earlier like golden music, music melody, world music whose business share is almost similar. They have a monthly sale of 10-12 lacs. They also bought many different brands that differentiate their music store. Music melody produce some local instruments but in a small scale. [pic] Competitors Position based on Sales 1. Existing small music stores: There are some small competitors in this market. They mainly get their product from the big competitors because investment costs need a huge amount of money to bring instruments. They also sale regionally produced instruments like harmonium, bahala etc. This kind of stores is also our concern because some of them may have the potential to grow as a huge competitor. 2. Future opening of music store: Music appeals everyone in the world. Music industry in Bangladesh is growing at a steady rate. Because now days Nokia, Benson hedges etc are coming up with competition to bring out the talents from our country. This gives even small time musicians grow in confidence to buy some heavy instruments. Also music TV programs in all channels and music schools are establishing in Dhaka this also demand music instruments. So as demand for music instruments are growing, the more there will be openings of music store. Competitive advantage: In order to sustain and expand in this competitive marketplace we will take effective decision and implement them. Our store is providing the product of ESP. We will provide brand uniqueness. Also we will offer some after sale service to our customers who will buy expensive instruments costing more than 50,000tk. We are also providing some different service like: an exchange offer of your instrument with similar instrument but this would not be similar for everyone like we will check the instrument first that decide whether it will be profitable to exchange so that after repairing we can sell it again a good price also sometimes we may require some money with the instrument depending on the product. We will also repair different instruments in our store with a minimum charge of starting tk. 1000. Also we will provide customers with the service of customizing the instruments like color requirements, putting a tattoo or art, band logo on their guitar or other instruments charging differently depending on instrument. These services make our stores different from others. Marketing Plan Pricing Policy: For pricing, we divided our products in two segments. For ESP brand items, we are going to follow cost based pricing policy and for other products, we are going to follow competitor based pricing policy. These pricing strategies will help us sustain in the market, as well as make profit. Cost Based Pricing Policy: In this policy, we would consider all our expenses. These include transportation cost, utility cost, rental cost, promotional cost, storage cost etc. Once we find out all our expenses, we would divide it by the number of instruments kept in our store. This will give us expense per unit. After that, we would add the cost of the instrument itself with the expenses per unit. Then we will add 30% profit margin. An example is shown below: Selling price = Total Cost / ((100-margin) / 100) If Total Cost of a guitar is TK 70,000, then by applying this formula, we get: Selling price = 70, 000 / ((100 – 30) / 100) = TK 100,000 Competitor based pricing policy: This is a method where we will use prices of the competing products as a benchmark instead of considering own costs or the customer demand. This will be applicable for products that my competitors are offering as well. For example guitar accessories, amps, keyboard, piano, drums etc. The reason for selecting this strategy is because it would be really difficult to survive in price wars with my competitors. They have more experience and they are also in this business for a longer time. As a result they have already covered a lot of their investment. This means they can offer products at a lower price than us. Place: Our store will be located in Panthopath, Dhaka. It will be situated near Bashundhara City. Reasons for selecting this place are as follows: -some of my competitors are located here. This means customers will prefer this place, since they have many options. since our store will be outside Bashundhara City, we can operate at a comparatively lower rent. -Panthopath is lucrative place for conducting business. -as there is sufficient transportation facility, people can easily visit our store. -Since there are some jamming pads located near our store, people are likely to pay us a visit. After some years, we are planning to expand our business to some other locations. One of our priorities will be Uttara. This is because looking at the current market scenario, there are no musical stores in Uttara till now. Product: Our main focus is ESP guitars because ESP guitars are unique and are preferred by a lot of the younger generation. They like its exceptional designs. Some of the designs available are X-shaped, V-shaped etc. Besides that, the sound of ESP guitars is good for both riffs and lead guitar. For other guitars, it is tough to match the price of ESP, providing the same quality. Promotion Strategy Our  critical marketing program will be the grand opening, so we will place our initial advertising to give the greatest coverage. Our specific goal for the event is to create a big buzz for the local music community has ever seen regarding a new store. We will target our desired customer base using radio, newspapers, hand leaflet, banners and word of mouth. At present, radio is the easiest way to reach musicians for the simple reason that the love of music is what drives us to become musicians. Newsprint reaches a large portion of the public, letting them see what  we have to  offer before making a trip to the store. Large billboard and banners in different areas and hand leaflets are also very useful way to inform the people about our promotional activities. We will also have regular advertisement in different youth oriented magazines. Another promotional plan is to telecast our advertisements in different area based local cable channels. This is also a useful tool to inform people in economic way. Word of mouth is the one area we really hope to see develop, as a personal endorsement by a customer is worth more to us than what any advertisement can achieve. Distribution: We will follow the following strategies: 1. Direct purchases from manufacturers – generally the best price, but higher minimum orders. 2. Purchases from national distributors – large selections, good prices. 3. Purchases from regional distributors – small selection, average pricing. Management team We believe an efficient management team can increase the productivity of company. And a productive workforce can be an asset for a company and it can provide the company with a competitive advantage over the major players of the industry. We have started this business on the basis of partnership rules and regulation. There are seven partners and we all are the students of North South University. We know each other for a long period of time and we believe with our co operative effort we can make this company a very successful one. As we all are partners of the company and have contributed equally to the initial investment so all of us will be included in the decision making process. But for instant decision making we have prepared an organ gram. |Chairman |M. Riaz Mahmud | |CFO |M. Nahian Morshed | |Board of Directors |M. Faizur Rahman | |Board of Directors |Mustafa Waki Chodhury | |Board of Directors |Mohona Khan | |Board of Directors |M. Shahriar Firoz | |Board of Directors |Rizon Minhazur Rahman | We are hiring 5 sales executives, who will run our store. Our requirement is H. S. C. passed, fluent in English and have basic computer literacy knowledge. We will hire persons who are with good interpersonal skill and can convince the customers easily to buy instrument and behave well with the customer so that they remain loyal and happy with our service. Delivering Process Our business is an import oriented business. So, we’ll have to wholly depend on shipping for the delivery process and also container trucks will also be involved to deliver the instruments as the port is situated in Chittagong and we’ll have to transport the items to Dhaka. Customers will have the responsibility to transport their bought product to their favored destination. For payment to the parent company we will follow the Letter Of Credit (LC) system. In this system, we will get affiliated with an international bank which have subsidiary in Bangladesh. The international bank will have to be selected as the parent company might have trust issues and the international renowned bank will help us gain reliability. As soon as we receive the products, we will issue an LC. As our chosen company ESP is an established brand worldwide, they will take responsibility for the shipments. We had to get a license of ESP to get their permission of selling their product. The licensing took a great toll of our investment as we had to pay BDT. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ to ESP. According to the license, we need to achieve some requirements which are their benchmarks. †¢ We had to show projected sales and their requirement was to achieve an average of BDT. 50 lakh mark yearly within 5 years. †¢ We had to show them our work on balance sheet, income statement and break even analysis as they were looking into our business’ feasibility. †¢ Also they checked the location of the store to find out if enough demand will be generated from the â€Å"place† factor of four P’s. We reached an agreement that we will to train our servicing employees according to their training methods to create the same environment and to comply with their customer service. †¢ We also had to show them an overview of the demand of their brand ESP in Bangladesh. Financial Projections Income Statement Our income statement is initiated with finding out the sales of first month and it is utterly based on our surveys. We first found out the total market value in terms of BDT. We went through our surveys and found out the competitors’ yearly sales and the total represents the presumable market size. As we are in the initiation stage we are assuming to get a hold of no more than three percent (3%) of the market size. We did a sales forecast for every month. For starters, we assumed a growth rate of 0. 5 percent for the first three months which gradually increased to 1 percent and later we ended the first year with a growth rate of 2% in the last three months. The increasing growth rate will be as a consequence of our extensive marketing policies. The first year’s growth rate being only 12. 65% percent, we had to incur losses in every month. The econd year, the yearly growth rate we have assumed will be 12. 68% owing to the steady growth rate every month. And third year we expect a growth rate of 16% approximately. For our cost of goods sold, we presumed forty percent (40%) of our sales and we counted our sales discount to be 2. 5%. Another variable cost is sales commission of one percent (1%) of sales which is categorized as selling expenses. Fixed costs include both selli ng and administrative expenses. Selling expenses include store salaries of BDT. 20,000 per month, rent of BDT. 50,000 per month, advertising expenses of BDT. 5,000 per month, utility of BDT. 5,000 per month and depreciation expenses of BDT. 250 per month. The administrative fixed costs consist of salaries which is monthly BDT. 10,000, utility monthly 2,000, insurance monthly BDT. 2,000 and depreciation expenses of BDT. 200 per month. We expect to reach the break even in 6. 62 years and we have shown income statements for 10 years just for getting an idea of the net income in following years. Sensitivity: We have shown sensitivity analysis changing the sales revenue by five percent in both directions. For worst case scenario with 5% downfall in sales, our net loss in first year will rise by more than BDT. 70,000. In the most likely case, we also incur a loss of BDT. 105,000 approximately and best case scenarios with 5% sales increment, net profit will be almost BDT. 33,000. For 2nd year, most likely case scenario will produce a profit of BDT. 342,566 and worst case scenario will produce profit of BDT. 155,858. But, the best case scenario will generate less net income than most likely case because of tax rules. The 3rd year most likely case will see us earn a net income of BDT. 04,398. We have also assumed the worst case and best cases and if that happens we will have net income of BDT 508,314 and BDT 700,483 respectively. Cash-Flow Statement Cash flow statement is the way of constructing the cash inflows and outflows according to type of activities such as operating, investing and financing activities. It gives us the idea about if the company will be profitable over the years by generating sufficient cash and if it will be able to pay off its debt. We have done cash flow statements for 8 years and those will be included in the appendices. For our cash flows, we followed direct method starting with the operating activities which includes inflow from sales revenue and outflows from different expenses like cash paid to suppliers, salaries expenses, rent expenses, sales commission, advertising expenses etc. in investing activities, outflows includes BDT. 10,000,000 of purchasing of assets, other investment of BDT. 1,000,000 and purchasing of contract of rent BDT. 1,000,000 and there are no inflows. Financing activities has inflows form loan and owners investment worth BDT. 8,000,000 and BDT. 7,000,000 respectively. Cash outflows from financing includes loan payment of BDT. 171,438 per month. The payment of installment continues till year 7 when we paid off our debt. Our total cash flow will be negative till year 4, first quarter and since then its uprising. But we maintained a cash balance from the beginning generated from loan which will see us through these periods. From first year, our cash balance is reduced to BDT. 2,004,607 from BDT. 2,910,411 which is the starting balance of the first month. Second year it is reduce to BDT. 1,398,301 and by the end of year three the cash balance will be BDT. 20,853. Sensitivity: The sensitivity analysis of every year attached to appendices will show how much the expected cash flows can differ when we consider worst possible and best possible cases. The first year’s best case is likely to reduce the outflows by about BDT. 120,000 but the worst scenario will increase outflows by about BDT. 117,000. the second and third years’ sensitivity anal ysis shows the same effect reducing or increasing the cash outflows in best and worst cases respectively. Balance Sheet Our balance sheet shows how much the venture capitalist can depend on our business. In the balance sheet we tried to figure out the total asset each year as the first objective of a business is to maximize the value of its assets. We also showed if the assets matched the liabilities. Our total assets included cash, inventories, receivables, other current assets categorized as current assets and long term assets consists of non current assets, accumulated depreciation etc. Current liabilities are payables, short term debt and others while non current liabilities are long term debt and others and these two makes up the liabilities part. Equity has only common equity invested by the owners. For most of these items, we tried to maintain a specific percentage of sales such as for inventories, we maintained 20. 69% of sales, 40. 14% of sales as short term debt etc because we know these items are vulnerable to the change of sales and move in the same direction. Our first year’s total assets are BDT. 17,350,008 while the next two years it went down to BDT. 16,912,962 and BDT. 16,623,039. This can be associated with the increment in negative cash flows or increase in outflows. But it’s uprising from then as we expect it to rise as high as BDT. 5,481,609 in eight years. A significant change occurs in year seven as we reach break even; our total assets rises from about 20 million to above 24. 5 million. This is because of the rise in cash balance that year after recuperating the total investment. Sensitivity: By changing the sales by 5% positively and negatively, we found out the best and worst case scenarios which can contribute to the change of our total assets. Again, as we are looking to maximize the value of our assets, we have to be conscious about what the best and worst situations can do to our business. For the first two years, the worst case scenario doesn’t do much damage as the reductions in total assets are by about BDT. 50,000 from the most likely scenarios; BDT. 17,292,408 in first year and BDT. 16,846,620 in second year. While the best case scenarios in the first two years see our total assets to rise to BDT. 17,407,482 and BDT. 16,979,158. The third year the change about BDT. 75,000 in both cases as the best case scenario puts our total assets to BDT. 16,698,871 and the worst case to BDT. 16,547,041. For al these time, the increases and decreases in total assets are backed by the retained earnings portion of owner’s equity. Breakeven: |Pay Back | | | | | | | |Initial Investment | -15,000,000. 00 | | |Year 1 | 1,061,866. 91 | -13,938,133. 09 | |Year 2 | 1,450,954. 8 | -12,487,178. 20 | |Year 3 | 1,739,046. 20 | -10,748,132. 00 | |Year 4 | 2,119,043. 11 | -8,629,088. 89 | |Year 5 | 2,667,444. 37 | -5,961,644. 52 | |Year 6 | 3,328,314. 32 | -2,633,330. 20 | |Year 7 | 4,203,767. 76 | ,570,437. 55 | |Year 8 | 4,366,613. 47 | 5,937,051. 02 | | | | | | | 11,517. 17 | | | |228. 6438216 | | | |0. 26421429 | | |Pay back in years |6. 626421429 | | Exit Strategy: Our ongoing business is Musical instrument dealership. Our exit strategy is a mixture of liquidation and our own strategy. First we will liquidate some percentage of our assets. We are planning to sell those underperforming assets at a lower price and we will also invest some additional capital to establish a diversified service line. This will be actually a recording studio as we are planning to seize the opportunity created by lack of recording studio in Bangladesh. We are planning to open a recording studio which will contribute to the uprising music scenario in Bangladesh. Due to lack of quality music studios, we believe our exit plan from musical instrument dealership to recording studio will shift our position from decay to a growing stage in company life cycle. It will be our long term plan because we do not want to loose the face value of the product. Initial Investment: Rent (4 months)= Tk. 200,000 Equipments (Estimated Average per unit) Electric Guitar(5*30,000) |150,000 | |Bass Guitar(5*30,000) |150,000 | |Acoustic Guitar(20*3000) |60,000 | |Piano(2*100,000) |200,000 | |Keyboard(10*20,000) |200,000 | |Drums(5*30,000) |150,000 | |Mixer(3*50,000) |150,000 | |Microphone(5*10,000) 50,000 | |Processor(5*20,000) |100,000 | |Accessories(Strings, Cables, Tuners etc) |90,0000 | |Other Equipments |100, 000 | |Total |1,400,000 | Estimated Initial Marketing Cost=300,000 Furniture=100,000 Reserve For Cash Requirements=3,000,000 Dealership Cost=10,000,000 Total Initial Investment=15,000,000 Conclusion We have worked on this business plan for the last three months and gathered all the related information about the music industry. After analyzing all the data we have came up with the idea investing in this business can be really challenging but profitable. If we can survive through the initial trouble we can diversify our business by investing in different regions of Bangladesh. In the era of communication people are very fond of the creative ideas and we believe our business is creative and unique enough to attract the potential customers. Reference: www. google. com www. yahoo. com acct. tamu. edu/smith/acctwebs. htm Haque, Akkas Ashif (2008) ‘Three taxes of Bangladesh’ How to cite Starting a Business: Musical Instrument Dealership, Papers

Ethical Issues and Financial Analysis Case Study †Free Samples

Question: Discuss About the Ethical Issues and Financial Analysis? Answer: Introducation Through this report, various case studies have been analyzed with reference to their ethical position, financial information and disclosures, ethical dilemmas and the review of an article mentioned in the Business review. The aim of the report is to confine the readers and the users with knowledge and meaning of the concept of ethics and finance. The report has been framed with the executive summary summarizing the start of the report and the major aim of preparing the report. Then the brief introduction has been given for whole of the report detailing the structure of the report. Then the first case study has been discussed with respect to the questions asked and it deals with the ethical and governance issues. The second case study has been discussed which deals with the financial analysis of the annual report of the company namely David Jones Limited. The third case study is dealt with the decision about whether to do or not do something as to whether the company shall engage the particular accounting firm or not and what are the requirements of getting the same selected. Then in the fourth case study the ethical issues have been discussed with auditing issues and scope of the work of audit committee and that last case study is the literature review of any article published in the Business Review Weekly. With these considerations, the report has been bifurcated in different sections and headings followed by the adequate and proper conclusion and recommendation. Etihics and Governance Each person shall follow some code of conducts either defined by the law or defined by the religious statutes or defined by the inner morality of the person dealing with many situations. If no person follows the ethics then he or she will face the difficulty of doing any kind of work in an effective and efficient manner. The Governance is related to the world which means that all the activities of individuals those working in the company or working in their day to day life shall be governed in the proper manner and it shall be so governed by the top management of the organization or the inherent code of conducts which has been provided by the relevant laws or statutes (Dandino, 2016). Thus, the concept of ethics and governance are inter related and have to be worked simultaneously. It is so said in the sense that if ethics are there without the governance system then no one will be ready to follow the ethics and in other sense if governance system was there but without ethics then the purpose of having the governance will be futile. Thus, ethics and governance needs to be worked simultaneously (Andrews, 2011 and Arjoon, 2016). In the given case, Vicky have to go home and have given her friend Becks to buy the accounting text book on her behalf and she has given $100 to him and said that keep the balance after returning from home. The market price of the text book is $85. After few days Becks went to the shop and finds that the book seller was engaged in selling the second hand book for $65 to the students. This second hand book is really in new frame and looks like it is the new one. By seeing this, he has purchase the accounting text book for $65 and thought that he will be able to gain $20 and giving the $15 back to his friend Vicky and Vicky would not find it possible to identify whether it is the second hand book or the new one. In respect of the above case study, the following have been answered: Stakeholders in the situation - Stakeholders are the persons who have the requisite interest in the matter in which they are dealing. For instance in case of the organizations stakeholders are the persons who have interest in the affairs of the organization like shareholders, financial institutions and other lenders, employees and government, etc. In the given case study stakeholders are Vicky and Beck. Vicky is regarded as the stakeholder in the sense that she has given the amount of $100 to her friend Becks in the view that he will purchase the best accounting text book for her which is available in the market at $85 and remaining $15 she will obtain from Becks after she returns from the home. Beck is regarded as the second stakeholder in this situation in the sense that the he has to purchase the accounting text book on the behalf of her friend and is liable to return the balance amount along with the accounting text book to her (Fontaine, 2016 and Philips, 2014). Involved Ethical Issues Ethical issues means that whether the ethics involved in the case study are positive in nature or negative in nature. As per the case study, the ethical issues are involved in the terms of finance, compliance and personnel. Ethics in the terms of the finance includes the manipulation with the available funds of the Vicky as the same has been given in the view that the accounting text book as bought will be new but opposite has been happened. Beck has knowingly bought second hand book in the urge of having the financial gain of $20 and hence manipulated the financial figures to Vicky. Ethics in terms of the compliance is involved in the sense that Beck has not complied with the defined stipulations of buying the new accounting text book and hence has violated the issues. Ethics in personnel includes the situation where Beck has not maintained the transparency and fairness of the transaction so entered. Our View If I would have been in the situation of Becks, then I would have purchased the books as per the requirement of Vicky and in case she finds herself okay with second hand book then I would have purchased that and have returned the remaining amount to her without any motive of cheating her or making any gain out of the work so done (Weisul, 2012). Financial Analysis The financial analysis of the company David Jones Limited has been made with reference to annual report of the company for the year ending 2013 in view of the following parameters: Main activities and operations - The company is registered and listed in Australia and is engaged in the business of up market departmental store since its inception. It is the subsidiary of Woolworths Holdings Limited which is also engaged in the business of departmental store and is one of the leading companies in Australia. David Jones limited was founded in the year 1838 in Australia by Mr David Jones thereafter it has been expanding since then. In today scenario the company has 43 stores in Australia. The business operations of the company have been bifurcated in the four segments namely fashion and beauty, lifestyle, home and food and electrical appliances. Each segment of the company provides various products ranging not only for the adults or teenager but also for the kid and children and even new born babies. They have the online shopping model where you can place the order and track it till the order is received. Also they have their different stores where everyone can go a nd buy the products as per the defined needs and expectations. They have also opened the financial model where the financing is also being given to their customers (David Jones Limited Official Website, 2013). Chief Executive Officer and Chief Financial Officer - As per the annual report of the company for the year ending 2013, Paul Zahra is the Chief Executive Officer of the company and Brad Soller is the Chief Financial Officer of the company (David Jones Limited Official Website, 2013). Important Financing and Investing Decision - As per the Notes to the accounts of the financial statements, the company has hedged its currency exposures by holding the derivative instruments. These derivatives include the futures, options and derivative contracts. The major investment decision that the company has taken is that to get itself merged into the Woolworths Holding Limited and in the forthcoming year ending 2014 the company has been merged into the Woolworths Holding Limited (David Jones Limited Official Website, 2013). Directors Declaration in relation to the Information in the Financial Statements Following declarations have been made by the directors in their report that That the directors are fully responsible for the preparation and management of the financial statements and the notes to the financial statements and the annexed schedules if any. That the financial statements so prepared shall be for the interest of the shareholders as well as the stakeholders That the financial information so contained shall be provided with full set of the financial statements to the external auditors of the company That the external auditors of the company are required to take an independent examination in accordance with the relevant accounting standards and auditing assurance standards duly standardized by the Australia accounting standards board. That the financial statements containing financial information are prepared in accordance with the International Financial Reporting Standards and the provisions of the Corporations Act 2001. That further declaration is made that the financial statements containing the financial information so prepared with the application of the going concern assumption and the material respect of prudence (David Jones Limited Official Website, 2013). Compliance with the ASXCGC In the annual report of the company it has been mentioned and declared under the heading Statement of Compliance that the company has complied with the Australian Securities Exchange Corporate Governance council, corporate governance principles and recommendation and the provisions of the Corporations Act 2001. Also the companies in its Statement of Corporate Governance have laid down the eight principles and have mentioned its compliances. Independent Auditors Report Following have been addressed in accordance with the independent auditors report- Companys audit firm is Ernst and Young Global Limited and audit partner was Graeme Mc Kenzie Statement of Auditors in relation to Accounting Information That the responsibility of the auditors are to express their opinion of the financial statements of the company in the form of auditor report That the company and its management is fully responsible for the preparation and management of the financial statements including the notes to accounts That the audit has been conducted with the Auditing Standards of Australia (David Jones Limited Official Website, 2013) Statement in relation to Independence That the audit opinion so formed on the financial statements is totally independent and is free from any bias or any error. That no contraventions have been observed in relation to auditor independence within the requirement of the Corporations Act 2001 (David Jones Limited Official Website, 2013). Money other than Audit fees received by the Auditor As per the note detailing the auditor remuneration, it has been observed that apart of $495500 received for the auditing and reviewing of the financial statements, the amount of $163568 have been received on account of Assurance related services and the taxation services (David Jones Limited Official Website, 2013). Decision Analysis List of factors for selecting the accounting firm: The accounting firm shall process all the bills, invoices, payment and receipts in the timely manner The firm shall have adequate staff which can fulfill the requirements of the company The firm shall have competent staff that shall be able to handle the accounts and financials of the company. That the accounting firm shall give the competitive rates. It shall not be too much low and shall not be too much higher. List of services for selecting the accounting firm: Daily maintenance of books of accounts Reviewing the bills and invoices Follow up with parties for making and receiving the payments Relationship with the banks Compliance with the requirements of the different and applicable laws for the time being in force. Reconciliation with the bank and parties accounts Ethical Dilemma As per the requirements of the Corporations Act 2001 along with Australia Prudential Ethical Standards 110, the management of the company, board of directors, is required for the preparation of the financial statements of the company and the auditors are required to express their opinion on the financial statements of the company by applying their judgment and full independence. Further the audit committee is responsible for ensuring that all the compliances as listed in acts or laws or any standards have been made and have been properly discussed and disclosed appropriately (Arthur, 2016 and Metzger, 2013). The chief executive officer of the company is not in the picture of ensuring the compliances as the same work have been entrusted to the audit committee. In the given case the member of the audit committee raised the question that the impact of financial crisis in the year 2009 has not been mentioned in the agenda to the meeting of the audit committee. The clarification that he has received from the other member is that the Chief Executive officer of the company has said that the same has not any type of effect and thus its not useful to introduce as the agenda and also the compliance audit is also not required to be done. If I would be in that situation, then it would have been discussed in the meeting of the audit committee and have properly laid down the duties and responsibilities that lies with the chief executive officer and the relevant instructions shall be made to do the compliance audit and make the report thereon. Critical Thinking Marketing is tool for a business to express about its products and services to its prospective client to have revenue by selling goods and providing services to these clients by the company. The marketing is done by marketing department of the company in the forms of slogans, packet design, involvement any celebrity and other social media activities. For example making a feedback call, writing a thank you mail to customers are some marketing tools commonly used by the company now a days. The marketing is depend on four P elements which are known as Four Ps of marketing that are Price, Promotion, Product and Place. Before planning of marketing strategy by marketing department these factors are always taken into account to get good returns from the marketing. Marketing Strategy in Recession In an economy, when the economy is growing at a good pace, the quality products and services provided by the company are their marketing tools for attracting the customers and main focus of the companies are to have increased volume of revenue in addition to reduced expenditure on marketing. But in case when economy is going towards recession, every company and its management is getting concern about the revenue to be earned and then the management put pressure on the marketing division to identify new marketing strategy from which they can attract customers even if the purchasing power of the customer is reducing. The Finance division managers generally do non-sense things at the time of pressure on them in recession. This involves firing of employees at lower levels to reduce the cost and increase the margins, new products and services are initiated in the markets, cutting the costs related to marketing without knowing wants and requirements of the customers present in market at the time of recession. Most analysist says that the best time for doing the marketing is the recession time. In the recession time revenue is dropping and if the good marketing strategy applies at the time with full focused to gather the customers attention on the products and services, the company can do wonders. Following are the things which require to be done at the time recession by the company:- If the company has monopoly in the market, then only company should launch new product in the market to get the attention of the customers. And if the company has no monopoly then the company should focus on its key bran product and services which are already in the market and liked by the customers. For example, in case of Samsung, during recession of 2010 and 2011, the company shifted the focus to its galaxy brand and able to sustain in the market. The advertisements in recession times should be more attractive, lucrative, and creative and sometimes includes funny things to attraction the attention of customers in down time. Taking a feedback in bad times plays a major key role at the time of recession in marketing. People have a tendency of not taking feedback at the time of their low period but feedback at this time is very necessary to know whether there is any positive things in the negative feedback can be extracted. And if this could able to do by manager then company can use that positive point and can do miracles. Thus, in order to conclude, the bad time is good time for creating and establishing the exiting brand to deeper into the market and in the minds of customers. Conclusion The report has laid down different cases study and their analysis. In the first case study, it is observed that the act of Beck is unethical. In the second case study, the annual report of the company has been analyzed. Third case study has detailed the factors required from an accounting firm and requirements to appoint accounting firm. Fourth case study has described the responsibility of audit committee and Last case study has reviewed the marketing strategy. Thus, its recommended to follow the guidelines as prescribed and follow ethics in any kind of work. References Andrews K., (2011), Ethics in Practice : Managing the Moral Corporation, Harward Business Review School Press. Arjoon S. , J. Gopal, (2016), Ethical Orientation for Future Managers : The Case of Trinidad, Social and Economic Studies, pages 98-114. Arthur, (2016), Whats wrong with Tread way commission report?, Journal of Business Ethics, pages 183-193. Dandino P. (2016), Corporate Governance : Something for everyone, Franchising World, pages 40-41. David Jones Limited Official Website, (2013), Annual Report available on https://www.davidjones.com.au/Jones accessed on 07/05/2017 Fontaine C (2016), The Stakeholder Theory available on https://www.martonomily.com/sites/default/files/attach/Stakeholders%20theory.pdf accessed on 07/05/2017 Metzger M (2003) The Organization of Ethics and Ethics of Organization : The case for Expanded Organizational Ethics Audits Business Ethics Quarterly, pages 27-43. Phillips R., (2014), Some key questions about Stakeholder Theory, IVEY Business Journal . Weisul K., (2012), You mean cheating is wrong? Business Week Iss

The Effect of Competition, Jit and Tqm Essay Example

The Effect of Competition, Jit and Tqm Essay Journal of Economic and Social Research 10(1) 2008, 35-72 The Effect of Competition, Just In Time Production and Total Quality Management on the Use of Multiple Performance Measures: An Empirical Study Melek Eker* Fikri Pala Abstract. This paper is an empirical investigation into the use of multiple performance measures in manufacturing organizations. Specifically, the relationship between multiple performance measurement system and competition factors, JIT practices and TQM practices is examined through the data collected from 122 manufacturing firms from the Turkish top 500 companies in 2005. The results show there is a linear relationship between using multidimensional performance measurement system and the firms that have high market position are those that are using JIT and TQM more than others. JEL Classification Codes: D29, M29. Keywords: Multiple Performance Measures, Competition, Just in Time Production (JIT), Total Quality Management (TQM), Factor Analysis, Multi-nominal logistic Regression Analysis. 1. Introduction Performance measurement is a concept of modem business administration history. The organizations in the market have to identify with concepts such as dynamism, scarce resources and complexity and have to show high performance to survive thereby needing to measure and to evaluate their performances accurately. This means for firms that performance measurement is more than a systematic action, but today, performance measurement and evaluation system is the most important managerial tool for organizations. Nowadays, because of high specialization, division of labour and high competition, its clear that performance should be thought more Department of Management, Uludag University, Bursa. Department of Management, Uludag University, Bursa. 36 Melek Eker Fikri Pala elaborately as a concept and discussed not in a result-focused but in a process-focused way. (Albright, 2006:157-174; Yasin and et al. , 2005: 323). In this context, it will be possible to state two types of criteria conteming the performance measurement in organizations. These are financial and nonfina ncial performance criteria. Financial criteria evaluate the performance in terms of monetary assets gained and therefore attach importance to the result. We will write a custom essay sample on The Effect of Competition, Jit and Tqm specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on The Effect of Competition, Jit and Tqm specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on The Effect of Competition, Jit and Tqm specifically for you FOR ONLY $16.38 $13.9/page Hire Writer On the other hand, a non-financial criterion evaluate the performance in terms of units or divisions and work processes in a company and highlights the actions that provide final financial result and enable its sustainability. Its possible to separate performance criteria theoretically, but both are linked practically. In fact, firms are organizations in business to make a profit, but today it is possible to argue that there are various functions in organizations and therefore financial performance is likely to be affected much more by non-financial processes. Hence, performance measurement has to have a structure containing both flnancial and non-financial criteria. (Wruck and Jensen, 1998:401^23). Due to its effect on how successful firms are, performance measurement system has to contain accurate and reliable information, which is so critical to business organizations because of its roles in future planning, evaluation of targets and actual results, and decision-making matters affecting employees are all based on the strength of the information contained in performance measurement evaluative processes. However, the more important point needing to be noted here is that generally the meaning of performance for organizations has become limited to only profitability or financial incomes. Undoubtedly, firms are profltbased organizations, but more than that, they have to be sustainable. Making profitability sustainable depends on managers abilities to see all developments in and around firms and evaluate them according to future results. So, this underlines that the concept of performance should not be confined only to financial results, but also should have a wide meaning including the non-financial criteria as well. Balanced Scorecard (BSC) is a performance measurement model, which was proposed as a result of this obligation. Three reasons for using multiple performance measures are: (1) perceived limitations in traditional accounting-based measures, (2) Fisher (1995) ndicates that many firms believe that financial measures are too historical and backward-looking, lack predictive ability to explain future The Effect of Competition, Just In Time Production and Total Quality 37 Management on the Use of Multiple Performance Measures: An Empirical Study increasing competitive pressure and (3) applying new management techniques like TQM and JIT needed for non-financial measures (Itner and Larcker, 1998: 217-218). Performance should therefore not be interpreted only as profit-focused activities but also as non-financial activities directed toward obtaining or following profit process. This kind of new comprehension on performance measures points to changing perception of firms toward performance. In this context, improvements in information technology make it easy to observe internal and external business processes, consequently making it possible to apply BSC. (Donovan, 1-3). Hitherto studies have shown that the use of non-financial performance measures by the firms is directly related to such variables as market competition, computer aided production, new production techniques, the structure of firm (size, culture, technological situation and adopted strategy etc. ) and sector structure. The aim of this study is to determine whether the multidimensional performance measures are used or not by the manufactures of top 500 firms in Turkey and if theyre used, to define the relationship between multidimensional performance measures and. firms market position, market competitive density degree, JIT and TQM practices. In this context, first the literature and the developed hypotheses on the subject will be reviewed and then the designation of sampling and factor analysis, descriptive statistics, multi-correlation and multinomial logistic regression analysis results will be described together with the results from our empirical study. 2. Literature Review and Hypotheses 2. 1. Literature Review Many factors contribute to why many firms prefer non-fihancial performance measures. In view of this, some researchers suggest that the preference for these measures on a large scale is related to the enterprises operational and competitive structure (Said, et. l. , 2003: 193-223), others suggest that this preference can be related to the JIT, TQM and CAM structure (Hoque, et. al 2001: 23-45). Similarly, while many reported that the use of multiple performance measures is relevant only to the strategic preference of managers (Malina and Selto, 2001:48; Govindarajan and performance, reward short-term or incorr ect behaviour, provide little information on root causes or solutions to problems, and give inadequate consideration to difficult to quantify intangible assets such as intellectual capital. 38 Melek Eker Fikri Pala Gupta, 1985: 51-66), some reports demonstrate that an enterprises environmental conditions affect this preference. On this subject, for example. Hoque (2004) found that there was a meaningful relationship between environmental uncertainties and the preference for these measures. Chenhall and Morris (1986: 16-35) found that organizations prefer nonfmancial management accounting systems to cope with high environmental uncertainties effectively. The use of multiple performance measures and its positive effect on production performance are demonstrated in another section of the literature. For example. Banker, Potter and Schroeder (1993: 33-55) stated that multidimensional performance measurement system reports presented to the personnel in production line was positively associated with the implementation of modem management techniques such as JIT, Team Work and TQM. However, Chenhall (1997: 187-206), Callen, et al. (2005: 271309), Itner and Larcker (1995: 1-34) examined the use of BSC together with the aforementioned modem techniques and argued that enterprises using the TQM/JIT and non-financial (production performance) measurements together have reached a higher performance than other firms without these measurements. Additionally, many studies examine the positive contribution of multiple performance measures on the general enterprise performance from the fmancial perspective. For example, Davies Albright (2004: 135-153) and Dilber et al (2005: 220) argued that there is a meaningful positive relationship between the use of BSC and high-level fmancial performance. In an empirical study by James, Hoque (2000: 1-17) demonstrates that the use of BSC increases general enterprise performance, but this increase is not associated with organization size, product life circle, or market position. Lingle and Schiemann (1996: 56-61) found that enterprises managed by measurements reached a higher fmancial performance level, a higher industrial position and a higher level in the management process relative to enterprises that are not managed by measurements. Ittnera, Larckera and Randalb (2003: 715-741) indicated that the enterprises placing more emphasis on measurement and variety have acquired a much higher stock exchange income. Perera, Harrison and Poole (1997: 557-572) argue that the use of non-financial measures show significant associations with customer focused strategy, but not the link to organizational performance. Apart from studies examining BSC effects on general enterprise performance, other studies have examined the enterprises suitable working The Effect of Competition, Just In Time Production and Total Quality 39 Management on the Use of Multiple Performance Measures: An Empirical Study conditions as an effective performance measurement tool in BSC. For instance, Cavalluzzo and Ittnera (2004: 243-267) state that organizational factors such as willingness in the top management directed at the use of performance knowledge, decision making and training in the subject of performance measurement techniques have a positive effect on measurement system development and usage. Also, Moers (2005: 67-80) called significant attention to the positive relationship between the variety of performance measures and the degree of perfection with bias during the performance evaluation. It is clear that the bias mentioned here indicates a pre-cognitive accumulation directed at performance measurement. On the other hand, Krumwiede (1998: 239-278) suggested that organizations with higher quality information systems could implement new measurement systems comfortably relative to companies with less sophisticated information systems. Thus, he suggests that this highlights the linear relationship between opportunities for existing information systems and the success of implementation. In addition, he draws attention to managers^ who are satisfied with information from the existing system that might not be willing to invest in new systems. This will give way to the development of a negative relationship between the system and its implementation. Briefly, these studies, within a framework related to literature conceming multidimensional performance measurement system, draw attention to the use of multiple performance measures by enterprises associated with the anagers preference, specifically, the enterprise managers scientific level, organizational culture, environmental conditions, technological developments, new management techniques, enterprise performance and indirectly, stock exchange incomes. Our study considers the relationship between the four dimensions that occur in BSC (financial, customer, internal business processes, learning and growth); a) with the enterprises position in the market, b) with the level of competition in the market, c) with the JIT pra ctices and d) with the TQM practices. 2. 2. Variables and Hypotheses 2. . 1. Balanced Scorecard BSC created firstly by Kaplan and Norton in 1992 at the end of pursuits on altemative planning, control and performance measurement system in 40 Melek Eker Fikri Pala management accounting, is an efficient management tool (Kaplan and Norton: 1992). The target is to enable managers to obtain comprehensive viewpoint about overall business and in this way help them focus more on critical activities that are supposed to improve the organizational strategy of the firm (Wongrassamee, et. al. 2003: 18). In that way, BSC undertakes two crucial functions. First is being a strategic guide for department managers. Second is being communication and strategic planning tool describing the link between financial and nonfinancial criteria as a guide for firms (Kaplan and Norton 1996; Kaplan and Atkinson, 1998: 367-375; Atkinson, Kaplan and Young: 2004; Simons: 2000). Using BSC provides some opportunities to managers on subjects like ability to evaluate changes around a firm, to determine and evaluate the processes of the aims of a firm, to check whether internal performance targets are achieved or not and sustaining the continuation of improvements, in the final analysis. Four dimensions of BSC and derived indicators have created these opportunities. These four dimensions or perspectives will be explained briefiy. Financial performance measures; they are the focal point for the target and measures of other three perspectives in BSC. In this sense, financial performance measures can be considered as the outcome of operational activities (Rao: 2000). Therefore, each selected measure should be a part of the cause-and-effect relationship leading to an improvement in financial performance. These measures are items such as sales amount, market share, new customers, new markets, cash now, return on capital, etc. (Morrow, 1992: 145). Customer performance measures; today, being customer-focused is one of important items for firms, so at the same time its a kind of important expression of vision and mission. In this sense specific measures reflecting critical factors like time, quality, cost should be determined. Customer satisfaction, improving costumer loyalty, gaining new customers, customer profitability, and market and customer shares in targeted scope are basic measures. Internal operation measures; these are obtained from critical success factors which are effective on providing shareholder and customer satisfaction by focusing on work processes and activities (Keegan, Eiler and The Effect of Competition, Just In Time Production and Total Quality 41 Management on the Use of Multiple Performance Measures: An Empirical Study Jones, 1989: 45-49). But, the most important point here is that to create value for both customer and shareholder, it is necessary to define and measure an exact intemal operation value chain at the designing and development stage, production and commercializing (Eker, 2004:128). These measures include the duration of presenting new product to the market, number of new products, sales percentage of new products, rate of defect, duration of production, production cost, just-in-time delivery, etc. Leaming and growth measures; making real the ideals related with financial, customer and intemal operations highly depend on the learning and growth capacity of an organization. In leaming and growth measures especially, it investigates and measures what sort of methods to be followed for increasing the growth of intemal operation methods, which measures are employee satisfaction, productivity and sustainability ofthe employees. 2. 2. 2. Market Competition One of the distinguishing factors of the use of multiple performance measures by the firms is the competition environment in the market. As the market competition increases, the firms are likely to need multidimensional performance measurement system more than before in rder not to lose their power and market share. Also, the measures included in multidimensional performance measurement system (BSC) are known to increase the level of competitiveness by monitoring the static and dynamic capabilities of the firms (Hoque, Mia and Alam, 2001: 26). If its considered that the world has become a single market in global scale, in such a condition, its necessary for a firm to have the capability of offering speedy customer service (reliability), high quality and low cost, different and new product/service in order to be dominant in its own sector. Furthermore, all these need to be supported by total and coordinated organization efforts and also by performance measurement systems serving the same objectives within the organization. BSC is not only satisfied with following the financial performance of the firm, but it could also be functional by monitoring non-financial performances like customer satisfaction, renewal via quality production, which are essential to sustaining the competitive advantage (Otiey, 1999: 363-382; Howell and Soucy, 1987: 27; Trussel and Bitnet, 1998:441). 2 Melek Eker Fikri Pala 2. 2. 3 Just-In-Time Production It is possible to observe that traditional performance measurement system is inconsistent with JIT system benefiting from technological innovations at a maximum level and also that it prevents or hides broadbased effectiveness of new production methods. In this sense, the restrictions of traditional measurement system in JIT environment might be listed as follows: Continuous development in produc tion process is basic element in JIT manufacturing environment. To reach this aim easily, its intended to make flow of production possible with minimal parties and decreasing stock levels to a minimum. Yet, production and productivity measures of traditional understanding have reported that the productivity is low when small-lot production is made (Drury, 1990: 40-41). For this reason, traditional accounting system suggests increasing batch capacity rather than decreasing lot size, which leads to raising stock levels, long supply process, ihcreasing cost and declining customer satisfaction (DonoVah, 2-3; Mcnair, Lynch and Cross, 1990: 29). As in standard costing, appropriate operational control of traditional accounting system cannot be carried out in todays production environment (Allott, 2000: 54-56; Cheatham and Cheatham: 1996; Ezzamel, 1992: 117). Besides, due to the reliability and consistency of manufacturing processes in JIT environment, deviations do not exist or exist in quite low level and it also leads to less use of deviation analyses. JIT manufacturing system changes will bring about changes in information requirements (Upton, 1998:110). As it is known, normally traditional performance reporting is prepared monthly or weekly and cannot detect on time real reasons of processes that are not realized as expected. Yet, in JIT production system there is a possibility of short production cycle, so it requires information for the problems coming out in accordance with one-day or real time principal. In current production environment, direct labor cost is between 5%15% of total product cost. In this sense, traditional accounting system is likely to exaggerate the importance of labor cost and The Effect of Competition, Just In Time Production and Total Quality 43 Management on the Use of Multiple Performance Measures: An Empirical Study ignores the control and measurement methods of increasing general production costs. Another limitation of traditional accounting system is its failure in reporting the criteria such as quality, reliability, supply duration, flexibility, and customer satisfaction (Johnson, 1990:63). As a result of this, management and the employees are encouraged to focus only on costs rather than those critical success factors. Consequently, JIT production system is in need of a performance measurement system that will follow, measure and report critical success factors such as production and delivery time, quality, flexibility, cost efficiency and continuous development(Fullerton, 2003: 40; Mcllhattan, 1987: 25-26). In current environment, which is dominated by a flexible, dynamic, and process-oriented roduction understanding, JIT production system cannot perform its functions including result-focused traditional performance measurement system, measuring, evaluating and reporting of operational actions in order to be successful. Therefore, performance measurement system of a corporate using Just-in-time production system should support basic variations such as increasing product or service quality, continuous development and reducing the losses (Hendricks, 1994: 27). BSC meets the new management requirements because of its following qualifications: (1) focusing long term perspective instead of short term perspective; (2) performing data both in fmancial and non-financial/operational dimensions; (3) being timely and ready for usage instead of being prepared for terms; (4) being easy to understand and apply; (5) immediately answering/adapting the changes in the production process, (6) transforming the firm strategy to operational measures (Santari, 1987: 27). 2. 2. Total Quality Management TQM does produce value, through a variety of benefits: improved understanding of customers needs; improved customer satisfaction; improved intemal communication; better problem-solving; greater employee commitment and motivation; stronger relationships with suppliers; fewer errors; and reduced waste (Powell, 1995: 15-37). In order to get this value and to ensure the success of the system, the features of the performance measurement system of the businesses applyi ng the system should be: (Kaydos, 1999: 150) 44 Melek Eker Fikri Pala to focus the attention of managers on the satisfaction of foreign and domestic customers to produce assumptions on strategy to detect the unforeseen quality and wasting problems to provide objective information for priority-setting to receive support from managers and employees for further changes when they see concrete improvements in performance to increase the loyalty of employees by encouraging managers to delegate their authority Taking all these features into account, it is seen that BSC is in compliance with what is expected from a performance measurement system in the context of TQM. Because there is a reciprocal relationship between BSC and TQM as the former makes the latter more efficient through its applications. Accordingly, BSC makes TQM more efficient in the following matters: (Kaplan and Norton, 2001:376) Firstly, it complements the intemal processes where the progressive elements with critical importance for the strategic success are found. TQM is implemented in many businesses; however, the effects of its implementation can be determined neither in financial terms nor in terms of the performance with respect to the customer, and the implementation remains limited to the department or unit level. BSC, on the other hand, identifies the processes that are important for the strategy as well as the priorities in these processes. Moreover, it also determines whether the process developments focus on such important issues as cost-cutting, quality improvement and shortening of production cycle, or not. Secondly, BSC identifies the non-financial quality measures regarding the quality costs and prepares reports on a daily or real-time basis, and it can find out the real causes of the unfulfilled transactions (Sinclair and Zairi, 2000: 156-157). Therefore, BSC proves to be a crucial resource, which provides continuous and acctirate feedback to managers and employees, in meeting customer expectations, improvement of processes and reporting of quality performance measures. Thirdly, BSC urges managers to develop business processes in order to achieve successful outputs for customers and shareholders, and to create value. Within this framework, a perpetual relationship between quality and the financial outputs is made possible. Based on the above studies, we posit that increasing application of JIT and TQM, as well as intense market competition, would prompt greater The Effect of Competition, Just In Time Production and Total Quality 45 Management on the Use of Multiple Performance Measures: An Empirical Study multiple performance measures usage. Therefore, the following hypotheses are proposed: Hypothesis 1 : The greater emphasis on the use of multidimensional performance measurements by the management will be associated with a more intensely competitive environment. Hypothesis 2: The greater emphasis on the use of multidimensional performance measurements by the management will be related to a greater application of JIT. Hypothesis 3: The greater emphasis on the use of multidimensional performance measurements by the management will be associated with a greater application of TQM. 3. Research Methodology 3. 1. The Nature of the Research This study depends on the data related to 430 manufacture firms of the top 500 in Turkey. The data forms were delivered between the dates of 01 January- 30 June by post and mailed to the top managers (general manager or vice general managers) of manufacture firms that participated in this study. The survey forms return rate was 28. 3% (122). The manufacturing activity of the firms is depicted in Table 1. 6 Melek Eker Fikri Pala Table 1: Profile of respondents by manufacturing activity Manufacturing Activity Frequency 25 15 1 10 12 6 6 13 7 20 1 6 121 Percent 20,5 12,3 ,8 8,2 9,8 4,9 4,9 10,7 5,7 16,4 ,8 4,9 99,2 Valid Percent 20,7 12,4 ,8 8,3 . 9,1 5,0 5,0 10,7 Cumulative Percent 20,7 33,1 33,9 42,1 51,2 56,2 61,2 71,9 77,7 94,2 95,0 100,0 1 Textile, clothing and foo twear 2 Food and allied products 3 Drink and tobacco 4 Construction 5 Petroleum and chemicals 6 Plastic products 7 Metal Wares 8 Machinery 9 Wood and paper products 10 Automotive and spare part 11 Glass products 12 Electronic products TOTAL 5,8 6,5 ,8 5,0 100,0 As can be seen from the table, manufacturing activity distribution was realised in the following order, 20,7% textile, clothing and footwear, 16,5% automotive and spare parts, 12,4% food and allied products and 10. 7% machinery sector. 3. 2. Data Collection Tools The survey form, which was developed to collect the research data, was comprised of three parts. In the first part, it is aimed at defining the usage level of JIT and TQM practices. Within this framework, participants were requested to designate their choose not used, partly used, used, rather used and used at high level. The second part consisted of 5 questions, which were directed at defining the firms market situation and the competition level in the market. Within this framework, participants were requested to mark each term very bad, bad, average, good and very good for each denotation which occurred between 1 and 5. In the last section, the diversity of measurement is measured with an adapted version of the instrument used by Hoque and James (2000) and Hoque et al. (2001). The aforementioned BSC approach was comprised of four sub-dimensions, such as financial, customer, intemal business processes and leaming and growth and a total of 20 items. The participants were requested to designate whether their firms used the aforementioned measures. For this, the likert scale, in which the choices between 1 and 5 were not used at all. The Effect of Competition, Just In Time Production and Total Quality 47 Management on the Use of Multiple Performance Measures: An Empirical Study partly used, used, used rather a lot, and used very much. The reliability analysis was performed to test the consistency of BSC s survey results. The alpha coefficient was found to be 90%. No variable was negatively associated with the . total correlation. The data showed strong internal consistency. 3. 3. Data Analysis In this study, the data was entered into SPSS 13 for data analysis. Factor analysis, descriptive statistics, multi- correlation and multinomial logistic regression analysis were performed. 3. 3. 1 Factor Analysis Exploratory factor analysis was used to designate the factors which form the sub dimensions of BSC. Firstly, KMO (Kaiser-Meyer-Olkin) sampling adequacy measure was calculated for determining the convenience of data for factor analysis. KMO varies from 0 to 1. This measure shows that sampling is convenient for factor analysis when it is close to 1 and it shows that sampling is not convenient for factor analysis when it is under 0. 50. In the analysis the KMO sampling sufficiency has been calculated as 0. 803, this shows that this sampling has sufficient size. We use basic components and varimax rotating technique to carry out factor analysis. The obtained factor analysis results were examined, because the factor burden related to the market share measure in the second and third factors and the factor burden related to the employees satisfaction measure in the second and fourth factors that have almost the same burdens, analysis has been done again excluding these two variables. At the end of the analysis 5 factors have been determined whose Eigen value is above 1. Five factors explained 69. 857 % of the total variance. Factor 1 explained most proportion of the total variance (17. 098 %) and consisted of variables which contained internal business processes measures. Factor 2 explained 14. 381% of the total variance and consisted of variables, which were related to customer performance measures-I. Factor 3 explained . 13. 582% of the total variance and consisted of variables, which were related to financial performance measures. Factor 4 explained 13. 495% of the total variance and factor 5 explained 11. 301% of the total variance and they consisted of variables, which were related to learning and 48 Melek Eker Fikri Pala growth measures and customer performance measures-II, respectively. Table 2 shows groups of questions. Table 2: Rotated Component Matrix Factor Factor Factor Performance Measurement 1 3 2 Items Internal Business Measures ,839 Rate of material scrap loss Ratio of good output to total ,748 output at each Production process ,667 Manufacturing lead time ,613 Materials efficiency variance ,546 Labour efficiency variance Customer Performance Measures-I ,745 Customer response time ,694 Number of warranty claims ,662 On-time delivery ,609 Survey of customer satisfaction ,562 Number of customer complains Financial Performance Measures ,873 Sales growth ,827 Operating income ,576 Return-on-investment Learning and Growth Measures Number of new product launches Time-to-market new products Number of new patents Customer Performance Measures -II Percentage of shipments returned Due to poor quality Number of overdue deliveries Factor 4 Factor 5 ,831 ,824 ,736 ,774 ,742 The analysis carried out on performance measures was also performed respectively on competitive factors. According to this, alpha co efficient was calculated as 58% for competitive factors. KMO sampling adequacy measure was 0,561 therefore sampling was convenient for factor The Effect of Competition, Just In Time Production and Total Quality 49 Management on the Use of Multiple Performance Measures: An Empirical Study analysis. Also, significant level of Bartlett test was calculated as 0,00. Consequently, both tests showed that factor analysis could be applied to data. In the factor analysis, principal component analysis and none rotation technique were used. At the end of the analysis 2 factors have been determined which have Eigen value above 1. Two factors explained 65. 972% of the total variance. Factor 1 explained most proportion of the total variance 38. 186% and Factor 2 explained 27. 786% of the total variance. In the results of factor analysis the first factor is named firms market situation and the second factor as market competitive density level. Table 3: Rotated Component Matrix 1. Factor ,867 ,824 ,683 ,820 ,810 2. Factor Competition for Marketing Competition for Market Share Competition for New Product Development Competitors Power Number of Competitors in the Industry 3. 3. 2. Descriptive Statistics related to the Variables and Correlation Analysis In Table 4, the BSC and sub-dimension averages, minimum, maximum values and standard deviations of the firms are presented. The firms usage points of overall multidimensional performance measures are between 38 and 100; the average usage point was 74. 751. When the BSC subdimensions were analysed, the financial measures were between 6 and 15 and the average was 12. 8525. The customer measures usage points were between 17 and 40 and the average was 30. 5656. The intemal business process measures usage points varied between 7 and 25 and the average was 18. 9174. The learning and growth measures usage points were between 4 and 20 and the average was 12. 6148. These average figures show us that the firms use the financial performance measures (86%), customer performance measures (76%), and intemal business processes measures (75%) at a rather high level and teaming and growth measures at a medium level. 50 Melek Eker Fikri Pala Table 4 : BSC and Sub Dimensions Averages, Minimum, Maximum Values Mean Standard Cronbach N Theoretical Minimum Maximum No deviation alpha of range items ,572 18,3639 2,40303 2,2 21,2 Competition 122 5 5-25 Factors 3,57 1,191 1 1 5 JIT 117 1-5 1,144 1 1 4,08 TQM 121 1-5 5 74,7951 12,64842 ,905 20-100 38 100 Overall 122 20 Multidimensional Performance Measures ,762 15 12,8525 2,07970 122 3 3-15 6 Financial Performance Measures 40 30,5656 5,46361 ,787 Customer 122 8-40 8 17 Performance Measures 18,9174 4,23396 ,849 Intemal Business 121 5-25 25 5 7 Measures 4 122 4 20 12,6148 3,88352 ,813 Learning and 4-20 Growth Measures Variable Table 5 shows a correlation matrix for all variables. As proposed, the overall use of multiple performance measures is positively and significantly correlated with firms market situation, market competitive density level, JIT and TQM practices and the correlations were 0,425 (p

The Young Offenders Act essays

The Young Offenders Act essays This essay was written to show the advantages and disadvantages of the Young Offenders Act over the previous Juvenile Delinquents Act. Also it should give a theoretical understanding of the current Canadian Juvenile-Justice system, the act and it's implications and the effects of the young offenders needs and mental health on the outcome of the trials. In the interest of society the young offenders act was brought forth on april second 1984. This act was created to ensure the rights and the needs of a young person. Alan W. Leshied says "On one hand the justice and legal objectives of the act are being effectively realized while on the other hand the needs and treatment aspects of it leave much to be desired." The research of the Young offenders act is still ongoing but Leshied says that it is becoming clear that the custody positions have been in dispute since the act came into effect. The old Juvenile delinquency act states in section 38 "The care and custody and discipline of a juvenile delinquent shall approximate as nearly as maybe that which should be given by his parents, and... as far as practability every juvenile delinquent shall be treated, not as a criminal, but as a misguided and misdirected child . . . needing aid, encouragement, help and assistance."(Page 72) If a youth is close to the adult age of 18 years they could be transfered to the adult justice system. This means that they would be given the same sentences as an adult including and up to life in prison. Many people have tried to correct this problem that they see as a weakness. Yet, so far their attempts have failed. Another weakness they find, is that the courts are expensive and unsatisfactory methods of dealing with crime that is not very serious. Before the fabrication of legal aid most young offenders were ...

The Science Behind Fog

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Pseudomonas Essay Example | Topics and Well Written Essays - 500 words

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