17 Feb 2010

Sample Essay: Business Plan for a Startup Business

A business startup requires a lot of thoughts and strategies. Whether it is in the manufacturing industry or the service industry, every minute detail of the business prospect in terms of its profitability to its competitors must be studied and evaluated to understand the gravity of the venture and the risks involved. Thus, a proper business plan has to be developed and tested against the current market to understand its viability.

A business plan will only help to develop and improve the proposed business. It helps the proposed to understand the business, define what they want from the business, understand customer needs, and how to optimize the proposed business.

The first stage of the business plan is to focus on the basic parameters of the proposed business, like constructing the mission statement, identifying the keys to success, undertake market analysis, and create a break-even analysis to give the proposed a critical head start toward understanding the business.

However, startups are not as simple as it seems, for in the manufacturing industry, one needs to address product development, packaging, retail fittings and signage, office equipment, website development and maintenance, and the initial capital to run the show before actual returns are generated. Unless one has the wherewithal to support these expenses on their own, they will then have to look to banks to avail loans. In the service industry, the level of investment is comparatively lesser, and therefore not much thought needs to go into the financial aspect of the startup capital.

An ideal platform for a startup business would be to develop the plan in stages to meet the proposed business goal. Adding a basic sales and expense forecast will help understand profit and loss, so vital in business (Berry, 2008).

There has been a drastic change in the way logistics operate today. Today, logistics is about economics of scope than economics of scale. What this means is that more and more companies are now concerned about the scope for development rather than volume. Quality is what is foremost on the agenda of logistic operators.

Business is characterized as evolving away from the earlier objective of single exchange transactions towards a long-term buyer-seller relationship of mutual benefit. These strategic relationships generate managed supply chains.

Today, logistics involves the cooperation through economic networks for mutual benefits. In other words, individualism has given way to collectiveness. That’s right! Logistics is about total solution under one roof. This way, companies manage their business with lesser paperwork, less tracking and negotiations, and shared responsibilities. What brought about this transformation? Consumers; that’s right! Consumers today seek greater product variety at high quality level and obviously, reliability. Product availability is mandatory. Thus, the huge containers that used to carry high volumes of consignments have now been cut to size to accommodate quicker and easier handling, thereby accommodating faster and efficient services, plus continuity. In order to attain such professionalism, global corporate houses have become centers of corporate structures, centered on the principles of co-operation and partnership; outsourcing of logistics functions.

Globalization and outsourcing has opened new vistas for logistic operators in relatively all areas of operations, be it shipping lines, forwarders, terminal operators, road haulers, or rail operators. The integration of these services under a single umbrella is what corporate managers seek today. Together, this integration provides new value-added services as an integrated package.

Executive Summary

The strategy process is quite intriguing, yet exhilarating. Every company has its share of researchers who respond to the strategy process challenge by identifying certain traits that can either bring moments of exhilaration or disillusion. Disillusion comes from the often grotesque outcome of their effort leading to an outcome that is far from impressive. A lot of empirical research goes into the strategy process; large, often heroic and distinctive, collection of data is required to explore the possibility of linking strategy process and decision-makings, and finally to performance. The potentially revealing and insightful information comes at a cost, a cost that can nip the career perspective of the researcher, if it crashes. However, the outcome, though comprehensive, can be complex, messy, and notoriously fragile.

Nonetheless, a significant part of the research is characterized by controversial normative orientation; strategic change or protecting and extending existing strategies, as Chakravarthy (2003) said. Such outcomes remain highly influential (if successful) until they are outdated, out fashioned, or shown to be hazardous.

In short, a prescription that would guarantee supra-normal profits consistently would de-facto become the strategic management field’s own version of the proverbial money machine (Szulanski et.al, 2

Objective

This paper proposes to illustrate the advantage that introduction of information technology has in leveraging the competitive advantage in the courier industry. The business is set to operate from Minneapolis, and with so many courier companies operating around the city, it becomes imperative for the startup courier business to introduce MIS to enhance and beat competition. Minneapolis-Saint Paul area has many courier companies of repute. Names of OnTrac Courier Services, LLC, General Delivery Service Incorporated, Blazing Saddles INC, Edina Couriers LLC, DHL Express, Dash Delivery Service, On Time Delivery Service, and Quicksilver Express Courier to name a few, are well established names in the courier business, and any startup courier business will have to either match them in service or beat them with technology to make any mark here. It is with this objective in mind that the startup courier company that is proposed will incorporate the best of technology to leverage competition (Citysearch, 2008).

Mission

The courier industry is highly competitive, and consumers have become far more knowledgeable, and this makes the industry far more complex to run. Unless customer service is enhanced, there is every chance of the business losing important clientele and depleted database. To enhance service and keep abreast competition, the new Courier business will introduce the best of technology to enhance performance through tracking and execution. Since a lot of important documents and consignments are routed to destinations to save time, courier companies need to offer fast, reliable and foolproof service to them. This is what the introduction of new technology will offer, and sought for the new startup company

Keys to Success

As a startup, the first priority would be to vision the future to create a successful business strategy. The vision is something that is proposed of an industry that it must create, shape and transform over time. For this, the business leaders need to seek input from the enterprise, customers, employees and business partners. Earlier, many business houses defined their products and strategies to attract customers, but this has now changed. Today, concentration is on what values they have created for customers. Therefore business must address customer needs and demands rather than using their product or service and enforcing it on the customer. Greater competition, globalization and faster imitation have caused many products or services to become commoditized. Customers are far more knowledgeable and demanding than earlier days. They have access to more information through new channels such as the Internet. They are more knowledgeable and discerning than ever before and demand exceptional value. Customer relationships have come to the fore.

Peter Drucker (2001) once wrote that there was only one valid definition of a business purpose, and that was to create a customer. What the business thinks it produces is not of importance, it is what the customer thinks he is buying, what he considers as value, that determines the present and future of the business[1].

Similarly, Adrian Slywotzky (1996) in Value Migration[2] said that a business strategy in never complete without addressing its customers, define and differentiate its services, define the tasks it will perform, configure its resources, and creates utility for the customers.

IT related programs to improve and increase customer services are mandatory as well.

Company Summary

As a startup courier company in the Minneapolis area, the company has great business potential, as the twin cities of Minneapolis-Saint Paul metropolitan area is home to many industries and business. The new company will incorporate some of the latest IT solutions to beat competition. It will put in place a strong supply chain management that will provide real-time visibility and control over changes occurring in the supply chain industry. The technological development is such that, the supply chain industry today has the availability of solutions for Supply Chain Planning (SCP), Supplier Relationship Management (SRM), Enterprise Resource Planning (ERP), and Business Intelligence (BI). This is what will help the new startup company develop its business and beat competition (Oracle Corporation, 2005).

Product Description

Logistics refers to the systematic management of various activities required to move a product or from the production/manufacture plant to the customer. It encompasses more than just movement of goods; it involves timing, cost, location, availability, and support systems. With globalization, competition at regional and international level has become even more intense, and cost and availability are prime concern for the end-user. Most companies therefore are forced to rethink their logistic operations to maintain stability on all fronts.

While we saw that in the 1980s and 1990s companies tried to out beat competition through improved production and reduced costs (cheap labor being one), technological advancement negated this advantage and forced companies to look for alternatives. Time is a constraint in today’s business world. Time spent on execution of orders has led to legal entanglement and business loss. This is the biggest worry in the world of supply-chain management. There is a growing demand for time-based logistics management, where customers are increasingly sophisticated and value time as money. To ensure quick and efficient streamlined flow of goods from the producer/supplier to the customer, companies now track factors that cause delay and try to eliminate them (Kent N. Gourdin, p.9, 2001).

Efficiency and durability are trade mark of a successful logistic operation. Using state-of-the-art network modeling tools to determine how well the distribution network serves the customers, logistics should include, inbound to outbound facilities, inventory, and service, employing all modes of transport (air, sea, rail, and road). Another important aspect of logistics is to analyze variables, such as inventory cost, time-in-transit, and service by product, industry, and location (Dynamic Logistics, 2007).[3]

The Internet, e-tailing and electronic commerce play an important role in logistics and their importance can be traced to dramatic changes in the corporate world of supply chain management. Together, they have gained importance in bringing gains and sustaining competitive advantage. Of the technology options, Logistics Execution Systems (LES) plays a vital role in the order fulfillment and product delivery.

Companies need to meet challenges, and to do this successfully, they spend time and money developing solutions in-house that will enable them to accurately identify, track, manage and report on material flow as well as efficiently allocate resources to related tasks throughout the pipeline. In order to achieve this, companies need to focus on:

Centralized distribution centers

Channel-specific distribution center design

Repackaging, labeling and pricing at the distribution point

A move to more conventional or hybrid warehousing with on-line, real-time computer-based warehouse management systems

Compliance as well as supplier labeling and price marking

Increased use of standard bar code for product, packaging and ship container identification to facilitate warehouse management, shipment tracking and POS transaction monitoring

Supplier’s retail store level inventory (VMI).

Trading partner communication

Growing use of decision support, modeling and simulation tools

Employee empowerment through tools to increase operational efficiency and productivity

In warehousing operations, an increasing number of companies have grown cautious about investments in large scale, opting instead for more flexible, fully conventional approaches or hybrids that combine mechanized and conventional alternatives (Hill, p.2-3, 2003).

Initially, LES were introduced to permit real-time material tracking and resource management in conventional warehouses, using bar codes for material tracking, a broader array of radio data terminals for industrial applications, and a dramatically improved computer performance at lower cost and a variety of software tools to relational data base management.

Warehouse Management Systems had clearly come of age. Industry leaders began to see results as revenue grew at better than 20% annually and initiated programs to add functionality in the areas of labor (LMS) and transportation (TMS) management. LES (logistics execution systems) emerged as the new acronym for systems that managed material and data flow in the supply chain (Hill, p.4, 2003).

There are three basic forms of outsourcing with regard to supply chain management. These are other methods used to improve production, quality and inventory. They are:

The outsourcing of the production of components. Global Corporate develop long-term relationships with a number of suppliers on the basis of mutual trust.

Value-Added Logistics (VAL). VAL implies that production and distribution of a supply chain integrates into one.

The outsourcing of transportation, warehousing and distribution. Third-party Transportation, warehousing and distribution activities are fast growing outsourcing businesses.

Though the above methods have been successfully used and managed by a few corporate, outsourcing of transport, warehouse and distribution should be the ideal situation to minimize capital investment and ensure more professionalism.

Market Segmentation

A supply chain involves the movement of raw materials from a supplier to the production house, which is then processed to form the final product, before being sent to the customer (who placed the order) through a distribution system. As mentioned earlier, with the advent of computers and software to run them, it has become easy to track the movement of shipments from the origin to their final destination. Any organization that is in the service, maintenance and production sector rely on quick supply and replacement of spares and parts for their business success. Though the functions are more or less the same, supply chains vary depending on the size of the organization and the type of business they are in. Customer satisfaction is paramount. In a highly competitive world of computer hardware manufacture, satisfying a customer is utmost paramount for success. Scheduled deliveries, dispatch of spares and add-ons on time are paramount to the success of that business. Should a customer find his/her business affected due to non-availability of spares, or delayed replacement of machinery parts in their workshop, they will not only cancel their order, but would in all likelihood change the supplier for delayed shipment.

Almost all industries use couriers these days to stay competitive and because of this, all courier companies, must be able to provide foolproof and reliable service to stay in front. Be it the computer manufacturers or their suppliers, heavy or light machinery manufactures or suppliers, office equipment manufacturers and suppliers, service units and so on, they depend on time-bound services to beat competition.

Competitive Edge

Transportation eats into profits considerably. As in the case of location, transportation costs can be minimized by having the distribution centers close to customer’s access. The same can be said in terms of production and spares as well. Air transport is quick, but at the same time expensive, in comparison to shipping by boat or rail. Yet using sea or rail often means maintaining higher levels of inventory in-house to meet quick demands by the customer (Rockford Consulting, 1999).

Some 30% of the cost of a product is encompassed by transportation; therefore it is imperative to use the correct transport mode.

There has been a drastic change in the way seaports operate today. The era gone by Fordism ‘Economies of scale’ has been replaced by ‘Economies of scope’. This post-Fordism change has seen a revolution in logistic movement. Subsequently, the port authorities who were hitherto the ‘bosses’, found themselves at the receiving end. Today, logistics talks of organizations cooperating through economic networks for mutual benefits. In other words, individualism has given way to collectiveness. Consumers today seek greater product variety at high quality and reliability. Availability is mandatory. Thus, huge containers are now cut to size to accommodate faster and efficient services. In order to attain such professionalism, global corporate houses have become centers of corporate structures, centered on the principles of co-operation and partnership; outsourcing of logistics functions.

The outsourcing of transportation, warehousing and distribution is an appropriate way to cut transportation costs. Third-party Transportation, warehousing and distribution activities are fast growing outsourcing businesses. Globalization and outsourcing has opened new vistas for shipping lines, forwarders, terminal operators, road haulers, rail operators and barge operators. Together they provide new value-added services as an integrated package. Improvements in terminal and landside operations are required to lower the cost on door-to-door servicing and savings at sea, one reason why shipping companies are expanding their scope to include terminal operations and hinterland transportation. Customer service is most important for any business. In order to achieve this, easy product reach is necessary. This can be provided using multi-level mode of transport to reach the customer’s destination (Christopher M, 1992).

Strategy process can be defined as the identification or uncovering of connections between the social, cognitive and political processes by which strategies can be formulated to make firms perform (Szulanski et.al, 2006).

Wireless technology, such as @Par combines with ERP and WMS systems. This technology enables clients for pick-up, put away, receive, deliver, dispatch, cycle count, and cart management functions, the lifeline of the supply chain business. It is built on a robust platform that integrates through XML. It has advanced features like instant messaging, speech recognition; RFID tags, and uses a wireless LAN to transmit data in real time.

IristaWare system prioritizes, directs and confirms activities based upon the real-time conditions and constraints of space, equipment, and inventory. This software enables companies to automate their inbound order processes, inventory control, and outbound distribution activities using RF, barcode, and auto-ID technology. From advanced ship notice (ASN) processing to lot and serial number maintenance, iristaWarehouse tracks and controls the movement of both raw materials and finished goods through the distribution network. Advanced functionality including yard and dock management, value added processing, cross-dock fulfillment, and wave planning provide the tools to increase throughput while reducing operating costs (irista.com).

Monitoring and analyzing daily demand signals creates an accurate forecast in inventory and transportation. Real-Time Forecasting (RTF) helps reduce forecast errors substantially leading to reduced and expedited shipments and transportation costs.

In can also be noted that how today’s standards-based modeling, monitoring, connectivity, and process integration tools that comprise IBM’s Process Integration suite are allowing companies to implement process automation components with greater speed and agility than ever before.(Noel, Supply Chain Management).

Decisions pertaining to supply chain management cover long-term and short-term goals. Strategic decisions come under the jurisdiction of corporate policies, while operational decisions deal with day-to-day activities and problems within the organization. Therefore, an organization normally structures their supply chain on a long-term basis, while at the same time, focus on the day-to-day activities. In order to succeed, corporate heads need to assess the market demands, customer service, transport considerations, and pricing constraints to structure the supply chain effectively. These factors are inconsistent, and thus have to be monitored regularly to avoid harm.

Structuring a supply chain also requires an understanding of the demand patterns, service level requirements, distance considerations, and cost estimation, among others. These factors too are highly volatile, and can affect deliveries and supplies. Thus, this is an additional parameter that needs constant monitoring.

Sales Strategy

Innovation is the secret behind success and failure. By treading known strategies or ideas, one can never achieve the kind of success envisaged by them. It takes more than just hard work to beat competition. Innovation makes all the difference. Considering the various technological advantages available today to offer efficient, safer and fast services, the new startup courier company can with limited resources be able to outsource a major part of its services and still end up with a sizable business volume that hurts competition.

Transportation eats up a major chunk of a producer’s profit, and if a solution is provided to ease the tension and at the same time, reduce their overheads, it will become an instant success. This is what is required by the startup courier company to concentrate on.

Management Summary

With the introduction of new technology to support operations, tracking and routing of consignments will be easy and clients will be able to get prompt delivery schedules and confirmations, enabling them to plan their strategies to minimize costs. In today’s world of globalization, the movement of spares and important machines are routed through couriers because of their worth. Couriers engage in land, air and sea transport to complete of shipments based on their value and size. By tie-ups, the company will be able to minimize their operational costs, but enjoy handsome returns from their association with partners. This will enhance profits and help the startup courier company to beat competition. The new technology will decrease manpower and operational overheads, while at the same time, streamlining deliveries.

Financial Plan

The Financial plan must draw on the following to derive the profit and loss statement and the revenue generated by the courier business for the first year of operations.

Company Name:

Income Statement for the year ending _____________ [Month]

Revenue:

Revenue: Services
Total Revenue Generated: Services

Revenue: Miscellaneous
Bank Interest
Total Revenue: Miscellaneous

Revenue: Expenses

Direct Costs:
Materials
Equipment Rentals
Salary (Owner)
Wages
Maintenance
Miscellaneous
Total Direct Costs

General And Administration
Accounting and Legal Fees
Advertising and Promotion
Bad Debts
Bank Charges
Depreciation and Amortization
Insurance
Interest
Office Rent
Telephone
Utilities
Credit Card Commissions
Credit Card Charges
Total General And Administration

Total Expenses

Net Income before Income Taxes

Income Taxes

Net Income

CASH FLOW PROJECTIONS

(Add a row of monthly headings to cover one year period)

Cash Revenues
Revenue from Service Charges
Cash Disbursements
Cash Payments to Franchisee Partners
Management Draws
Salaries and Wages
Promotion Expense Paid
Professional Fees Paid
Rent/Mortgage Payments
Insurance Paid
Telecommunications Payments
Utilities Payments
Total Cash Disbursements

Reconciliation of Cash Flow
Opening Cash Balance
Closing Cash Balance:           Total ash Revenues – Total Cash Disbursements
(Susan Ward, About.com).

Profit and Loss

Conclusion

While starting a courier company may be simple, there is more to a company that sustains itself in the face of competition and those that fizzle out without a fight. A lot of study and planning is required to undertake a project that has numerous competitors fighting over the spoils. This report just about summarizes the basic needs to understand the market requirement and what are the parameters to be addressed to launch a competitive courier company in Minneapolis area. With a huge industrial and business base, Minneapolis offers good opportunities to well-established and unique service providers. The basic necessity of any service-oriented company is to address the needs of the customer, for, the customer is king.  Innovation and the use of technology such as MIS and RTF (Real-Time Forecasting) and Wireless technology, such as @Par combined with ERP and WMS systems help courier companies to track and record the movement of consignments. With globalization, courier business has gone overboard and more and more practices are being incorporated to beat competition. Logistics is an area of wide acceptance, as machinery and equipment find their way across borders to ease production and quality costs. This has made many courier companies to expand their business into multi-mode logistic operations with partnerships to ease huge capital investments.

The new startup courier company that is sought to be made up looks at including logistics in a big way to beat existing business in the Minneapolis area.

Bibliography

Berry T, Bplans: A Simpler Plan for Startups, http://articles.bplans.com/index.php/business-articles/writing-a-business-plan/a-simpler-plan-for-start-ups/

Szulanski G, Porac J, and Doz Y, Strategy Process: Introduction to the Volume, The Challenge of Strategy Process Research, 2006, http://www.rotman.utoronto.ca/~baum/v22_intro.pdf  iristaWare, http://www.irista.com

Jasmine Noel, BPM and SOA: Better Together, IBM-sponsored white paper by analyst, a founding member of Ptak, Noel & Associates, http://all-free-info.com/supply-chain-management

Christopher M., 1992, Logistics and supply chain management: Strategies for reducing costs and improving services (London: Pitman Publishing).

Citysearch, 2008,  http://twincities.citysearch.com/yellowpages/directory/Twin_Cities_MN/20/532/page1.html

Rockford Consulting Group Ltd, RCG University, Supply Chain Management, 1999, http://rockfordconsulting.com/scm.htm

Oracle Corporation, Measuring Supply Chain Excellence, March 2005 AMR Research report “How Best to Measure Your Supply Chain Today, http://www.oracle.com/newsletters/updates/2005-10-21/supply-chain-management/measure-supply-chain-effectiveness.html

Kent N. Gourdin, 2001, Global Logistics Management: A Competitive Advantage for the New Millennium, Blackwell Publishing, Google Book Search

John M. Hill, 2003, White Paper, Logistics Execution Systems Perspective, Supply Chain Forum, www.idii.com/wp/ESYNC_LES_Perspective.pdf

Dynamic Logistics, Services, 2000-2010, www.dynamiclogistics.com

Susan Ward, About.com, Small Business: Writing the Business Plan, http://sbinfocanada.about.com/cs/businessplans/a/bizplanfinanc_4.htm


[1] Peter Drucker, 2001, The Practice of Management, Butterworth-Heinemann, Oxford, p.35

[2] Adrian J. Slywotzky, 1996, Value Migration, Howard Business School Press, Boston, p.4

[3] Dynamic Logistics, Services, www.dynamiclogistics.com

15 Feb 2010

Sample Essay: The Globalisation of Capital

The globalisation of capital is about movement.  Capital is a moving entity, with a value system based, not solely in one country, but universally defined as attached to industry in more than one part of the world.  Capital has the ability to move, so that even though factories whose homeland endorses a company in another country, the capital can exist bilaterally.  Capital can also detach itself from one particular owner or activity; though it is mainly attached to a specific type of owner or activity first and foremost.  The globalization of capital exists in the secondary nature of money; that is, it’s inherent ability to become mobilized.  In this paper, an analysis of the globalization of capital will be examined from its traditional roots in Marxism to its more, or less, modified roots in modernism.  Capitalism is about ownership.  This paper will explore the source of ownership and the history that ownership has undergone to come to its current stage.  Also, a prediction of the future of the globalization of capital will be given, and its predetermined state defined by labor and by the country in which capital is attached.

In analyzing the current state of the globalization of capital the history of feudalism, and capitalism will be imparted.  Marx himself will be given a brief glance, as his theories focuse on “…capital’s inherent drive for self-expansion and technological innovation on the one hand and its tendency to exacerbate social inequality and instability on the other” (Hudis, 2001).  Globalisation itself will be dissected and its fundamental paradoxes and successes will be instrumentally examined and the idea of hegemony will be brought to light in the discussion of the WTO (World Trade Organization).

The capacity for monetary funds to overwhelmingly define a nation, let alone the world, is one which entails great power.  In society there exists the capacity for nation states to discover what to do with this power and how to best organize the funds by which it can be sustained.  This alone will aid in the discovery of what the globalization of capital is at its base, its roots, and its future.  The following paper will yield the idea that in labor and class relation between worker and capitalists there is the potential to exert the funds by which power is held, and capital can be the key to the pursuit of autonomy.

Marx

To discover what globalization of capital means, an overview of the man whose ideas flood the gateway of capitalism must be undertaken, and examined.  Though Marx himself wasn’t a capitalist, his writings on capitalism are still widely held in view today.  Capitalism is mainly and chiefly about an inherent impetus for technology and social innovation, as Hudis writes in his 2001 article, Marx in the Mirror of Gobalization, As Marx saw it, capitalism is not only about the production of material goods and services, but also about the production of value.  Labor, in Marx’s view, is the source of value.  And the magnitude of value, he argues, is determined by the amount of socially necessary labor time it takes to produce a given commodity.  Marx held that there is a continual contradiction between these two purposes:  producing for material wealth and producing for value.  As productivity rises, more goods are produced in the same unit of time, so the value of each commodity falls.  The increase in material wealth corresponds with a decline in the magnitude of value-that is, production costs fall and prices tend to fall as a result.

In different countries the labor market presents itself so frugally which in turn harbors other countries to suffer from the low cost of goods being imported (China is an example of this, but their situation will be discussed in length later on in the paper).

In the struggle of dominance and power, countries are prone to replace value with numbers, which causes a nationwide if not worldwide effect.  In America this is overtly true, as the market system prizes surplus product made cheaply rather than valued goods made with worth.  Marx’s statement about wealth collides with the ideas of value.  In the contradiction, in economy terms, wealth overshadows value to an extraordinary degree and what results sometimes is a struggle between trading countries in either the import of cheap goods or the export of high quality goods.  The decline in value in goods, in capitalism, is a risk.  The funds needed to support the production are in jeopardy when trying to maintain a high production output.  To counteract this problem, a capitalist will try to advance productivity, and since the greater the amount of export produced, the better the opportunity to receive a high dividend.  As Hudis writes,

The best way to increase productivity is to invest in labor-saving devices.  The resulting growth in productivity, however, reproduces the initial problem, since the increase in material wealth leads to a further decrease in the relative value of each commodity.  Capitalism is thus based on a kind of treadmill effect, in which the system is constantly driven toward technological innovation regardless of its human or environmental cost.  The restlessness and drive for innovation that characterize contemporary high-tech capitalism was long ago anticipated by Marx.

In Marx’s view, the unremitting improvement and productive increase ultimately proceeds with blatant discount of national borders.  The ingenious of capital was that it created a world market.   As Hudis writes of Marx’s ideas on capital, “National restrictions on the movement of capital would eventually have to be lifted, he argues, because capital must constantly find new markets to absorb its ever-growing productive output”.  This process then leads to the pinpointing and centralizing of capital, and a ‘relative immiseration’ of the mainstream population.  The essence of capital is to increase production by ‘labor-saving devices’ (which could mean through technology or machinery to cutting down the cost of workers through foreign market places).  Due to the fact that workers do not own capital but do own their own initiative and labor power, social wealth conglomerates in the hands of less and less people.  As Hudis states on this subject, “Many consider this confirmed by the growing inequities that follow from the globalization process, as indicated by the fact that 225 individuals now control more wealth than half of the world’s population”.  What testifies to this factoid is that labor saving techniques or dead labor induce in the population a level of comfort that their jobs are being done for them which leaves them more leisure time, which in turn aids in the economy because the workers use their money to insure that their leisure time isn’t thwarted.  This is true for most capitalist societies, and is especially prevalent in the United States.

In the interest to returning to the idea of globalization, Marx and Engels write,

“Modern industry has established the world market.  All old-established national industries have been destroyed.  They are dislodged by new industries whose products are consumed in every corner of the globe.  In place of the old wants, we find new wants, requiring for their satisfaction the products of distant lands and climes…All fixed, fast-frozen relations are swept away; all new-formed ones become antiquated before they can ossify.  All that is solid melts into air” (From the Communist Manifesto cited in Michael Elliott’s 2001 article, The Wrong Side of the Barricades).  In this statement, the idea of mom and pop shops, of locally owned businesses, have fallen, and the idea of world trade and major corporations capable of mass trade, have risen up, and typically stayed at the top of the economy game.

History/Analysis

The history of globalization can best be cited in Marx’s era.  Globalization served to unfetter the degree of human potential, and the despots of the time such as priests, and other rulers no longer held power.  It was in the vast wealth of technology that promised a surplus to all cultures of people, and that which saved them from the degrading rural life.  It was trade that refocused the idea of where power was held and which altered greatly the difference between states and countries, and that offered the gift of nationalism and liberty.  At least, that is how globalization started.  Now, globalization is a dichotomy in terminology and practice, it offers inferior men while also providing those men/workers with the chance to revolt against capitalism.  The Unites States itself, although considered a great leader in power, cannot be so considered when in fact its economic and political resources are spread out so widely through the world; in fact the modern world does not have one source of a definite power center.

So, in the history of the globalization of capital there is also a history of exploitation.  The intricacies of trade also have in their wake a wide spread geographical playing field.  It was first with the Chinese trade routes in the 15th century that the true physical concept of globalization was put in record books.  The Chinese however, dropt this globalization idea during the Ming dynasty and it was the Europeans who quickly took it upon themselves to become the harbingers of globalization.  (Wolf, 2003).   In the roots of globalization is the concept of technology and its advancement as key to altering the course of the world’s economy.  As has been aforementioned, the human workforce is rapidly becoming dispensable with the oncoming investment in machines to do the labor more quickly, and more cheaply.  This, throughout history, has lead to the decline of cost of product.  Transportation and communication have also become more than affordable, as Wolf states, “…natural barriers to trade and communication are far lower than they have ever been before.  The railway, the steamship, the refrigerator and the telegraph created the opportunities for the integration of the 19th and early 20th centuries”.  With a rapid transition, cost production quickly fell to popular affordability.

To return to capital, and the history therein, the idea of feudalism can be quickly glanced over.  Feudalism gives a harrowing example of labor in a business type relationship.  The ideas of labor that existed in that era are still to an extent alive today.  The transforming characteristics that are prevalent in labor is monetary compensation; and this definition holds true throughout the centuries, as John Holloway states.

Value, in the form of money, is the new liquidity of the class relation. It is the fact that social relations come to be mediated through money that makes it possible for the worker to shift from one master to another, in each case selling his or her labour power in return for a certain amount of money. It is the fact that the lord-turned-capitalist can convert his wealth into money that makes it possible for him to abandon one group of workers and move to another, and to participate in the global exploitation of labour.

Cheap labor allowed globalization to maintain a certain prestige of power because, the labor in turn allowed for cheaper transportation which in turn lead to a high demand of product across the globe.

In the globalization of capital, globalization will only become more widely accepted as the new economic mandate because the new device of the computer is permitting trade across borders quickly and with ease; the internet also has brought down the cost of communication to almost zero (Wolf, 2003).  Going back to the idea of exploitation that this section began its inquiry, it is with exploitation and the cheap labor force in either immigration or companies transferring to lower cost production countries that still enforces the negative side of the globalization of capital.  The world will not be less, civilized, cultivated or globalised.  The vastness of opportunity afforded by globalization despite its exploitation will continue to grow because demand is high enough.  In the interest of dominance, globalization continues, as Wolf states, …protection against imports of manufactures intensive in the use of low-wage labour was an obvious way to reward the industrial working class.  Protection could also be justified for militarily essential products, such as steel.  Policy-makers also wanted an economy capable of fighting long wars.  This led to government involvement in the development of the ‘national economy’- an abstract entity that belonged to the nation state, collectively, not to its people, individually.

The history of globalization entails the development of trade.  Ending laissez faire, immigration and free trade all resulted in universal suffrage, the mobilization of armies, and industry (in advanced countries).  Especially in industry is found the unmitigated growth of population, and technological advancement. In postindustrial countries, the retarding of the three aforementioned items paved the path for trade unions, labour market legal protection, and welfare states (Wolfe, 2003).

It is in the First World War that the liberal global system was tested.  In this war, the increase in power affected all post-industrial or industrial countries.  In war, the ability for nations to be innovative is unceasing; in the First World War the innovation was the first coordination of national economic development.   Of this subject, Wolf states, Lenin explicitly recognized the German war economy as ‘a complete material preparation for socialism’.  This new form of planned economy subsequently became the model for all the developmental states of the post-colonial developing countries.  The First World War also greatly increased the sense of obligation to the citizen-soldier.  Welfare states were bigger in the inter-war years than they had been before the war, just as they were bigger in the 1950’s than before the Second World War.

During war, the ability for a nation in becoming vested with capital is surprising.  During times of war, the economy is at a high, because jobs are needed and during the First and Second World Wars, the labor market turned to women as the men were fighting.  The rate of employment then was also in great surplus as most men were employed through the war and those left were employed in industry for developing and catering to wartime needs.  Industry during war then was in great demand for the export of war machines and war related equipment was in high demand in same-sided countries.  War, then, extended the need for the globalization of capital.  This effort however did not go unmitigated.

With the surplus of jobs, of capital and of globalization of capital there comes great responsibility.  The war afforded jobs, and wealth, but all that increase in revenue could not go without restrictions.  In this regard capital had to surrender to certain specification, as Wolf states,

By the 1930s the combination of collectivist ideas, protectionist interests, universal suffrage, war, monetary disorder and economic depression had destroyed the assumptions, beliefs, policies and practices that had underpinned the liberal world economic order.  The final blow was a breakdown in international political relations, as the great powers created economic systems that reinforced their own power and shielded them from the power of their rivals.  Multilateralism was replaced by bilateralism, non-discrimination by discrimination, free trade by comprehensive protection, freedom for capital flows by exchange controls and free movement of labour by rigorous restrictions.  National socialism fascism, militarism and communism were seen as the waves of the future, loathed by some and love by others.

The restoration of the world after the wars depended greatly on the advancement and capabilities of a country to illicit trade.  The globalization of capital became very strong in the proceeding years of the war.  Globlisation of capital aided in stabilization of economy; this happened through labour employment, trade agreements and control over immigration.

The focus of the world after the wars was directed towards trade and currency conversion.  In the later half of the 20th century, particularly the 1970s through the 1990s, there was crises.  The crises came in the form of a fixed exchange rate and domestic stabilization (Wolf, 2003).  In 1971 it is noted that the Bretton Woods system of exchange was abandoned which led to monetary expansion due to inflation (oil).  This then led to the floating exchange rate and inflation control.  Though capital can be seen as lost in the exchange rate, it also affords necessity in determining the appropriate amount of exchange for goods or labour, despite qualms to the negative effect.  In defining the new exchange rate and the discussion and sentiment other countries had towards such a rate, Wolf states,

Countries that could not tolerate floating rates, notably in Europe, decided that there was a need for a new exchange rate arrangement based on the principle of Europe-wide stabilization.  Thus was born, also in the early 1970s, the process that led three decades later to currency union.  Developing countries meanwhile clung as long as they could to their exchange rate pegs, almost all of them against the dollar.  When combined with excessive borrowing by governments and incompetent liberalization of controls on capital flow, the result was to be a series of shattering exchange rate and financial crises in the 1980s and 1990s.

Exchange rate then is detrimental to the concept of the globalization of capital.  Capital is dependent upon the rate by which it is given, and this rate was in need of a leveling ground after the wars.  So that one country wouldn’t have monetary dominance over another country, the exchange rate was put into force.  Trade then, became not so dependent upon unmitigated exchanges, but became more about increase in product output.

Developing Countries and the Exchange Rate

When the Chinese sailed across their trade routes, the idea of money wasn’t necessarily involved in profit, but rather the exchange of goods was more in lieu of their desired gain.  After the wars, across the globe, the devastation of war was felt on the defeated side, as well as the side that invested their money, and labor in war machines, and now that the war had come to an end, their investments were made nil, and debt settled into the countries woes.  On this topic Wolf states,

The move to floating rates and domestic monetary stabilization made it easier to contemplate the abolition of exchange controls.  But this move, which was to become universal among the advanced countries by the early 1990s, was also consistent with the advance of information technology and the general move towards reliance on market forces.  For the high unemployment, high inflation and lower growth of the 1970s did more than destroy faith in naïve Keynesianism, it also created increased interest in market solutions.  With Ronald Reagan and Margaret Thatcher in power in the US and UK, respectively, there began what amounted to a market counter-revolution in the advanced economics.

The liberalization of exchange controls helped to enable the devastated, war-ravaged countries and to regain their economic power.  The history of the globalization of capital carries with it the analysis of inflation, exchange rates and liberalized exchange controls.  There cannot be a modern view of the globalization of capital without its history put into focus.  Today, the trade in goods and other services is more integrated than in its preceding history.  World trade today has doubled, and barriers (both naturally and man-made) have collapsed.

The gross domestic product (GDP) has even more today, than in its history, been increasingly preceded by services (Wolf, 2003).  This is thanks to war mainly, and the continual cheapness of all labor.  The trouble with services is that it is often times very difficult to trade.  The decrease in goods however is still predominately seen across the globe thanks to the steady increase in productivity.   Trade then thrives in areas where goods are the cheapest and the exchange rate follows suit.  The globalization of capital is relevant to the free labor movement and the cheapness of labor because of the mobility of people, especially in countries where immigration is not so restrictive, as Wolf states, “A German bus driver is paid thirteen times as much as a Kenyan one, for example, in terms of purchasing power.  These controls have locked a large part of humanity into failed states and economies, with inevitably adverse consequences for their incomes and so for global inequality.  The emergence of a global market for skilled people may be making this even worse since the wages of the unskilled depend heavily on the presence of the skilled”.  It seems that the globalization of capital would defect the ideas of impoverished countries, but with trying to find the cheapest labor to produce the most product, such ideas are still prevalent around the world.

Mobility & Capital Today

The idea of the globalization of capital is one that is mobile.  Trade agreements, communication technologies and cheap labor (often times overseas) all enable capital to be a mobile entity.  The foreign exchange rate market for example has a turnover rate of over a hundred trillion dollars a year (Wolf, 2003).  This is thanks to mobility.  Investments, stocks, portfolios, and bonds are all based globally due to the technological advancement of the Internet.  International relations need to be harmonious in order for capital to maintain its mobility.  Wolf gives a dissection of the fundamental changes in international relations in regards to trade, capital and globalization,

First, there is a single undisputed hegemon, the US, and little chance of a war among great powers in the near future, except perhaps between the US and China.  But China is not, at present, powerful enough to be a genuine rival of the US.  Second, all the great powers have abandoned the atavistic notion that prosperity derives from territorial gains and plunder rather than internal economic development and peaceful exchange.  Indeed, the striking feature of today’s war against terrorism is that all the world’s great powers are on the same side.  Third, all the great powers share a commitment to market-led economic development and international economic and political integration.  Fourth, the global institutions and the habit of close co-operation reinforce the commitment to cooperation.

Trade then, and by extension the globalization of capital becomes one in which the gains for the country outweigh the future threat of war.  The stability in a world market comes from the continual agreement between countries to maintain stable ties with one another: cooperating in exchange rates and product output does this.  By combining the wealth of each nation through the exchange rate and then allowing either the country, the business or the individual their own rights to trade, there begins to exist hegemony throughout each person, institution and state.  This in turn allows for peace, and in the idea of the globalization of capital, each trading organization has the opportunity to come into their own wealth with regards to the free trading laws.

Now, there is found the disappearance of the nation-state and the appearance of individual economy, to some degree.  The World Trade Organization allows the individual their own rights in trade and interest in capital.  Globalisation is dependent upon financial structure, and the development of global credit; it is also becoming the new grounds by which oligopolies are becoming wealthy (that is multinational corporations who stand to gain the most in the globalization of capital because they produce more product for less money).  In the globalization of product as well, a new power base has emerged in banks, and the new freedom of capital has lead to poverty in un-industrialized nations (Rikowski, 2001).

Conclusion

In conclusion Rikowski states,

…economic factors such as the deregulation of labour and financial markets, the ‘communications revolution’ through the Internet, the growth of e-commerce, knowledge as a leading factor of production, and many other economic developments are brought in. The speed, intensity and volume of economic transactions increase, and the markets never sleep. The point is that in this form of analysis these technological and economic trends, together with the rise of transnational institutions regulating world trade, finance, competition and investment, are seen to be undermining the political integrity of the nation-state. Since the integration of the old Eastern Bloc countries and China into the world economy, global capitalism has become a reality.

Therefore, the globalization of capital is dependent upon the trade formations between countries, which in turn enable other countries to increase their revenue through trade.  Capital, though mobile, depends on a home base to ensure its own exchange rate and labour costs.  World finances aren’t dependent upon governmental control mainly but instead the WTO sets regulations and by these regulations hegemony in monetary regards is being the forerunner of national relations.

The globalization of capital is the ability of companies to gain revenue in a foreign market place.  By this, the nation-state is losing power and the power is transferring hands from government to trade unions and even down to the individual who trades on eBay.  The Internet is the driving force of globalised capital, and cheap communication, trade, and technology.  More and more, trade is becoming less and less expensive.  Turning any type of activity or products of value into a commodity demands labor (cheap labor) and the idea of a high yield profit from a high yield investment is the center definition of globalization (Rikowski).  In the end, the globalization of capital will serve to unite the world in monetary terms.  The globalization of capital gives the free trading world the opportunity to become self-made, and gives countries the opportunity to become wealthy after devastation (either by war or natural affects).

Work Cited

Elliot, Micheal.  The Wrong Side of the Barricades. Time Canada.  Vol. 158, Issue 3, p19.         September, 2001.

Holloway, John.  Capital Moves. Capital and Class, No. 57.  pp.137-144, Autumn, 1995.

Hudis, Peter.  Marx in the Mirror of Globalisation. CYREV: A Journal of Cybernetics   Revolution, Sustainable Socialism, and Radical Democracy.  Issue 7, Spring 2001.

Rikowski, Glenn.  Transfiguration:  Globalisation, the World Trade Organization and

The National Faces of the GATS. < www.libr.org/isc/articles/14-Glenn_Rikowski.html>

Wolf, Martin.  Is Globalisation in Danger? World Economy.  Vol. 26, Issue 4, p.393-411, April,          2003.

09 Feb 2010

Sample Essay: Globalization Of Chanel

“Fashion has to do with ideas, the way we live, what is happening.”

Gabrielle “Coco” Chanel

History of the Chanel Brand

The success of Chanel as one of the leading luxury brands in the world could be traced back to the humble beginnings of its namesake’s founder, Gabrielle “Coco” Chanel. She had revolutionized fashion and had literally liberated women from restrictive clothing and ostentatious accessories through introducing a whole new look that she had started from her own sense of style and freedom. Her designs have greatly appealed to several women from high societies in all ages – but were likewise much imitated by the lower class. She popularized the use of jersey as an haute couture material and her name later on became one of the prominent symbols of elitism, wealth and class[1].

The success of the luxury brand could be attributed both with the manner for which it has adapted to the changing modes of the society and with the way it stood ground and faithful to the original meaning of Chanel “classics,” and in remaining true to the fact that fashion is a conglomeration of ideas – an apt reflection of the way people live and of the events that inspired such way of life. It is not an entity to stand for itself; it is not with the promotion of downright ostentatiousness, but rather with the celebration of femininity and fluidity of motion.

Competition with Other Brands through the Years:

The years 1914 to 1918 saw several socio-economic changes during the First World War There was a growing recognition on the changing roles of women in the Parisian society and the flamboyant manner of dressing became seemingly inappropriate after the onset of war. Thus, Chanel’s introduction of the “flapper style” in the 1920s became in tune with the growing social consciousness that was evidently resulted from the Parisians’ war experiences. Women were finally liberated from their corsets and short sleek hair became the fashion for women who were already asserting their newly found freedom. Chanel became the epitome of the 20s style as the masculine, flat-chest silhouette of couture became synonymous to style and liberation[2]. Much of Chanel’s success was likewise attributed to her partnership with Pierre Wertheimer and to the introduction of Parfums Chanel in the luxury market.

However, the female form returned in the 1930s through the introduction of clothing from Madeleine Vionnet and Mainbocher. Chanel perfume likewise found a very stiff competition with the advent of a new line of perfumery from Elsa Schiaparelli. Yet, Chanel managed to prevail as she was chosen to dress the most influential women of that period – Katharine Hepburn, Grace Kelly, and Elizabeth Taylor. Coco Chanel established a successful fashion studio near the museum of Louvre in Paris, France. Coco Chanel also started her set of jewelry line that was initially used for her daytime sportswear collection[3].

The Chanel perfume line likewise thrived as Chanel No. 5 became the dynamic equivalent of upper class fragrance in the late 1920s. In 1929, Chanel’s partner, Pierre Wertheimer introduced Soir de Paris to gain access to a much general market. This partnership has thrived and became one of the leading industries of the upscale market in spite of the growing differences of the personal relationships of Wertheimer and Chanel. Chanel felt that the Wertheimers were exploiting her talent through not adequately providing her with her fair share in the income of the company. The Wertheimers however, maintained that they have solely financed Chanel’s business ventures and were it not for their help; Chanel would not be able to gain prominence and wealth[4].

The onset of World War II and the invasion of the Nazi forces to France prompted Chanel to close her shop. As the Wertheimers fled to the United States, Chanel tried to gain full control to Parfums Chanel but has failed to do so as the Wertheimers had already anticipated that move.

In the 1940s, Chanel went into exile in Switzerland after France gained victory over the Nazi forces. Chanel allegedly had an affair with Nazi officer Hanz Gunther von Dincklage. Because Frenchwomen who were said to have been supporters of the Nazi forces received unjust social stigma, Chanel decided to go to Switzerland and temporarily continue the closing of her shop[5].

At this time, it was said that one of Chanel’s fragrance engineers, Beaux invented a series of perfumes then called, “Mademoiselle Chanel.” As Chanel attempted to ship the perfumes to the US, Wertheimer was forced to settle into an agreement with her. Mademoiselle Chanel thus disappeared after this alleged agreement.

The 1950s saw the emergence of a new fashion voice from the teen-ager groups, who – prior to 1950s have been following the fashion trends of the middle aged population. There was also a dramatic increase in the population due to several pregnancies after the war. At this time, Marks and Spencer’s ready to wear items were much in vogue as well as Christian Dior’s post-war opulent fashion. Different from the resulting reactions of the public after the World War I, the women at this period felt the need to dress more ostentatiously after experiencing deprivation on fabrics and rich and fashionable clothes during the war. Chanel was angered when she saw this change upon her return from self-exile in Switzerland. She felt that fashion should not be regressing but must continue to embody the fluidity of motion that comes with the passage of time, particularly during the post-war years. But because of the rise of the number of pregnant women, Chanel’s shapeless designs regained its popularity[6].

Chanel asked for financial backing from Wertheimer in exchange of the rights to the Chanel products, which would no longer be exclusively confined to perfumes. This proved to be an excellent business decision as Chanel was able to regain its competitive edge in the luxury market. With the successful inclusion of the classic Chanel 2.55 bag and the Chanel suits, Chanel once again secured its position in the market of the upper echelons of society.

In the 1960s, the television played a major role in the course of the fashion industry. The Beatles and rock and roll provided heavy influences in the manner for which the younger generations dress themselves. The concept of mod fashion was introduced and skirts have dramatically diminished their lengths. Pierre Cardin and Paco Robanne became the leading stylists of this era. Chanel, however, resented this. She felt that the ugliest part of a female body is her knees and must therefore be covered for most of the times. At the end of 1960s, floor length “Maxi” dresses became the fashion rave[7].

Chanel re-engineered classical fashion through the innovations that she introduced in her Chanel suits and pillbox hats. As a matter of fact, there has been no other suit that could rival then first lady Jackie Kennedy’s famous pink Chanel woolen suit, which embodied her feminine style and power.

Chanel’s death in 1971 ended Coco Chanel’s reign as Chanel’s chief designer. She was replaced by Karl Lagerfeld, who were said to have introduced significant changes in the Chanel line while at the same time remained faithful to Chanel’s definition of elite classicism. In 1974, the house of Chanel launched a new eau de toilette, Cristalle which was designed when Coco Chanel was still alive. When Jacques Wertheimer took over in 1974, Chanel No. 5 was starting to be regarded as an outdated perfume and was less favored than Yves St. Laurent’s Opium. He then started to change this conception by banking on the brand’s classicism and exclusivity. The sales of Chanel No. 5 dramatically increased through high-caliber endorsements from the likes of Catherine Deneuve in 1970, renewing the Marilyn Monroe classic endorsement of Chanel No. 5 in the 1950s[8].

In the 1980s, Princess Diana gained prominence as a fashion icon and thus powered dressing and tailored look became the prescribed mode of style. Aside from this, shoulder pads became the latest trends and the TV soaps Dynasty and Dallas became the most influential dictators of fashion. Chanel responded into this by launching the Chanel line of brocade jackets and just above-knee short straight skirts. Quilted Chanel bags became the representatives for vogue clutch bags with colors that match the footwear[9].

The early 1990s was a period of recession. However, Chanel remained to be a global leader in terms of fragrance and in marketing. In the mid-1990s, Chanel further undertook boutique expansions and ventured on skin care line, sunglasses and watches.

In the 2000s, Chanel was able to acquire assets and businesses in the luxury business. Its acquisition of A. Michel et Cie, an exclusive hat maker complemented the company’s existing fashion industry holdings on flowers, feathers and buttons.

Marketing Strategies and Further Expansions:

The company has ventured further as a 2,400-square-foot Chanel boutique was opened in Hongkong , and paying nearly $50 million for a building in Japan’s Ginza shopping district. With the present economic recession, this proved to be a wise venture as the shifting economic trends are now being centered to Asian countries such as Japan, China and India.

Chanel’s legacy on upper-classicism and elitism became one of the reasons why it did not lose its competitive edge against upper-class rivals like Bvlgari, Cartier, Christian Dior, Versace, Louis Vuitton, Tiffany & Co., Gucci and Prada. Time Magazine had several features accounting Coco Chanel’s success and the empire that she has left, that managed to stand amidst periods of global economic crises and recessions[10]. Much of Chanel’s success is due to her unwavering personal style and an adamant refusal to be dictated and be reduced as a mere follower of societal norms, without losing sight of the inherent timelessness in her designs.

In the same manner, Chanel was also able to free the women from the shackles of restrictive clothing without compromising class and elegance and at the same time popularized her clothing philosophy among the masses that could easily imitate her designs. Though imitations, these prove to be Chanel’s measurement of success and further helped the company gained further international recognition.

Marketing strategies that are more aggressive compared to other companies provided the company with a fat profit margin – particularly in the industry of perfumery. In 2005, Nicole Kidman became the face of Chanel No. 5 and more recently, Audrey Tautou became the powerful embodiment of the Chanel credo. The company was willing to take risks and infused so much capital, even at times of economic difficulties. This provided them with positive results and further enabled them to expand to other high-end product lines. Aside from this, the company had successfully shifted its market focus and that proved to be adaptive and expansive in nature. In the late 1980s, Chanel focused on dominating the US market. Presently, Chanel is already focusing its market strategies to Asian countries, which now have the bigger capacity to pay for high-end products.

Chanel became the first perfume company to treat advertising as a project comparable to the making of a film. As a matter of fact, Chanel has its series of short films that effectively brings the viewers into context while at the same time advertise their products. These proved to be an effective as well as an original strategy. Chanel’s short films were oftentimes depicted through the lives of the rich and the famous – banking on the notion that every woman’s dream is to attain what Coco Chanel has attained in her lifetime – prominence and wealth and the desire of whoever men she has chosen. As in every short film, the journey of brining the viewers in the context also marked the beginning of a romantic and an escapist fantasy. The choices of models that would perfectly advertise the brands, which include Marilyn Monroe (1950s), Catherine Deneuve (1970), Nicole Kidman (2005) and Audrey Tautou (2009), were an embodiment of feminine beauty and sensuality. Who would ever forget Marilyn Monroe’s classical Chanel No. 5 advertisement, as it gained similar fame and prominence as Marilyn Monroe herself? Chanel No. 5 became a symbol for certain facets common to all women – exquisiteness, timelessness and even the difficulty of attainment. Choosing Audrey Tautou as a present endorser may have been a symbol for Chanel to finally asserting its Parisian uniqueness and slowly abandoning its all-American imagery.

In 15 August 2002, Media Business published that Chanel shifted its market to target women in younger age brackets through the launching of its new fragrance – Chance. Chance has received “the biggest marketing push in the company’s history – with an introductory budget of more than $12 million. Chanel therefore found new competition in this line with the already established Happy by Clinique and CK One of Calvin Klein. This effort is apart from the launching of Allure in 1996 and Coco Mademoiselle soon after, which was targeted for the younger population too. This maybe attributed to the growing number of wealth distribution in the younger ages.

Businessweek, in its January 29, 2007 issue published that Chanel is taking aggressive measures to appeal to a younger set of consumers further by selling Chanel products in independent high-end boutiques such as Jeffrey’s in New York and Maxfield’s in Los Angeles. These aggressive marketing measures were even more heightened upon the launching of Chanel No. 5’s internet film campaign in 2005, with its new style icon, Audrey Tautou.

Compared to other brands like Louis Vuitton and Gucci, Chanel provides autonomy to its regional heads and is more decentralized in order to maximize its marketing potentials amidst competition.

Chanel made an Asian statement when it erected a 10 floor retail facility in the Ginza district in Tokyo, Japan. This is Chanel’s largest store in the world which showcases not only retail stores but high-end restaurants in conjunction to the classic Chanel theme. It also showcases a hall for concerts and exhibitions to further provide rich cultural experiences to the shoppers. Chanel would be opening its new Shanghai boutique after it has received strong sales in China for the past years. The first Chanel store in mainland China was opened in 1999 in Beijing[11].

Presently, Chanel operates 42 boutiques in the Asia-Pacific – 8 in Hongkong and 5 in mainland China making a total of 151 Chanel boutiques worldwide, while one of its closest competitions, Gucci, has 425 stores[12].

Chanel in Times of Recession

In spite of the seeming invincibility of Chanel, its resiliency is being tested by the present financial crises. Chanel had to downsize in order to adjust with poor economic gains. Its much funded worldwide tour was postponed into an indefinite period of time in order to offset losses[13]. However, Chanel managed to retain its status through marketing strategies that promoted its products “as luxurious yet attainable investments, while all the while trying to remain above the scrum of middle-class consumer culture”[14]. As a matter of fact, Chanel continued to promote itself as the embodiment of Parisian elegance through bringing Coco Chanel’s history come to life, in spite of the fact that its highest selling store was situated not in Paris but in a shopping mall in Waikiki, Hawaii.

Fighting Product Imitations:

Though earlier, Chanel said that she does not want to undertake any effort to combat the piracy of her products, the company today already took a stand against such piracies, owing to the fact that products are already gaining their respective “investment” statuses. Like any luxury brands, Chanel products were now bought not only for their functionalities but also for their promised uniqueness and exclusivity.

These changing perspectives may have been derived from the growing efficiencies on technological breakthroughs. Right now – particularly in developed countries such as the United States of America, France and England, with the growing affluence of the middle class in Asia, consumers already find it relatively easy to obtain the products that they need. They now seek for uniqueness and for exclusiveness – for the opportunity to own something that others could not readily obtain. This has undoubtedly paved further prominence of luxury items – particularly of Chanel, which from viewing history remained “different” from the fashion addiction of the mainstream public. As a matter of fact, Chanel recently placed serials in all of their products to further promote the “uniqueness” of one product from the other.

This “exclusivity” may have been affected by the counterfeit Chanel products and may be one of the reasons why Chanel already took a stand against piracy. However, as with any other products, the existence of counterfeit items becomes one of the primary bases for measuring the products’ success and popularity.

While the black market could be tolerated, the gray market poses a bigger threat to luxury products such as Chanel. The gray market tends to sell genuine products through non-affiliated and non-endorsed channels at a much cheaper rate. This ultimately damages the brand’s high-end image – particularly to the upper class, which patronizes these products most.

Projected Sales and Performance[15]:

Chanel has been very discrete in revealing its annual revenues and its over-all performance. As a matter of fact, because of its non-disclosure, it was not included in the Forbes Magazine’s most recent to 2000 companies of the world. However, one could be able to arrive at the closest estimates by looking at Chanel products’ performance compared to its other competitors such as Christian Dior. Presently, the owner of the Chanel fashion house – Alain and Gerard Wertheimers of Paris hold a tight rein in the over-all management of the company. In spite of the company’s reluctance to reveal its over-all finances, its owners – Alain and Gerard Wertheimers ranked 55th in Forbes’ 2009 list of world billionaires with a net worth of $8 billion.  According to Gilbert Harrison and Robin Andrea Harris, founder and vice-president of the fashion industry investment firm Financo, and Mitch Hara, managing director in Peter J. Solomon Co.’s merger and acquisitions groups in an interview entitled, “Buying Chanel (All of it),” published in www.portfolio.com and written by William Dutge (2008), Chanel’s 151 boutiques worldwide may be worth $10.3 billion to $14.8 billion.

In arriving at this assumption, Harrison, Harris and Hara looked at Chanel’s performance in the fashion business, in its perfume lines and its other acquisitions. According to them Chanel’s annual revenue runs between $2.3 billion and $3 billion in terms of its fashion products sales making its estimated value between $5.6 billion to $7.7 billion. In the lines of perfume and cosmetics, considering that it has an average performance compared to its competitors – Clarins, Estee Lauder, and L’Oreal, its annual revenue may range from $180 million to $240 million making its added value $3.1 billion to $4.1 billion. In spite of the fact that the average luxury-goods stock is off 40 percent due to economic recessions, it is deemed that Chanel is able to hold up better than other high-fashion lines. This added value may range from $2.2 billion to $3 billion.

Forbes magazine recently published a list of most desirable luxury brands using the online survey of Nielsen in 48 countries worldwide. Chanel came in second to the list while Dior came in fifth. As Dior announced its revenue of around $6.5 billion in the first quarter of 2008, posting an average of 5% growth, Forbes estimated that Chanel maybe earning a total of $8.67 billion[16].

Presently, Chanel No. 5 holds 6 percent of the worldwide fragrance market share[17]. A variant of Chanel perfume, Coco Mademoiselle holds 3 percent of the market shares in Britain, which is indicative of how Chanel survived the changes in the upper market preferences through the years. The launching of the movie “Coco Avant Chanel” starred by its endorser Audrey Tautou undeniably educated the new consumers about the exquisiteness of Chanel and its namesake designer.

Conclusion:

These developments would provide the reasonable conclusion that Chanel has survived the market and has been globally recognized because the company, as a whole kept on re-inventing itself without losing sight of its real identity. Chanel continues to dominate the market in spite of increasing competition and changing preferences, because, as Coco Chanel herself pointed out, it is an embodiment of woman of the world.

References:

Coco avant Chanel. Dir. Anna Fontaine. With Audrey Tautou, Benoit Poelvoorde, and Alessandro Nivola., May 2009

“Chanel.” Accessed 10 December 2009 from www.referenceforbusiness.com

“Chanel to Open New Shanghai Boutique.” 12 October 2009. Accessed 07 December 2009 from www.luluscouture.com

“International Directory of Company Histories.” Vol. 49, St. James Press, 2003

“The World’s Billionaires.” Forbes’ Magazine. March 11, 2009. Accessed 10 December 2009 from www.forbes.com

Betts, Kate. “Coco Chanel.” Time Europe. 13 November 2006. Accessed 07 December 2009 from www.time.com

Davies, Lizzy. “Chanel Sheds 200 Jobs as Sales of Luxury Items Decline.” The Guardian. December 2008. Accessed 07 December 2008 from www.guardian.co.uk

Dutge, William. “Buying Chanel (All of It).” May 2008. Accessed 10 December 2009 from www.portfolio.com

Weston-Thomas, Pauline. “Flapper Fashion 1920s.” 2007 Accessed 07 December 2009 from www.fashion-era.com

Weston-Thomas, Pauline. “1930s Fashion History, Costume Images and Social History.” 2007 Accessed 07 December 2009 from www.fashion-era.com

Weston-Thomas, Pauline. “1940s Utility Clothing.” 2007. Accessed 07 December 2009 from www.fashion-era.com

Weston-Thomas, Pauline. “1950s Fashion History, Costume History and 50s Social History.” 2007. Accessed 07 December 2009 from www.fashion-era.com

Weston-Thomas, Pauline. “1960-1980 Fashion History.” 2007. Accessed 07 December 2009 from www.fashion-era.com


[1] “International Directory of Company Histories.” Vol. 49, St. James Press, 2003

[2] Weston-Thomas, Pauline. “Flapper Fashion 1920s.” 2007 Accessed 07 December 2009 from www.fashion-era.com

[3] Weston-Thomas, Pauline. “1930s Fashion History, Costume Images and Social History.” 2007 Accessed 07 December 2009 from www.fashion-era.com

[4] “International Directory of Company Histories.” Vol. 49, St. James Press, 2003

[5] Weston-Thomas, Pauline. “1940s Utility Clothing.” 2007. Accessed 07 December 2009 from www.fashion-era.com

[6] Weston-Thomas, Pauline. “1950s Fashion History, Costume History and 50s Social History.” 2007. Accessed 07 December 2009 from www.fashion-era.com

[7] Weston-Thomas, Pauline. “1960-1980 Fashion History.” 2007. Accessed 07 December 2009 from www.fashion-era.com

[8] Weston-Thomas, Pauline. “1960-1980 Fashion History.” 2007. Accessed 07 December 2009 from www.fashion-era.com

[9] Weston-Thomas, Pauline. “1960-1980 Fashion History.” 2007. Accessed 07 December 2009 from www.fashion-era.com

[10] Betts, Kate. “Coco Chanel.” Time Europe. 13 November 2006. Accessed 07 December 2009 from www.time.com

[11] “Chanel to Open New Shanghai Boutique.” 12 October 2009. Accessed 07 December 2009 from www.luluscouture.com

[12] “Chanel.” Accessed 10 December 2009 from www.referenceforbusiness.com

[13] Davies, Lizzy. “Chanel Sheds 200 Jobs as Sales of Luxury Items Decline.” The Guardian. December 2008. Accessed 07 December 2008 from www.guardian.co.uk

[14] Weston-Thomas, Pauline. “1960-1980 Fashion History.” 2007. Accessed 07 December 2009 from www.fashion-era.com

[15] Dutge, William. “Buying Chanel (All of It).” May 2008. Accessed 10 December 2009 from www.portfolio.com

[16] “The World’s Billionaires.” Forbes’ Magazine. March 11, 2009. Accessed 10 December 2009 from www.forbes.com

[17] Weston-Thomas, Pauline. “1960-1980 Fashion History.” 2007. Accessed 07 December 2009 from www.fashion-era.com

06 Feb 2010

Sample Essay: Oil Industry Mergers

Introduction

Borenstein and Moritsugu (2004) indicate that the Exxon and Mobil companies merged at the end of November 30, 1999 (ExxonMobil, 1999) when they were the two leading oil companies in the US. Their merger was motivated by a need to cut costs through economies of scale, in the face of rising operation costs. I must be added that the two companies did originate fro the same company the Standard Oil Company, which was ordered in 1911 by the Supreme Court of the US to be split into 34 companies. Out of these splinter companies Exxon and later on, Mobil emerged. This historical piece however did not have anything to do with their eventual regrouping.

In all, there were some 2,600 mergers of smaller firms between 1990 and that year. It emerges here that the main drive for mergers was the need to cut costs by approaching the market and the logistics together (Cartwright & Schoenberg, 2006, p 11).

This paper sets to discuss the merits and demerits of such mergers with special emphasis on their benefits and demerits to the project teams, stakeholders and the public at large, with the aim of making recommendations on how management of such processes can be improve.

Background

Industry mergers are a phenomenon that has been commonplace for quite sometime now. They basically involve two organizations coming together to form on large corporate under which they operate. The new organization which may have a combination of the names of the merging components or a totally new name operates as a new entity. The new rules under which the new entity operates depends in the agreement on the terms of the merger.

The history of mergers can be traced back to the 1895 to 1905 period in the US when the small companies with small market shares combined forces to form larger entities that dominated the target markets. In this way their collective value accounted for 20% of the total GDP (Cartwright & Schoenberg, 2006, p 3). Since then mergers have remained a popular way of market consolidation and strengthening of the capital base of the various firms involved.

The rise of globalization in the 1990s further increased the market for international mergers with firms located in different countries and continents coming together. These multinational mergers have resulted in huge conglomerates across borders with multibillion dollar financial bases and thousands of international shareholders.

The Exxon-Mobil Merger

The merger that took place between Exxon and Mobil falls into a broad category of mergers known as a Horizontal Merger. DePamphilis (2008, p740) states that this is where two competing companies with a similar product line and the same target market come together to fortify their presence. They turn all the energies that went into competition before to promote their joint product together. This kind of merger is easier than others since the two merging groups already understand their market and understand each others product perfectly.

In December 1 1988, the Exxon and Mobil oil companies announced their intent to carry out a horizontal merger valued at $80 billion (Cable News Network {CNN} Money, 1998). The aim of this merger was to “Create an oil entity rivaling the biggest in the world”. Under the terms of the agreement the new company would be called the Exxon Mobil Corp.

The two chief executives Exxon’s Lee Raymond and Mobil’s Lucio Noto announced then that the main motive of their merger was to compete more effectively in the face of sharp drops in oil prices. One objective the bigger company was set to achieve would be to cut costs of operation so as to maximize profit. Industry analysts said it was a good prospect for the two firms to merge since many organizations at the time were slashing the pay of employees and making capital spending plans to cut costs.

The new Company Exxon Mobil Corp indeed posted a profit of $ 9.8 billion in 1999 up from a joint $ 5.5 billion the year before, when the two firms were still separate entities (Slocum, 2009, p 8). So by all indicators the merger worked wonderfully for the two merger project teams. But the cost of merger to the other stakeholders was another story all together.

The Stakeholders

The stakeholders of this and the other similar mergers involving BP-Amoco, Chevron-Texaco, Total-Petrofina and Conoco-Phillips; are the project teams, the employees, the shareholders, the trading partners and the consumers. These stakeholders have been affected differently every time a merger of this magnitude is carried out (Kroger & Tram, 2000, pp 2-3).

Choices Facing The Project Teams

The main stakeholders in any merger are the project teams of both firms responsible for working out the merger. Much as mergers are profit and survival driven and just have to be done, there are many problems therein (Deans et al, 2002 pp 2-3). The issues to be faced include liability consolidation, welfare of all stakeholders, terms of engagement and planning for a joint future. All of these must be set into a game plan that can be executed swiftly and efficiently so that all those involved are not affected or disrupted for too long.

Those working out the merger must closely consider what their future partners are bringing on the table in terms of assets, liabilities, personnel, opportunities and previous profit margins (Kroger & Tram, 2000, p 30). This ensures that all cards are played on the table and no nasty ones are kept aside to be unleashed later. The past profitability, the market prospects, the scale of operations and the asset base and liabilities must all be declared to know the exact situation each party is getting into. This is usually easier said than dome since the temptation to hide weaknesses such as bad past business decisions usually very high on both sides.

Another challenge for both parties is to separate dreams from reality. The two companies always come together with the ego and vision of their directors and management teams. Consolidating these dreams into one solid vision may be a make or break issue for the two parties. It is imperative therefore to be able to balance dreams with reality. If one firm is wishing to expand its market presence while the other wishes to expand its capital infrastructure, then the two issues must be carefully synergized by considering the advantages and disadvantages of both against the background of the most urgent under the new circumstances. In fact, in most cases one of the parties is forced to take a backseat and give some space to the other.

One of the paradoxes is that while employees are being laid-off to cut costs, the costs of the laying-off exercise must be catered for instantaneously. The most direct way of doing this is to borrow the money to pay off employee gratuity so to borrow the money to pay off employee gratuity so as to spread the cost over many years of repaying the loan. Ultimately it is cheaper to have the employees out of the payroll, but the immediate cost of doing that is another undesirable albeit inevitable liability.

Another issue that faces the leaders of the firms is how to consolidate the disparate management practices and traditions of the two firms. It is usually tempting to ignore this factor but the outcome is almost always detrimental. Two organizations operating in the same field such as the oil giants may be completely different in their manner of operation. New rules and traditions have to be worked out that will work for both organizations (Cartwright, & Schoenberg, 2006 p 21). This involves policy and code of conduct. In many mergers those involved opt to leave such nitty- gritty for later, but this only elongates the duration of the merger unnecessarily. Employees and other operatives need to know the new rules as soon as possible since they have to resume work immediately the champagne bottles have been popped.

The other important consideration is that the welfare of the retained employees be looked into. Assuming that they have no role to play, as often happens, does not augur well for the future of the new company. The employees must be given an opportunity to invest in the future company so that they feel apart of it. If they are left floating then they may be disillusioned and disoriented by the whole merger process. When they are left at sea like yet they have a future role in the new company, is not good for its future prospects.

Both firms also have to face up to the fact that they have certain trading partners whose services may have to be terminated in the new setup. Most of these partners including suppliers and service organizations, always feel threatened by such mergers since they may be left out in preference of the firms previously serving the other merging partner. The pragmatics of cost cutting may actually ensure that this is actually the case. All the same, they have to be handled with great care. The partners usually know a plethora of weaknesses of the firms they have been dealing with and can therefore expose this knowledge on the public domain or launch nasty court cases that may delay or derail the merger altogether (Kroger & Tram 2000, p 8).

Problems Facing Trading Partners

The trading partners are all those people including suppliers, transporters, servicing and maintenance firms(Cartwright & Schoenberg, 2006, p 32). This group may have a history of serving either of the merging firms well in the past. The moment the issue of a merger comes up they immediately feel threatened. Unless they are assured by the new managers of the merged firm that they shall be retained or their outstanding credits shall be settled, life becomes very difficult for them. The prospects of going to court to settle certain matters becomes a grim reality since in many mergers they are totally left out to the equation.

The partners may find it really difficult to operate after their services are suddenly terminated as a cost cutting measure of the new arrangement. Some of them face the very real danger of going under especially if the terminated deals were their main lifeline.

Partners’ Gains

Those partners who are retained face real prospects of exponential growth, since they end up dealing with a bigger organization than they did before. They also gain from an expanded network which literally means dealing with more people and thus gaining more contacts. This is a really good prospect for business expansion.

The Employee Problems

The employees of the two companies in the merger find themselves being pushed rudely out of their comfort zones in various ways. First, they may be declared redundant. In the Exxon-Mobil Merger a total of 9000 jobs were set for cutting off out of the total of 123,000 the two firms had worldwide. This accounted for some 8% job cuts with all those workers being declared redundant. The impact of such job cuts are grave indeed on the employees who until then were comfortably working and managing their lives (Kroger & Tram 2000, p 16).

Indeed in the case of mergers it is very common for the welfare of the junior staff members who have kept the companies going for years, to be given the least priority since the main driving force of the merging groups is simply profit (Ferenczy, 2009, p 6). The problem is not just financial as they are usually given a handsome payoff for their dedicated labor. The problem is more about the fact that they have to plan their lives anew.

That is usually not the easiest thing. Getting another job usually means beginning to build up their careers from scratch, since the past experience they have accumulated may not be considered very much in the new appointment. Secondly, they are faced with the reality of having to take a pay cut if they find a firm that is no able to employ them at the same rate of payment. Thirdly, they find that that feeling of belonging that they shared in with others in the company is suddenly proved to be a cruel illusion. This may result in serious psychological consequences. Lastly, any plans they may have made for career advancement are suddenly rendered useless. This means that life has to begin from a lower level which they thought they had overcome in the past. For some the trauma and disillusionment usually mars all the gains to be made by the merger (Ferenczy, 2009, pp 6-8).

Even the employees who survive do not find it easy either. They suddenly find themselves operating with new bosses, colleagues and clients. They also have to adjust to new rules and more often than not sacrifice part of their pay in the name of cost cutting. In addition, their views may not be considered necessary when the mergers are being discussed. All these disruptions should be carefully taken into cognizance as when terms of merging are laid on the table, but unfortunately, in most cases they are not.

The Employee Gains

Among the gains of the employees are that those who survive usually end up working for higher wages once the merger picks up and the gains begin to be seen (Cartwright & Schoenberg, 2006 p 22). Higher pay packages are offered them and they experience and exciting career growth provided that the merger is successful. This offers them greater opportunities and personal development prospects than they had before.

Secondly, there is a better prognosis for career advancement. Promotion means handling more people over a larger scope. This increases the gains that go with career advancement. Generally speaking the pie is bigger and so the individual share increases as well.

The Shareholders’ Losses

Another group that is adversely affected during most mergers is the shareholders. After the big merger deal at Exxon-Mobil the shareholders found themselves left with the short end of the stick. They were compelled to take a drop in their share value due to consolidation of he new shares. When trading of the new shares opened, Exxon shareholders were staring at a drop in value of 3 points, while Mobil lost 2 points. The combined drop forced the merger value to come down to $ 76 billion from the projected $ 80 billion. This took most of the thrill out of the deal as far as shareholders are concerned (CNN Money).

Another problem that shareholders have to contend with immediately after such deals is the failure to declare dividends for ordinary shares (Cartwright & Schoenberg, 2006 p 23). The oft given excuse is that the new company is still restructuring and thus dividends will be declared later. No matter how big the firm, and how large its profit margin, there are always hidden costs in a merger that have to be attended to and so the stakeholders would be lucky to emerge with anything. Usually, only preferred shares are dealt with until the new forma settles down.

In some cases, shareholders are called upon to dig deeper into their pockets to help the new multinational take shape. This happens where certain pressing liabilities have to be taken care of first. Whatever name it may be given in such an instance, the shareholders are basically required to give more money to keep the firm running

Benefits to the Shareholders

The benefit in the long run to the shareholders is that they can gain when the merged company does grow as profit margins increase. This happens when the new firm finally settles into business and gains new ground by benefiting from the cost cutting measures.

Challenges Facing Consumers

Theses are members of the general public who buy the products of a company. They can do they can buy as individuals or as organizations. The main interests of consumers are availability of what they want at the right price and the correct quality (Kroger F. & Tram, 2000, p 20). Usually these three elements do not occur simultaneously, and so amends have to be made by sacrificing one for the other. One example of a time when such amends are made is when companies start merging.

According to Slocum (2009, p12) the merger of most United States based oil companies left a gaping hole in the pockets of consumers since the mergers meant higher pump prices at the  gas stations. The prices are usually a function of many factors, but among the most important is competition. When firms are in direct competition with each other, price manipulation is one important aspect they use to attract customers. These manipulations may not sometimes directly mean that customers pay less since there are usually hidden charges. However in general prices remain low since arbitrary price increases can be suicidal in an environment of cut-throat competition.

This advantage is lost to the customer once mergers take place. This is a direct consequence of the fact that the consumer’s money is the main target of the merging firms. When they turn their competition into partnership, they become a cartel that controls prices and thus increase it at the earliest sign of financial distress (Kroger & Tram, 2000, 21).

Advantages to Consumers

Even then, loyal consumers, especially the corporate ones are always considered when major decisions are being made. They are the ones who keep the companies going in the lean times, and with time, the companies learn that rubbing such customers the wrong way is economic suicide. So they do not emerge as losers even in a merger.

The main advantage to consumers is the improvement in quality that results from the outstanding features of each individual company’s products being consolidated into one better whole. Apart from that the consumer benefits from wide ranging products over and above what they had in the individual company before, especially in areas where only one of the partner companies was represented.

Managing Mergers

Mergers are inevitable especially when markets become saturated and competition reaches its peak (Deans et al, 2002, p2). The main means of survival in those circumstances is to ensure that the merger is well managed so that the attendant problems that may come with it are avoided. Many mergers fail not because those merging have the worst intentions but because they are complacent on certain factors which look unimportant at that point but turn out to be crucial later.

The first thing to bear in mind when handling a merger is how it will affect all the stakeholders and the general public (Baron, 2008, p 17). If all parties are brought on board throughout the merging process, such that all their views are taken into cognizance, then the whole process will be smoother. ExxonMobil set a poor precedent here that saw oil and oil products rises steeply in price in a manner that blighted their reputation. It was this same fall from grace with the public that had caused the forced split of the original mother company, Standard Oil, which had fallen afoul of the public mood with environmentally damaging practices and mistreatment of employees. So the outcry that followed the steep oil price increases was quite reminiscent of the gloomy past.

Another factor that must be borne in mind is the envisaged gains to be made by the merger. Just like one company succeeds because it has a clear vision set in clear achievable and time-bound objectives; so do two or more companies that merge into one. With this in mind, there must be a clear vision that must apply to all parties. The Exxon-Mobil merger clearly had this in mind. The vision of the two oil giants was to cut down on the costs of production, to consolidate their two markets, to strengthen their presence in the stock market and to eliminate the competition between them (ExxonMobil, 1999). Obviously they had their problems while pursuing the merger, but the end result has been splendid so far.

The two managed to cut down on production costs by laying-off a total of 9000 workers and thus having a leaner operation which soon started showing results. They also took care of the issue by putting together their wide international reach and their immense equipment base to control their production and reach an expanded clientele. All these factors worked to their advantage (DePamphilis, 2008, p16).

On the issue of competition, the two companies were accused of causing a steep rise in petroleum and gasoline prices. They were the two hugest oil companies even before their merger save for the BP-Amoco group that had merged before. They therefore had quite a clout in the market. They took full control of the market and dictated prices and supply. Eventually they emerged just as well off as they had planned.

Another issue that is important for the merging companies that they took into full account was the issue of stock markets (Baron, 2008, p 18). Apart from banks, the stock market is an important source of revenue for a company. The self-worth of the company is also seen in terms of its market capitalization. Ignoring this aspect is always misguided and that is a path that the two giants did not take. Instead they consolidated their market base such that ExxonMobil remains to date the true claimant to being the largest company in the world.

One issue that has almost completely eluded the ExxonMobil merger is to have in place environmentally friendly policies. There have been public outcries from such organization as Greenpeace. The oil giant has been accused of carrying out environmentally unfriendly practices and opposing the popular stand on global warming. In fact they have been accused of funding initiatives opposed to the cessation of global warming. Considering that this was one of the issues that faced its great ancestor Standard Oil Company almost two centuries ago, one can only conclude that old habits really die hard.

Conclusion

As time continues to pass and competition tightens between companies competing for the same markets, the drive to merge will continue taking precedence. Because of this it is very crucial the merging companies take into consideration all the factors and stakeholders involved if they are to merge successfully. As Deans et al (2009) warn, if the merger is not properly managed, it will end up in disaster.

References

Baron,  D. P., 2008. Business and the organisation. 6th ed. Chester (CT): Pearson. Borenstein S. & Moritsugu K., 2004. Wave of oil industry mergers helped push up gas prices. The San Diego Union Tribune, 28 May. p 4.

Cartwright, S. & Schoenberg, R., 2006. “Thirty Years of Mergers and Acquisitions Research: Recent Advances and Future Opportunities”. British Journal of Management 17.

Deans K.G., Kroeger F. & Zeisel S.,  2002.  Winning the Merger Endgame: A Playbook for Profiting From Industry Consolidation. New York: McGraw Hill.

DePamphilis, D., 2008. Mergers, Acquisitions, and Other Restructuring Activities. New York: Elsevier, Academic Press.

ExxonMobil, (1999).”Our History.” Last updated November 30, 1999. Retrieved on: August 17, 2009.     <http://www.exxonmobil.com/history>

Ferenczy, I., 2009. Employee Benefits in Mergers & Acquisitions, 2008-2009. New Delhi: Infibeam.

Kroger F. & Tram M., 2000. After the Merger. New Jersey: Prentice Hall

Slocum, T., 2009. No Competition: Oil Industry Mergers Provide Higher Profits, Leave

Consumers with Fewer Choices. New York: Public Citizen.

Filed under: Sample essays — Tags: , , , , — admin @ 3:07 am

15 Oct 2009

Sample Essay: Why The Cold War Was Good For America

During the whole period, rivalry was expressed through propaganda, image distortion, dirt of dangerous weapons, military conditions; competitive in technology e.g. space race and industrial advances. Both USSR and US spent exotically in defense. Despite their allying against the axis powers in the world war two, they fell in sharp differences on the post-war world’s image as they had become the worlds supper powers based on economy, technology and even politics. This conflict divided the world in a bipolar world due to a prompt for countries to align themselves with either of these powers. This rivalry in a suppressed form had greatly spread all over the world within a short time pf start existence and being.

The cold war was in real sense is a struggle hence conflict between two opposing ideologies, communism and capitalism. Capitalism, which would also be termed as anti communism, was well adopted and embraced by the Americans in their overall politics while communism dominated the USSR political domain in all aspects of its being. The cold war continued making remarkable impacts on not only these parties involved but the entire world. After all was said, occurred and done impacts could be felt either positively or negatively in dependence to regio[i]ns initial state of being and the current stage propagated  by this rivalry caused by difference in ideologies. The impact on Americans as frequently argued out was on different basic areas of dependence.

It is very true that cold war brought good results. One of them is the introduction of communism. This finally brought to an end the soviet unions collapse. In addition to this, the, the cold war was a causative factor of a tremendous revolution of in technology that has ever been in the history of humanity1. In a confident way, I would in every bid possible, put forward an evidence to prove that the cold war in its occurrence brought some benefits to the USA more so in these ways.

The cold war resulted into an ultimate strengthening and being of the communist Russian. This gave the US an only state of being the remaining supper power in a world that became unipolar.

All countries would be in recognition of the fact that US has become the overall overseer of these countries in the world. After the collapse of the USSR ,USA has ever since became a sole state that has preeminence in ever power , domain ,iron terms of , economy , military diplomacy ideology , technology and culture in opposition and capability to bring out it’s interests in every part of the world2[ii] .

When this war ended and consequently the Soviet Union’s existence and power diminished, the USSR’s ideology of communism also dropped and it faded away in the countries known to have been sole strong embracers of communism. The failure and drop of communism gave capital ideology a tremendous rice and acceptance in most countries.

The world in a unipolar state under the supremacy of it awards to USA in due process embraces and accepts capitalism. It is noteworthy that the US has benefited from the cold war in that its state no world’s view of it has changed. The USA has changed has gained the position and recognition of being a world’s supper power and in turn brings about respect and a great opportunity to impact the post cold war world in best way possible . Because the USA has become the supper power, many countries look unto her for help and support in terms of technical advice and financial age. This in turn keeps USA on toes in every domain that directly involves decision-making and policy formulation and enactment.

Had the Soviet Union not collapsed there would be division and loss of business parts and cooperates for USA because some of her partners were entirely embracing communism. This would consequently affect the American’s economy in a bigger way than at the moment.

The cold war was in a more clear way was beneficial to the USA than even the USSR which at the end of the span of time collapsed never to rise again. It brought about the numerous advancements to the USA in a wider range of aspects. More technologically, USA rose up to some notches higher than she was initially a bid to be ahead of the other, both USA and USSR manufactured and invented weapons that are more powerful.

The weapons manufactured during this time were powerful and found use by the military in defense. In a bid to advance in weapon to technology, USA adopted more practices that are scientific. This move helped to enhancing the USA’s technology in defense. Involvement of USA in arms race brought about the inventory and use of nuclear energy in manufacture of some more sophisticated weapons and equipment to be used. With the invention of nuclear energy there has therefore been the use of which consequently supplication to USA’s energy sources. Now apart from coal, the consumers could now use nuclear energy hence saving some reasonable amount of money. This nuclear technology has therefore provided an option to the Americans on the type of energy, and reduced her dependency on oil3. Though very dangerous to the human existence, nuclear energy brought about by the technology acquired during the cold war in the arms race.

The cold war also brought about state technology. During this rivalry, every party was in great attempt to outdo their rival by any means possible. The adoption and use of space by USSR promoted USA to adopt a space program that would also help gain information about her rival the USSR. The space programs have aided a great deal in Intelligence Corporation, which helps USA keep track of everything happening around her and her enemies. It has today helped them to deal with terrorism and any other security threat to USA in their air space4.

The USA benefited from the cold war in terms of racial integration within the military.  This was and is still very essential in the country’s defense. The entire population of America became united together in effort to defend their country and national heritage5. This was a common but very noble cause as they felt that this rivalry directed affected their lives in not only the military basis but also the society[iii]The Americans since and during this time became united and embraced promotion like never before. It is therefore noteworthy to conclude that the cold war killed racism to a certain level, brought about integration and the spirit of patriotism. This happened as USA was on her feet trying to outturn its rival in every possible way.

On a conclusive note despite the fact that the cold war brought a lot of negative effects in all aspects but especially the economy there is something positive that could be attributed to the cold war in USA even today .

All the advancements gained during the cold war can be put in a nutshell to include space technology and nuclear technology.  USA therefore rose in position to be a supper power and national integration of USA could greatly be attributed to the cold war .Today Americans can be proud of themselves and they are confident in terms of defense as they have one of remarkably sophisticated military systems ever since time in memorial.

Reference

Kenton J. Moody, Ian D. Hutcheon, Patrick M .Nuclear Forensic Analysis. NY: Grant.

China’s Nuclear Weapon Development, Modernization and Testing  http://www.nti.org/db/China/wnwmdat.htm

John, J. and Harvey A. Espionage in America. New Haven: Yale University Press, 2003

Harvey John, J. Espionage in America at the commence of the cold war. New Haven: Yale University Press, 2003.

Hogan, Michael. The End of Cold War, Its meanings and Implications, Cambridge University Press, 1992


1.Nuclear Forensic Analysis By Kenton J. Moody, Ian D. Hutcheon, Patrick M. Grant pg. 34

2. China’s Nuclear Weapon Development, Modernization and Testing  http://www.nti.org/db/China/wnwmdat.htm

3 John, J. and Harvey A. Espionage in America. New Haven: Yale University Press, 2003

4 Harvey John, J. Espionage in America at the commence of the cold war. New Haven: Yale University Press, 2003

5 Hogan, Michael. The End of Cold War, Its meanings and Implications, Cambridge University Press, 1992.

05 Oct 2009

Sample Essays: Food Lion, Bi-Lo and Harris Teeter

The American grocery store company Lion LLC is a company headquartered at Salisbury, North Carolina. Food Lion LLC has about 1300 supermarkets in 11 south east and mid Atlantic states. Food lion, Bloom, and Bottom Dollar Food are the three models of Food Lion LLC to cater the diversified interests of the market. (Super market news, February 24, 2007).The supermarket chain Bi Lo is headquartered in Mauldin, South Carolina. To attract high end customers Bi-Lo invested in redesigning its store lay out to attract high end customers. As a result of this a new super Bi-Lo concept featuring a larger store lay out with emphasis on health foods has emerged. As a part of this new Super Bi-Lo branded stores are opened and older stores are remodeled in affluent neighborhoods (super market news, February 24, 2007).The super market chain Harris Teeter is based at Mathews, North Carolina and this chain operates 174 stores in eight south eastern states. Harris Teeter has adopted a policy of differentiating itself from its competitors by providing exceptional customer service. They have also formed newly branded departments such as meat department, sea food department, produce department etc. (The Florida Times, October 2006)

Target Market: Marketing strategy is composed of a set of sub-strategies concerned with competition, segmentation, pricing, promotion, and distribution. The concept of segmentation involves positioning and target markets. The target group consists of high income group urban population. As the product marketed is mainly constituted of food products the target group can be specified as high income group adult population.

Product positioning: There is a relationship between market, product, and function. Buyers in the same market seek products for broadly the same function. Positioning helps a company to exploit its market better by selecting suitable segments that are compatible with its resources. Positioning is helpful in focusing strategies more sharply on target groups. Products in different segments of the market may be brought by the same buyer for different family members, or for different occasions.

Current Marketing Strategy: The marketing strategy followed by all of the three companies is almost similar as they are concentrating on high income group of urban population. More over all of them are mainly dealing with food products and are mainly operating in the same socio economic environment of South Carolina and various south eastern states. Competition is high in the market and various traditional promotion policies are adopted. Among these three companies the Food Lion is having the most diversified marketing strategies with various options of locating its outlets and functions to cater the interests of the wider customer groups including that of the rural areas and low income groups.

Improvements required in current strategy: Knowledge of consumer behavior is helpful to the marketer in understanding the needs of his different consumer segments and developing appropriate marketing strategies for each. Such knowledge will be useful for the marketer for developing an understanding of consumers’ response to the various marketing stimuli, which can be provided in terms of the product, price, promotion, and place. The study about the process by which a consumer arrives at the purchase decision can create an insight into the variables influencing the purchase decision. A number of variables such as psychological, personal, social, and cultural factors are influential in forming the purchase decisions of a consumer. The selection of target market also implies selecting the competitors with whom the company will compete. Another important point in this context is that the segment may be large but may already be well served by several well equipped competitors. Therefore it is vital to consider the following specific segment factors such as: 1.segment durability: segments based on fashions are short lived and any substantial investments shouldn’t be made on the basis of such segmentation.2.Mobility: The movement in and out of a segment of members of a target group has to be considered because the mobility rate of target group members is high in respect of a certain product.3.Visibility:indicates the extent to which the want of a target market or segment is distinctive. Highly visible segments are likely to be more stable than other segments of a market.4.Accessibility: Those in the target market should be directly reachable through established communications and distribution channels. As a conclusion it can be said that the current strategy of these organizations can be effectively improved by 1.focusing on those details that will best help the company develop product, promotional, pricing, and distribution strategies, and 2.by focusing on the set of benefits sought so that the company can build their offering to match the configuration of benefit sought by the consumer and in turn it will constitute a critical advantage to act as the buying inducement.

References:

1. (Super market news, February 24, 2007)

2. (The Florida Times-Union, October4, 2006)

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