The different theories associated with the performance of foreign markets - Free Essay Example

Sample details Pages: 7 Words: 2064 Downloads: 8 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? Purchasing power parity According to the Law of One Price identical goods should (under certain conditions) sell for the same price in two different countries at the same time. It is the foundation for purchasing power parity (PPP) theory, which relates exchange rates and price levels The purchasing power parity (PPP) theory is the measure of purchasing power of one currency alongside another currency after taking into account their exchange rate. The basic idea of PPP was popularized by Gustav Cassel in 1918 in his journal Abnormal Deviations in International Exchanges,. According to the Abnormal Deviations in International Exchanges the rate of exchange between two countries is primarily determined by the quotient between the internal purchase power against goods of the money of each countries. The general inflation will lower the purchasing power in all countries in a very different degree , and the rate of exchange should accordingly be excepted to deviate from their old parity in proportion to the inflation of each country. Don’t waste time! Our writers will create an original "The different theories associated with the performance of foreign markets" essay for you Create order There are two types of PPP. Absolute Purchasing Power Parity suggest that prices of the same basket of products in two different countries should be equal when measured in a common currency. Relative PPP describes the inflation rate. This describes that because of market imperfection, prices of the same basket of products in different countries will not necessarily be the same when measured in a common currency. Different versions of the Law of One Price and PPP Different versions of the Law of One Price and PPP Balance of payments model (MANGEMENT, Dragon Asset) This model holds that a foreign exchange rate must be at its equilibrium level the rate that produces a stable current account balance. A nation with a trade deficit will experience a reduction in its foreign exchange reserves which ultimately lowers (depreciates) the value of its currency. The cheaper currency renders the nation goods (exports) more affordable in the global market place while making imports more expensive. After an intermediate period, imports are forced down and exports rise, thus stabilising the trade balance and the currency towards equilibrium. Like PPP, the balance of payments model focuses largely on tradable goods and services, while ignoring the increasing role of global capital flows. In other words, money is not only chasing goods and services, but to a larger extent, financial assets such as stocks and bonds. Such flows go into the capital account item of the balance of payments, thus, balancing the deficit in the current account. The increase in capital flows has given rise to the Asset Market Model. Asset Market Model The explosion in trading of financial assets (stocks and bonds) has reshaped the way analysts and traders look at currencies. Economic variables such as growth, inflation and productivity are no longer the only drivers of currency movements. The proportion of foreign exchange transactions stemming from cross border trading of financial assets has dwarfed the extent of currency transactions generated from trading in goods and services. The asset market approach views currencies as asset prices traded in an efficient financial market. Consequently, currencies are increasingly demonstrating a strong correlation with asset markets, particularly equities. THE SUPPLY AND DEMAND THEORY The supply and demand theory, according to this one, the exchange rate is held to be determined by the supply and demand for foreign currencies. Actually, the supply and demand theory is not a theory, but instead a descriptive mechanism. To say that a rate of exchange is established by supply and demand is to tell how a rate is established, but to say a little about the factors that determine it or why the rate is at a given level and not at some other level. All of the forces, substantive, technical, and psychological, that have impact on a rate of exchange, must, by the very nature of the market itself, act by determining the demand for, and the supply of foreign exchange. What are Fundamental determinants of exchange rates? Foreign Exchange being a commodity likes any other commodities the exchange rates tend to fluctuate from time to time. There are various factors that cause the fluctuation in the rates of exchange. These factors can be divided into several following groups. These groups can affect the exchange rates on a short term as well as long-term basis. Fundamental Factors The fundamental factors include all such events that affect the basic economic and fiscal policies of the concerned government. These factors normally affect the long-term exchange rates of any currency. On short-term basis on many occasions, these factors are found to be rather inactive unless the market attention has turned to fundamentals. However, in the long run exchange rates of all the currencies are linked to fundamental causes. The fundamental factors are basic economic policies followed by the government in relation to inflation, balance of payment position, unemployment, capacity utilization, trends in import and export, etc. Normally, other things remaining constant the currencies of the countries that follow the sound economic policies will always be stronger. Similar for the countries which are having balance of payment surplus, the exchange rate will always be favourable. Conversely, for countries facing balance of payment deficit, the exchange rate will be adverse. Co ntinuous and ever growing deficit in balance of payment indicates over valuation of the currency concerned and the dis-equilibrium created can be remedied through devaluation. Political and Psychological factors Believed to have an influence on exchange rates. Many currencies have a tradition of behaving in a particular way for e.g. Swiss franc as a refuge currency. The US Dollar is also considered a safer haven currency whenever there is a political crisis anywhere in the world. Technical Factors The various technical factors that affect exchange rates Capital Movement The phenomenon of capital movement affecting the exchange rate has a very recent origin. Huge surplus of petroleum exporting countries due to sudden spurt in the oil prices could not be utilized by these countries for home consumption entirely and needed to be invested elsewhere productively. Movement of these petro dollars, started affecting the exchange rates of various currencies. Capital tended to move from lower yielding to higher yielding currencies and as a result the exchange rates moved. Relative Inflation Rates: It was generally believed until recently that one prima-facie direction for exchange rates to move was in the direction adjusted to compensate the relative inflation rates. For instance, if a currency is already overvalued, i.e., stronger than what is warranted by relative inflation rates, depreciation sufficient enough to correct that position can be expected and vice versa. It is necessary to note that exchange rate is a relative price and hence the market weighs all the relevant factors in a relative term, (in relation to the counterpart countries). The underlying reasoning behind this conviction was that a relatively high rate of inflation reduces a countrys competitiveness in international markets and weakens its ability to sell in foreign markets. This will weaken the expected demand for foreign currency (increase in supply of domestic currency and decrease in supply of foreign currency). Exchange rate policy and intervention: Exchange rates are also influenced in no small measure by expectation of changes in regulation relating to exchange markets and official intervention. Official intervention can smoothen an otherwise disorderly market but it is also the experience that if the authorities attempt half-heartedly to counter the market sentiments through intervention in the market, ultimately more steep and sudden exchange rate swings can occur. In the second quarter of 1985 the movement of exchange rates of major currencies reflected the change in the US policy in favour of co-ordinated exchange market intervention as a measure to bring down the value of dollar. Interest Rates: An important factor for movements in exchange rates in recent years has been difference in interest rates; i.e. interest differential between major countries. In this respect the growing integration of the financial markets of major currencies, the revolution in telecommunication facilities, the growth of specialized asset managing agencies, the deregulation of financial markets by major countries, the emergence of foreign exchange trading etc. having accelerated the potential for exchange rates volatility. Speculation Speculation or the anticipation of the market participants many a times is the prime reason for exchange rate movements. The total foreign exchange turnover worldwide is many a times the actual goods and services related turnover indicating the grip of speculators over the market. Those speculators anticipate the events even before the actual data is out and position themselves accordingly in order to take advantage when the actual data confirms the anticipations. The initial positioning and final profit taking make exchange rates volatile. These speculators many a times concentrate only on one factor affecting the exchange rate and as a result the market psychology tends to concentrate only on that factor neglecting all other factors that have equal bearing on the exchange rate movement. Under these circumstances even when all other factors may indicate negative impact on the exchange rate of the currency if the one factor that the market is concentrating comes out positive the curr ency strengthens. Summary of factor affecting exchange rates (JEFF, Madura) What are the different ways that a foreign exchange rate can be quoted? The foreign exchange can be quoted in two ways (YOURFOREXDIRECTORY.COM) Direct Quote A direct quote means indicates how many units of home currency traders need to buy one unit of foreign currency. In other words, its the home currency price of 1 unit of foreign currency. In a direct quote, the domestic currency is always listed as the base currency. For Example for a US trader to compare the British Pound(GBP), to say, the US Dollar, the pair will be listed as USD/GBP, which indicates how many US Dollar are required to buy one British Pound. Here, the USD is the base and the GBP is the counter currency. Indirect Quotes Indirect quote indicates how many foreign currencies are needed to purchase one unit of domestic currency. In an indirect quote, the foreign currency is the base currency and the domestic currency is the counter or quote currency. For example, if UK is the foreign market, then an Indirect Quote will be displayed as GBP/USD. This quotation is the reverse of direct quote which means that how many British Pound are needed to buy a single US Dollar. Difference between spot and forward exchange rates Spot Rate The foreign exchange transaction for immediate exchange is called Spot rate (immediate means within two days). The exchange represents a direct exchange between two currencies, has the shortest time frame, involves cash rather than a contract. Forward Rate A forward rate is a specific exchange rate at which two parties agree to trade currencies. The parties enter into a forward contract that specifies an exchange rate and a future date of exchange. Spread calculation for Spot market Income in currency market are made from the difference between the bid, which is the exchange rate at which a dealer or bank is willing to purchase a particular currency, and the ask, which is the exchange rate for which a dealer or bank is willing to sell a particular currency. The difference between the bid and ask is called the spread. Foreign currency broker or bank will quote both a bid and an ask for a particular currency. The average of the bid and ask (ask plus bid divided by two) is referred to as the midpoint price. The bid-ask spread is usually given as a percentage and it is calculated using the below formulae. (INVESTOPEDIA) Formulae for calculating spread ÂÂ   Bid Ask Dollar to Pound 0.64703 0.64719 Data taken 0n 09/09/2010 Then the bid-ask spread will be 100 ÃÆ'Æ’- (0.64719- 0.64703) / 0.64719 = 0.0247%, which is about 2.4 bps. ÂÂ   Bid Ask Pound to Dollar 1.54514 1.54552 Data taken 0n 09/09/2010 Then the bid-ask spread will be 100 ÃÆ'Æ’- (1.54552- 1.54514) / 1.54552= 0.0245%, which is about 2.4 bps. Spread calculation for Forward market The spread for a forward currency quote is calculated in the similar way as the spread for a spot currency quote. The distinctive factor linked with spreads for forward foreign currency quote is that spreads will increase as the length of time until settlement increases. Currency exchange rates would be expected to have a higher range of fluctuations over longer periods of time, which increases dealer risk. Also, as time increases, fewer dealers are willing to provide quotes, which will also tend to increase the spread.

Re-Defining the Independent Film Value Chain - 9672 Words

Re-defining the Independent Film Value Chain A paper by Peter Bloore Introduction: An industry value chain or system could be summarized as a connected series of activities, that combine to create and deliver a product (or value) to customers. These activities could include research and development, manufacturing, packaging, marketing, and distribution. Strictly speaking, a value chain represents those activities as carried out within a single company, and a value system represents those activities being carried out by a series of different businesses or freelancers, acting together to create and deliver the product. The value chain and system has already been applied by business academics and consultants in various sectors, including†¦show more content†¦The value chain is a framework for identifying all these activities and analyzing how they affect both a company s costs and the value delivered to buyers.† (Porter 2001 pg 74) However some products are not created and delivered to the end user by a single company. To accommodate this Porter created the concept of the â€Å"value system†, which includes the individual value chains of all the separate companies or players who are co-operating within an industry to deliver a final product. As shown in the It was developed from existing concepts of business systems being used by the consultants McKinsey and co., and writers like Gluck (1980), Bauron (1981) and Bower (1973); as cited by Porter 1985, pg 36). 2 2 diagram below, this could include the suppliers of raw materials, the manufacturers, the distributors (or channels) and the end buyers. It is important to note that the value chain concept does not in any way attempt to represent the flow of revenue back through the chain from the exploitation of the product. It is only concerned with value addition during production and distribution. Porter has also subsequently observed the effectsShow MoreRelatedMedia Representation Of Gender And Gender3046 Words   |  13 Pagesunder representation, subordination of women and limiting women’s perceptions as well as how the news, television and adverts were responsible for the annihilation of women symbolically will be discussed. Media’s representation of women reflects the values and dominant male attitudes in society and teaches the youth how to behave and believe in traditional sex roles are considered, along with a discussion of the negative effects of representation of women in advertising. Many other key issues of differentRead MoreAmazon Your Industry: Extracting Value from the Value Chain4647 Words   |   19 PagesAmazon Your Industry: Extracting Value from the Value Chain Way cool Web sites and measures of hits and eyeballs are clearly driving revenue in the dot-com world. To date, these metrics have provided the basis for the extraordinary market valuation of the new generation of Web retailers. In the near term, most e-tailers must focus on surviving the incubator phase of the Internet retail industry by gaining enough market shares to become a sustainable player. Efficiency and productivity lieRead MoreEthical Behavior and Social Responsibility of Organizations4823 Words   |  20 Pages†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 4 Defining Ethics †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 5 Defining Social Responsibility †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 6 Social Responsibility of Organizations to Internal Beneficiaries Social Responsibility to Employees †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ 7 Social Irresponsibility to Employees: Wal-mart †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦... 8 Social Responsibility to Shareholders †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 11 Social Irresponsibility to Shareholders: Enron †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 13 Social Responsibility to the Supply Chain †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Read MoreStrategic Action Disney On Consumer Focused Initiative Essay3628 Words   |  15 PagesUnderstanding other countries culture, ethics and language are invaluable in creating a successful business internationally. By taking into consideration the countries’ beliefs, cultural values and traditions, the company would be able to set out its plan to successfully tap into the consumers’ interest and values. The strategic actions that Disney made in France and Hong Kong were executed by giving importance, emphasis, and adaptation to both French and Chinese cultures (Carillo Carlos, 2012). SomeRead MoreDist Channel3946 Words   |  16 Pagesmove products to a firm’s target market through more than one marketing channel. Conventional distribution channel v/s vertical and horizontal distribution channel A conventional distribution channel is a channel which consists of one or more independent producers, wholesalers and retailers, each a separate business seeking to maximize its own profits. It is the most common type of distribution channel. All producers, wholesalers and retailers must have a good coordination in order to have an effectiveRead More Is the Black Family Only A Myth? Essay4088 Words   |  17 Pagesfamily as dysfunctional and problem -rid den are a reality or simply a myth. Despite its inception some 400 odd years ago, slavery continues to impact families of African descent. Al though forcibly taken to American shores with shack les and chains draped around them like garments, Africans retained some sense of family both mentally and spiritually. The familial bond which was present those 400 years ago still exists today. It is the tradi tional African family structure that is the baselineRead MoreCompetitive Advantage: Creating and Sustaining Superior Performance65536 Words   |  263 PagesChapter 2: The Value Chain and Competitive Advantage 15 The Value Chain 15 Identifying Value Activities 16 The value Chain and Organizational Structure 22 CHAPTER 3: Cost Advantage (p. 62) 22 Section 1: The Value Chain and Costs Analysis (p.64) 22 Section 2: Cost Behavior (p. 70) 24 Section 3: Cost Advantage (p. 97) 30 Chapter 4: Differentiation (p.119) 38 Section 1: Sources of Differentiation 38 Section 2: The cost of differentiation (p.127) 41 Section 3: Buyer value and differentiationRead More Identity Crisis in Canadian Film Essay5812 Words   |  24 PagesIdentity Crisis in Canadian Film Much has been written about the ways in which Canadas state as a nation is, as Peter Harcourt writes, described and hence, imagined (Harcourt, The Canadian Nation -- An Unfinished Text, 6) through the cultural products that it produces. Harcourts terms are justifiably elusive. The familiar concept of Canadian culture, and hence Canadian cinema, within critical terminology is essentially based on the principle that the ideology of a national identityRead MoreDigital vs Print21238 Words   |  85 Pagesthe digital world to maximize their value and influence. Internet has impacted many businesses worldwide giving them an opportunity to evolve and bring innovation to their business direction and economic model so they can offer a balanced value proposition to the consumer and gain competitive advantage in the market. There is a general understanding that since the inception of digital media, the print media industry has been going through several challenges to re-engineer their business models forRead MoreGrand Strategies6960 Words   |  28 PagesGrand Strategy: Retrenchment ï  ® Retrenchment = the organization goes through a period of forced decline by either shrinking current business units or selling off or liquidating entire businesses Liquidation = selling off a business nit for the cash value of the assets, thus terminating its existence Divestiture = involves selling off of businesses that no longer seem central to the corporation ï  ® ï  ® Corporate-Level Strategy: What business are we in? Business-Level Strategy: How do we compete

Strategic Thinking And Change Management Free Essays

string(124) " Whilst the company implemented online video rentals, it failed to transform its business model early enough \(Carr 2010\)\." Abstract In the last two years, the high street has been in crisis as well-known retailers such as Blockbusters, Jessops, JJB sport, and Comet among many others collapse into receivership. It seems to have been hit by the triple whammy of the double dip recession, digital competition and the emergence of mega shopping centres. Given the tough economic times, the importance of strategic thinking and change management cannot be sidelined. We will write a custom essay sample on Strategic Thinking And Change Management or any similar topic only for you Order Now UK retailers must reinvent and realign themselves to the needs of the external environment for them to continue to thrive. As well-known retailers go into administration, there is need for business enterprises to rethink their approaches and to realign themselves to the needs of the external environment in order to restore the high street to the heart of local community life. In this view, this paper identifies the need for strategic change in the digital competitive environment. The paper explores on how business enterprises can realign themselves to meet the needs of the modern consumer while drawing on a range of strategic management theories. Additionally, the paper provides a small critique of contemporary strategic management research and practice. Introduction In the recent years, the high street has been hit by a crisis as major chains enter into administration. Blockbuster has seen its business slip away to online retailers such as LoveFilm and Netflix (Watkis 2013). Similarly, Jessops, JJB sports and Peacocks have gone into administration. The biggest loss was the demise of Comet which led to a significant loss of up to 6900 jobs after all of its stores were closed down (Anon 2013). More recently, fashion chain Jane Norman became the latest casualty to enter into receivership. Experts have warned that ‘consumer recession’ is tearing through the UK and that many other chains are likely to be shut down (Hawkes 2013). The closure of established chains and the increase in empty units is a clear indication of a declining fortune of Britain’s high streets (Minton et al. 2013). As such, this paper identifies the need for strategic change in the digital competitive environment. The paper explores on how business enterprises can realign themselves to meet the needs of the modern consumer while drawing on a range of strategic management theories. Need for strategic change in the digital competitive environment Given the fast changing business environment, there is need for retailers to be innovative for them to remain competitive. In this context, innovation is not just about developing new technologies but it also includes finding new ways of doing business in the face of change (Afuah 2009). The convenience of online shopping online and the price cuts offered by most online sellers have no doubt contributed to the fall out of most of the well-known high street retailers. Consumers have changed their purchasing behaviours, ditching their customer loyalty to local shops and instead opting for online purchase. For high street retailers to tackle digital disruption, they must realign their business processes to meet the ever changing needs of the modern consumer. This raises a fundamental question: how can business enterprises realign themselves to meet the needs of the changing business environmentWhat sort of strategy should organizations employShould they apply a click and brick strategy or a pure play strategyTo effectively address these questions; we will examine the case of Blockbuster video rental chain. Strategic management/strategic thinking key to improving competitiveness and efficiency It is indeed true that the challenges facing business enterprises in the 21st century are huge, messy and rich in operational and strategic threats (Konsynski 1993, p.111). The challenges facing major chains have been enormous from threats of a double dip recession to threats of digital competition. The question that is posed to management is how to manage these changes without getting swamped in the unpredictable chaotic environmental turmoil (Todnem 2005). The answer to this question lies with strategic thinking and change management. Knowledge of strategic thinking and change management is needed more today than ever before. As exemplified in Michael Porter’s thinking, strategy is an outcome of rational calculation about competitive advantage that a company has in relation to new entrants and industry competitors (Pettigrew et al. 2001). According to Porter (1979), the goal of a corporate strategy is to find a position where in a company can best defend itself from these forces and influence them in its favour. In this regard, strategic thinking and change management has a greater role to play in improving the efficiency and competitiveness of Blockbuster. Applying strategic insights and approaches would enable the company to thrive in the changing business environment. Strategy formulation A model such as the one below may be used by the company for formulating its strategy. External appraisal may be conducted to assess the environment in which the company operates. External appraisal includes an assessment of industry structure and how changes in laws, politics and social preferences (changing consumer habits) affect the firm (Jofre 2011). An internal appraisal is equally important to identify the organizations strengths and capabilities as well as the threats, weaknesses and opportunities available. Given that there are likely to be more than just one possible strategy, it will be necessary to discriminate among the possibilities through evaluation and choosing. A coherent evaluation should be based on goals and policies, competitive advantage arising from the strategy, and the alignment of the strategy to the needs of the external environment (Jofre 2011). Fig.1 Basic model of strategy formulation (Jofre 2011) To understand the internal and external factors affecting Blockbuster, it will be necessary to conduct a SWOT analysis of the company as well as examine porters 5 forces. SWOT Analysis Strengths Blockbuster has abundance of retail stores which increases accessibility. The company also offers multiple outlets of delivery including online rentals (Miller 2010). Additionally, the company offers high quality products and ensures that its products are up to date (Ferrel Hartline 2007) Weakness The main weakness of Blockbuster has been its low adaptability to the changing business environment. Whilst the company implemented online video rentals, it failed to transform its business model early enough (Carr 2010). You read "Strategic Thinking And Change Management" in category "Essay examples" And as a result of the late entry of online video rental, the company has lost most of its customers to online competitors such as Redbox and Netflix. Its dependence on brick and mortar has been its main weakness. Threats Together with other high street retailers, Blockbuster faces the risk of being completely phased out in the market given the changing consumer habits and the emergence of online competitor such as Netflix and Redbox. Already more than 100 retail stores have been closed. Besides strong digital competition, the company faces the challenge of an emergence of alternative rental options which eventually provides consumers ownership of the rental movies. Consumers are increasingly migrating to these new choices such as Video-on-demand and DIVX (Clark et al. 2013) Opportunities The company does have many opportunities with which it can use to counter the perceived threats and weaknesses. The retail chain can, for example, use interactive media and other successful media outlets to regain consumer loyalty which has been lost to its online competitors over the past few years (Clark et al. 2013). The retail chain also has a good position in the value chain. Blockbuster is a large company which makes contracts with major suppliers, producers and distributors of games and movies. Given its size and the large quantity of its purchases, the company is able to negotiate for lower prices than their competitors, providing them with an edge in the competitive business environment (Jordan 2011). Most recently, Netflix increased its monthly subscription rates. Blockbuster may take this to their advantage by targeting disrguntled Netflix customers. Further, there is a huge opportunity available in the online market. The online video rental market has been growing in demand since the emergence of Netflix. With the growing demand, Blockbuster has the opportunity to move in and establish its presence in the online video rental market. Blockbuster’s life cycle strategy Fig.2 below shows Blockbuster’s strategic history. It comprise of four broad phases: start-up, growth, maturity and decline. The life-cycle also shows the impact made by initiatives to add to the original strategic position (Anon 2013) and a revision made when the original strategy becomes unsustainable or rather threatening. Fig.2 Model illustrating Blockbuster’s life-cycle (Anon 2013) Porter five forces Threat of potential new entrants With the current digital competition especially from Netflix, Lovefilms and Redbox, the video rental market does not seem appealing. The movie rental industry is mature and the company is currently at the height of product life cycle where a decline occurs (Clark et al. 2013). For the company to continue to thrive in the industry, it must try to outperform its competitors by targeting disrguntled Netflix customers through offering lower prices and focusing on growing their online rental subscriber base. Bargaining power of buyers Buyers are set to benefit from the competition as this increases their bargaining power. As Blockbuster and Netflix battle for market share, they utilize methods of price reduction which ultimately benefit the buyers (Janjua 2012). Threat of substitutes With intense competition in the Market, there is a potential threat of substitute products. In fact, as Netflix and Blockbuster battle it out, others are gaining ground in substitute offerings as seen with Video-on-demand which has grown at double digit rates in the past two years. Bargaining power of suppliers Suppliers are likely to have less purchase power especially given the acquisition of Movielink. If this acquisition leads to more online downloads, the company will have little need for plastic cases and DVDs and as such, the bargaining power of suppliers is likely to reduce (Janjua 2012). Intensity of competitive rivalry The rivalry in the market is definitely high. Already, Blockbuster has lost many of its customers to Netflix. The company must reinvent and implement strategies that would sway back customers. How Blockbuster can realign itself to the needs of the external environment The corporate strategy would require the company to capitalize on innovative emergent technologies to provide it with strategic breakthroughs in the competitive business environment, while not losing sight of its in-store operations (Fryman 2010). As such, a click and brick strategy would be more suitable for the company. Blockbuster must realigns its business processes with IT and use it in their favour. In realigning their business processes with IT, the company must access the strategic alignment model in terms of purpose, initiatives, project leadership, infrastructure and goals that will create a paradigm shift (Carr 2010). The realignment process must enable the company to embrace online opportunities which Netflix and Redbox have already perfected. Realigning business process with IT (Kalakota 2011) Whilst Blockbuster seems to have already embedded IT into their core business model as seen with the total access program which enhances online customers’ experience, this has not helped much as the company has lost most of its customers to online retailers such as Netflix and Lovefilm .The failure by the company to quickly adapt to the changing business environment and consumer habits is suggested to have been the main problem. The company took long to transform its business model and when it did, the competitive landscape had already been fundamentally altered and the tradition model destroyed by the new platform model (Carr 2010). The company needs to conduct a massive marketing campaign which should focus on growing their online rental subscriber base. The company could also form an alliance with cell phone companies and arranging with these companies to allow customers to stream movies on their cell phones. This would be a great idea considering that people have their cell phones all the time. With larger cell phone screens, customers would be able to stream movies from anywhere including in the subways, bus stations and even at workplaces. Viewing could be per subscription or pay-per-view (Clark et al. 2013). Another strategic move would be to partner with airline companies in order to implement a blue box program at airports such as the Redboxes at McDonalds (Jordan 2011). The blue box program would enable travelers to pick up a movie at one airport and to return it to another airport or blockbuster store. Further, the company should focus on strengthening customer relationship management by implementing a business strategy that maintains relevant value across all its customer groupings and introducing new customer proposition initiatives that would provide them with an edge over their competitors (Afuah 2009). Additionally, Blockbuster needs to implement an ERP system that will enable it to track their inventories. The system can be implemented incrementally from one region to another. This will reduce the time and duplications that the company currently has, thereby increasing efficiency. Currently, for customers to check out their movies from different blockbusters, they are required to register with each store individually. Given that the ERP system integrates data and allows for sharing of information across multiple departments, this may benefit the company through quicker processing of orders and faster shipments. . Whilst recognizing the need to realign business process with IT, the company should not to lose sight of its in-store operations. Customers of today have become savvier and are increasingly taking charge of their own shopping experience (Deloitte 2011). Retail stores must equally evolve to become part of the complex relationship between the retailer and customer by providing new ways of experiencing breadth and depth of range (Deloitte 2011). In-store theatre and a ‘touch and feel’ experience around the product item should be able to sway more consumers back to shopping in high streets. Provision of personalized services and guided shopping experience should equally encourage more consumers to go back for rental services from the stores. Critique of contemporary strategic management research and practice But while strategic thinking and change management has a greater role to play in resuscitating high street retail stores, such practices are not always successful. For example, while the ERP system may increase the efficiency and effectiveness of management decisions, failure of such systems may adversely impact on the organization resulting in cost overruns and supply chain problems (Morgan Smith 2002). Moreover, a strategy formulation that positions a firm in a niche may narrow the firm’s perspective (Mintzberg et al., 1995). That is, such a strategy may overlook opportunity if they are only concentrating on a certain group of market. Another criticism is that strategic planning systems are designed as top-down planning systems and as such strategic decisions are only relegated to top management (Morgan Smith 2002). This implies that the planning systems serve to fulfill only the goals and interests of the top management and not that of the organization. Strategic management is based on rational decision making. But because most of the time we have incomplete information, fully rational decisions may not be possible and change process may result in adverse effects (Jofre 2011). Hence whilst change management may be intended at increasing the firm’s adaptability, structures developed to promote rationality may have opposite effect (Jofre 2011). Nonetheless, it is clear that high street retailers need to realign their business processes to meet demands of the changing business environment. Conclusion There is no doubt that the past few years have seen a crisis as major high street chains such as Blockbusters, Jessops, JJB sport, and Comet among many others go into administration. The collapse of well-known retailers into receivership is a clear indication of a declining fortune of Britain’s high streets. All these retailers which have gone into administration do share certain commonalities. They all tend to have a significant number of stores and have all had difficulty adapting to the changing business environment and retail habits. For these retailers to continue to thrive in the industry, they must reinvent and realign themselves to the needs of the external environment. For example, Blockbuster needs to realign its business processes with IT and use it in their favour. The company should adopt a click and brick strategy. That is, the company must embrace online opportunities without losing sight of its in-store operations. The company could also form alliances with cell phone companies to allow customers to stream movies on their cell phones. The company may as well partner with airlines and implement a blue box programs at the airports such as the Redboxes at McDonald. The company may also implement ERP systems to increase their efficiency and effectiveness of management decisions. Its retail stores must also evolve and should be able to provide customers with new ways of experiencing breadth and depth. In-store theatre and a ‘touch and feel’ experience around the product item should be able to sway more consumers back to shopping in high streets. Provision of personalized services and guided shopping experience should equally encourage more consumers to go back for rental services from the stores. Reference Afuah, A., 2009. Strategic innovation: new game strategies for competitive advantage. University of Michigan. NewYork: Routledge publishers Anon 2013. A strategy life-cycle: Blockbuster. [Viewed on 22nd May 2013] available from http://strategydynamics.com/info/blockbusters-strategy.aspx Anon, 2013. The death of the high street – or the birth of a new kind of retailer[Viewed on 19th May 2013] available from http://www.enterprisenation.com/blog/the-death-of-the-high-street-or-the-birth-of-a-new-kind-of-retailer/ Janjua, A., 2012. Make it a blockbuster night. Blockbuster Carr, A., 2010. Blockbuster CEO, Jim Keyes, on competition from Apple, Netflix, Nintendo, and Redbox. [Viewed on 19th May 2013] available from http://www.fastcompany.com/1656502/an-interview-with-blockbuster-ceo-jim-keyes-part-ii Clark, M., McKelvey, L., Robinson, B., Sampson-Rasberry, S., 2013. Blockbuster analysis. [Viewed on 20th May 2013] available from Deloitte, 2011. The changing face of retail. The store of the future: the new role of the store in a multichannel environment. Deloitte LLP. Ferrell, O.C. and Hartline, M., 2007. Marketing strategy. 4th edition. Cengage Learning publishers Fryman, 2010. Transitioning business models: Are there any businesses that successfully transitioned from brick-and-mortar to completely online[Viewed on 19th May 2013] available from http://ask.metafilter.com/167587/Transitioning-business-models Hawkes, S., 2011. Jane Norman is high street fashion victim. The Sun. [viewed on 18th May 2013] available from http://www.thesun.co.uk/sol/homepage/news/money/3663189/Fashion-chain-Jane-Norman-becomes-the-latest-high-street-casualty.html Jofre, S., 2011. Strategic management: the theory and practice of strategy in (business) organizations. University of Denmark Jordan, A., 2011. The Effects of Netflix and Blockbuster Strategies on Firm Value. Claremont McKenna College Kalakota, R., 2011. ‘Brick, Click and Mobile: multi-channel strategies for satisfying your customers’. In: Mbusiness: the race to mobility. [viewedd on 20th May 2013] available from www.ebstrategy.com Konsynski, B.R., 1993. ‘Strategic control in the extended enterprise’. IBM Systems Journal, vol.32 (1), pp. 111-142 Miller, Y., 2010. Blockbuster analysis. [Viewed on 19th May 2013] available from http://www.keeparticles.com/blockbuster-analysis_a13497.htm Minton, A., Skelton, D., Sennett, R., Umunna, C. and Jones, E., 2013. How can we save the streetThe Guardian. [viewed on 18th May 2013] available from http://www.guardian.co.uk/commentisfree/2013/jan/15/how-can-we-save-high-street Mintzberg, H., Quinn, J.B. and Ghoshal, S. 1995. The Strategy Process (European Edition), London : Prenctice-Hall. Morgan, N. and Smith, E., 2002. Contemporary issues in strategic management. Kagiso publishers Pettigrew, A.M., Homas, H. and Whittington, R., 2001. Handbook of strategy and management. Sage publications Porter, M. 1979. ‘How Competitive Forces Shape Strategy’, Harvard Business Review, vol.57 (2): 37-145. Shrivastava, P., 1986. ‘Is strategic management ideological?’ Journal of Management, vol.12 (3), 367-377 Todnem, R., 2005. ‘Organizational change management: a critical review’. Journal of Change Management, vol.5 (4), 369-380 Watkis, N., 2013. What can marketers learn from the surge of high street store closures[Viewed on the 19th May 2013] available from http://www.mycustomer.com/topic/marketing/what-can-marketers-learn-high-street-store-closures/161721 How to cite Strategic Thinking And Change Management, Essay examples

Project Management Approaches Project Management Methods

Question: Describe about the Project Management Approaches for Project Management Methods. Answer: Introduction Project Management refers to the set of methods and guidelines to define the activities that must be followed during the project timeline in order to effectively manage the project. There are a number of different approaches that can be followed to manage the projects and the selection of the same depends upon several factors such as duration of the project, project domain, project budget, resources that are involved and likewise. Project Management Approaches Project Management Body of Knowledge (PMBOK) PMBOK is a project management methodology that defines the several phases of managing a project to the Project Manager. It defines what all activities must be accomplished by the project, what must be deliverables of the project, what all controls must be applied and many more (Duncan, 2016). There are a number of phases in this methodology that make it easy for the Project Managers to follow a defined path. The three broad phases in PMBOK are initiation phase, intermediate phases and the final phase ((Project Management Institute, 2016). Pros: Project Management Body of Knowledge (PMBOK) breaks down the project in a number of steps which makes it easy for the manager to implement the strategy in a more effective manner The activities and strategy that is suggested in PMBOK is not specific to a particular industry or a particular project domain. It can be used across all the different industries regardless the nature of the project Standardization of the processes in a project is a prime necessity for all the businesses and the same is provided by the activities that are covered under PMBOK Cons - PMBOK does not completely adhere to the stages that are defined under the standard Project Life Cycle (PLC). There may be scenarios where the organizations may prefer the standard PLC processes over the stages defined under PMBOK Projects In Controlled Environment (PRINCE2) PRINCE2 is a structured project management methodology that defines the stages to manage the project. There are a number of different stages that are present under this particular approach to manage the projects. Figure 1: PRINCE2 Stages (Nielsen, 2016) Pros: PRINCE2 is a process based methodology that makes sure that it covers all the measures that may aid a project team in case of a deviation. There is always a mechanism present under this methodology to provide a solution to an issue during the project timeline. PRINCE2 is extremely low on cost as the methods that are defined under it are free from the licensing fees and other overhead costs. PRINCE2 is a mature methodology that is present in the field since more than three decades. There are a number of projects that have been managed by this methodology that have been completed with success. There is also a huge database for reference that can be utilized by other projects (Chandana, 2016). Cons: The Project Manager is more of a mediator between the project team and the project board. All of the activities flow between these two parties. There is a lot of documentation that is covered by this methodology. Some of it may become unnecessary for a certain set of projects. Agile Project Management Agile Project Management is a value based project management approach that works on the ad-hoc basis (Cohn, 2016). It is an iterative-incremental approach that makes sure that the entire team involved with the project is integrated as a whole. The top level managers, project board, project manager, resources and the customer itself are closely integrated to have frequent communication between each other to maintain extreme level of transparency and clarity in the project (Cervone, 2016). Pros: The first and the foremost advantage of using Agile Project Management is the highest level of customer satisfaction that comes easy with this methodology. The customer is involved at all the times in this methodology which ensures that the project proceeds as per the expectations of the customer. The product quality that is delivered by this management methodology is also supreme. The risks that are associated with the project are also reduced in this case leading to better project control and improved project predictability Cons: There is no defined direction provided to the team members which may cause a state of confusion among the team. Resource allocation and allocation of roles and responsibilities is also not an extensive part of this approach Comparative Analysis of the three Project Management Methodologies Parameter PMBOK PRINCE2 Agile Approach Knowledge based methodology Process based methodology Value based Methodology Methods and Phases There are primarily three phases in this particular methodology as initiation, intermediate and final which broadly include planning, execution, and monitoring and closure activities (Nutek, 2016). The stages in this methodology include project initiation, planning, execution, delivery, monitoring, control and closure. There are no defined stages in this methodology but can broadly be grouped as Analysis, execution, delivery with a constant evaluation across all the phases. Team Involvement The primary focus in this methodology is on the Project Manager and the responsibilities associated with the same. The roles and responsibilities of the team comes secondary This methodology defines the role and duties of every single team member that is associated with the project The team is integrated in to one single unit. However, there are no specific directions and allocations that are defined for the team. Role of Project Manager Project Manager in case of PMBOK is held responsible for every single activity that goes wrong during the project timeline. The issues such as schedule or budget overrun or other major to minor risks are accountable by the Project Manager itself. The ownership of these risks is also included in the Project Managers role. The Project Manager in case of PRINCE2 is more of a mediator between the board members of the project and the team members that are involved. In case of an issue or a deviation, the team reports the same to the PM who takes it forward to the project board. The board comes up with a resolution which is communicated to the team via PM (Saad, 2016). The Project Manager is responsible for the daily scrum meetings and is also responsible for the conversion of the requirements in the project backlogs in the practices. PM is the chief motivator for the team members in case of the agile methodology. Scope for Changes There is a moderate level of scope for the changes to be implemented in the projects managed by this methodology. However, Change Management is one of the major knowledge areas that are explored by PMBOK which allows the changes to be made up to a certain level. This one is a process based approach and the next process in the cycle begins only after the one prior to it is successfully completed. This feature makes it difficult in incorporate the changes. It is extremely flexible in nature and thus allows the changes to be implemented easily at any of the project stage with least amount of re-work. Feasibility Study It is included in the initiation phase of the project before the creation of the Project Charter document (Zandhuis, 2016). It is not explicitly executed in the project timeline. It is not explicitly executed in the project timeline. Terminology There is a different set of terminology that is followed in this methodology with the major terms as Project Charter Document, Cost/Benefit Analysis, Feasibility Study and many more. Some of the major terms that are used in this methodology include Project Brief, Risk Analysis, Project Delivery and many others. Sprints, Backlogs, Scrum, Work-set etc are the basic terms that are used in case of the Agile Methodology. Project Management tools/systems Work breakdown structure In a project, work breakdown structure can be used to perform following functions: Helps in planning a project by breaking down key activities into more manageable and smaller work units. The smaller units of work help in finding out number of staff hours required to perform a task. Allocation and delegation of responsibility in order to achieve a task. Sequencing and scheduling the execution of different events in order to improve the effectiveness of time allocated to the activity. Implemented as a base of financial execution reporting. Management of project risks. Gantt chart The Gantt chart allows to plan a timescale of the project which helps in estimating the resources required to perform a task. Work Breakdown Structure can be integrated in a project to prepare a Gantt chart. The dates and duration elements of this chart helps in planning, coordinating and tracking keys tasks of the project (Swan, 1942). They are good for small projects but for lengthy projects the tool becomes a poor time management tools. Critical path analysis As mentioned in last section that, Gantt charts do not provide desirable results for lengthy projects then critical path analysis can be used to provide a more logical sequence and timing of each activity. It provides an effective time management and communicate interdependency for large sized projects. They can be used along with Gantt chart as this analysis can be highlights those activities which are critical activities. The critical path is the longest duration of completing a project. This tool also highlights float times of all the involving activities. In addition to this, the tools can be used for effective management of resources where in they can be de-allocate from non-critical to critical activities (Woods, 1969). PERT (Project Evaluation and Review Techniques) PERT provides better time estimation for the project by calculating for uncertainty in finding task durations. This will help the project manager to estimate the worse, best and most likely duration of time for each activity. It identifies interrelationships among different activities like Critical Path Analysis. Similarly, it plans and allocates resources to each activities. It can be easily integrated with work breakdown structure and Gantt chart. Gates and milestones Milestones define major interim goals of the project and Gates depict the major objectives which can be accomplished at different stages of a project. They act as key deliverables of the project thereby keeping stakeholders and team on track. However, they are difficult to follow during the course of project execution. Project management system A project should always contain a set of objectives to measure the performance of the project. Control is required to monitor the work which is to be done. A good control system ensures that right things are done at estimates point of time. The two crucial project management system which should be used are conformance management and performance management system. Conformance management system ensures that outcome of project stands on the technical / functional expectations of the clients for instance: clear instructions are being communicated, regular inspection and reporting and quality assurance contracts with suppliers, etc. Performance management system defines a measurement process to assess the project on the pre-defined outcomes. This system establishes the critical objectives of project i.e. time, cost etc. In addition to this, it focusses on achieving results and defines a clear boundary of authority and reporting. Integration of project management tools or systems All the above mentioned tools can be easily integrated with each other. Work Breakdown Structure and Gantt chart complements each other by utilizing the activities and time duration of one another. Similar, critical path can be defined on top of Gantt chart and provides the longest duration of project completion. Gantt chart defines the duration of each activity and critical path defines whether the activity is crucial or not and in turn Gantt chart decides upon the resources to be allocated to the activities. Conclusion An amalgamation of the best features of all these that would include a structured approach with a scope of value based processes along with required amount of documentation, low cost, risk analysis and estimation during the early stages of the project, feasibility study and an active customer involvement would be the apt project management methodology to adapt which will be applicable across all the industries and project domains. References Cervone, F. (2016). Understanding agile project management methods using Scrum. Retrieved 20 August 2016, from https://www.gbd.dk/files/649_Understanding_agile.pdf Chandana,. (2016). Structure of PRINCE2: Its Benefits in Project Management. Simplilearn.com. Retrieved 20 August 2016, from https://www.simplilearn.com/prince2-structure-and-benefits-in-project-management-article Cohn, M. (2016). Agile and the Seven Deadly Sins of Project Management. Retrieved 20 August 2016, from https://www.mountaingoatsoftware.com/uploads/presentations/Agile-Seven-Deadly-Sins-Project-Management-PMI-2011.pdf Duncan, W. (2016). https://www2.fiit.stuba.sk/~bielik/courses/msi-slov/reporty/pmbok.pdf. Retrieved 20 August 2016, from https://www2.fiit.stuba.sk/~bielik/courses/msi-slov/reporty/pmbok.pdf Nielsen, K. (2016). PRINCE2 Friend or Foe? How the Two Complement Each Other Date: September 2013 Prepared by: Klaus Nielsen, Founding PRINCE2 and PMBOK Friend or Foe?. Retrieved 20 August 2016, from https://www.omniacademy.ma/pdf/PMBOK_Prince2.pdf Nutek,. (2016). Project Management Body of Knowledge. Retrieved 20 August 2016, from https://nutek-us.com/PMBOK_Slides.pdf Project Management Institute,. (2016). A Guide to Project Management Body of Knowledge. Retrieved 20 August 2016, from https://www.cs.bilkent.edu.tr/~cagatay/cs413/PMBOK.pdf Saad, S. (2016). PRINCE2 Methodology: An Innovative Technique of Project Management growing progressively across the globe.. Retrieved 20 August 2016, from https://cgr.umt.edu.pk/icobm2013/papers/Papers/IC3-Jan-2013-049.pdf Swan, A. (1942). The Gantt chart as an aid to progress control. Journal Of The Institution Of Production Engineers, 21(10), 402. https://dx.doi.org/10.1049/jipe.1942.0031 Woods, C. (1969). Critical Path Analysis in Practice. Physics Bulletin, 20(4), 149-149. https://dx.doi.org/10.1088/0031-9112/20/4/022 Zandhuis, A. (2016). Guidance on Project Management. Retrieved 20 August 2016, from https://www.vanharen.net/Samplefiles/9789087538095SMPL.pdf