MANAGING AND ORGANIZATIONS IN CHANGING CONTEXTS

/in /by

MANAGING AND ORGANIZATIONS
IN CHANGING CONTEXTS
OPENING, THINKING, CONTEXTUALIZING
LEARNING OBJECTIVES
This chapter is designed to enable you to:

  • Appreciate the current contexts in which managingand organization occur
  • Identify the impact that changes in the contemporary world are having on managing
  • Provide a rough guide to the themes of the book

INTRODUCTION
We all learn to make sense of the situations we are in. However, just like a fast-flowing river, these situations are often changing in imperceptible ways. Before too long we find that the ways we have been using to make sense leave us out of our depth! Managers find that what they took for granted no longer helps them survive as well as it did in the past. Well-established techniques of the past, such as management by rules and instructions, by oversight and surveillance, by command and control, on the part of hierarchical managers, are changing. When everyone can be connected to anyone everywhere, when the value basis of employees is shifting radically, and when the organization laces itself over the globe and employs many of the diverse peoples that the globe has to offer, the old certainties are harder to hold. Today, more indirect techniques, such as managing in and through vision, mission, culture, and values, leading to a lot less imperative instruction and command and a great deal more dialogue and discussion, are fashionable: the switch is from ‘hard power’ in the form of imperative commands to ‘soft power’ in the form of getting people to do what we want them to do through indirect methods, such as induction into an organizational culture, training and strategy workshops, or leadership courses.
We often refer to different paradigms when discussing systematic approaches to some practice. The term derives from its use in the history of science, where different paradigms or models for analysis have been identified at different periods (Kuhn, 1962). The term can have broader application, however, having spread to fields such as management (Clarke and Clegg, 1998). Academic paradigms are ways of theorizing about an activity such as physics; in business the idea of there being different paradigms applies to the spheres of business practice, such as management. For something to be a paradigm it must be accepted as an ideal example and exemplar, something that shows people how to practice something. Hence, there is an element of fashion to management paradigms – they frame what is thought of as legitimate ways to conduct business at any given time.
p.8
CHANGING PARADIGMS
ORGANIZATIONS AND TECHNOLOGICAL CHANGES
The shift to a world in which digital capabilities enable elements of organizational practices to be moved offshore has led to the spectacular rise of Bangalore in India, as well as other places, as an IT and call centre ‘district’. Often when you phone the help desk of an organization that you are dealing with you will be speaking to someone from a region of the global economy in which English-language skilled graduates are available to work at rates much lower than in the country in which the organization is headquartered. Since it is much cheaper to live somewhere with a much lower standard of living, employers are able to pay far less. They outsource work to third-party organizations in cheaper labour zones.
Outsourcing involves contracting the provision of certain services to a third-party specialist service provider rather than seeking to deliver the service from within one’s own organization. Usually, outsourcing is entered into to save costs and to deliver efficiencies and productivity benefits. By not concentrating on services and tasks that are peripheral to the main business, an organization can better focus on those things it needs to do well while leaving the peripheral tasks to organizations that specialize in the delivery of those services. Often, areas such as HRM, catering, IT, and equipment and facilities maintenance are outsourced. Outsourcing may not necessarily entail moving some subset of operations to another country. Instead, it may be that some elements of what an organization regards as non-core business are hived off to a specialist contractor that concentrates on doing the outsourced activity efficiently, at the lowest costs, and to a contracted standard. Outsourcing is not a new phenomenon: in major production industries such as automotives, the outsourcing of initially non-core and latterly core functions and services has been progressively used since the 1930s (Macaulay, 1966).
The development of outsourcing, burrowing away at the innards of organizations, hollowing them out, and networking them into other organizations’ capabilities and competencies, has accelerated in organizations since the late twentieth century. The imperative to outsource – as distinct from the opportunity to do so – was a result of globalization and increased competition, leading to a continual need to improve efficiency and to increase service levels. Thus, vertically integrated services were no longer seen as the best organizational arrangements for gaining competitive advantage. Extending the organization’s capabilities, whether core or non-core, to a third party, became synonymous with efficient and effective management. Outsourcing became fashionable.
Many new industries have developed on the back of the digital revolution, often referred to as knowledge-intensive industries, those which we find at the forefront of contemporary global competition, such as Google, IBM, Microsoft, and Dell. In these organizations we find new organizational forms that challenge the older, more bureaucratic structures of the past, structures that we will explore in Chapter 15.
Digital capabilities have transformed the world – some journalists such as Friedman (2005), of the New York Times, suggest that digital capabilities have made the world ‘flat’ – by which he means that advances in technology and communications now link people all over the globe. In part this explains the rapid development of India and China, and the growth of global businesses that exploit the opportunities of the Internet to create and design goods and services on a 24/7 cycle – globally – taking advantage of different time zones to work on accounts, data, and designs seamlessly. The world has sped up to a state of immediacy: any reader of this book would know how to find its authors’ email addresses in a matter of seconds.
p.9
MANAGING TECHNOLOGICAL CHANGES
Shorter life cycles, virtual connectivity, and disaggregation spell many changes in ways of managing. The dominant trend is an increasing separation of routine processes from more essential work, which is often reflected in a spatial division of labour. Thus, for instance, as we will see in Chapter 16, in call centres the work is as routine and scripted as in any work process designed in an early twentieth-century bureaucracy by one of F. W. Taylor’s scientific managers (see Chapters 14 and 15). The means for storing the rules may have shifted from paper to software and the nature of the work may be less physical, but there are still essential similarities.
There are consequences for other jobs when much of the routine is extracted and repositioned elsewhere. The remaining core staff – rather than those that are peripheral – will need to be more skilled than before. They will be working in technological environments subject to rapid and radical change. New competencies and skills will be required. Managing will mean more developmental work oriented to renewing staff’s specific skills and general competencies rather than seeing that they follow the rules, issuing imperative commands, and generally exercising authority. Managing will mean negotiating the use and understanding of new technologies, contexts, and capabilities, and facilitating the understanding of those who will be operating with the new tools and environments. Changing technological paradigms mean that managers must be able to make sense of the new technology for all those who will use it. Sandberg and Targama (2007: 4) note, citing Orlikowski’s (1993) influential work on Japanese, European and US firms, that many technology implementation projects fail because of what the employees do – or do not – understand.
Traditionally, organizations were neither very responsive nor flexible because of their bureaucratic nature, as we will see in Chapter 14. They had tall hierarchical structures, relatively impermeable departmental silos, and many rules. Such organizations offered little incentive for innovation and, typically, innovation was frowned on because precedents went against the rules. Such organizations could hardly be responsive – they were not designed to be.
More responsive organizations should have employees who are capable of problem solving rather than having to refer any problem, deviation, or precedent to a higher authority. Such people need to be trained and engaged in styles of managing and being managed that reinforce empowerment, using far more positive than negative approaches to power, as we will see in Chapter 9.
New technologies attach a premium to a flexible, timely approach to customer requirements. In order that such flexibility can exist in an organization it has to be premised on ways of managing employees that allow them to be responsive to customer requirements in developing products and services. As we will see in Chapters 14 and 15, the critique of bureaucracy has been particularly acute in the areas of public sector management. Especially in the Anglo-Saxon countries, from the 1980s onwards, the extensive adoption of strategies of deregulation, privatization, and contracting out, often on the back of significant changes in technology, have led to profound changes in the nature of public sector work. Something known as new public management (Osborne and Gaebler, 1992) has had a profound impact on the public sector, in the public (or civil) service, education, universities, and health care, especially. The clarion call has been for more entrepreneurial managers and less rule following. Whether this is a good or bad thing has been the subject of lively debate, which we discuss in Chapter 15.
p.10
CHANGING RELATIONS OF SERVICE AND PRODUCTION
Look at your computer; check the clothes you are wearing; what about your shoes? Where do your things come from? Bet they were made in several countries and none of them may be where you live. Bet also that China was one of the countries. Today, ‘Made in China’ is a ubiquitous label – we find it on virtually any manufactured product that we are likely to wear or use in the office or home.
Supermarkets such as Walmart represent the end of a supply chain that invariably starts somewhere in China. The concentration of much global manufacturing in China is a relatively recent phenomenon, which really gathered pace in the 1990s. Just as much of service work has been disaggregated into lower value-adding elements such as call centres that can be located anywhere, much of what was once produced by a domestic blue-collar labour force in the heartlands of Europe or the USA, is now produced globally, often in China.
One consequence of the shifting international division of labour is that employment and organizations in the developed world are increasingly based on the production of services rather than goods. Material things – such as computers, clothes, and household goods – are being produced in the developing world while the most developed parts of the world economy switch to services, such as financial services. One consequence is that the nature of work and organizations is changing rapidly in both worlds. In the developing world peasants are rapidly becoming factory workers; in the developed world there has been an explosive growth in what is referred to as knowledge work, done by knowledge workers in knowledge-intensive firms. Chief among these are IT firms (Alvesson, 1995; Starbuck, 1992), global consultancy, law, and accounting firms, as well as the universities, technical colleges, and schools that produce the new knowledge workers.
SHIFTING LOCATIONS; SHIFTING MANAGING
An increase in knowledge-intensive work means that organizations have to employ – and manage – different kinds of employees. Brains not brawn, mental rather than manual labour, are the order of the day. Employees need to be capable of working with sophisticated databases, software, and knowledge management systems. These have to be related to customer requirements often on a unique and tailored basis that deploys a common platform while customizing it for specific requirements. Thus, technical and relational skills will be at a premium.
Knowledge-intensive work, according to Alvesson’s (2004) research, depends on much subtle tacit knowledge as well as explicit mastery. In such a situation, working according to instruction and command will not be an effective way of managing or being managed, especially where the employee is involved in design and other forms of creative work on a team basis, often organized in projects. In such situations, increasingly common in contemporary work, ‘because of the high degree of independence and discretion to use their own judgment, knowledge workers and other professionals often require a leadership based on informal peer interaction rather than hierarchical authority’ (Sandberg and Targama, 2007: 4). As we will explore in Chapters 5 and 6, some of the old theories and approaches to leadership and project work need updating.
p.11
GOING GLOBAL
Digital technologies and a growing international division of labour between economies specialized in services and production make the world economy increasingly globalized. Competition is based less on traditional comparative advantage as a result of what economists call ‘factor endowments’, such as being close to raw materials, and more on competitive advantages that arise from innovation and enterprise. IT means that enterprise and innovation can now be globally organized. No industry is more indicative of this than the financial services industry, where firms such as American Express, Citicorp, and HSBC span the globe. These multinational behemoths operate as integrated financial services providers almost everywhere. Global competition goes hand in hand with outsourcing in industries such as these, as such firms exploit technology to disaggregate ‘back-office’ routine functions and locate them in cheaper labour markets, as we discuss in Chapter 17.
The rise of India and especially China has seen a major restructuring of the global economy. As Martin Jacques said in 2010 in a TED Talk on ‘Understanding the rise of China’:
The world is changing with really remarkable speed … in 2025 … Goldman Sachs projections suggest that the Chinese economy will be almost the same size as the American economy … [By] … 2050, it’s projected that the Chinese economy will be twice the size of the American economy, and the Indian economy will be almost the same size as the American economy. And we should bear in mind here that these projections were drawn up before the Western financial crisis.
Jacques makes the point that for 200 years Europe and North America dominated the global world but that now, with the awakening into capitalist development of countries such as China and India, who between them have over one third of the global population, as well as other newly emerging states such as Indonesia and Brazil, civilizations and cultures that have for the past 200 years been marginal and minor players on the world stage are now at its centre. If the future managers reading this book want to have stimulating and successful careers in the future they are as likely to be forged in these countries as in Europe or North America. The managers that you will become will have to be truly global in experience and outlook.
MANAGING GLOBALLY
Doing business internationally in real time, enabled digitally, produces ample opportunity for cultural faux pas and misunderstanding. Work groups may be working in serial or in parallel with each other on projects that are networked globally. Global organization means managing diversity: it means developing appropriate ways of managing people who may be very different from each other – from different national, ethnic, religious, age cohort, educational achievement levels, social status, and gender backgrounds (Ashkenasy et al., 2002). One consequence of globalization and diversity is that HRM must be both increasingly international and equipped to deal with diversity, as we will see in Chapter 6.
Diversity is increasingly seen as an asset for organizations: people with diverse experiences can contribute more varied insights, knowledge, and experience than can a more homogeneous workforce. (In the terms that we use in Chapter 10 we can say that it is a good thing to introduce more polyphony into organizations but it can also introduce more conflict: see Chapter 8.) An evident reason is that if a business wishes to sell globally it must understand all the specificities of the local markets into which it seeks to trade. One good way of doing this is to ensure that the organization has employees that understand that market. Moreover, in certain markets, such as the Middle East, where etiquette and rituals are of considerable importance in everyday interactions, it is enormously beneficial to have employees who do not have to learn through making costly mistakes because they have an intuitive understanding. Moreover, as we will see in Chapter 14, organizations whose members are not representative of the populations the organizations draw on and serve risk being seen as discriminatory in their recruitment policies. There are ethical issues concerned in managing diversity as well.
p.12
CHANGING CONCEPTIONS OF TIME AND SPACE
Technological developments such as the Internet and other telecommunications seem to make the whole world something that can be present here and now – as users of Google Earth no doubt know. Email can fly around the world in seconds, as quite a few people can testify who have pressed the send button inadvertently on something they might have preferred not to share globally.
While time and space are two fundamental coordinates of the way we relate to the world, the ways in which we make this representation are not fundamental but socially constructed. The earliest concerns of modern global management were with the centrality of clock time in the time and motion studies of F. W. Taylor. Indeed, in these studies the central motif was that of time–space relations, as we will see in Chapter 14. Stopwatches measured in terms of microseconds to prescribe ways of doing tasks. Space was rigidly defined in order to maximize the speed of work. These notions of space and time as phenomena under strict organizational control are hardly relevant in the age of the Internet. With a computer, camera, and broadband connection any organization member can simulate immediacy with anyone anywhere in the world similarly equipped. In such a situation time and space are eclipsed. Organizations can be global, navigating anywhere.
MANAGING TIME AND SPACE
Immediacy through the eclipse of space presents problems. Work is much more accountable and transparent as others can be online anytime, anywhere, challenging the understandings that the other has developed. Often these understandings will be embedded in a sense made in a cultural, linguistic, religious, ethnic, and age and gendered context that is simply foreign to partners elsewhere. Great cultural sensitivity, as well as a capacity to handle circadian rhythms, is needed in the interest of global business. In such contexts there will be a great deal of doing by learning as managers seek to make sense of others whose cues are not only unfamiliar but often mediated by the limitations of Internet communication. Managing communication in these circumstances poses especial challenges, as we will see in Chapter 10.
CHANGING DEMOGRAPHICS, CHANGING VALUES
The era from the 1960s onwards has been dominated by the ‘boomer’ generation, who are now slowly moving out of the workforce, to be replaced with people drawn from Generation X and Y. Generation X, broadly defined, includes anyone born from 1961 to 1981. In the West, Generation X grew up with the Cold War as an ever-present backdrop. During their childhood they saw the dismantling of the post-war settlement and the advent of neo-liberal economics (such as Thatcherism) and the collapse of communism. They often grew up in single-parent households, without a single clear or guiding moral compass. They had to negotiate the hard years of global industrial restructuring when they were seeking their first jobs; they experienced the economic depression of the 1980s and early 1990s; and saw the decline of traditional permanent job contracts offering clear career structures. Instead of careers they were invited to accept insecure short-term contracts, unemployment, or junk jobs in McDonaldized organizations, or get educated. Many of them ended up overeducated and underemployed, with a deep sense of insecurity. Not expecting that organizations will show them much commitment, they offer little themselves.
p.13
Generation Y includes anyone born in the late 1980s and 1990s, sometimes to professional boomer couples who left childrearing later than previous generations or, as a result of boomer males mating with much younger women, maybe procreating with a new partner for the second or third time, celebrating the attraction of old money for young flesh. Young people born in this bracket are the first digital generation for whom the computer, Internet, mobile, iPods, DVDs, and the Xbox were a part of what they took for granted growing up. While Generation X was shaped by de-industrialization in the West and the fall of communism globally, Generation Y developed into maturity during the War on Terror, grew up reading Harry Potter, and has enjoyed relatively prosperous economic times, in part because of the success – for the West – of globalization. If you want to know more about the generations and the differences they are inscribed in you could talk to your parents or grandparents – if they haven’t already talked to you about these things!
MANAGING CHANGING VALUES
The employment of Generation X members offers real challenges for managers seeking to motivate and gain commitment from employees. As we will see in Chapter 3, the issues of commitment and motivation are increasingly central to managing. The X generation will be more cynical than its predecessors and less likely to accept rhetoric from management that is not backed up by actions. For Generations X and Y, according to Sennett (1998: 25), there is a predisposition towards high uncertainty and risk-taking as defining features of the challenges they want from work because they do not expect commitment. In part this is because they do not expect anything solid or permanent: they have seen casino capitalism at close quarters as brands they grew up with moved offshore or were taken over, or radically changed by new ownership, and so tend to distrust prospects of long-term or predictable futures.
Using traditional management control and command devices to manage people who desire to explore is not appropriate. Instead, the emphasis will have to be on creativity and innovation, as we explore in Chapter 12.
If there is one value that binds these disparate generations together it is the sense that the previous generations have really made a mess of the planet; green values are very strongly held, and saving the environment through sustainability is high on the list of value preferences. Consequently, as we discuss in Chapter 13, issues of corporate social responsibility, especially those addressed to sustainability, are high on the values agenda. Such changes pose major implications for how organizations attract, select, retain, and treat employees, as we see in Chapter 6 on HRM.
CHANGING CONCEPTIONS OF THEORY AND PRACTICE
One of the trends that readers of the book may not be so well aware of as the people who set it as a text is the changing nature of the relation between what academics do, funding arrangements from government, and conceptions of the usefulness of academic work. Academics do research. This is what defines them as academics. In the past, they worked in circles that were largely self-referencing: if successful, they published a book or two, some academic papers and, if they were really successful, others would read them and cite them in their research. Times are changing. Academic researchers in all fields are increasingly expected not just to produce outputs in the way of publications but also to have an impact.
p.14
Impact is usually defined in terms of having a positive effect on a specific sphere of practice beyond academia, including being able to demonstrate the contribution made to society and the economy (see Nutley et al., 2007). It is generally agreed that there are three main ways of making such an impact. Academic research can have an instrumental impact, influencing changes in policy, practices, and behaviour; it can have a conceptual impact, changing people’s knowledge, understanding, and attitudes towards social issues; or it can have an impact through capacity building where involvement in research develops the skills of those involved. The debates about impact are quite generic and are found in many OECD nations in recent years, as the costs of higher education and research funding have grown, so the clamour for demonstrations of relevance and impact have grown from politicians and the public. In the following article you can find an interesting account of how this debate has been addressed in the field of management, the field in which the work considered in this book seeks to make its impact.
EXTEND YOUR KNOWLEDGE
In Jean Marie Bartunek and Sara Lynn Rynes’ (2014) ‘Academics and practitioners are alike and unlike: the paradoxes of academic–practitioner relationships’, Journal of Management, 40 (5): 1181–1201, which is available at the companion website https://edge.sagepub.com/managingandorganizations4e, rather than seeing the academic–practitioner gap as essentially dichotomous they identify and suggest ways of working with the divide that foster research and theory building. Several different tensions are associated with the gap, including differing logics, time dimensions, communication styles, rigour and relevance, as well as interests and incentives. Initiatives of national governments, ranking systems, and special issues of journals have exacerbated these gaps, which they suggest ways of bridging.
USING MANAGING AND ORGANIZATIONS
The basic themes of this text are now established. In this book, as we have foreshadowed, we will introduce you to the main lines of management and organization theory, and we will situate these in the major changes marking the present-day world. These, we will argue, make the ideal of the wholly rationalistic organization evermore difficult to believe in principle and secure in practice. However, most of what you will learn as a management student makes assumptions about the rationality of organizations and management. Organizations go to great lengths to try and ensure that stocks of knowledge are shared as widely as possible within the organization, as we will see in subsequent chapters, and do so in ways that are reflected in each of the subsequent chapters:

  1. Managing the most basic organizational and managerial capability – how to achieve common sensemaking (Chapter 2).
  2. Creating induction programmes that socialize individuals into an organizational frame of reference (Chapter 3).

p.15

  1. Training individuals in teamwork and groupwork (Chapter 4).
  2. Hosting leadership development, coaching, and training for common understanding (Chapter 5).
  3. Building highly rationalistic HRM plans and seeking to implement them (Chapter 6).
  4. Emphasizing strong, common cultures (Chapter 7).
  5. Designing lots of rules to frame everyday behaviour in the organization and manage conflicts (Chapter 7).
  6. Managing organizational conflicts, so that the goal-oriented elements of organization can come to fruition, despite countervailing tendencies, schisms, and frictions in an organization (Chapter 8).
  7. Managing power, politics, and decision-making so that plans are implemented, not resisted, and so sectional and specific interests are well aligned with rational plans (Chapter 9).
  8. Communicating these rational plans, their culture, and other messages to organization members (Chapter 10).
  9. Capturing all of what their members know and embedding it in management systems as they try and practise organizational learning (Chapter 11).
  10. Managing change, introducing and effectively using new technologies, and ensuring innovation (Chapter 12).
  11. Incorporating new mandates arising from social issues and concerns articulated by new stakeholders and influential social voices, such as sustainability, ethics, and corporate social responsibility (Chapter 13).
  12. Implementing global management principles in the organization (Chapter 14).
  13. Adjusting the structure of their organization to fit the contingencies it has to deal with, be they size, technology, or environment (Chapters 15).
  14. Designing the organization in ways that seem best fit for purpose (Chapter 16).
  15. Managing to manage globally, to manage globalization, and to deal with the added complexities that managing in a global world entails (Chapter 17).

SUMMARY
In this chapter we have staked out the territory that the book covers. We have dealt with nothing in depth – the rest of the book does that – but we have provided an indicative guide to the topics that we shall address subsequently. Managing and organizing is very dynamic – its world never stays still – so innovation, change, and tension are often characteristic of the way that events pan out.
EXERCISES

  1. Having read this chapter you should be able to say in your own words what each of the following key terms means. Test yourself or ask a colleague to test you.

p.16
Paradigms
Outsourcing
‘Flat’ paradigm
Supply chains
Globalization
Digitalization
Organizations
Theory–practice gap
Generation X and Y
Values

  1. Why do organizations become globalized?
  2. What do you think are the major changes that are shaping the contemporary world and what do you think their impact is on management?

TEST YOURSELF
Review what you have learned by visiting:
https://edge.sagepub.com/managingandorganizations4e or your eBook
 
Test yourself with
multiple-choice questions
Revise key terms with the interactive flashcards
CASE STUDY
This is a very simple case study to get you started. Think about the last organization that you were a member of for some time. It might have been a school, a church, or an employing organization. What were its main routines? How were these organized in terms of some of the factors that might frame organizations? Think about factors such as how standardized, timetabled, or ritualized the flows of time and organizational effort were in the organization in question. What were the characteristic markers of identity of the different people and groups in the organization? What were the goals of the organization?
ADDITIONAL RESOURCES
If you want to know more about the major changes shaping the contemporary world of business you could take a look at Clarke and Clegg’s (1998) Changing Paradigms. It is dated now, but still has several interesting points to make about globalization, digitalization, and so on. This book is not too difficult for the introductor
 

 
"Looking for a Similar Assignment? Order now and Get 10% Discount! Use Code "Newclient"

Title: Identifying and engaging audiences through online conversational discourse: An analysis of social media usage within small medium enterprises (SMEs).

/in /by

 
 
 
 
 
PhD Research Proposal
 
Identifying and engaging audiences through online conversational discourse: An analysis of social media usage within small medium enterprises (SMEs)
 
 
Contents Page
 
The broad field within which my MPhD topic falls                                            Page 3
An outline of the subject matter of my proposed thesis (Abstract)                   Page 3
Reasons for interest in this field                                                                       Page 4
The main theorists                                                                                            Page 5
The framework upon which my research will be based                                    Page 10
How my thesis will extend their work                                                                Page 11
Methodology                                                                                                     Page 12
Carrying out the research – the specific techniques                                        Page 13
Timescale                                                                                                         Page 16
An explanation of the original contribution to knowledge                                 Page 16
References                                                                                                       Page 18
Bibliography                                                                                                      Page 23
 
 
The broad field within which my MPhD topic falls
Title: Identifying and engaging audiences through online conversational discourse: An analysis of social media usage within small medium enterprises (SMEs).
An outline of the subject matter of my proposed thesis
Abstract
With an increasing body of literature (Fill, 2009, Kozinets et al, 2010, Jobber, 2010) highlighting the importance and influence of word of mouth communications and how it can assist and enrich the communications process; it may be argued identifying and engaging audiences through online conversational discourse is now just another facet of the ‘day job’ for many organisations, including SMEs. Woodside and Delozier (1976, p.12) for example link WoM with consumer risk, while others establish links with complaining behaviour (Blodgett et al, 1995: 32) product judgements (Bone, 1995, p.214) consumer attitudes (Bickart and Schindler, 2001, p.31) and as an integral aspect of the customer relationship (Wangenheim, 2005, p.154). Furthermore, as Goldenberg et al (2001, p.212) suggests the increasing use of the internet, enables surfers to communicate quickly with relative ease, establishing the contemporary version of this phenomenon, known as electronic word of mouth (eWoW) as an intrinsic marketing communication channel. However for many SMEs, as Bulearca, (2010, p.298) suggests using social media and especially micro-blogging sites such as Twitter is only a recent phenomenon, as it is mainly since 2008 that social networking sites ‘exploded’ in user numbers and marketing applications. It may therefore be considered that there is limited academic research into this area (Zhao and Rossen, 2009; Jansen et al, 2009) and much of it is focussed on the user side, with little known from the companies’ perspective. What is evident from recent studies (Singh et al, 2008, Harris et al, 2008, Dwyer, 2007, Young at al, 2007) as Sashi (2012, p.267) confirms is that new technologies and tools spawned by social media have altered the roles of buyers and sellers; unlike traditional market exchanges in which the seller largely controlled marketing mix decisions relating to product, price, promotion, place and developed strategies to meet the needs of customers, social media helps shift control of some of these decisions directly to customers (Sashi, 2012).Not only that but social media enables customers to participate in value adding and marketing decisions as Sashi, 2012, p,.267 intimates by connecting and interacting not only with sellers but also with other customers as well as non-customers, an important facet of eWoM.
The objectives of this research will therefore focus on mapping how far SMEs can and are adapting their practices to identify and engage audiences through conversational discourse, utilising social media channels and networks, and with what implications for the future of marketing strategies. In order to expand the expediency of current literature one strand of future research will include a broader analysis of social media practice among business professionals, (aged 35-45) in order to establish how this may influence the identification and engagement of audiences (prosumers) through social media networks. An analysis of views and experiences from industry experts is also proposed, as well as a more detailed case study evaluation of SMEs, specifically in terms of eWoM on Twitter and blogs, as well as how they may be used to meet strategic objectives, as compared with traditional marketing methods.
Reasons for interest in this field
As a marketing communications professional working for more than 15 years – I have worked both from a consultancy basis and within SMEs, so I can definitely relate to the challenges and opportunities available through social media and specifically how to manage electronic word of mouth (eWoM) communications. A specific difficulty, evident in working practice is the ability to engage, develop and maintain conversational discourse effectively with business to business groups via social media. I am also interested within a broader spectrum as to how social media is effecting and influencing interpersonal relationships outside of the work environment which will also be explored expediently as part of this study, together with the experiences of other marketing communications professionals to inform recommendations. I am particularly enthusiastic about having the opportunity to analyse the influence and impact of social media within SMEs, as marketing communications, specifically word of mouth, social media and the impact on
customer engagement and reputational management in the UK and Internationally are areas which I hope to continue research and teaching within. Also, within the context of the current financial crisis and continuously emerging social network sites, it can be argued that there is a need to redefine models of eWoM communications, in order to more effectively target stakeholders so as to better serve the needs of managers, entrepreneurs, firms and society.
The main theorists who have made a contribution to this area of research
Identification of the relevant literature
An increasing body of literature has highlighted the importance and influence of word-of-mouth (WoM) communications and how it can assist and enrich the communications process (Fill, 2009, p.51/52). WoM has been related to many aspects of marketing. For example, Woodside and Delozier (1976, p.12) link WoM with consumer risk, while others establish links with complaining behaviour (Blodgett et al, 1995: 32) product judgements (Bone, 1995, p.214) consumer attitudes (Bickart and Schindler, 2001, p.31) and as an integral aspect of the customer relationship (Wangenheim, 2005, p.154). Historical definitions such as Helm and Schlei (1998, p.42) define WoM as: “Verbal communications (either positive or negative) between groups such as the product provider, independent experts, family, friends and the actual or personal consumer.’ As Fill (2009, p.52) highlights organisations now use WoM techniques commercially in order to generate a point of differentiation. Mazzarol et al (2007, as cited in Fill, 2009, p.52) identify the ‘richness of the message’ and the ‘strength of the implied or explicit advocacy’ as important triggers for WoM.
Latterly, organisations such as Stanomedia (2011) have developed this argument a stage further to suggest that when people communicate with each other by many more means than just orally “word of mouth” no longer fits in such a small definition, at least not for marketing purposes. Furthermore, as Goldenberg et al (2001, p.212) establishes the increasing use of the internet, enabling surfers to communicate quickly with relative ease, has established the contemporary version of this phenomenon, known as ‘Internet WoM or ‘word of mouse’, as an important
 
marketing communication channel. In what is sometimes labelled as ‘viral marketing’ as Goldenberg et al (2001,p.212) suggests, companies are currently investing considerable efforts to trigger an electronic word of mouth process and accelerate its distribution (Schwartz 1998; Oberndorf, 2000). And because channels like email, Facebook, Twitter or text messages most likely communicate information from ‘trusted’ sources the person receiving them is very likely to believe them and a situation is created in which the customer takes on the role of a type of ‘consumer-marketer hybrid’ (Kozinets, 2010, p.83). In this instance other participating customers have the power to approve “the communicator” or the people voluntarily sign up to listen, which means they already trust the organisation to some degree, (Stanomedia, 2011).
As Goldenburg et al (2001, p.212) suggests social media is able to foster the exchange of word of mouth messages, by creating a virtual community for consumers to interact with each other. When compared with the effect of external marketing efforts (e.g advertising) in this study, information dissemination is notably dominated by eWoM paths. Trusov, Bucklin and Pauwels (2009) also compared eWoM to ‘traditional marketing efforts’ when analysing methods to increase the quantity of users on a particular social networking site. On the whole it can be ascertained from this paper that eWoM referrals have a strong effect on new customer acquisition, influencing more individuals and lasting over a longer period than more ‘traditional marketing.’ Importantly, this study also offers managers a tool to improve the metrics they use for assessing the effectiveness of traditional marketing when WoM effects are present, while also offering a mechanism to quantify eWoM through outgoing messages. As a technique to measure the transition of conversational discourse, this methodology should prove advantageous to SMEs. Plus there is the opportunity to build on some of the ‘limitations’ from this data, including the analysis of more than just one large social networking site, which in this instance has prevented analysis of the effects of WoM for – and marketing actions by – competing sites. Modelling heterogeneity in order to clarify segmentation or specific audiences, is also an important aspect, to identify more detailed engagement strategies, pertinent for SMEs, particularly those operating within the business to business typology, which are primarily focussed on attracting, engaging with and building long-term relationships with specific interest groups, including ‘networked narratives’ (Kozinets et al, 2010) rather than ‘customers’ per se.
While the main concerns of SMEs in relation to the identifying and engaging of audiences through social media are likely to be related to the generic characteristics of limited time/resources and expertise, the e-marketplace provides a favourable environment, including; lower operating and marketing costs, better opportunities to promote their products/services, and enrich their overall marketing communications mix, (Chong et al 2010, p.5). Overall, the principle benefits of the SME e-marketplace as reported by many academics and practitioners are cited in Chong et al (2010, p.6) including: reducing search costs by facilitating comparison of price, products, and services (Kandampully, 2003; Bakos, 1998; Kaplan and Sawhney, 2000); improving production and supply capability (Barua et al., 1997; Albrecht et al., 2005); improving personalisation and customisation of product offerings (Bakos, 1998); enhancing relationships with customers (Kierzkowski et al., 1996); reducing marketing costs as compared to traditional marketing media (Sculley and Woods, 2001); reducing numbers of marketing staff (Gloor, 2000); operating 24/7 and around the clock over 365 days per year (Ngai, 2003); facilitating global presence (Laudon and Laudon, 2002); exploring new market segments (Murtaza et al., 2004); and interactive conversational discourse is more effective in terms of services marketing communication (Petersen et al, 2007).
SMEs are often categorised as having fewer resources, as Centeno (2012, p.253) confirms, which may include not only financial, but also marketing knowledge (Gilmore et al, 2001, Mount et al, 1993) as well as marketing communications personnel to undertake the day to day implementation. Centeno (2012, p.253) acknowledges, paradoxically that SMEs may also have a short-term focus with flat and informal organisational structures, which may also be suitable for a more dynamic and innovative responses to the market (Gilmore et al, 2001, McGaughey, 1998). Importantly, one shift facilitated by social media channels for the benefit of SMEs as Qualman (2011, p.193) outlines is financial, in that the money previously dispersed to ‘middlemen’ is now being redistributed to the companies themselves and direct to consumers.
However for many SMEs, as Bulearca, (2010, p.298) suggests using social media and especially micro-blogging sites such as Twitter is only a recent phenomenon, as it is mainly since 2008 that social networking sites ‘exploded’ in user numbers and marketing applications. It may therefore be argued that there is limited academic research into this area (Zhao and Rossen, 2009; Jansen et al, 2009) and much of it is focussed on the user side, with little known from the companies’ perspective. Despite this, as Israel (2009, p.147) states a new business located in a spare bedroom or less-than-prime former industrial space can build a network of customers at little or no cost. However, as an interviewee from an SME within a recent study (Bulearca, 2010) reiterates ‘Twitter needs consistency and commitment, a clear understanding of its purpose, functionalities and tools, and a strategic implementation if it is to yield the best results. ‘Return-on-investment (or value) is also difficult to quantify as results are ‘more people orientated than financial’ and the tools provided by Twitter are still perceived as ‘very basic’, (Bulearca, 2010, p.304).
Chua, (2009, p.119) also outlines growing evidence that Social media mechanisms are being used by business as part of their customer relationship management strategies (Singh et al, 2008, Dwyer, 2007) as well as managing reputation and trust (Gordon, 2006, Gray, 2006), niche marketing (Singh et al, 2008) and gathering market intelligence (Habermann, 2005, O’Flaherty, 2008). Schoble and Israel (2006, p.232) take this a stage further in their analysis when they highlight that in their view blogging is vital for companies, not just in terms of outbound communications, but inbound as well, describing their role as multifaceted in terms of; a crisis firefighter, a superior research aggregator, a tool for recruiting, a product builder and customer service and support enhancement. In addition, blogging, it is argued by Schoble and Israel (2006, p.232) will help companies to ‘win’ not just by talking to people but also by listening. Recent examples of studies as cited by Chua (2009, p.120) includes; a 2007 Forrester survey of 119 chief information officers working in SMEs and larger companies in the USA (Young et al, 2007) in which 89% declared that they had adopted at least one Web 2.0 tool (out of blogs, wikis, podcasts, RSS, social networking and content tagging).
While, Harris et al (2008) conducted a telephone survey of 400 SMEs in the UK concerning their use of Web 2.0 tools, including 30 case studies of small firms which were early adopters of blogs, although the study did not explore specifically how blogs could be used to support marketing objectives. Singh et al (2008, as cited in Chua, 2009, p.120) presents a general discussion of the marketing potential of blogs for businesses primarily focused on large firms, which includes a couple of anecdotal examples of small businesses which have made effective use of blogs for marketing.
What is evident from these studies as Sashi (2012, p.267) confirms is that new technologies and tools spawned by social media have altered the roles of buyers and sellers; unlike traditional market exchanges in which the seller largely controlled marketing mix decisions relating to product, price, promotion, place and developed strategies to meet the needs of customers, social media helps shift control of some of these decisions directly to customers (Sashi, 2012).Not only that but social media enables customers to participate in value adding and marketing mix decisions as Sashi, 2012, p,.267 intimates by connecting and interacting not only with sellers but also with other customers as well as non-customers, an important facet of eWoM.
Chua et al (2009, p.119) makes a significant point in relation to future research paradigms with SMEs, as it is argued that much of the existing eBusiness research tends to treat them as a homogeneous group (Parker and Castleman, 2007, Castleman, 2004 and Martin and Matlay, 2001). Part of the challenge in investigating social media usage in SMEs is therefore to at least in the first instance form a better understanding of the complex internal and external SME contexts governing whether or not the adoption of social media makes sense for specific types of SMEs, and for specific purposes such as facilitating and mapping eWoM conversational discourse and whether this is more appropriate for certain purposes such as establishing and maintaining customer engagement in predominantly B2B SMEs.
It is suggested that in order to expand the expediency of current literature that one strand of future research could include a broader analysis of social media practice among business professionals, ‘prosumers’ (aged 35-45) in order to establish how this may influence the identification and engagement of audiences through social media networks. An analysis of views and experiences from industry experts is also proposed, as well as a more detailed case study analysis of current engagement levels with online conversational discourse in SMEs, specifically in terms of eWoM on Twitter and via blogs and how they may be used to meet strategic objectives, as compared with traditional marketing methods.
The conceptual/theoretical framework or approach upon which my research is based
In summary this research is intended to analyse and develop a new model for SMEs in terms of approaches to identifying and engaging audiences through online conversational discourse that considers the suitability of specific social media mechanisms i.e micro-blogging sites such as Twitter and blogs. Due consideration will be given to the importance of eWoM in terms of attracting and retaining customers, as well as return on investment measurements. As Jones (2010, p.150) suggests the Web 2.0 world poses a number of challenges to small businesses and the ways in which they communicate; how best to operate successfully in this new landscape is an issue that small businesses have to address at an individual level, from experience and on a ‘need to manage’ basis. It is concluded by Jones, (2010, p.150) that a more grounded, empirically informed, evidence-based case-study analysis of specific small business practice of using Web 2.0 is the best way forward for impact assessment and further research areas are recommended as: ‘real-world’ small business practice of Web 2.0 use, via in-depth case study analysis; the role of Web 2.0 in the co-creation of value for small businesses; evaluating consumers and prosumers views of small business Web 2.0 marketing activities. It is the intention of this research to investigate and analyse these areas, as well as understanding current practice withn SMEs as informed by marketing communications ‘experts’, which will add a third analytical dimension in order to deliver a detailed overview of this subject matter.
An outline of how my thesis will extend, elaborate upon or provide a critique of their work
Key research questions
The research questions will be refined after the full literature review and (baseline study), from the following:

  1. What are the challenges and opportunities for SMEs in terms of identifying and engaging audiences through online conversational discourse, in light of the concept of the ‘participative web’ (OECD, 2007) that empowers users to contribute to developing, rating, collaborating and distributing internet content and customising internet applications?
  2. What factors create successful online conversational discourse through social media usage/networks?; Understanding: current practice and future developments from the perspective of marketing communications professionals
  3. How can eWoM be effectively harnessed by SMEs to help promote their business offerings, in terms of differentiation from competitors; communicating with publics and stakeholders to co-create value, raise their profile, build trust and enhance reputation, research and better understand the markets in which they operate; generate trade with other businesses and overall develop and grow their business as compared with traditional marketing materials and in order to meet marketing objectives?
  4. How can SMEs better understand the role of prosumers in entrepreneurial marketing? Evaluating prosumers’ views of small business social media activities, including the influence of ‘participative web’ activity in the co-creation of value for SMEs, but also considering the impact on social outcomes, orchestrated by a mutual dependence on social networks
  5. What are the implications for the future of social media usage by SMEs? What deters SMEs from adopting eWoM techniques? What factors create successful eWoM social media programmes? What is the process of audience engagement and SME implementation and monitoring? What is defined as an effective return on investment and how does this contribute to meeting overall marketing objectives? This could include: analysis and development of a new business model that supports SMEs in the planning and development stages of any social media strategies in order that they can effectively map participation, outcomes and value propositions  as a way of building international competitive advantage and generating economic dynamism, growth and jobs to support the knowledge economy.

Methodology
At this point, the working title: ‘Identifying and engaging audiences through online conversational discourse: An analysis of social media usage within small medium enterprises (SMEs)’ is not in the form of a research hypothesis. The questions outlined earlier do, however, help to identify key areas for further analysis and investigation.
In order to put the influence of SMEs on the UK economy into perspective the latest statistics from the Federation of Small Businesses (2011) are included below:

  • There are 4.5 million small businesses in the UK
  • SMEs account for 99 per cent of all enterprise in the UK, 58.8 per cent of private sector employment and 48.8 per cent of private sector turnover
  • SMEs employed an estimated 13.8 million people and had an estimated combined annual turnover of £1,500 billion
  • Businesses with employees account for a quarter of all enterprises – a fall of 29,000 since 2010
  • There are 876,000 businesses in construction – a fifth of all UK enterprises
  • London has 748,000 enterprises – more than any other region
  • The South East has the second largest number of enterprises with 745,000. Combined with London, a third of all businesses are based here
  • 45.3 per cent of businesses are registered for VAT and/or PAYE
  • The number of sole proprietorships increased by 87,000 in 2010 and the number of companies, 6,000

Micro: 0-9 employees, small: 10-50 employees, medium: 50-249 employees (updated November, 2011).
Carrying out the research – the specific techniques of investigation and analysis I plan to use
The utilisation of qualitative and quantitative data, a ‘sequential mixed methods’* (Cresswell and Plano Clark, 2007, cited in Creswell, 2009, p. 14) approach to research will be utilised throughout the compilation of this study. As Jogulu and Pansiri (2011, p.688) state the mixed methods research approach, also referred to as the third path (Gorard and Taylor, 2004, as cited in Jogulu and Pansiri, 2011, p.688), or the third research paradigm (Johnson and Onwuegbuzie, 2004, p14) is widely used and recognised by management scholars.
Cresswell and Plano Clark (2007, p.5) define mixed methods as: a research design with philosophical assumptions as well as methods of inquiry. Further substantiating this vision, by stating: “As a methodology, it involves philosophical assumptions that guide the direction of the collection and analysis of data and the mixture of qualitative and quantitative data in a single study or series of studies” (Creswell and Plano Clark (2007, p.5). Its central premise as cited by Creswell and Plano (2007, p.5) is that the use of quantitative and qualitative approaches in combination provides a better understanding of research problems than either approach alone.
In addition, it is argued by Jogulu and Pansiri (2011, p.688) that a mixed methods approach, advocates the use of both inductive and deductive research logic, which is a great strength in itself, as having an inductive-deductive cycle allows the equal undertaking of theory generation and hypothesis testing in a single study, without compromising one for the other.
It is also expected given the relatively new concept of social media usage in SMEs that any methodology will be to some extent exploratory and inductive. Initial analysis will focus on the implementation and analysis of online questionnaires based on a standard format (e.g. Likert scale model) to obtain mainly quantitative responses, which will be complimented by a qualitative approach in the form of case-study analysis which will include in-depth interviews and observation, as detailed in the provisional diagram below.
The first stage of this research paradigm is to collect primary quantitative survey data via two different online questionnaires aimed at: marketing communications professionals (chartered institute of public relations members) and prosumers (aged 35-45) as a sample segment of ‘participative’ social media users. According to Easterby-Smith et al (2009, p.90) there are three main types of survey: factual, inferential and exploratory. Inferential surveys as Easterby-Smith et al (2009, p.91) confirms are aimed at establishing relationships between variables and concepts whether there are prior assumptions and hypotheses regarding the nature of these relationships.
For the purposes of this study SMEs in South East England, including the following counties: Suffolk, Essex, Norfolk, Kent, Sussex, Surrey, Berkshire and Cambridgeshire will be targeted in order to provide a targeted analysis of case-studies.
Eisenhardt (1989, p.534) defined case study ‘as a research strategy that focuses on the dynamics present within a single setting.’ According to Eisenhardt (1989) there are three ways case studies could be used to accomplish the researcher’s aims – case studies provide description whilst testing and/or generating theory. Case study data can also come from a variety of sources. Stake (1995) identified six sources from which qualitative research data are collected for case studies. First, the nature of the case, particularly its activity and functioning, second, its historical background, third, its physical setting, fourth, other contexts, such as economic, political, legal, and aesthetic; fifth, other cases through which the case is recognised; and sixth, those informants through whom the case can be known. Interviewing ‘experts’ in the subject, such as senior managers, marketing/PR and communications managers, as well as observation at various intervals, will form a key element of the case-study preparation.
Collecting primary data as a priority is suggested as there is unlikely to be a large volume of published statistics or texts available that encompasses a detailed picture of how SMEs have adapted their practices and priorities to encompass social media activity, as well as the monitoring of its effectiveness as compared with traditional marketing materials as a means of meeting strategic objectives.
 
 
Timescale

Activity
 		 Words Duration
Literature review 20,000 6 months
Methodology 15,000 8 months
Data gathering   12 months (overlapping with methodology)
Data analysis 20,000 8 months
Conclusion, implications and recommendations for further research 15,000 5 months
Introduction and abstract 5,000 2 months
Amendments and revisions   2 months
Total 75,000 (200 pages approx.) 36 months (3 years)

 
What specifically do you hope this thesis will discover or explain that will make it an original contribution to knowledge?
Social media as a research paradigm, with its many facets is still very much in its infancy.  As McQuail, (2000, as cited in Daugherty et al, 2008, p.16) highlights ‘consumers are active and in charge of their media experiences, making it more important than ever to understand motivational factors’ in this instance that drive consumption and interaction with organisations and individuals. This power shift as Severin and Tankard (1992, as cited in Daugherty et al, 2008, p.16) describes, challenges media theorists (and organisations, specifically SMEs) to change the way they traditionally have identified (and engaged with) audiences, with a lesser focus on examining the theoretical effects of media and a greater focus on understanding why and how consumers use media. From the SME’s perspective, engaging
audiences through online conversational discourse, deploying the tools of Web 2.0, will facilitate communications in new ways with their varied stakeholders. As Jones (2010, p.149) states communication methodology has changed significantly to promote mutual value between the organisation and their ‘audience’: ‘Where once businesses communicated to their customers and other stakeholders, they now communicate in partnership with them.’ The views, experiences and recommendations of marketing communications experts will also be considered in order to inform current and future practice.
In light of this, this study is designed to examine and analyse the opportunities, challenges and barriers to utilising social media channels effectively by SMEs, within the B2B context primarily, by testing existing implementation and quantifying the outcomes from the perspective of senior internal employees and marketing communications experts. An important element of this analysis is to explain the influence and expedience of eWoM as a means of influencing engagement and the distribution of messages via a primary framework analysis, utilising the case-study examples. Plus, to underpin this study a broader investigation of social media usage by professionals aged 35-45 will be undertaken to ascertain attitudes, motivations, objectives and outcomes to inform engagement and eWoW behavioural traits as well as the impact on wider social relationships. This approach is intended to broaden understanding and primary data related to the use of social media specifically within the B2B context to better inform future implementation and practice.

References
Albrecht, C., Dean, D., Hansen, J. (2005). Marketplace and technology standards for B2B e-commerce: progress, challenges, and the state of the art, Information & Management, Vol. 42 No.3, pp.865-75.
Bakos, Y.J. (1998), “Towards friction-free markets: the emerging role of electronic marketplaces on the internet”, Communications of the ACM, Vol. 41 No.8, pp.35-42.
Barua, A., Ravindran, S., Whinston, A.B. (1997), Efficient selection of suppliers over the internet, Journal of Management Information Systems, Vol. 13 No.3, pp:117.
Bickart, B and Schindler, R M (2001) Internet forums as influential sources of consumer information, Journal of Interactive Marketing 15 (3) pp: 31-40.
BIS: Department for Business Innovation and Skills – Business population estimates for the UK and Regions, 2011. Available at: http://www.fsb.org.uk/pressroom/assets/statistical%20release%20bpe%202011%20edition.pdf Accessed on: 17 June, 2012
Blodgett, J G et al (1995) The effects of customer service on complaining behaviour, Journal of Services Marketing 9 (4) pp: 31-42.
Bone, P F (1995) Word of mouth effects on short-term and long term product judgements, Journal of Business Research 21 (3) pp:213-23.
Bulearca, M and Bulearca, S (2010) Twitter: a viable marketing tool for SMEs, Global Business and Management Research: An International Journal 2 (4) pp: 296-309.
Burton, S and Soboleva, A (2011) Interactive or reactive? Marketing with Twitter, Journal of Consumer Marketing 28 (7) pp:491-499.
Carson, D and Cromie, S (1990) Marketing planning in small enterprises: a model and some empirical evidence, Journal of Consumer Marketing 7 (3) pp: 5-18.
Centeno, E and Hart, S (2012) The use of communication activities in the development of small to medium-sized enterprise brands, Marketing Intelligence and Planning 30 (2) pp: 250-265.
Chua, A et al (2009) Exploring the types of SMEs which could use blogs as a marketing tool: A proposed future research agenda. Australasian Journal of Information Systems 16 (1) pp: 117-136.
Daugherty, T et al (2008) Exploring consumer motivations for creating user-generated content. Journal of Interactive Advertising 8 (2) pp: 16-25.
Diffley, S et al (2011) Consumer Behaviour in Social Networking Sites: Implications for Marketers, Irish Journal of Management 53 pp: 47-65.
Eisenhardt, K M (1989) Building theories from case study research. Academy of Management Review, 14 (4) pp: 532-550.
Federation of Small Businesses (2011) Small business statistics. Available at: http://www.fsb.org.uk/stats Accessed on: 17 June, 2012.
Gilmore, A et al (2001) SME marketing in practice, Marketing Intelligence and Planning 19 (1) pp: 6-14.
Goldenberg, J t al (2001) Talk of the network: A complex systems look at the underlying process of word-of-mouth. Marketing Letters 12 (3) pp: 211-223.
Hansen, S (2008) The global diffusion of relationship management, European Journal of Marketing, 42 (11/12) pp: 1,156 – 1,161.
Harris, R J (2008) Developing a collaborative learning environment through technology enhanced education (TE3) support. Education and Training 8 (9) pp: 674 – 686.
Hearn, G et al (2009) Applications and implementations of new media in corporate communications. An action research approach. Corporate Communications: An International Journal 14 (1) pp: 49-61.00000000
Helm, S and Schlei, J (1998) Referral potential – potential referrals: An investigation into customer’s communication in service markets. Proceedings from 27th EMAC Conference, Marketing Research and Practice pp: 41-56.
Jansen, B J et al (2009) Twitter power-tweets as electronic word-of-mouth, Journal of the American Society for Information Science and Technology 60 (11) pp: 2,169 – 2,188.
Jogulu U D and Pansiri J (2011) Mixed methods; a research design for management doctoral dissertations. Management Research Review 34 (6) pp: 687 – 701.
Johnson, R B and Onwuegbuzie (2004) Mixed methods research: A research paradigm whose time has come. Educational Researcher 33 (7) pp:14-26.
Jones, B (2010) Entrepreneurial marketing and the Web 2.0 interface, Journal of Research in Marketing and Entrepreneurship 12 (2) pp: 143-152.
Kandampully, J. (2003). B2B relationships and networks in the internet age. Management Decision, Vol. 41 No.5, pp.443-51.
Kierzkowski, A., McQuade, S., Waitman, R., Zeisser, M. (1996), Marketing to the digital consumer, McKinsey Quarterly Vol. 3 pp.5-21.
Kozinets, R V et al (2010) Networked narratives: Understanding word-of-mouth marketing in online communities. Journal of Marketing 74 pp: 71-89.
Lefebvre, R C (2011) An integrative model for social marketing, Journal of Social Marketing 1(1) pp: 54-72.
Liang, T-P et al (2006) Personalised content recommendation and user satisfaction: Theoretical synthesis and empirical findings. Journal of Management Information Systems 23 (3) pp: 45-70.
Mabry, E and Porter, L (2010) Movies and Myspace: The Effectiveness of official websites versus online promotional contests. Journal of Interactive Advertising 10 (2) pp: 1 – 15.
Mount, J et al (1993) Organising for development in the small business, Long Range Planning 26 (5) pp:111-20.
Murtaza, M.B., Gupta, V., Carroll, R.C.E.-M. (2004), “Marketplaces and the future of supply chain management: opportunities and challenges”, Business Process Management Journal, Vol. 10 No.3, pp.325-35.
Ngai, E.W.T. (2003), “Internet marketing research (1987-2000): a literature review and classification”, European Journal of Marketing, Vol. 37 No.1/2, pp.24-49.
Palmer, A and Koenig-Lewis, Nicole (2009) An experiential, social network-based approach to direct marketing, Direct Marketing: An International Journal 3 (3) pp: 162-176.
Parrott, G et al (2010) An analysis of marketing programmes adopted by regional small and medium-sized enterprises, Journal of Small Business and Enterprise Development 17 (2) pp: 184-203.
Petersen, K.J., Ogden, J.A., Carter, P.L. (2007), B2B e-marketplaces: a typology by functionality, International Journal of Physical Distribution & Logistics Management, Vol. 37 pp.4-18.
Sashi, C M (2012) Customer engagement, buyer-seller relationships, and social media, Management Decision 50 (2) pp: 253 – 272.
Singh, T et al (2008) Blogging: A new play in your marketing game plan. Business Horizons 51 (4) pp: 281-292.
Stanomedia (2011) What is word of mouth marketing in today’s world? And its importance. Available at: http://stanomedia.wordpress.com/2011/06/02/importance-of-word-of-mouth-marketing/ Accessed on: 24 June, 2012.
Stocker, A and Tochtermann, K (2008) Investigating Weblogs in Small and Medium Enterprises: An Exploratory Case Study. Available at: http://www.mendeley.com/research/investigating-weblogs-small-medium-enterprises-exploratory-case-study/  Accessed on 24 June, 2012.
Taylor, M and Murphy, A (2004) SMEs and e-business, Journal of Small Business and Enterprise Development 11 (3) pp:280-289.
Trusov et al (2009) Effects of word-of-mouth versus traditional marketing: Findings from an internet social networking site. Journal of Marketing 73 pp: 90-102.
Wangenheim, F V (2005) Post switching negative word of mouth, Journal of Service Research 8 pp: 67-78.
Woodside, A G and Delozier M W (1976) Effects of word of mouth advertising on consumer risk taking, Journal of Advertising 5 (4) pp: 12-19.
Young, G O et al (2007) Efficiency gains and competitive pressures drive enterprise Web 2.0 adoption. Forrester Research. Available at: http://www.forrester.com/Research/Document/Excerpt/0,7211,41794.00.html Accessed on: 24 June, 2012.
Zhao, D et al (2009) How and why people twitter – the role that microblogging plays in informal communication at work, Group ’04, May 10-13.
Bibliography
Brown, E (2011) Working the Crowd. Croydon: CPI Group (UK) Ltd
Castleman, T (2004) Small business as social formations: diverse rationalities in the context of e-business adoption, Electronic Commerce in Small to Medium-Sized Enterprises: Frameworks, Issues and Implications. Idea Group Publishing; Hershey, Pennsylvania, pp: 31-51.
Clapperton, G (2011) This is social media tweet, blog, link and post your way to business success. West Sussex: Capstone Publishing Ltd.
Cresswell J W (2009) Research Design: Qualitative, Quantitative, and Mixed Method Approaches. Third Edition. London: Sage Publications Ltd.
Easterby-Smith, M et al (2009) Management Research. 3rd ed. London: Sage Publications.
Fill, C (2009) Marketing Communications: Interactivity, Communities and Content. Fifth edition. Harlow: Pearson Education.
Gloor, P. (2000), Making the e-Business Transformation, Springer, New York, NY.
Israel, S (2009) Twitterville: How Businesses Can Thrive in the New Global Neighbourhoods. London: Penguin Books Ltd.
Jobber, D (2010) Principles and Practice of Marketing. Sixth edition. Maidenhead: McGraw-Hill Education.
Laudon, K.C., Laudon, J.P. (2002), Management Information Systems: Managing Digital Firm, Prentice-Hall International, Upper Saddle River, NJ.
Qualman, E (2011) Socialnomics: How social media transforms the way we live and do business. New Jersey: John Wiley & Sons Inc.
Schollhammer, H and Kuriloff, A ( 1979) Entrepreneurship and Small Business Management. Chichester: Wiley.
Scoble, R and Israel, S (2006) Naked Conversations: How Blogs are Changing the way Businesses Talk with Customers New Jersey: John Wiley & Sons Inc.
Sculley, A.B., Woods, W.A. (2001), B2B Exchanges: The Killer Application in the Business-to-Business Internet Revolution, Harper & Collins, New York, NY.
Stake, R (1995) The art of case-study research. CA: Thousand Oaks.
 

 
"Looking for a Similar Assignment? Order now and Get 10% Discount! Use Code "Newclient"

The Audit Expectations Gap in the Public Sector of Turkey

/in /by

University of Essex
Essex Business School
 
 
 
 
 
 
The Audit Expectations Gap in the Public Sector of Turkey
 
 
 
 
 
 
 
December 2014
 
 
 
 
 
 
 
 
 
 
 
 
BE951-7-AU: RESEARCH METHODS AND METHODOLOGIES IN ACCOUNTING AND MANAGEMENT
COURSEWORK 2
 

Summary:

The concept of audit expectations gap has been widely used in private sector studies. However, in the public sector, it has not been received much attention. Until now, only a very limited number of researches on the audit expectations gap in the public sector have been carried out. Similarly, in Turkey, researches on audit expectations gap generally focus on the private sector. With regard to the public sector of Turkey, research on audit expectations gap has not been undertaken at all. This study aims to identify the existence of the audit expectations gap in the Turkish public sector in terms of performance audit by providing answer to the following questions: Whether or not the audit expectations gap exist in the Turkish public sector relating to performance auditing? If it exists, what is the nature of audit expectations gap?

Background:

Liggio (1974, p.27) first used the term of audit expectations gap in the literature and
defined it as the difference between ‘the levels of expected performance as envisioned both by the independent accountant and by the user of financial statements’. In 1978, Cohen Commission Report (1978, p.xi) broadened the definition as ‘a gap between the performance of auditors and the expectations of the users of financial statements’. However, Porter (1993) criticized previous definitions as they were too limited and did not consider inadequate performance, and made a definition as ‘the gap between the public’s expectations of auditors and auditors’ perceived performance’ (p.50). Although these definitions are private sector oriented, in a broader sense, they could also be used in the context of public sector as the nature of audit is apparently similar.
In general, to examine the audit expectations gap, two approaches are available.  In the first approach, based on private sector auditing, Porter (1993) specially investigated opinions of auditors and public, regarding the roles and duties of auditors. In the second approach (Chowdhury and Innes, 1998), based on the public sector auditing, the audit expectations gap is investigated in the context of accountability. In this approach, accountability is regarded as fulfilment of standards in the process of auditing and reporting. Since this approach aimed to investigate the perceptions of auditors, seven concepts were chosen in the context of accountability: auditor accountability, auditor independence, auditor competence, audit materiality and audit evidence, truth and fairness, and performance audit (p.247).
As mentioned earlier, unlike the literature on private sector auditing, research on audit expectations gap was very limited in the context of public sector. Until now, only Pendlebury and Shreim (1990; 1991), Chowdhury and Innes (1998), and Chowdhury et al. (2005) have conducted research on the audit expectations gap in the public sector of different countries.

Aims and Objectives:

In Turkey, researches on audit expectations gap in the public sector have not been carried out at all. This study will attempt to fill this research gap in the auditing literature. In order to establish a sound research framework, an approach based on ‘accountability’ has been employed for this research. This study will be concerned with the TCA[1] auditors’ accountability to the PBC[2] and the auditees in the context of performance audit. The following objectives are set in order to achieve the aim of the research:

  • To evaluate TCA auditors’ and the report users’ opinions about the performance audit function and the performance audit reports in the context of accountability,
  • To assess performance audit reports produced by TCA in the context of accountability.

Methods:

This study aims to investigate the presence and the characteristics of the audit expectations gap in the public sector of Turkey. It also seeks to understand participants’ perspectives, perceptions, and interpretations. This study, therefore, has an explorative approach. For these reasons, interpretivist paradigm will be employed. To accomplish the aim of this study, a qualitative methodology will be selected owing to its connection with the research paradigm and appropriateness in identifying objectives of the study. The researcher will choose two different methods to accomplish the objectives of the study. The first method will be composed of semi-structured interviews with the auditors of the TCA and two groups of users: PBC, as the recipient of the TCA audit, and the auditees. The purpose is to explore the perceptions of auditors and other users which may cause expectations gap and to identify the characteristics of the gap. The second method will be the analysis of performance audit reports of TCA as a secondary source. The purpose is to support the findings gathered from the interviews in respect to the reasons and components of the gap. A software will be used in order to analyse both interview transcripts and audit reports.

 
 

References:

Chowdhury, R., and Innes, J., 1998. A qualitative analysis of the audit expectations gap in the                                          public sector of Bangladesh. International Journal of Auditing, 2(3), pp.247-261.
Chowdhury, R. R., Innes, J., and Kouhy, R., 2005. The public sector audit expectations gap in Bangladesh. Managerial Auditing Journal, 20(8), pp.893-908.
Cohen Commission, 1978. AICPA Reports, Conclusions, and Recommendations of the
Commission on Auditors’ Responsibilities. New York: American Institute of Certified Public Accountants. Available at: http://documents.routledge-interactive.s3. amazonaws.com/9780415508117/articles/commission.pdf [Accessed 05 December 2014]
Liggio, C. D., 1974. The expectation gap: The accountant’s legal Waterloo? Journal of
Contemporary Business, 3(3), pp.27-44
Pendlebury, M., & Shreim, O., 1990. UK auditors’ attitudes to effectiveness auditing. Financial Accountability & Management, 6(3), pp.177-189.
Pendlebury, M., & Shreim, O., 1991. Attitudes to effectiveness auditing: Some further evidence. Financial Accountability & Management, 7(1), pp.57-63.
 
 
 
 
 
[1] Turkish Court of Accounts, Supreme Audit Institution of Turkey.
[2] Plan and Budget Committee of Turkish Grand National Assembly.

 
"Looking for a Similar Assignment? Order now and Get 10% Discount! Use Code "Newclient"

The Factors Affecting E-Business Companies

/in /by

The Factors Affecting E-Business Companies
 
 
Introduction
The business and commerce transactions have been transformed by the advances of the information and communication technology (ICT) and more specifically by the Internet. As the Internet presents a broad spectrum of information and payment mechanisms to the users, it could also increase the level of product and service purchases. Globally reaching trillions of USD, e-commerce has enabled businesses to operate beyond the geographical boundaries, to reach more customers and to compete with other companies not only at national level, but also international level. Developed countries could adopt e-commerce more easily than the other countries as they have sound economic and technological infrastructure. However, even today in some regions of developed and developing countries the level of Internet penetration which affects e-commerce transactions directly is lower. Moreover, there are several inequalities between some groups in terms of Internet usage. Culturally beliefs and attitudes of the consumers are also affect e-businesses. Today even in developed states there is lack of trust to online transactions. As e-commerce is not in a vacuum, it is also affected by politic factors. Politic decisions embody in laws and laws follow social, cultural and technological developments. Since advances in the Information and Communication Technology are the driver of e-commerce, legal environment have been adjusting itself to new digital era. Thus e­businesses are also affected by the new understanding of legislation. This paper will try to evaluate the several factors (economic, demographical, cultural and politic) affecting e­businesses success.
 
 
Economic Factors
 
The economic sustainability and competitiveness of a country determines its e-commerce potential. The countries which have a sound economic infrastructure and improved technological environment could easily adopt online trade. Therefore, key macro-economic
 
indicators, such as per capita GDP; the improvement in ICT infrastructure, such as computer and the Internet penetration and the speed of online transactions; and the advanced payment methods, such as the level of credit card use, affect e-commerce adoption of a country at macro level (Hariharaputhiran, 2012). The development level of a country’s economic structure and its economic stability have also played a crucial role in the adoption of new technologies. Therefore economically developed countries seem to have higher Internet penetration and online trade transactions (Wunnava & Leiter, 2009). For example, income level which is one of the key indicators of a developed economy, affects expansion of the e­commerce because it is directly related to the purchasing power of people (Karimov, 2011).
Globalisation which leads elimination of trade barriers, decline in the costs of the transportation and communication, increased investment opportunities in new markets and more competitive trade environment, is another factor affecting and forming e-commerce transactions. In the globalising world, thanks to the advances in telecommunication and transportation, e-commerce is regarded as a new and easy way to access markets. Today only the businesses which adopt and implement global communication and transportation links, utilize the benefits from the competitive trade environment (Aydin and Savrul, 2014). In addition, the local firms which face foreign competitors in the domestic market, prefers adoption of e-commerce to compete them. However, it is also argued that e-commerce has not changed the actors which have the advantages from the competitive international trade. Global firms still dominant actors of international trade and it is claimed that limited resources of local and small sized firms[1] might put them at a competitive advantage in their domestic markets (Totonchi and Kakamanshadi, 2011).
 
Demographic factors
 
In order to enjoy benefits from the Internet in terms of commercial transactions, the users should have the opportunity and the skills of using the Internet. Thus, skilled users would make the right choice consciously to use the Internet for their purposes. With this perspective demographic factors such as gender, age, education and income become the crucial element of any e-commerce company’s success. If there is an inequality between social groups to access and use the Internet, the level of online transactions will be limited and this will affect e-commerce companies negatively.
In this context, the digital divide has been a critical issue in ICT since the massive usage of the computer. The digital divide has two dimensions. First, the divide addresses the availability of groups to access computers, and other ICT products and services. Moreover, digital divide could be a matter of disparities between countries and the regions in a country. As a political, cultural and socio-economic reality, some groups have better opportunity to access computers and the Internet. For example, this inequality could arise between female and male, young and old, rich and poor and educated and uneducated. Although digital divide exists, due to the increasing usability of Information Technologies (IT), it is argued that the gap is closing between male and female, young and old, and rich and poor due to the governmental actions and socioeconomic improvement (Lee, 2010). Accordingly, a recent survey by OxIS[2] reveals that as the use of internet is increasing in the UK, the digital divide for low-income households, lower educated groups, older, and disabled people is getting narrower (Dutton and Blank, 2013). However, in underdeveloped and some developing
 
countries, even in some regions of the developed countries the digital divide still exists. For example, across Africa in 2014 only 9.8% of the inhabitants can access the Internet (IWS, 2015). Empirical studies show that in developing countries, there have been a digital divide between regions as well. For example even in Croatia, the newest member of EU, between urban and rural areas the digital divide exists in terms of broadband[3] adoption (Krizanovic, 2013). Moreover even between EU countries, with regard to fixed and mobile broadband penetration, it is argued that there has been a significant digital divide and the efforts could not close the gap successfully (Polykalas, 2014 ).
 
Cultural factors
 
The intention of shopping online is affected both technological and socio-cultural factors. Although the level of economic and technological development of a country or a region is directly determines the degree of online consumption, even in developed countries some people still tend to do face-to-face shopping rather than online shopping. Those people still want to touch or test the products or they do not trust in online transactions especially payment systems.
Especially the countries which have lower levels of e-commerce transactions, online payments, credit cards and e-money are regarded as risky. Actually, in some countries the majority of the population could not be familiar with these concepts. In such countries to overcome general belief and increase e-commerce transactions some mixed (traditional and electronic) methods are applied. For example, in Jordan many online traders implement cash on delivery option in their transactions (Abu-Shamaa and Abu-Shanab, 2015). Interestingly, a
 
recent survey reveals that even in the UK, 14% of the Internet users, termed as Adigitals, overwhelmingly negative beliefs and attitudes about the Internet (Dutton and Blank, 2014)
Trust is regarded as one of the prominent factors that affect the success of the e-commerce companies (Zhu et al., 2011). In online shopping trust means ‘having confidence that the store will offer fair prices, insert the right product information, reserve consumer’s privacy, and handle credit card and transaction information securely.’ (Abu-Shamaa and Abu-Shanab, 2015, p.2).
Another significant issue that affects online shopping attitudes of the individuals is trust in online payment system. Due to the fraud concerns some people might not want to pay online in their transactions. Moreover online payment is regarded as a complex method for some people. However, implementing safer and simpler online payment methods will encourage the potential e-customers to shop online (Bahaddad et al., 2013)
 
Political Factors
 
E-businesses are also affected by the governmental policies and regulations. Actually, all businesses must comply with the governmental regulations especially with the laws. Moreover, they must aware of the effects of any forthcoming legislation on their operations. Political factors affecting e-businesses include any legislation, initiative or funding to support the adoption and improvement of e-commerce and information technology.
Politically, the governments encourage and regulate online trading in several ways. Firstly, amendment of the laws and the regulations help to the functioning of e-commerce. Moreover, the existence of governmental incentives and programmes which encourage the development new technologies and improve technological infrastructure also have an impact on the success of e-commerce implementations (Permwanichagun, 2015).
 
With regard to legislation, Chaffey (2011) categorize the laws governing e-commerce into six groups: (1) Data protection and privacy law, (2) Disability and discrimination law, (3) Brand and trademark protection, (4) Intellectual property rights, (5) Contract law and (6) Online advertising law. In this paper data protection, contracting and jurisdiction issues will be discussed.
 
Data protection and privacy regulations
 
Although e-commerce presents many benefits to the economies and the people, the open structure of the Internet also brings some problems. Misuse of personal data might be one of the most important problems in online trading. E-commerce firms generally collect and use personal information of online shoppers in order to form their marketing strategies by meeting the personal needs of the individuals (Boritz and No, 2011). In order to complete e­commerce transactions, crucial personal data is required to be shared which has raised privacy and specifically fraud concerns. Hence, online shoppers’ trust in the e-commerce transactions would be decreased and this would affect the performance of online traders negatively.
While completing online shopping the customers are required to share personal information such as name, address and credit card number. In some cases, some additional information such as, preferences, income, and consumption behaviours are required to be shared. These are the simplest methods of collecting data. Another method is gathering the Internet Protocol (IP) number during visiting the Website. By this way, it could be possible to track visitors’ future web surfing. Another important approach to collect personal information of Website visitors is ‘cookies’, which are small text files that are set on an Internet user’s computer when one browses the Internet (Luzak, 2013, p.547). Cookies are beneficial because they ease the verification of identity. However, they are generally used to collect individual’s long
 
term browsing histories including payment information. Cookies are also an appropriate tool for online behavioural advertising (OBA) which could be defined as ‘[a]djusting advertisements to previous online surfing behaviour’ (Smit et al., 2014, p.15). Today almost all advertisement platforms are used this mechanism in their online advertising strategies (eMarketer, 16 May 2013). Although the advertisers are eager to implement OBA by using cookies, without informed consent, the cookies could violate the privacy of the individuals. Due to these privacy concerns, policy makers in US and Europe focussed on implementing opt-in regime which requires explicit consent of users (Bennet, 2011). Recently, the information which is shared in social networking Websites such as Facebook and Twitter, could be also collected and used (Jaafor et al., 2014). More recently, since the launch of the GPS (Global Positioning Systems) integrated mobile phones, it is possible to track users’ movements without any permission (Maekawa, 2014). Furthermore, it is possible to gather and transfer personal data during cloud computing processes (Sahin, 2013). Aforementioned procedures which enable customer tracking, could assist the firms to individualise customer transactions. However, the gathered data could also be transferred to third party organisations without the permission of the consumer. This would increase the concerns about confidentiality of data.
In order to respond to the privacy concerns, some legislations and procedures are entered into force by the governments. Moreover, there are also self-regulation efforts to overcome the privacy concerns. Data protection and protection efforts could be categorised into two groups: the market-driven, as used in the US and the government-driven, as used in the United Kingdom. In the self-regulation or market-driven approach, data protection procedures are determined by the private norms of the industry. The companies release the degree of information to be collected and used in their privacy policy statement according to industrial guidelines. In the US, no legal regulation is applied on the data collection procedures of the
 
companies. However, in order to assure customers’ trust, web seals such as TRUSTe and WebTrust are used. The Websites which conform to privacy organisations’ procedures display a sign (Adelola, 2014).
In the government regulation approach, data protection procedures are set by the laws which include regulations in terms of collection, use, and transfer of personal data to different countries which have not privacy regulations (Boritz and No, 2011). Several data protection and privacy laws in term of online transactions are put into effect by several countries, such as the United Kingdom, Germany and Canada. One of the outstanding legislations is Directive 95/46/EC of the European Council which was enacted by European Union in 1995.[4] The Directive focuses on ‘the protection of individuals with regard to the processing of personal data and on the free movement of such data.’ One of the prominent features of the Directive is prohibition of transferring personal data to the jurisdictions which have not satisfactory protection mechanisms. The Directive also aimed to constitute a single data protection regulation among the member states (Kshetri and Murugesan, 2013).
After the promulgation of the Directive of 1995, due to the significant technological developments, the mechanisms of accessing, collecting, storing, transmitting, processing, sharing, and using personal data in online transactions has transformed. In order to respond to these developments, new regulations and amendments were entered into force. In 2002, the Directive 2002/58/EC of the European Parliament and of the Council which dealt with the processing of personal data and the protection of privacy in the electronic communications sector was entered into force (EU, 2015). In 2006 and in 2009, the Directive of 2002 was
 
amended by the Directive (2006/24/EC) and the Directive (2009/136/EC) (as known as ‘cookie’ directive) respectively. The EU’s Data Protection Directives are regarded as the major legislative mechanism to protecting consumer data in online transactions (Kshetri and Murugesan, 2013).
The 2009 amendment which was put into force in all member states[5] in 2011, is so crucial, as it regulates one of the biggest challenges of confidentiality data, ‘cookies’. According to this directive, ‘explicit consent’ is required to launch cookies on the devices of Website visitors. Therefore, the personal data of visitors could not be collected unless they explicitly accept it (opt-in). Hence, the e-commerce companies based in the EU should design their data collection procedures from opt-out to opt-in according to this regulation (Smit et al., 2014). A research from ‘QuBIT’, customer data platform company, suggests that 60% of Internet users polled refuse to accept cookies if asked to opt in, but 99.9% give ‘implied consent’ if they are simply notified that a visited site uses cookies, but take no further action (Heyes, 2012, p.68). The results of this research reveal that implementing explicit consent is so crucial in order to ensure Web users’ privacy.
 
Contracting
 
E-commerce transactions are completed via contracts, just like the traditional commerce transactions. However, e-commerce needs electronic contracts as the way of agreement on the contracts have transformed due to the technological developments. In traditional commerce, the way of forming contracts vary. Contracts could be formed in written or be
 
negotiated orally. The contract law generally ignores the way of forming contracts; instead intention is regarded as the main issue of the cases. Intention is generally embodied in the offer and acceptance tools. As the e-commerce transactions are fulfilled through online network, the transforming offer and acceptance approach could be viewed as an obstacle to the sound contracts (Mik, 2013). Another controversial issue about contracting is signature. In the traditional contracting regime, signature is a mark that states the agreement to the terms of a contract. However, in online commercial transactions as there is no paper-based contract, completing transactions could not be possible with traditional signature. In order to overcome this obstacle, digital signature is started to be used in e-commerce transactions (Gu and Zhu,
 
2014).
 
Besides traditional contracting procedures, there have been also new methods. These are Shrink-wrap, Click-wrap and Browse-wrap. Shrink-wrap licence had been used especially by the software manufacturers, before widely use of the Internet. Terms and conditions are generally attached to the software package. In this type of contract, by using the software, the customers agree to be bound by the terms of the licence (Garcia, 2013). After the rise of the Internet, a new type of contract emerged called Click-wrap (or Web-wrap). In this type, the user is required to scroll through the terms and conditions of the contract and click an on­screen button such as I agree or I accept to complete transaction. More recently, a new contracting mechanism, similar to the Shrink-wrap, has arisen: Browse-wrap. In Browse-wrap type of contracts, it is not necessary to take a specific action, such as clicking or ticking, to state agreement. By merely browsing or using a Website, the user agrees to be bound by the Terms of Service located elsewhere (Palanissamy, 2013). Browse-wrap is built on the success of Click-wrap. However, the user might be bound to a EULA (End-User License Agreements) merely by browsing the Website. Hence, the concerns arose with regard to
 
enforcement of browse-wrap contracts. Browse-wraps sometimes could be subject to an appeal.[6]
 
Jurisdiction
 
Today, offer and acceptance, more specifically click-wrap and even browse-wrap[7] is regarded as essential elements of an enforceable of electronic contracts (Palanissamy, 2013). However, some issues such as choice of law and jurisdiction are still problematic. To address these issues is very complicated as the Internet has a borderless nature and it transforms the pace and the manner of business communications. In traditional commerce, geographical borders generally identify the commercial relations. Moreover, territorial borders usually overlap with the legal and cultural borders (Davidson, 2009). Today, due to the borderless nature of e­commerce, in terms of legal disputes some controversial questions have arisen: ‘Which country’s court will hear the disputes? or ‘Which country’s law will be applied to resolve disputes?
Jurisdictional issues became complex, due to the global context of the Internet. Legal theorists evaluate jurisdiction mainly in two groups (Ward and Sipior, 2010a): Personal jurisdiction and long arm statute. Personal jurisdiction refers the power of the courts over resident individuals or businesses within a country or a state. However, in some cases, the courts could have an authority over non-resident individuals and businesses which refer long arm statute. In the US, the widely use of the Internet and more specifically e-commerce transactions leads the courts to apply long arm statute on the Internet and the e-commerce disputes (Ward and Sipior, 2010b)
 
As e-businesses could easily operate beyond borders, their operations might face different or multiple jurisdictions which creates an uncertainty. Therefore, they should be aware of jurisdictional risk ad try to reduce it. To do so, legal analysis and evaluation should be done in their operations (Ward and Sipior, 2010b)
 
Conclusion
 
ICT and more specifically the Internet affected all aspects of our lives. The way of conducting businesses has also changed in the new digital era and the phenomenon of e­business emerged. Today, commercial transactions occurred through online channels and the Internet. Therefore even small sized businesses could operate beyond borders, regardless of time. In developed and developing countries the level of e-commerce adoption is very high. However rest of the world could not even meet the Internet. Also there are disparities even in developed countries in terms of the Internet and e-commerce adoption. In addition belief of the individuals to the online transactions is another prominent factor. Even in developed countries there is a lack of trust in online shopping. Politic decisions also affect e-commerce with legislations. Confidentiality of data, contracting and jurisdiction are the prominent issues that legal environment dealt with. These factors bring both advantages and disadvantages to the e-businesses. In this context, e-businesses should utilize the opportunities and try to overcome threats.
 
Reference List
 
Abu-Shamaa, R., & Abu-Shanab, E. (2015, February). Factors influencing the intention to buy from online stores: An empirical study in Jordan. In GCC Conference and Exhibition (GCCCE), 2015 IEEE 8th (pp. 1-6). IEEE.
Adelola, T., Dawson, R., & Batmaz, F. (2014, December). Privacy and data protection in E­commerce: The effectiveness of a government regulation approach in developing nations, using Nigeria as a case. In Internet Technology and Secured Transactions (ICITST), 2014 9th International Conference for (pp. 234-239). IEEE.
Aydin, E., & Savrul, B. K. (2014). The Relationship between Globalization and E-commerce: Turkish Case. Procedia-Social and Behavioral Sciences,, 150, 1267-1276.
Bahaddad, A. A., Houghton, L., & Drew, S. (2013). Attracting customer in Saudi Arabia to buy from your business online. International Journal of Business and Management, 8(7),
p65.
Boritz, J. E., & No, W. G. (2011). E-commerce and privacy: Exploring what we know and opportunities for future discovery. Journal of Information Systems,25(2), 11-45.
Chaffey, D. (2011) E-Business and E-Commerce Management: Strategy, Implementation and Practice. 5th edn. Harlow, England: Pearson/Financial Times Prentice Hall.
Council Directive (EC) 95/46/EC of 24 October 1995 on the Protection of Individuals with Regard to the Processing of Personal Data and on the Free Movement of Such Data [1995] OJ L281
Council Directive (EC) 2006/24/EC of 15 March 2006 on the retention of data generated or processed in connection with the provision of publicly available electronic communications services or of public communications networks and amending Directive 2002/58/EC [2006] OJ L105/54
Council Directive (EC) 2009/136/EC of 25 November 2009 amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services, Directive 2002/58/EC concerning the processing of personal data and the protection of privacy in the electronic communications sector and Regulation (EC) No 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws [2009] OJ L337/11
 
Davidson A. (2009). The Law Of Electronic Commerce [e-book]. Port Melbourne, Vic:
Cambridge                     University                     Press;                     Available at:
<https://books.google.co.uk/books?id=SS_Zy7f6ds8C&printsec=frontcover&dq=The+L aw+Of+Electronic+Commerce&hl=tr&sa=X&ei=Dqc-
VZ38MMbvUsaMgdAM&redir_esc=y#v=onepage&q=The%20Law%20Of%20Electron ic%20Commerce&f=false> Accessed 26/04/2015
Dutton, W. H., Blank, G.,(2013). Cultures of the internet: The internet in Britain. Oxford: Oxford Internet Institute, University of Oxford. Retrieved September 2013.
Dutton, W. H. and Blank, G. (2014). Cultures of the Internet:Five Clusters of Attitudes and Beliefs among Users in Britain. OII Working Paper, Oxford Internet Surveys (OxIS) Project, 9 February 2014
Emarketer (16 May 2013). Available at: <http://www.emarketer.com/Article/Third-Party-Data-Guides-Campaign-Targeting/1009894> Accessed:25/04/2015
 
EU                                       (2015)                                       Available at:
<http://europa.eu/legislation_summaries/information_society/legislative_framework/l241 20_en.htm> Accessed 25/04/2015
Garcia, M. (2013). Browsewrap: A Unique Solution to the Slippery Slope of the Clickwrap Conundrum. CampbellL. Rev., 36, 31-175.
Gu, J., & Zhu, X. (2014). Designing and Implementation of an Online System for Electronic Contract Negotiation Based on Electronic Signature. Journal of Software, 9(12), 3020­3027.
 
Hariharaputhiran, S. (2012). Challenges and Opportunities of E-Commerce.International
Journal of Marketing, Financial, Services & Management Research, 1(3), 98-108
 
Hayes, J. (2012). ‘Cookie law’: a hostage to fortune?. Engineering & Technology, 7(8), 66-69.
IWS (2015), Available at:<http://www.internetworldstats.com/stats1.htm> Accessed:24/04/2015
Jaafor, O., Birregah, B., Perez, C., & Lemercier, M. (2014, November). Privacy Threats from Social Networking Service Aggregators. In Cybercrime and Trustworthy Computing Conference (CTC), 2014 Fifth (pp. 30-37). IEEE.
 
Karimov, F. P. (2011). Factors Influencing E-Commerce Growth: A Comparative Study of Central Asian Transition Economies. International Journal of E-Adoption (IJEA), 3(4), 29-43.
Krizanovic, V., Zagar, D., & Grgic, K. (2013, June). Econometric analysis of demographic and socio-economic factors influencing broadband adoption in Croatian rural counties. In Telecommunications (ConTEL), 2013 12th International Conference on (pp. 283-288).
IEEE.
Kshetri, N., & Murugesan, S. (2013). Cloud Computing and EU Data Privacy Regulations. Computer, 46(3), 86-89.
Lee, J. W. (2010). The roles of demographics on the perceptions of electronic commerce adoption. Academy of Marketing Studies Journal, 14(1), 71-89.
Luzak, J. A. (2014). Privacy Notice for Dummies? Towards European Guidelines on How to Give “Clear and Comprehensive Information” on the Cookies’ Use in Order to Protect the Internet Users’ Right to Online Privacy. Journal of Consumer Policy, 37(4), 547-559.
Maekawa, T., Yamashita, N., & Sakurai, Y. (2014). How Well Can a User’s Location Privacy Preferences be Determined Without Using GPS Location Data? Transactions on Emerging Topics in Computing DOI 10.1109/TETC.2014.2335537, IEEE Available at: http://0-ieeexplore.ieee.org.serlib0.essex.ac.uk/stamp/stamp.jsp?tp=&arnumber=6850005 Accessed:26/04/2015
Mik, E. K. (2013). Certainty at Last? A’New’Framework for Electronic Contracting in Singapore. Journal of International Commercial Law and Technology, 8(3). 160-178
Oni, O., & Papazafeiropoulou, A. (2014). Diverse views on IT innovation diffusion among SMEs: Influencing factors of broadband adoption. Information Systems Frontiers, 16(4),
729-747.
Palanissamy, Ayyappan. (2013) Legal Issues in e-Commerce and e-Contracting-An Overview of Initiatives in Malaysia. International Journal of e-Education, e-Business, e-Management and e-Learning, 3 (2), 173-177.IEEE
Pattarawadee Permwanichagun, Sumeth Kaenmanee and Aree Naipinit, (2015). The External Environments Factors Affecting Success for Implementation: In Context of Sole Proprietorship   E-Commerce   Entrepreneurs   in   Thailand.   International Business
Management, 9(1) 122-127.
 
Polykalas, S. E. (2014, November). Assessing the evolution of the Digital Divide across European Union. In Web and Open Access to Learning (ICWOAL), 2014 International Conference on (pp. 1-6). IEEE.
Sahin, S. (2013) On Current Trends in Security and Privacy of Cloud Computing. In Application of Information and Communication Technologies (AICT 2013), 7th International Conference, 23-25 Oct. 2013 pp. 1- 5. IEEE
Savrul, M., Incekara, A., & Sener, S. (2014). The Potential of E-commerce for SMEs in a Globalizing Business Environment. Procedia-Social and Behavioral Sciences, 150, 35­45.
Smit, E. G., Van Noort, G., & Voorveld, H. A. (2014). Understanding online behavioural advertising: User knowledge, privacy concerns and online coping behaviour in Europe. Computers in Human Behavior, 32, 15-22.
Totonchi, J., & Kakamanshadi, G. (2011). Globalization and e-commerce. IPCSIT: 2nd International Conference on Networking and Information Technology. IPCSIT: IACSIT Press. Available at: http://www.ipcsit.com/vol17/39-ICNIT%202011-T889.pdf Accessed: 25/04/2014
Ward, B. T., & Sipior, J. C. (2010a). Where in the World is Internet Jurisdiction: A US Perspective. International Journal of Value Chain Management: ICT adoption and Social-Technical Aspects of ICT, 4 (1/2), 5-17.
Ward, BT, Sipior, JC (2010b) The Internet jurisdiction risk of cloud computing. Information Systems Management 27(4) pp. 334-339.
 
Wunnava, P. V., & Leiter, D. B. (2009). Determinants of intercountry Internet diffusion rates.
American Journal of Economics and Sociology, 68(2), 413-426.
Zhu, D. S., Lee, Z. C. R., & O’Neal, G. S. (2011). Mr. Risk! Please Trust Me: Trust
Antecedents that Increase Online Consumer Purchase Intention. Journal of Internet
Banking                 &                Commerce,                 16(3).                Available at:
http://www.arraydev.com/Commerce/Jibc/2011-12/Zhu_acceptedv02.pdf Accessed:25/04/2015
[1] E-commerce is also a crucial issue for small sized firms, especially SMEs, to operate in a competitive environment. Although e-commerce presents valuable opportunities to SMEs, there are several limitations which affect successful adoption and implementation of online trading. Primarily, as their products and the services are not generally suitable for online trading, SMEs could not adopt e-commerce easily. Secondly,
SMEs have problems in terms of logistics and payments. Lastly, security issues and the legal framework affect adoption of e-commerce. Some of these problems could be solved by adapting new strategies to the small sized businesses. However, the structural obstacles, such as legal framework, poor technological infrastructure could only be eliminated by the efforts of the governments (Savrul et al., 2014).
[2] Oxford Internet Surveys, Oxford Internet Institute of University of Oxford
[3] ‘Broadband can be defined as anything with a bandwidth larger than 4 Hz (…) Broadband technology is an umbrella term which covers varying high-speed access technologies including ADSL, cable modems, satellite and Wi-Fi’ (Oni and Papazafeiropoulou, 2014: 729)
[4] After this regulation, there were several attempts to improve data protection procedures in line with the new technological developments were made by the EU. For example, in 2012, the Commission proposed a major reform of the EU legal framework on the protection of personal data. The new proposals will strengthen individual rights and tackle the challenges of globalisation and new technologies. (see, Available at: <http://ec.europa.eu/justice/newsroom/data-protection/news/120125 en.htm> Accessed:26/04/2015). Another significant development is a landmark ruling of 2014 which dealt with the ‘right to be forgotten’, in relation to online search engines. (see, Available at: <http ://ec.europa. eu/justice/data-protection/files/factsheets/factsheet data protection en.pdf> Accessed:26/04/2015)
[5] As other member countries, in the UK, e-privacy legislation developed in line with the EU norms. In order to align with the EU Directive of 1995, the United Kingdom put into force Data Protection Act of 1998. Although in the Act, the concept of ‘privacy’ is not mentioned, as a fundamental right, processing of citizens’ personal data is regulated. In practice the Act provides opportunity to the citizens to control their personal data processing. In the UK, the privacy law is enforced by the Information Commissioner’s Office (ICO), a governmental institution. If a Website based in the UK collects personal data, it should inform ICO in line with the principles of the Act which regulates the procedures of collecting and using personal information and privacy policies which inform online visitors how the personal information will be processed and removed (Adelola et al., 2014).
[6] For example, the court in Ticketmaster Corp. v. Tickets.com, Inc. stated ‘[i]t cannot be said that merely putting the terms and conditions in this fashion [listed on the website] necessarily creates a contract with anyone using the web site’ (see. Ticketmaster Corp. v. Tickets.com, Inc. (Ticketmaster I), No. CV99-7654 HLH, 2000 U.S. Dist. LEXIS 4553, at *8 (C.D. Cal. Mar. 27, 2000))
[7] As Garcia (2013, p.31) indicates; ‘ Browsewrap now stands poised to build upon the legal success of online licensing and become as accepted as Clickwrap in American courts.’

 
"Looking for a Similar Assignment? Order now and Get 10% Discount! Use Code "Newclient"

BE161-7-AU: CORPORATE REPORTING AND ANALYSIS

/in /by

 
 
 
 
 
 
 
       BE161-7-AU: CORPORATE REPORTING AND ANALYSIS
COURSEWORK
 
Financial Comparison and Analysis:
AstraZeneca PLC and GlaxoSmithKline PLC
 
 
 
 
Umit KURNAZ
Registration No: 1405507
 
 
 
Colchester, 2015
Word Count: 3953

1.                  Introduction

This report will analyse and compare the two pharmaceutical companies GlaxoSmithKline PLC (GSK) and AstraZeneca in terms of their financial performance. These companies will be evaluated with regard to their financial ratios. Financial ratios give a clear picture of the financial health of a business and are very useful for comparing different companies.

1.1.            Pharmaceutical industry

A single company does not operate apart from its environment. Economic structure and the actions of other competitors affect any company’s success. Therefore in order to analyse and compare companies in terms of financial performance, the industry in which they conduct business should be evaluated. Pharmaceutical industry can be defined as an industry which develops, produces, and markets licensed drugs or biologicals for human and veterinary use. The pharmaceutical industry has doubled in value since 2000. According to IMS Health (2014) world pharmaceutical market sales reached US$874 billion in 2013.  The 10 largest drugs companies control over one-third of this market, several with sales of more than US$10 billion a year and profit margins of about 30% (WHO, 2014). The industry has a very competitive structure. While large-scale and research based companies develop medicines and vaccines, smaller companies produce generic medicines. As world population is rising and diseases which require long term management is increasing the pharmaceutical industry is going to grow. Spending on medicines globally is expected exceed US$1.17Tn by 2017(IMS Health, 2014a) On the other hand, there are some challenges, such as maintaining R&D productivity, pricing pressure, patent expiries  have impact on pharmaceutical sector as well.

1.2.            AstraZeneca PLC

AstraZeneca was established in 1999 through the merger of Astra AB of Sweden and Zeneca Group PLC of the UK. AstraZeneca specialized in the discovery, development, manufacturing and marketing of prescription medicines. Its product pipeline is focused on six important areas of healthcare: cancer, cardiovascular, gastrointestinal, infection, neuroscience, and respiratory and inflammation. Currently employing around 50,000 people worldwide AstraZeneca is among the top ten healthcare companies in the world (IMS Health, 2014b). Geographically, U.S. is the largest market of AstraZeneca during 2013, accounting for 38%. On the other hand, Europe and emerging markets were responsible for 26% and 21% of sales, respectively (AstraZeneca, 2013).

1.3.            GlaxoSmithKline PLC (GSK)

GSK was established in 2000 by the merger of Glaxo Wellcome PLC and SmithKline Beecham PLC. It is currently world fifth largest pharmaceutical company and the largest healthcare company in the U.K. (IMS Health, 2014b) employing around 100,000 people worldwide. The company has three primary business areas: Pharmaceuticals, Vaccines, and Consumer Healthcare. Geographically, GSK’s revenues outside the U.S. and Europe account for about 40% of its total sales during 2013, being therefore very well exposed to developing markets (GSK, 2013), contrary to AstraZeneca.

1.4.            Overview of report

This report evaluates and compares the two UK-based pharmaceutical companies in terms of their financial performance by analysing their financial ratios during the period of 2009-2013. Financial ratios will be analysed with regard to following categories: Profitability, liquidity, efficiency, gearing and investment. All financial ratios are calculated by using Financial Statements of both companies and exist in the Appendix. In the end, by evaluating all outcomes of financial statements and ratios, the question of ‘which company is a good option to invest?’ will be answered for potential investors.
 
 
 
 
 
 
 

2.                  Ratio Analysis

2.1.            Profitability Ratios

2.1.1.      Return on Capital Employed (ROCE)

 
First of all, profitability of the two companies will be compared through the key profitability ratios. To begin with ROCE of two companies, we can see from the Figure 1, ROCE in GSK and AstraZeneca fluctuated from 2009 until 2011. After the year 2011, AZ saw a sharp decline in ROCE while GSK’s ratio decreased slightly.
Looking at AstraZeneca’s figures, obviously, main reason behind decline in ROCE is deterioration of operating profit. As it is stated in the Annual Report, the sharp decrease in ROCE in 2012 and 2013 is stemmed from the reported operating profit which was down 24% and 51% respectively. In order to analyse this downward pattern, structure of operating profit for the final three year should be evaluated in more detail from the Table 1.
 
 
 
 
 
 

Table 1. Horizontal Analysis of some figures from AstraZeneca’s Income Statements
2011 2012 2013
Actual figures Base figure Actual figures Comparison with 2011 (%) Actual figures Comparison with 2012 (%)
Revenue 33,591 100 27,973 83 25,711 92
Cost of sales -6,026 100 -5,393 89 -5,261 98
Gross profit 27,565 100 22,580 82 20,450 91
Administrative expenses -17,030 100 -15,402 90 -17,333 113
Profit on disposal of subsidiary 1,483 100 — —
Other operating income & expense 777 100 970 125 595 61
Operating profit 12,795 100 8,148 66 3,712 49

 
Chairman of AstraZeneca defined 2012 financial performance as a ‘significant revenue decline associated with the loss of exclusivity for several products.’ Looking at the revenue figure of AstraZeneca of 2012, it was down 17% to $27,973 million compared with 2011. According to Annual Report of 2012 loss of exclusivity on several brands, most notably Seroquel IR, and the disposals of Astra Tech and Aptium were the key drivers of the revenue decline. Furthermore, decline in operating profit was much more significant than revenue. In 2012, operating profit was down 34% (almost twice as the decline in revenue) compared with the 2011. In 2013 loss of exclusivity continued to have negative effect on AstraZeneca. According to Annual Report of 2013, loss of exclusivity on brands accounted for a revenue decline of some $2.2 billion. In 2013, operating profit was down 51% compared with the 2012. Over the coming years, it is forecasted that this trend will continue as some medicines continue to lose exclusivity in US and Europe markets. Another significant development which had impact on operating profit in 2013 is $1,758 million impairment due to disappointing sales of diabetes drug Bydureon, according to WSJ (6 February 2014).
All in all, it can be claimed that GlaxoSmithKline has been more profitable company in terms of return on capital employed than AstraZeneca after 2011.

2.1.2.      Return on Total Assets (ROTA)

As it can be seen from the Figure 2 AstraZeneca’s ROTA figures prevailed over the GSK’s figures between 2009 and 2011. However, AstraZeneca had a sharp decline in ROTA in 2012 and 2013 due to above-mentioned decrease in operating profit meanwhile GSK saw a slightly decrease.
Table 2 shows the components of ROTA for both companies during 2009-2013. It is obvious from the table; the deterioration of ROTA is stemmed not only from decrease in operating profit but also increase in total assets for both companies. The decline in operating profit for AstraZeneca was much more significant than GSK after 2011. The main reason behind the decrease in operating profit for AstraZeneca is decline in revenue due to loss of exclusivity for several products which was mentioned in Section 2.1.1.

Table 2. Return on Total Assets (ROTA) of AstraZeneca and GlaxoSmithKline (2009-2013)
AZ GSK
YEAR OPERATING PROFIT TOTAL ASSETS OPERATING PROFIT TOTAL ASSETS
2009 11,543 54,920 8,425 42,862
2010 11,494 56,127 3,783 42,230
2011 12,795 52,830 7,807 41,080
2012 8,148 53,534 7,392 41,475
2013 3,712 55,899 7,028 42,086

 

2.1.3.      Return on Equity (ROE)

Return on equity (ROE) is another important profitability ratio. This ratio measures the profitability of a company with regard to the capital provided by the ordinary shareholders. Figure 3 demonstrates that the ROE trends of both companies during the period. As can be seen from the graph, after having seen a sharp decline in 2010 GSK’s ratio increased year by year. On the other hand, AstraZeneca’s figure grew erratically between 2009 and 2011, and decreased dramatically for the last two years. In order to understand these patterns, the components of the ratio should be evaluated also.
Looking at GSK, main reason behind the decline in annual profit of 2010 is the expansion of the Operational Excellence programme which was announced in February 2009, according to Financial Review of 2010. With an estimated total cost of approximately £4.5 billion, 75% of the costs of this programme were incurred by the end of 2010. One of the outstanding restructuring costs which were incurred in 2010 is acquisition of Stiefel Laboratories Inc., which was about a $2.9 billion deal, according to WSJ (20 April 2009).
 

2.1.4.      Operating Profit Margin

Another important ratio for analysing both of the company is operating profit margin which measures the two companies’ operating performance. Operating profit margin for GSK was almost constant at about 30% during the period except the year 2010. As it is stated in the Annual Report of 2010, due to restructuring costs related to the Operational Excellence programme and the acquisitions of Reliant and Stiefel, there was a decrease of 59% in operational profit which is about £2,438, compared with the 2009. On the other hand, after reaching its peak at 38.09% in 2012, AstraZeneca saw a sharp decline in operating profit margin for the last two years. Figure 4 shows that there is something wrong for AstraZeneca in 2012 and 2013 with regard to operating profit margin ratio.
 
In order to understand sharp decline in operating profit margin, we need to analyse the components of the ratio in more detail. Figure 5 demonstrates structure of operating profit margin for AstraZeneca for the period of analysis. Although revenue, denominator of the ratio, was decreasing year by year after 2011, downward trend in operating profit was much more significant. As it is stated in the Annual Report of 2013, the decline in operating profit was greater than the decline in revenue primarily due to expenditure associated with the AstraZeneca’s key growth platforms and strengthened pipeline. On the other hand, Chairman stated that the decline in revenue was, in part, offset by the key growth platforms: Brilinta, diabetes franchise, respiratory, Emerging Markets and Japan, which delivered an incremental $1.2 billion of revenue in 2013.
 

2.2.            Liquidity Ratios

2.2.1.      Quick Ratio

In order to compare the ability of covering short term obligations, Figure 6 demonstrates quick ratios for GSK and AstraZeneca for the period of 2009-2013. While AstraZeneca’s quick ratios were above 1 for the period, GSK’s quick ratios were under 1, meaning current assets (except inventory) are not big enough to cover current liabilities. Though AstraZeneca’s ratios are better with regard to liquidity than GSK’s ratios, it is useful to analyse the companies’ profitability ratios also. As analysed earlier, profitability figures for GSK were better than AstraZeneca. Therefore, despite the fact that GSK’s quick ratios are below 1, ‘pharmaceutical giant’ is not in trouble with regard to liquidity because of good profitability performance.
 

2.3.            Efficiency Ratios

2.3.1.      Day sales of inventory

‘Day sales of inventory’ ratio measures a company’s performance that how long it takes a company to turn its inventory into sales. Averaged inventory turnover for AstraZeneca is 118 days while for GSK is 185 days during the five-year period. Figure 7 compares how fast AstraZeneca and GSK turn over their inventory within a year. While GSK’s stock of inventory lasted in 166-201 days, it took 96-139 days for AstraZeneca to sell its entire inventory in the recent years. In this view, AstraZeneca has been more efficient company than its competitor as shorter day sales of inventory means the inventory can be converted into cash sooner.
 

2.3.2.      Asset turnover

Figure 8 shows asset turnover ratio of two pharmaceutical giants between 2009 and 2013. It is obvious that GlaxoSmithKline’s asset turnover figures prevailed over AstraZeneca’s figures during the period. As can be seen from Table 3, although AstraZeneca’s assets are more than GSK during five-year period, the latter had better asset turnover performance over the period. This means, GSK has used its assets more efficiently to generate revenue than AstraZeneca between 2009 and 2013.
 
 
 
 
 
 
 
 

Table 3. Asset Turnover of AstraZeneca and GlaxoSmithKline 
(2009-2013)
  2009 2010 2011 2012 2013
AstraZeneca Sales 32,804 33,269 33,591 27,973 25,711
Net assets 20,660 23,213 23,246 23,737 23,224
Asset Turnover (times) 1.6 1.4 1.4 1.2 1.1
GSK Sales 28,368 28,392 27,387 26,431 26,505
Net assets 10,742   9,745   8,827   6,747   6,737
Asset Turnover (times) 2.6 2.9 3.1 3.9 3.9

 
AstraZeneca’s asset turnover ratio decreased during 2012 and 2013. In order to understand this downward trend, the components of the asset turnover ratio should be evaluated. As it can be understood from the Figure 9, asset turnover of AstraZeneca decreased in 2012 and 2013 due to significant deterioration of sales revenue. AstraZeneca’s sales in 2012 were down 15% to $27,973 million and in 2013 were down 6% to $25,711 million. According to Chairman, most of the revenue decline was related to loss of exclusivity on several
brands, such as Arimidex, Atacand, Crestor, Nexium and Seroquel IR, in the portfolio. Although the decline in revenue was, in part, offset by key growth platforms in 2013, over the coming years, it is forecasted that this trend will continue as medicines such as Crestor, Nexium and Seroquel XR continue to lose exclusivity in some markets. Therefore this trend is likely affect sales revenue negatively over the coming years.
 

2.3.3.      Sales Revenue to Capital Employed

Figure 10 shows that sales revenue to capital employed figure for GSK and AstraZeneca between 2009 and 2013. The sales revenue to capital employed for AstraZeneca averaged 0.8 times while GlaxoSmithKline averaged 0.96 times during the period.  As can be seen from the Figure 10, while GSK’s ratios are almost constant and prevailed over its competitor’s figures, AstraZeneca saw a decline trend after 2011. AstraZeneca’s figure stood at 0.91 times in 2011 and slightly decreased year by year reaching 0.65 times in 2013.
 
 
In order to understand the downward trend of AstraZeneca in terms of sales revenue to capital employed, the components of the ratio should be evaluated during the period. Figure 11 demonstrates the structure of sales revenue to capital employed figure between 2009 and 2013.
As can be seen from the Figure 11, deterioration of sales revenue to capital employed ratio was caused from the above-mentioned decrease of sales revenue in 2012 and 2013. Although capital employed has an upward trend, extra capital employed was not properly reflected in revenue.

2.4.            Gearing Ratios

2.4.1.      Gearing (Debt to Equity) Ratio

Figure 12 shows that gearing (debt to equity) figure for GSK and AstraZeneca between 2009 and 2013. The debt to equity ratio for AstraZeneca averaged 27.64% while GSK averaged 64.58% during the period. AstraZeneca’s figures have been below 50% during five years meaning AstraZeneca has been mostly funded by shareholders’ capital rather than borrowing. On the other hand, as GSK’s figures fluctuated between approximately 60% and 71% during the five year period, it is in a risky situation. A high debt to equity ratio generally means that a company has an aggressive strategy in financing its operations with debt. This situation may affect a company negatively due to additional interest expense.
According to Annual Report of 2013, GSK’s policy is described as “to borrow centrally in order to meet anticipated funding requirements.” Moreover it is stated that company’s long-term credit ratings have remained unchanged since February 2008 and current ratings are A+ (stable outlook) by Standard and Poor’s and A1 (negative outlook) by Moody’s. However, in August 2014, Moody’s (2014) downgraded GSK’s credit rating to A2 from A1(Telegraph, 5 August 2014).
 
 
While GlaxoSmithKline’s debt to equity ratio currently stands at an extremely high level of 220%, meaning that for every £1 of equity, GlaxoSmithKline currently has £2.20 of debt, the company’s relatively high level of profitability means that debt levels are seems to be well-serviced. However, in order to have a judgement, GSK’s interest coverage ratio should be analysed as well.
 

2.4.2.      Interest Coverage Ratio

Figure 13 shows that interest cover ratio for GSK and AstraZeneca between 2009 and 2013. The interest cover ratio for AstraZeneca averaged almost 11 while GSK averaged 9 during the period. This means AstraZeneca and GSK have ability to pay their interest payments on debt 11 times and 9 times respectively, by their operating profit. Although GSK has a high level of debt to equity ratio, mentioned in section 2.4.1, it is likely to have opportunity to make its interest payments on debt.
 
 
Looking at AstraZeneca’s interest coverage trend from Figure 13, it climbed rapidly from 2009, stood at its peak of 14.9 by 2012 and was down 50% in 2013. Therefore there is something wrong for AstraZeneca in 2013 in terms of interest coverage. In order to understand sharp decline, the components of interest coverage ratio should be evaluated. Figure 14 shows the components of interest coverage ratio for AstraZeneca. Although interest payable, denominator of the ratio, decreased in 2013, above-mentioned downward trend in operating profit was much more significant. All in all, it can be said that both GSK and AstraZeneca is safe with regard to interest cover.
 
 

2.5.            Investment Ratios

2.5.1.      Earnings per share (EPS)

EPS, as a measurement of a company’s profitability per unit of shareholder ownership, is one of the most important ratios for an investor. Table 4 demonstrates EPS figures for both companies. EPS of AstraZeneca experienced an upward trend from 2009 and reached a peak of 464 p in 2011 and saw a sharp decline by 2013. In 2012 reported EPS was down 29% which was lower than the decline in core operating profit. According to Annual Report of 2012 this was the result of the benefits from net share repurchases and a lower tax rate. Furthermore reported EPS for the year 2013 was down 55% to 124.4 p. Annual Report of 2013 reveals that one of the most significant reasons for this decline is the impairment of Bydureon in the fourth quarter of 2013 which reduced reported EPS by $1.10
On the other hand, GSK’s EPS, beginning from 109 p in 2009, demonstrated a sharp decline by 2010 and increased and reached its peak of 110.5 p in 2013. According to Annual Report of 2010 the reason of this decline was impact of legal cost of £4,001 million.  Both companies’ EPS trends are broadly in line with their profit after interest and tax figures.
 
 
 
 
 
 

Table 4. Diluted EPS for AstraZeneca and GlaxoSmithKline  (2009-2013)
AstraZeneca GSK
Years  Diluted EPS (p) Issued shares (m) Diluted EPS (p) Issued shares (m)
2009 321.8 1,448 108.2 5,069
2010 362.1 1,438   31.9 5,085
2011 464.0 1,361 102.1 5,028
2012 306.3 1,261   90.2 4,912
2013 124.4 1,252 110.5 4,831

Figure 15 shows profit after tax interest and tax figures for each company during five-year period. As can be seen from the Figure 15, beginning from the year 2009, AstraZeneca demonstrated an upward trend and reached its top in 2011 and decreased dramatically over the final two years. In 2012 reported profit after interest and tax was down 37% to $6,297 million compared with the 2011. This decline was mostly related to loss of exclusivity on several brands in the portfolio, combined with the higher Core R&D and SG&A expenses, according to Press Release dated 31 January 2013 (AstraZeneca, 2013). Bloomberg (4 February 2013) wrote that AstraZeneca faced increasing competition from lower-priced generic medicines which decreased its profit. In 2013 reported profit after interest and tax was down 60% to $2,556 million compared with the 2012 figures. According to Telegraph (6 February 2014) AstraZeneca was under increasing pressure as cheaper competitors to its best-sellers come onto the market which affected its sales. Moreover it was forecasted that new generic competitors would erode its sales further.
 

2.5.2.      Price Earnings Ratio (P/E)

PE is an important ratio which shows a company’s current share price compared to its per-share earnings. This ratio is closely followed by investors as it is likely to affect investment decisions directly. Table 5 demonstrates PE ratio for both companies. As can be seen from the table, GSK’s ratio was higher than AstraZeneca’s in 2011 and 2012. However in 2013 AstraZeneca’s P/E ratio increased significantly and was almost twice as GSK’s. It’s obvious that sharp increase in P/E ratio stemmed from decrease in EPS accompanied with increase in market prices. 2013. Nevertheless, comparing with the GSK, high P/E ratio of AstraZeneca means investors are expecting higher earnings growth in the future. With regard to GSK, its EPS and market share price are relatively stable during the period.
 

Table 5. P/E ratio for AstraZeneca and GSK (2011-2013)
  AZ GSK
Years PE ratio Market price share EPS PE ratio Market price share EPS
2011 6.4 2,975.0 464.0 12.6 1289 102.1
2012 9.5 2,909.5 306.3 15.8 1422   90.2
2013 28.7 3,574.5 124.4 14.6 1618 110.5

 

2.5.3.      Dividend cover

Figure 16 shows that dividend cover figure for GSK and AstraZeneca between 2009 and 2013. The dividend cover ratio for AstraZeneca averaged 2.01% while GSK averaged 1.31% during the period. Normally a dividend cover ratio below 1.5 is regarded as risky and a ratio below 1 indicates a company is paying the current year’s dividend with retained earnings from a previous year. As can be seen from the Figure 16, dividend cover ratio for GSK in 2010 and AstraZeneca in 2013 were below 1. GSK’s low dividend cover trend was not stable as it increased in 2011. However, with regard to AstraZeneca, as its dividend cover ratio is 0.74 in 2013, the company needs something more than earnings to pay its dividend. AstraZeneca could borrow from their reserves of retained earnings from the year 2012 to pay a dividend. Only for one year this is fine but if this situation acquires continuity it will not sustainable in the long term and generally regarded as a warning sign for a company.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

3.      Conclusion and recommendations

All in all, ratio analysis of the two pharmaceutical companies shows that GSK’s financial performance over the past five years has been relatively stable. This is good for investors which presents a high level of predictability in terms of GSK’s future performance. Moreover, GSK has been absolutely more profitable company than AstraZeneca. Despite the fact that it has lower ability to cover its short-term obligations than its competitor, its high level of profitability is likely to compensate this deficit.
On the other hand, as GSK has higher gearing ratio compared with its competitor. GSK followed an aggressive strategy to finance its operations with borrowing. This situation may affect a company negatively due to additional interest expense. Looking at its interest coverage, GSK have ability to pay their interest payments on debt 9 times by its operating profit in 2013.
In 2014, GSK has been found guilty of bribery by a Chinese court and has agreed to pay a fine of £297m to the government (Guardian, 19 September 2014). Contrary to expectations, this problem did not affect its share price negatively.
With regard to AstraZeneca, it’s obvious that patent expiries had a significant negative impact on its financial performance. In 2013, AstraZeneca’s sales and operating profit were down %8 and 51% respectively. Furthermore it’s expected that new generic competitors will erode its sales further and 2017 revenues will be broadly in line with those of 2013. Therefore the patent cliff seems to affect the company’s financial structure negatively over the next few years.
On the other hand, AstraZeneca had better price earnings ratio, compared to GSK in 2013.This means investors are expecting higher earnings growth in the future. US giant Pfizer attempted to takeover AstraZeneca 70 billion pounds ($118 billion) but the offer was rejected in May 2014 (Reuters, 26 May 2014). In November 2014 Astra Zeneca said that another takeover approach from Pfizer has become less likely after a US clampdown on tax inversions, as the AstraZeneca  increased its  sales and profit forecasts for the second time in 2014 (Guardian, 6 November 2014).
In conclusion, as it has growth expectations, AstraZeneca could be a better opportunity to invest. On the other hand, as its financial performance relatively stable over the past few years, GSK could be a better investment opportunity for investors who seeks predictability.
 
 
 

References:

Annual Reports
AstraZeneca, 2009, Annual Report
AstraZeneca, 2010, Annual Report
AstraZeneca, 2011, Annual Report
AstraZeneca, 2012, Annual Report
AstraZeneca, 2013, Annual Report
GlaxoSmithKline, 2009, Annual Report
GlaxoSmithKline, 2010, Annual Report
GlaxoSmithKline, 2011, Annual Report
GlaxoSmithKline, 2012, Annual Report
GlaxoSmithKline, 2013, Annual Report
 
Websites and Newspapers
 
AstraZeneca (31 January 2013), Available at:<  http://www.astrazeneca.com/Media/Press-releases/Article/20130131–astrazeneca-2012-fourth-quarter-and-full-year-results > (Accessed 29 December 2014)
 
Bloomberg (4 February 2013),  Available at: < http://www.bloomberg.com/news/2013-01-31/astrazeneca-fourth-quarter-profit-falls-on-generic-competition.html > (Accessed 28 December 2014)
 
Guardian (19 September 2014), Available at: <http://www.theguardian.com/business/2014/ sep/19/glaxosmithkline-pays-297m-fine-china-bribery > (Accessed 30 December 2014)
 
Guardian (6 November 2014), Available at:< http://www.theguardian.com/business/2014
/nov/06/pfizer-unlikely-astrazeneca-takeover-tax-inversion-clampdown> (Accessed 30 December 2014)
 
IMS Health, 2014a, Available at< http://www.imshealth.com/portal/site/imshealth/ menuitem. 762a961826aad98f53c753c71ad8c22a/?vgnextoid=9f819e464e832410VgnVCM10000076192ca2RCRD&vgnextchannel=a64de5fda6370410VgnVCM10000076192ca2RCRD&vgnextfmt=default> (Accessed 24 December 2014)
 
IMS Health, 2014b, Available at <http://www.imshealth.com/deployedfiles/imshealth/Global /Content/Corporate/Press%20Room/ Global_2013/ Top_20_Global_Corporations_2013.pdf > (Accessed 24 December 2014).
 
 
Moody’s, 1 August 2014, Available at: < https://www.moodys.com/research/Moodys-downgrades-GlaxoSmithKline-to-A2-outlook-stable–PR_305316 > (Accessed 26 December 2014)
 
Reuters (26 May 2014), Available at:< http://www.reuters.com/article/2014/05/26/us-astrazeneca-pfizer-idUSBREA3R0H520140526 >(Accessed 30 December 2014)
 
The Telegraph (6 February 2014), Available at:< http://telegraph.co.uk/finance/newsbysector /pharmaceuticalsandchemicals/10620977/AstraZeneca-profits-slump-57pc- as-it-battles
-patent-cliff.html, >  (Accessed 28 December 2014)
 
The Telegraph (5 August 2014), Available at:<  http://www.telegraph.co.uk/finance/newsby
sector/Pharmaceuticalsandchemicals/11013056/Neil-Woodford-GlaxoSmithKlines-troubles-
are-only-temporary.html > (Accessed 27 December 2014)
 
World Health Organization, 2014, Available at: <http://www.who.int/trade/glossary /story073/en/> (Accessed 24 December 2014)
 
WSJ (6 February 2014), Available at: <http://www.wsj.com/articles/SB100014240527023
04680904579366053554393432> (Accessed 25 December 2014)
WSJ (20 April 2009), Available at: <http://www.wsj.com/articles/SB124017856765232773 > (Accessed 25 December 2014)
 
 
 
 
 
 
 
 
 

Appendix

  1. Profitability Ratios
    • Return on Capital Employed (ROCE)

ROCE=((Profit Before Interest and Tax) / (Capital Employed)) X 100
Profit Before Interest and Tax :Operating Profit
Capital Employed:Total Equity-Non-controlling interests+Noncurrent liabilities

  • Return on Total Assets (ROTA)

ROCE=((Profit Before Interest and Tax) / (Total Assets)) X 100
Profit Before Interest and Tax = Operating Profit

  • Operating Profit Margin

Operating Profit Margin=(Operating Profit/Revenues) X 100

  1. Liquidity Ratios
    • Quick Ratio

Quick Ratio=(Current Assets-Inventory)/Current Liabilities

  1. Efficiency Ratios
    • Day Sales of Inventory

Day Sales of Inventory=(Inventory/Cost of Goods Sold) X 365

  • Asset Turnover

Asset Turnover=Sales Revenue/Net Assets
Net Assets:Total Equity-Non-controlling interests

  • Sales Revenue to Capital Employed

Sales Revenue to Capital Employed=Sales Revenue/Capital Employed
Capital Employed:Total Equity-Non-controlling interests+Noncurrent liabilities

  1. Gearing Ratios
    • Gearing (Debt to Equity) Ratio

Debt to equity=((Long Term Barrowings/(Long Term Barrowings+Equity))X100
Equity:Total Equity- Non-controlling interests

  • Interest Coverage Ratio

Interest Coverage Ratio=Operating Profit/Interest Payable

  1. Invesment Ratios
    • Earnings per share (EPS)

Exist in Annual Reports.
AstraZeneca’s EPS figures were converted to pound with the exchange rate at end of December each year which are 0.61, 0.62, 0.64, 0.65, and 0.62 in 2009, 2010, 2011, 2012, and 2013 respectively. Rates were available at:
http://www.xe.com/currencycharts/?from=GBP&to=USD&view=1Y(Accessed 1 January 2015)
 

  • Price Earnings Ratio (P/E)

Price Earnings Ratio=Market price share/EPS
Market price shares exist in Annual Reports.

  • Dividend Cover Ratio

Dividend Cover Ratio=Profit After Interest and Tax/Ordinary Dividends
Profit After Interest and Tax:Profit attrituble to shareholders
Dividends paid figures were found from Cash Flow Statements.
 
 

 
"Looking for a Similar Assignment? Order now and Get 10% Discount! Use Code "Newclient"

Business of the Creative Industries Environment

/in /by

You are asked to examine and critique different types of changing environments that pertain to creative practice.

 

Assessment  is intended to support individual idea development and the building of students’ own line of arguments. It is intended to be more of a think piece about what the student thinks about broad conceptual and policy issues. The format of the piece is less formal; a short report, which engages with key reading and ideas (no table of contents required). It is a short piece and students should not attempt to do too much – make just 1 or 2 arguments and make the arguments convincingly.

Through assignment 2, students will:

  1. The role of digital platforms as cultural intermediaries
  2. Barriers to entry to the creative industries
  3. Exploiting micro dynamics of innovation in co-working spaces

 

Complete a 1,000 word report. This is worth 10% of the module mark.

Complete a 1,000 word report on one of the following topics discussed in class:

Assessment 2 is intended to support individual idea development and the building of students’ own line of arguments. It is intended to be more of a think piece about what the student thinks about broad conceptual and policy issues. The format of the piece is less formal; a short report, which engages with key reading and ideas (no table of contents required). It is a short piece and students should not attempt to do too much – make just 1 or 2 arguments and make the arguments convincingly.

Through assignment 2, students will:

  1. The role of digital platforms as cultural intermediaries
  2. Barriers to entry to the creative industries
  3. Exploiting micro dynamics of innovation in co-working spaces
  4. The role of creative commons licences in the creative industries

-12-

LCBS5048 Business of the Creative Industries Environment

  1. Demonstrateacomprehensiveunderstandingofthecreativeindustriesandtheirroleinthecreative economy (25%).
  2. Applyknowledgebyanalysingconceptualideasandcreatingnewconceptsandsolutionsforareallife scenario (50%).
  3. Communicateresearchfindingsandconclusionseffectivelytosupportcogencyofargumentandto demonstrate academic engagement (25%).

 

 

 

 

 

Resources

 

Cultural intermediaries:

Bourdieu, P. (1984) Distinction: A social critique of the judgment of taste. Routledge
De Propis, L. and Mwaura, S. (2013) Demystifying Cultural Intermediaries: Who are they, what do they do and where can they be found in England?
Durrer. V. and Miles, S. (2009) New Perspectives on the Role of Cultural Intermediaries in Social Inclusion in the UK, in Consumption, Markets and Culture 12(3), pp225-241
Maquire, J.S. and Matthews, J. (2012) Are We All Cultural Intermediaries Now? An introduction to cultural intermediaries in context.
Scott, M. (2012) Cultural Entrepreneurs, Entrepreneurship: Music producers, mobilising and converting Bourdieu’s alternative capitals, in Poetics 40(3), pp237- 255
Webster, J., Gibbins, N., Halford, S. and Hracs, B.J. (2016) Towards a Theoretical Approach for Analysing Music Recommender Systems as Sociotechnical Cultural Intermediaries, in Proceedings of the 8th ACM Conference on Web Science, pp137- 145

 Assessment 2
Mon 3rd Feb (PM) Precarious Work and Challenging Environments:

De Peuter, G. (2011) Creative Economy and Labor Precarity: A contested convergence, in Journal of Communication Inquiry 35(4), pp417-425
Mayer, V. (2014) Creative Work is Still Work, in Creative Industries Journal 7(1), pp59-61

McRobbie, A. (2002) Clubs to Companies: Notes on the decline of political culture in speeded up creative worlds, in Cultural Studies 16(4), pp516-531
Morgan, G. and Nelligan, P. (2015) Labile labour-gender, Flexibility and Creative Work, in The Sociological Review 63(1-Suppl), pp66-83

Morgan, G., Wood, J. and Nelligan, P. (2013)_ Beyond the Vocational Fragments: Creative work precarious labour and the idea of ‘flexploitation’, in the Economic and Labour Relations Review, 24(3), pp397-415

 Assessment 2

-9-

LCBS5048

Business of the Creative Industries Environment

Tues 4th Feb Spaces of Access: accessing support for creative enterprises and workers. Bouncken, R.B. and Reuschl, A.J. (2018) Coworking-spaces: how a phenomenon of the sharing economy builds a novel trend for the workplace and for entrepreneurship’, in Review of Managerial Science 12(1), pp317-334
Capdevila, I. (2015) Co-working Spaces and the Localised Dynamics of Innovation in Barcelona, in International Journal of Innovation Management 19(3), pp154 Gandini, A. (2015) The Rise of the Coworking Spaces: A literature review, in Ephemera 15(1), p193
Montgomery, J. (2007) Creative Industry Business Incubators and Managed workspaces: A review of best practice, in Planning, Practice and Research, 22(4),		 Assessment 2

Thurs 6th None Feb

Assessment 2

pp601-617

Thurs 6th Feb Digital Environments: intellectual property in the digital age.

Guibault, L.M. (2006) The Future of the Public Domain: identifying the commons in information law (vol 16). Kluwer Law International BV.
Flew, T. (2005) Creative Commons and the Creative Industries. Media and Arts Law Review 10(4), pp257-264

Aichroth, P. and Hasselbach, J., 2003. Incentive management for virtual goods: About
copyright and creative production in the digital domain. Virtual Goods 2003, pp.70-81.

Montgomery, L. and Fitzgerald, B., 2006. Copyright and the creative industries in

 

 
"Looking for a Similar Assignment? Order now and Get 10% Discount! Use Code "Newclient"

Introduction to Work and Organisations Module code: LIPC1170

/in /by

 

 

 

LIPC Leicester International Pathway College

Programme title:     IFY, BAL

Module Title:            Introduction to Work and Organisations

Module code:          LIPC1170

Owning Board:       Joint Academic Board (DMU/OIEG)

Faculty:                     University Wide Learning (DMU)

Term/semester:      Spring Term, 2020

Module Leader:       Fiona Lloyd

Module tutors:         Iwona Johnson, Epi …, Tim Collins

Email address:        Fiona.lloyd@dmu.ac.uk

Assignment 1:       Course work, Individual Essay

Weighting –               40%

Word count:             1,500 words, (guidance)

Handout date:      Monday 3rd February, 2020, and available on Blackboard in the Assessment folder from 9.00am

Submission date:      Wednesday 19th February, by 09.00am, via turnitin

 

Learning Outcomes:

  1. Demonstrate an understanding of the basic principles and theories of organisational behaviour
  2. Explain the principles of management built into organisational structures and the design of work in the 21st Century
  3. Demonstrate an awareness of current issues relating to managing organisations

 

The essay must contain clear evidence of research.  Therefore, you will need to link your discussion to a variety of academic and factual sources of information such as recent publications (journals, books) and news.

 

 

 

Case study

Caduceus is a Limited liability organisation operating in the care industry in the heart of the UK, and serving the interests of a wide range of stakeholders.  These groups include individuals requiring full time care, individuals who wish to live independently in a sheltered living environment with a range of support services included, the NHS and local government services for health and welfare to the wider community.  With several units of operation in Northamptonshire, Leicestershire and Nottinghamshire, totalling 11 facilities in all, they offer services in a central regional position in the UK.

Caduceus has recently acquired Barhampton View, a care facility in Northampton, with one section providing independent living apartments through ownership to 40 clients, and another section on the same site of a fully supported care unit to meet the needs of 40 vulnerable adults all needing individual care and attention.

Services provided to full care residents at Barhampton are funded by the NHS, or private personal funds or family financial contributions. The independent living community own their own homes, pay normal Council Tax on each residential property and a set additional amount of maintenance fees added for the provision of services and facilities such as cleaners, a residents’ lounge, cinema room, lifts and grounds’ maintenance.

The acquisition of Barhampton by Caduceus has naturally raised concerns amongst staff in both areas of the Barhampton complex, as well as caused a level of instability at regional level in those employees who work for Caduceus.

Due to rising costs for staffing and a reduction in income from the NHS funded residents Caduceus is now considering offering the contract for cleaning, maintaining facilities and the estate in general to an organisation in the private sector and the process of placing tenders for the contract will begin in June 2020.  However, prior to any decision being made the CEO and Senior Managers of Caduceus  have invited a range of stakeholders including all employees at both local and regional level to join in a period of consultation based on improving productivity and efficiency in-house before offering the task to an outsourced private sector provider.  All staff are invited to join and participate in an Employee Forum discussion group.  Ideas for restructuring the organisation and the workforce to provide a better, more economical and efficient service from all individuals and teams participating in the employee forum will be given consideration as a priority over any tender from external organisations.

One team from the Leicester area has put forward some simple proposals for labour efficiency that they estimate will be able to reduce the workforce of the entire company by 20%, (and the associated wages and salary bill), but at the same time retain 80% of the current jobs and so limit the impact of job losses at local and regional level.

 

 

 

 

 

Tasks and questions

 

  1. Identify the management style being used by the CEO of Caduceus and explain why in the current operational climate for health sector organisations you think it may, or may not, be appropriate. In your answer you should make reference to a range of relevant theories on management and leadership styles, advantages and disadvantages of styles with regard to the scenario.
  2. Analyse the impact of the proposed change(s) on the motivation of the Care Services workforce. In your answer, you should make reference to a range of relevant theories of motivation, addressing their strengths and weaknesses which must be applied to the given scenario.

 

  1. Evaluate the impact of the consultation period on those participating in the employee forum. Again, use suitable theory to outline the possible benefits to those involved and evaluate them for both the short, medium and long term, making reference to possible changes in overall organisational structure resulting from the acquisition of the Barhampton complex.

 

 

 

Criteria Proposed marking structure  Marks
Research:

Evidence of research

Good quality sources

 

Required range of sources

 ü  Student has undertaken some research, and at least two academic sources (up to 6 marks)

ü  Student has undertaken research that covers a range of sources including at least one book, one webpage and one other that is appropriate to the task (up to 11 marks)

ü  Student has undertaken thorough research that covers a wide range of resources as above in addition to a journal or further academic source (up to 17 marks)

ü  Student has undertaken extensive research that covers a wide range of resources as above in addition to further current academic sources in the public domain. (up to 25 marks)

 25
Analytical Approach:

Arguments are justified through use of supporting evidence

Evidence is analysed

 ü  Basic descriptive discussion with little analysis, that begins to answer the question(s) (up to 9 marks)

ü  Further developed discussion with analysis, using supportive statements and theories that answer the task set (up to 17 marks)

ü  Considerable discussion with analysis and evidence to support task answer above with application of relevant theoretical models (up to 23 marks)

ü  Excellent discussion with strong analysis, using a range of theoretical models and supportive evidence and which draws conclusions, evidenced with a high level of research including various sources (as detailed above. (up to 30 marks)

 30
Student Voice:

Use of own words and style of writing; use of quotations is not excessive

Critical approach: stands of evidence are compared, contrasted and questioned

 ü  Own interpretation, own style developed, discussion evidence (some critical analysis within discussion can be drawn out of the evidence within the answers) up to 15 marks

ü  As above, with developing critical analysis, used to draw together and create contrast and comparison elements (up to 20 marks)

ü  As above, with excellent critique throughout, to draw strong conclusions that make sound discussion allowing an analytical and evaluative critique (up to 25 marks)

 25
Structure:

Essay Format

 

There is a sequential logic and clear structure to the assignment

 ü  Adequate structure that has a basic element of a beginning, middle and conclusive end (up to 5 marks)

ü  Developed structure with a conclusive argument woven and followed through that creates an appropriate justified conclusion (up to 7 marks)

ü  Excellent structure with an argument drawn from the structure of the essay throughout with a final strong conclusion that is valid, relevant and appropriate to the arguments made throughout the assignment (up to 10 marks)

 10
Referencing:

Correct use of Harvard conventions (in-text citations, reference list, cross-references)

 

 ü  Harvard Referencing is evident, correct, alphabetised, and is appropriate (up to 5 marks)

 

 5
General presentation:

Front cover

Spelling, punctuation and grammar

Correct use of paragraphing

Text formatting (line spacing, font size, word count, fully justified text)

 ü  Spelling, punctuation, grammar, appropriate use of paragraphs and a cohesive layout, which includes a front cover and a contents page, as well as page numbers as a footer (up to 5 marks)

 

ü  Text formatting (Arial 11, double line spacing)

 5
TOTAL:   100

 

 

 

 

 
"Looking for a Similar Assignment? Order now and Get 10% Discount! Use Code "Newclient"

Global Business Issues Module code:          LIPC1160

/in /by

 

                       

 

DMU International College

Programme:             International First Year (IFY) BAL

Module Title:            Global Business Issues

Module code:          LIPC1160

Owning Board:       Joint Academic Board (DMU/OIEG)

Faculty:                     University Wide Learning (DMU)

Term/semester:      Term 2, April 2020

Module Tutor:         Mr Mille Dias, Donovan Anderson‎, Chirag Dattani

Email address:        mille.dias@dmu.ac.uk;    donovan.anderson@dmu.ac.uk; chirag.dattani@dmu.ac.uk;

Assignment 2:       Essay (Written Report)

Weighting:              20%

Word count:           1,000 words (guidance)

Submission date:     Friday 24th April, 2020 by 9am via Turnitin

 

 

Learning Outcomes:

LO2 Utilise fundamental theories and principles in order to measure and analyse key business issues

 

LO3 Show an understanding of the inter-relationship between economic variables and issues within both a domestic and an international context

 

 

 

Bad Academic Practice

A major expectation of all assessments whilst at DMU/DMUIC is that students work in the English language and generate their assignments in the English language.   Initial work should be produced in English not a second language. This means that the use of any language generation/translation or websites is discouraged. The use of such tools may be considered Bad Academic Practice and the consequences outlined in the module handbook will apply.

 

 

 

INDIVIDUAL ESSAY

Introduction

Increased globalisation in the 21st century has been demonstrated by alliances between countries, the emergence of new trading blocs, mergers, acquisitions and takeovers, sometimes joining most unlikely business partners.

 

 

TASK

You are asked to produce an essay to analyse the potential impact of the very recent acquisition of Costa Coffee by the global soft drinks manufacturer Coca Cola.

 

As appendices you should provide a PESTLE model to analyse a range of impacting factors for Coca Cola with regard to this venture, and a Porter’s Five Forces Model analysing key points, and both focussing on the global perspective.  Other models might include a SWOT analysis, Ansoff matrix, Boston Matrix.

 

The essay must contain clear evidence of research; therefore, you will need to link your discussion to a variety of academic and factual sources of information such as recent publications (journals, books), news articles and media coverage of the acquisition.

 

 

Criteria Proposed marking structure Max Mark
Research:

Evidence of research

Good quality sources

 

 

 

 

 

Required range of sources

 ü  Student has undertaken some research, and at least two academic sources (up to 10 marks)

ü  Student has undertaken research that covers a range of sources including at least one book, one webpage and one that is appropriate to the task (up to 15 marks)

ü  Student has undertaken wider reading and  research that covers a wide range of resources as above in addition a journal or further academic source (up to 20 marks)

ü  Student has undertaken extensive research that covers a wide range of current and up to date resources as above in addition to journals or further academic reading (up to 25 marks)

ü

 25
Analytical Approach:

Arguments are justified through use of supporting evidence

 

 

 

 

 

 

Evidence is analysed

 ü  Basic discussion with some analysis, using either of the models that begins to justify the arguments made (up to 9 marks)

ü  Some developed discussion with analysis, using both models and supportive statements that answer the task set (up to 16 marks)

ü  Further developed discussion with analysis, effectively developing the use of several models and supportive statements that answer the task set (up to 23 marks)

ü  Considerable discussion with analysis and evidence to support task answer above (up to 30 marks)

ü  Excellent discussion with strong analysis, using a range of models, other supportive evidence, conclusions drawn and evidenced at a high level of research including various sources (as above research section) (up to 35 marks)

 35
Student Voice:

Use of own words and style of writing; use of quotations is not excessive

 

 

 

 

Critical approach: stands of evidence are compared, contrasted and questioned

 ü  Own interpretation, own style developed, discussion evidence (some critical analysis within discussion can be drawn out of the evidence within the answers) up to 7 marks

ü  As above, with developing critical analysis, used to draw together and create contrast and comparison elements (up to 13 marks)

ü  As above, with excellent critique throughout, to draw strong conclusions that make sound discussion allowing a contrasting and comparative critique (up to 20 marks)

 20
Structure:

Essay Format

 

There is a sequential logic and clear structure to the assignment

 ü  Adequate structure that has a basic element of a beginning, middle and conclusive end (up to 4 marks)

ü  Developed structure with a conclusive argument woven and followed through that creates an appropriate conclusion (up to 7 marks)

ü  Excellent structure with an argument drawn from the threads of the structure of the essay throughout with a final conclusion that is valid, relevant and appropriate to the arguments made throughout the assignment (up to 10 marks)

 10
Referencing:

Correct use of Harvard conventions (in-text citations, reference list, cross-references)

 

 ü  Harvard Referencing is evident, mostly correct and is appropriate (up to 3 marks)

ü  Excellent use of Harvard Referencing system which is alphabetised and correct (up to 5 marks)

 5
General presentation:

Front cover

Spelling, punctuation and grammar

Correct use of paragraphing

Text formatting (line spacing, font size, word count, fully justified text)

 ü  Spelling, punctuation, grammar, appropriate use of paragraphs and a cohesive layout, which includes a front cover and a content page (up to 5 marks)

 

ü  Text formatting (Arial 11, double line spacing spacing) and use of page numbers.

 5
TOTAL:   100

 

 

 

 

 

 

 
"Looking for a Similar Assignment? Order now and Get 10% Discount! Use Code "Newclient"

Business of the Creative Industries Environment

/in /by

Business of the Creative Industries Environment

Individual Essay 3,000 words

Assessment Notes ：the case studies of creative spaces are used alongside the theoretical and policy models of creativity and innovation, to outline a suitable ‘environment’ for creative practitioners to operate in

Module Resources ：

Introduction and Innovation Models:

1.NESTA (2018) Creative Nation https://www.nesta.org.uk/report/creative-nation/ O’Connor, J. (2016) The Cultural and Creative Industries: a literature review. ACE Potts, J. and Cunningham, S. (2010) Four Models of the Creative Industries. Brisbane: QUT

Storper, M. (2018) Keys to the City: How economics, institutions, social interaction, and politics shape development. Princeton University Press
Storper, M. (2016) The Rise and Fall of Urban Economies: Lessons from San Francisco and Los Angeles. Stanford

UK (2018) Industrial Strategy: Building a Britain for for the future. UK Government https://assets.publishing.service.gov.uk/government/uploads/system/uploads/a ttachment_data/file/664563/industrial-strategy-white-paper-web-ready- version.pdf

UK (2019) Government Technology Innovation Strategy, Cabinet Office

https://www.gov.uk/government/publications/the-government-technology- innovation-strategy/the-government-technology-innovation-strategy

 

  1. Relational environments: The mobility of tacit and symbolic knowledge Social capital and the role of spatiality in knowledge transfer

Adler, P.S. (1996) The Dynamic Relationship between Tacit and Codified Knowledge: Comments on Ikujiro Nonaka’s “managing Innovation as an organisational Knowledge Creation process”, in Pogorel, G. and Allouche, J. (eds) International Handbook of Technology management. Amsterdam: North Holland Asheim, B. and Coenen, L. (2005) Regional Innovation System Policy: a knowledge- based approach, CIRCLE 2005/13. Lund University

Baragheh, A., Rowley, E. and Sambrook, S. (2009) Towards a Multi Disciplinary Definition of Innovation, in Management Decision 47(8), pp1323-1339
Cooke, P. (2004) The Role of Research in Regional Innovation Systems: new models meeting knowledge economy demands, in International Journal of Technology Management 28(3-6), pp507-532

Faulconbridge, J.R. (2017) Relational Geographies of Knowledge and Innovation, in Bathelt, H., Cohendet, P., Henn, S. and Simon, L. (eds) The Elgar Companion to Innovation and Knowledge Creation. Edward Elgar, pp671-684
Lundvall, B-A. (2005) national Innovation Systems – Analytical Concept and Development Tool, at DRUID Copenhagen, June 2005

 

  1. Creative Ecosystems: The creative city. Underground Spaces. Infrastructure in the city as a basis for creative enterprise

Dovey, J., Pratt, A.C., Virani, T., Merkel, J., Lansdowne, J. (2016) Creative Hubs: Understanding the New Economy. British Council and NESTA https://creativeconomy.britishcouncil.org/resources/creative-hubs- understanding-new-economy/

British Council (2015) Creative Hub Toolkit

https://creativeconomy.britishcouncil.org/blog/15/06/28/creative-hubkit-made- hubs-emerging-hubs/ (see also https://creativeconomy.britishcouncil.org/projects/hubs/, https://creativeconomy.britishcouncil.org/blog/19/07/10/creative-hubs-learn/) Evans, G. (2009) Creative Cities, Creative Spaces and Urban Policy, in Urban Studies 46(5-6), pp1003-1040

Grandadam, D., Cohendet, P. and Simon, L. (2012) Places, Spaces and the Dynamics of Creativity. The Video Game Industry in Montreal, in Regional Studies 47(10), pp1701-1714
Granger, R.C. (2018) The Sustainability of Creative Cities. De Montfort University

Scott, A. (2016) Creative Cities: Conceptual issues and Policy Questions, in Journal of Urban Affairs 28(1), pp1-17
Rodrigues-Pose, A. and Crescenzi, R. (2010) Research and Development, Spillovers, Innovation Systems, and the Genesis of Regional Growth in Europe, in Regional Studies 42(1), pp51-67

 

 

  1. Social Capital, Sticky Knowledge, professional networks:

Granger, R.C. and Bazaz, P. (2017) The Art of Disruption: The role of universities in the creative economy. De Montfort University
Markusen, A. (1996) Sticky Places in Slippery Space: A typology of industrial districts, in Journal of Economic Geography 72(3)

Storper, M. (2018) Keys to the City: How economics, institutions, social interaction, and politics shape development. Princeton University Press
Faulconbridge, J.R. (2017) Relational Geographies of Knowledge and Innovation, in Bathelt, H., Cohendet, P., Henn, S. and Simon, L. (eds) The Elgar Companion to Innovation and Knowledge Creation. Edward Elgar, pp671-684

Granovetter, M. (1973) The Strength of Weak Ties, American Journal of Sociology 78(6), pp1360-1380

 

  1. Open innovation, alternative spaces:

Cunningham, S. (2016) The Creative Cities Discourse: production and/or consumption? Brisbane: QUT
Soja, E.W. (1996/2006) Thirdspace: Journeys to Los Angeles and other Real-and- Imagined Places. Oxford: Blackwell
Bourdieu, P. (1972/1977) Outline of a Theory of Practice. Cambridge: Cambridge University Press

 

Demand：

Complete a 3,000 words essay, on the following. This assignment is worth 75% of the module mark.

Providing policy and case study material that supports your argument, what would be the most suitable business environment for creative practice? As part of your answer, please consider:

  1. (i)  What are the conditions needed for technological innovation? What is the environment

described in the UK Technology Strategy?

  1. (ii)  What is the optimal environment presupposed in a creative hub?

Assessment 1 is a formal essay, which combines the theory and conceptual ideas relating to innovation, relational economies, and social capital discussed in class and gained through the module’s reading, with the observations and critical thinking of Leicester as a creative case study. An essay that attempts to describe a creative ecosystem or describes the theories discussed in class or Leicester’s cultural/economic policies, but fails to apply this to the question, or to formulate an argument will not pass the assignment. The emphasis is on your ability to critique theories, apply these to real life case studies, and to build arguments. As such, assignment 1 tests your learning against the following learning outcomes:

  1. Demonstrateacomprehensiveunderstandingofthecreativeindustriesandtheirroleinthecreative economy (25%).
  2. Evaluatecriticallytheoreticalconcepts,analysingtherelationshipbetweencreativity,innovation,the macro-economy, and a locality (25%).
  3. Applyknowledgebyanalysingconceptualideasandcreatingnewconceptsandsolutionsforareallife scenario (25%).
  4. Communicateresearchfindingsandconclusionseffectivelytosupportcogencyofargumentandto demonstrate academic engagement (25%).

 

 

 

 

 
"Looking for a Similar Assignment? Order now and Get 10% Discount! Use Code "Newclient"

Management of Innovation in the Creative Industries

/in /by

Question Description

I’m studying for my Blog Post class and need an explanation.

 

1000words

Reflexive blog

Your blog should reflect on your developing understanding of creative business management theory and practice. It is an opportunity for you to record your thoughts and ideas about topics covered in workshops. The post should demonstrate your engagement with issues covered in workshops and in your reading.

You should aim to provide evidence of your engagement with additional relevant material drawing on the case studies presented in class as well as on cases from your own research (e.g. newspaper articles, websites, podcasts, texts you have read) and attempt to note down key ideas / concepts and track their development. You should also think about how you can support the ideas in our blog posts with pictures, relevant videos (e.g. maybe an interview with a creative worker) and charts. You should use the reflective journal to discuss in depth one of the topics covered in this module (total length of your blog should be 1000 words).

The blog may contain:

• Your reflections on the subject of the workshops.
• Your reflections on module key readings and other texts from the reading list.
• References to cultural and creative industry debates on the specific notion of innovation in newspapers and academic journals, and your observations on these debates and their relation to issues covered in the module.
• Your thoughts and feelings about workshop activities and discussions, etc.
• Your reflections on any observations or experiences that relates to your developing thoughts.

Remember to reference your sources using Harvard, but be creative, too! You can experiment by including links, images, film clips etc. in your posts.

 
"Looking for a Similar Assignment? Order now and Get 10% Discount! Use Code "Newclient"