Table of Contents

• Answer: 1. 3
  • a) Working Capital Trade-offs. 3
  • b) Strategies for Financing Working-Capital 5
  • c) Analysis of Working Capital 6
  • d) Comparative Analysis. 10
• Answer: 2. 11
  • a) Analysis of the Balance Sheet 11
  • b) Share Price Analysis. 17
  • c) News. 17
  • d) Comparative Analysis. 18
• References. 20

Answer: 1

a)     Working Capital Trade-Offs

The concept of working capital trade-off is related to the relationship between profitability and liquidity. Trade-off simply means getting one opportunity at the cost of other. Companies applying the theory of risk and return, and decide whether they have the potential to undertake risk or they want to ensure guaranteed income. On the basis of these strategies the working capital is allocated or utilized by the companies. Based on the concept of working capital, it can be said that if the company chooses liquidity, then they would be willing to have adequate working capital in hand and less profit. On the other hand if the company wishes to take risk and generate more profit, then engagement of working capital is more in that case, so liquidity in terms of working capital in hand would have to be compromised (Ediindia, 2005). This section would be discussing the working capital trade-offs of three luxury car manufacturing companies Porsche AG, Daimler AG, and BMW.

Porsche AG is a German luxury car company which was established in the year 1931. The company generated €10,928 million in the year 2011 as revenue. The working capital of the company was estimated to be around €65.8 billion in 2011, which was derived from the receivable from the customers, increasing leasing and renting charges of assets, etc (Volkswagen AG, 2011). Porsche AG met its working capital requirement through credit from banks when they were in Volkswagen Group (Porsche Automobil Holding SE, 2013).  However, now the net liquidity position has improved with a 15 percent rise in sales and about 21 percent rise in the return on equity. So it can be said that Porsche no more has to rely on bank credits for working capital, but the company in 2011 negotiated with banking syndicate for extending a credit of €2.5 billion. This reveals that Porsche AG has to trade profitability for liquidity because the working capital requirement for running operational function is more important than investing the working capital. The company was running short of cash or cash equivalents due to which they had to keep provisions for credit from banks (Porsche SE, 2011).

Daimler AG another luxury car company which has many luxury car brands under its business, such as Mercedes-Benz, Maybach, Mitscubishi Fuso, and many more. The company was established in 1998 in Stuttgart, Germany. Revenue generated by Daimler AG in 2011 was €106.54 billion, and it was able to earn a profit of €5.667 billion in 2011, during the ongoing economic slowdown. The liquidity amounted to €11.9 billion in 2011, while the same was €13 billion in 2010. The decreasing liquidity is due to the extensive cash outflow for the pension plan assets, and also for the acquisition of the share of Tognum AG. Daimler AG is defensive in this regard, as it chooses to maintain liquidity and control credit risk exposure (Daimler, 2011). The company traded liquidity for profitability and for this Daimler AG also raised funds to finance the cash requirements of the company (Daimler, 2011).

BMW is a German automobile company which was established in 1916. BMW stands for Bayerische Motoren Werke AG. BMW is also the parent company of the most luxurious car called Rolls Royce and it also produces Mini marquee. The revenue earned by the company in 2011 was €68.82 billion and the operating income was about €8.006 billion. The net profit of the company increased in 2011 by €4,907 billion, which lead to increased cash inflow of the company by €1,664 billion. However, the changing working capital has decreased the cash flow from the operating functions by €1,212 million. This is because of increase in stock and introduction of new models of cars. So the working capital trade-off of BMW revealed that liquidity was traded for profitability. The company minimized the amount of working capital in order to invest them for launching new models of cars, after witnessing an increase in profit and cash inflow. Since the cash inflow from the operating activities was positive in the year 2011, so the amount for investing activities was around €5,499 million in 2011, which was €309 million higher than 2010 (BMW Group, 2011).

b)    Strategies for Financing Working-Capital

In order to analyze the strategies utilized by Porsche AG, Daimler AG, and BMW to finance their working capital, the probable strategies that companies generally apply for financing the working capital would be evaluated. Companies can sell their accounts receivable to the investors or financial institutions at discount to receive the amount immediately. This strategy also assists in eliminating the risk of non-payments by the customers. Suppliers can also be asked for credit extension, which means buying goods on credit.  The third and most well know method is to issue equity shares and raise funds through investors. Also debt securities are issued in order to raise finance. The debt instruments are the bonds, commercial papers, etc. The corporate finance professional in companies also assist in getting hybrid financing through instruments like preferred shares and convertible bonds.

In order to maintain the liquidity of the company, Porsche AG negotiated with banks to line up credit of around €2.5 billion due by the end of June 2013. The company has been also assured by the European Central bank for a massive liquidity support. Moreover, the company has also expected a growth of around 7 percent in the Asian countries, which also indicates that the sales would be increasing considerably in next two years, generating an increasing return of 15 percent. An increase in cash flow funds have been recorded in 2011, which was €765 in 2010, as compared to €992 million in 2011.

On the other hand Daimler AG focused on refinancing due to the volatile market condition to support their working capital requirements, as an initiative of risk management. Since the suppliers of Daimlers AG always supported the company by providing them credit as a source for working capital, so the company also took initiatives to support their insolvent suppliers. Daimler AG utilized an array of financial instruments to finance their working capital, such as bonds, commercial papers, financial instruments, and by selling the receivables, etc. In the year 2011, Daimler AG had a first-class access to the capital markets too. So the company had also raised fund from customer deposits.

BMW also like Daimler AG and Porsche AG utilizes the general sources of financing their working capital. The increasing level of profit in the year 2011 also resulted in increase of cash inflow in the company. For financing the working capital of the company, BMW has undertaken various financial activities in order to boost their cash inflow, such as issuing bonds, and other financial instruments. The cash inflow was recorded to be €87 million in the year 2011, which is lower than 2010. The cash inflow derived from the commercial papers was €439 million, which is higher than the amount generated in 2010 (€260 million). In the year 2011, the cash generated from the operating activities was around €241 million, while in 2010, there was a shortfall of €871 million. So it can be said that the strategies for financing the working capital were optimum and also reaped positive results compared to 2010 (BMW Group, 2011).

c)     Analysis of Working Capital

In order to evaluate the short-term liquidity of the company, ratios like quick ratio, current ratio, receivable and payable ratios, working capital leverage and turnover ratios are utilized (Planware, n. d.). Through the fund flow analysis, the sources of extra funds can be identified, and a working capital budget is also helpful in determining the amount of working capital to be allocated for the financial year and its implementation. However, in order to analyze the working capital efficiency of the three luxury car companies, the ratios and the cash flows would be taken into consideration.

Considering the liquidity ratios of Porsche AG from 2007-2011, it is evident that the current ratio in the year 2007 is 1.30, in 2011 it is 2.13. The current ratio reveals that Porsche AG has sufficient amount of liquidity, and if compared to 2010, the liquidity position of the company in 2010 reveals that the company was in a dangerous position because the current ratio was 0.13. The quick ratio in 2011 is 0.06, which means the inventory portion is high in current assets. However, quick ratio in 2008 was 0.76, which reduced in 2009. The working capital calculated in Table 1 shows that the working capital of Porsche AG in 2007-2009 was increasing positively, but a sharp decrease was seen in 2010, leading to negative working capital balance. Further a positive growth in 2011 indicates the movement of the company towards stability (Morningstar, Inc., 2012b).

Table 1: Working Capital Calculation

The working capital that is calculated from 2007-2011, included the current assets and the current liabilities and it reveals a growth in the working capital from 2007 to 2009, as can be identified from Figure 1. However, a drastic drop has been also seen in 2010, which has improve in 2011, but the inventory accumulation is higher than cash or cash equivalents.

Figure 1

The current ratio Daimler AG in 2007 was 1.27 and in 2011 was 1.11, which represents a slight decrease in the level of liquidity. However, the quick ratio of Daimler AG in 2007 was 0.93, while in 2011, it was0.73. The difference in the ratio reveals the percentage of inventory that the company holds. However, compared to the quick ratio of 2011, the company was in a better position in 2007. This might be probably due to financial crisis around the world. However, the leverage ratios reveal that the company has been able to decrease its debt portion when compared to equity in its capital structure. In 2007 the debt-equity ratio is 0.86, which increased to 1.10 in 2009, which the company could control and reduce in 2010, and 2011 to 0.94. The working capital calculated in Table 2 reveals that working capital of Daimler AG had dipped considerably in 2008 from 2007, as in 2007 it was £13,275, which reduced to £3,219 in 2008.

Table 2: Working Capital Calculation

However, Daimler AG has pulled themselves up through refinancing and issuing financial instruments to raise funds for working capital. Though Figure 2 shows highly liquid position of the company in 2007, but the company is still in a better position after the dip from 2008-2010.

Figure 2

The current ratio of BMW reveals a better position since 2007 because in 2007 the current ratio was 0.96, which was 1.04 in 2011. Quick ratio in 2007 was 0.15, which has further reduced to 0.23. The result shows an increasing accumulation of inventories in BMW. The financial leverage is high, as it was 4.10 in 2007, and has increased to 4.55, so this presents that the debt percentage in the capital structure of the company is higher compared to its equity. Perhaps liquidity position of the company shows a positive trend, but it is highly volatile (Morningstar Inc., 2012a). On the basis of the working capital calculated from the balance sheet of the company in Table 3, it can be seen that 2007 and 2008 shows negative working capital.

Table 3: Working Capital Calculation

Though the condition improved in 2009 and 2010, but again a decline can be seen in 2011. Figure 3 demonstrates the trend of working capital of BMW in the recent five years.

Figure 3 

d)    Comparative Analysis

After a comprehensive analysis of the working capital, financing sources, strategies and liquidity position of the three luxury automotive companies, it was found that on the basis of the working capital efficiency, Daimler AG can be considered the most sustainable and competent in the case of working capital because though the company has to face liquidity crunch 2007, but Daimler AG has opted for several strategies to skilfully finance its working capital and maintain its liquidity. Porsche AG on the other hand was processing positively in terms of liquidity, however, based on the negative results of working capital in 2010, it can be said that the liquidity condition can be considered sustainable though it can be addressed as an improving state for Porsche AG. Finally BMV would be considered last because BMW had negative working capital, which means the company had to go through extensive liquidity crunch. Further, it is still not in a very good position to be considered sustainable.

Answer: 2

a)     Analysis of the Balance Sheet

Volkswagen AG

The balance sheet of 2011 has been considered to discuss the assets, liabilities, and shareholders’ equity of Volkswagen AG. The total asset of the company amounts to €253,626 million in which the current asset is €105,640 million, and fixed assets of €147,986 million. The amount of inventories is €27,551, which is higher than that of the cash or cash equivalents amount as can be seen from Table 4. As far as the liabilities are concerned, the total liabilities of the company amount to €253,626 million. The shareholders equity is the net worth or also called the share capital. The shareholder’s equity or total equity can be seen in Table 1, which includes the subscribed capital, capital reserves, and other element which amounts to €63,354. The shareholder’s equity of Volkswagen AG is better than the other two companies.

Table 4

 Daimler AG

The balance sheet of Daimler AG indicates that the total assets of the company are €148,132 million, which includes the current asset of €61,118 million. In case of Daimler Ag too the inventory is €17,081 million, which is more than the cash equivalents. The shareholder’s equity or total equity as can be calculated as in Table 5 is €41,337 million, which is less compared to Volkswagen AG, but in a better position than Renault SA. The current liabilities are €54,855 million, which is less than the current assets. This means that the company has enough liquidity to pay off its short-term liabilities.

Table 5

Renault SA

In case of Renault SA the current assets amounts to €39,654 million. Here as can be seen in Table 6 that the amount of inventories is less than that of cash or cash equivalents, which is €8,672 million. This implies that Renault have sufficient liquidity to meet its short-term obligations. The current liability amounts to €38,954 million. This does not indicate a very good position with regards to the working capital of the company. As far as the shareholders’ equity is concerned, it can be seen in Table 6 that the total shareholders’ equity of Renault is calculated to be €24,567 million. So if a comparison among all the three companies is done, then it can be analysed that Renault SA has the minimum net worth or shareholder’s equity, which means that the debt portion in the company is high.

Table 6

b)    Share Price Analysis

The share price of Volkswagen is €161.7 which is down by £1.05 according to the market. But if the historical share price is taken into consideration then the share price can be concluded to be rising in future. (Yahoo finance, 2012c).

The share price of Daimler AG is €41.76. It is up by 48% in the market. The historical price shows that though there have been little fluctuations in the price level but the price is moving towards a rising trend from the last few months (Yahoo finance, 2012a).

The share price of Renault AG is €40.99 which is up by 48% (Bloomberg Businessweek, 2012). From the historical studies it can be inferred that the share price of the company is volatile. If the recent share price is compared with the previous year then it is found that the share has considerably come down and is expected to continue the downward trend (Yahoo finance, 2012b).

c)     News

In the future Volkswagen AG will face competition from the other automobile industries as the automotive future depends upon the social condition and the trend followed by the society, but still it has pledged to become the leading automaker in the world by 2018. The technological challenges which may arise will be overcome by intensive research and development by the internal and external of the company (Volkswagen AG, 2012).

In case of Daimler AG, there objective is to innovate and use green technologies as well as safe and superior automobiles that will fascinate its customers. Now Daimler AG has successfully achieved to have the broadest variety of range of vehicles. These vehicles are emission free and powered by batteries and free cells as to go with their policy of promoting greener technology. Daimler AG accepts the challenges and tries its level best to meet its responsibilities towards the society that it has committed to achieve. The head of the company’s motor sport division will leave his position due to which the successful position of the company might be hampered. Due to his absence the company may face some problems.

Renault SA is progressing in many countries though its core market is in Europe. The organisation is poised to enter various new markets so as to boost its fortunes and increase its market capitalisation among the world automakers. The organisation is coming up with innovations and more value added with existing products. Renault selects GT Nexus, to provide the organisation a platform for cloud supply chain. This platform will help the organisation to serve better to its fast growing customers and at the same time will reduce the inventory and transportation cost which would add to its fortunes.

d)    Comparative Analysis

According to my opinion, the best option to invest is in Volkswagen AG. The reason behind that is the share prices are showing upward movement. At the same time the turnover has also increased by 10% if compared with the same month of the previous year. The increase in the turnover percentage was not within the expectation of the company. They made a great progress during this time and will continue to certain extent. Exel which is a global leader in supply chain management had extended the contract with the company for another three year to manage the aftermarket logistics of the company. The company was awarded for this contract. So from every aspect, it will be better to invest in Volkswagen AG.

References

• Bloomberg Businessweek, 2012. Daimler AG-registered shares. [online] Available at: <http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=DAI:GR> [Accessed 27 December, 2012].
• BMW Group, 2011. Annual Report 2011. [online] Available at: <http://www.bmwgroup.com/e/0_0_www_bmwgroup_com/investor_relations/corporate_events/hauptversammlung/2012/BMW-Annual-Report-2011.pdf> [Accessed 27 December, 2012].
• Daimler, 2011. Consolidated Statement of Financial Position. [online] Available at: <http://ar2011.daimler.com/consolidated_financial_statements/balance_sheet> [Accessed 27 December, 2012].
• Ediindia, 2005. Working Capital Management [pdf] Available at: <http://www.ediindia.org/doc/SpecialPDF/chp-14.pdf> [Accessed 27 December, 2012].
• Morningstar Inc., 2012a. Bayerische Motoren Werke AG. [online] Available at: <http://financials.morningstar.com/ratios/r.html?t=BAMXF&region=USA&culture=en-US> [Accessed 27 December, 2012].
• Morningstar Inc., 2012b. Porsche Automobil Holding SE – PAH3. [online] Available at: <http://tools.morningstar.co.uk/uk/stockreport/default.aspx?tab=11&vw=fh&SecurityToken=0P0000J33G]3]0]E0GBR$$ALL&Id=0P0000J33G&ClientFund=0&CurrencyId=GBP> [Accessed 27 December, 2012].
• Planware, No Date. Business Planning Papers: Managing Working Capital [Online] Available at: < http://www.planware.org/workingcapital.htm> [Accessed 27 December, 2012].
• Porsche Automobil Holding SE, 2013. History: Porsche Automobil Holding SE. Available at: < http://www.porsche-se.com/pho/en/porschese/history/> [Accessed 27 December, 2012].
• Porsche SE, 2011. Annual Report 2011. [online] Available at: <http://www.porsche-se.com/pho/en/investorrelations/mandatorypublications/yearlydocument2011/> [Accessed 27 December, 2012].
• Renault, 2011. An ambitious strategy, for a brand in full renewal2011 annual report [pdf] Available at: <http://www.renault.com/en/lists/archivesdocuments/renault%20-%202011%20annual%20report.pdf> [Accessed 27 December, 2012].
• Volkswagen AG, 2011. Interim Report January-September 2011. [online] Available at: < http://www.volkswagenag.com/content/vwcorp/content/en/misc/ir/ir-webcasting.bin.html/downloadfilelist/downloadfile/downloadfile/file/Q3_2011_e.pdf> [Accessed 27 December, 2012].
• Volkswagen AG, 2012. Interim Report [pdf] Available at: <http://www.volkswagenag.com/content/vwcorp/info_center/en/publications/2012/10/Interim_Report_Sept_2012.bin.html/binarystorageitem/file/Q3_2012_e.pdf> [Accessed 27 December, 2012].
• Yahoo finance, 2012a. Daimler AG (DAI.DE). [online] Available at: <http://uk.finance.yahoo.com/q?s=DAI.DE> [Accessed 27 December, 2012].
• Yahoo finance, 2012b. Renault Soci (RNO.PA). [online] Available at: <http://uk.finance.yahoo.com/q?s=RNO.PA> [Accessed 27 December, 2012].
• Yahoo finance, 2012c. Volkswagen AG (VOW.DE). [online] Available at: <http://uk.finance.yahoo.com/q/pr?s=VOW.DE> [Accessed 27 December, 2012].

1  Executive Summary

Men looking for distinct and unique office wear and shoes will greatly benefit from OfficeElegance.com online clothing shop. OfficeElegance will remove the need for distributors and middlemen and make it possible for men to access functional, elegant, and beautiful office wear at affordable prices. This will work to reduce additional costs that will accrue as a result of complicated sales chain if middlemen are involved; thus, customers will be able to enjoy great savings given that they will paying for their favorite office wear and shoes at cheaper prices than they are used to, when they shop from normal offline fashion or clothing stores.

The OfficeElegance apparel collection would be produced of great design, high-quality materials, and sophisticated designs that have never been seen before in the industry within the first year. OfficeElegance will no longer be a one-city operation, but will be able to attract young men and women in most cities around the United States that are shopping for elegant and exclusive office wear and shoes. This can be due to the last decade’s massive advances and improvements in internet infrastructure, radio broadcasting, and cable television. As a consequence of these massive advances in telecommunications technologies, consumers’ preferences and desire for goods that reflect the increasingly evolving fashion industry have risen.

OfficeElegance’s owners and managers have significant experience in the fashion industry, especially in the outdoor apparel industry. Indeed, they have been interested in the production of office clothing, both men’s and women’s, for the past four years, and are thus well-versed in emerging fashion patterns as well as customer desires and tastes. One distinction between OfficeElegance and other apparel e-commerce websites for men and women is that it only offers office wear and accessories for men and women aged 18 to 24. Furthermore, OfficeElegance will not retain apparel inventory and will now partner with Ted Clothing Company in Boston, Massachusetts, to manufacture and deliver/ship all of OfficeElegance’s garments. In addition, OfficeElegance will partner with Lambretta Shoes Firm, headquartered in Boston, Massachusetts, to manufacture and deliver/ship all of OfficeElegance’s shoes. Office Elegance’s design team will closely work with both Lambretta Shoes Company and Ted Clothing Company’s design teams to ensure that the office wears and shoes sold by OfficeElegance are indeed trendy, beautifully, elegant, of great design, and of high value fabrics as envisioned.

1.1  Mission

OfficeElegance mission is to offer its customers with office wear, both shoes and clothing that are indeed trendy, beautifully, elegant, of great design, and of high value fabrics; that energizes office activity. Whether it is normal office routine, outdoor office assignments and events, or meetings, OfficeElegance office wear are durable, comfortable, beautiful, trendy, and makes people feel and look wonderful.

1.2   Keys to Success

• A website that is well designed, easy to use (user friendly), equipped with functionalities that makes its entertaining to use; giving users the experience of being on their favorite local store(Carroll & Broadhead , 2001, p.39).
• Developing a store image, which customers will consider beingattractive, trendy, and elegant.
• Developing an excellent relationship with vendors, both Lambretta Shoes Company and Ted Clothing Company’s in order to facilitate and guarantee timely and fast shipments.
• Establishing an efficient, effective, and successful marketing and advertising strategy which will ensure that the target clientele of 18-24 years office goers are reached.
• Establishing an excellent customer relationship and interaction by ensuring timely response to customers FAQs and feedbacks, as well as addressing complains and concerns(Belew & Elad, 2009, pp.206-208).
• Focusing on building customer confidence by ensuring the website’s security is guaranteed, and that in case deliveries are not as per customer’s choice, then there is some sort of money back guarantee(Carroll & Broadhead , 2001, p.44).

2  Company Summary

OfficeElegance will deal in office wear, both shoes and clothing that are indeed trendy, beautifully, elegant, of great design, and of high value fabrics; that energizes office activity; for both men and women. These clothing will be ideal for normal office routine, outdoor office assignments and events, or meetings. OfficeElegance office wear will be durable, comfortable, beautiful, trendy, and makes people feel and look wonderful. James O’Connor and Sherry Brandt, the owners of OfficeElegance, have considerable expertise in the fashion industry, especially in the outdoor apparel industry, and will seek to establish a cost-effective operation that will ensure consistent and timely shipping while eliminating product storage and middlemen costs. This will be done by partnership with third-parties such as Ted Apparel Company in Boston, Massachusetts, which will manufacture and deliver/ship all of the garments, and Lambretta Shoes Company in Boston, Massachusetts, which will produce and deliver/ship all of the shoes for OfficeElegance. Transactional processing of orders will be done by OfficeElegance online, which will also be responsible for the collection of online payments. The order will then be sent to either Ted Clothing Company or Lambretta Shoes Company both located in Boston, Massachusetts depending on whether it is for shoes or for clothing, where it will be processed and shipped to the buyer.

Focus will also be on marketing the office wear shoes and clothes to the targeted clientele especially in big cities such as New York. OfficeElegance will create events and make extensive use of the now popular social networking sites such as Facebook and Twitter to increase its online visibility. Use will also be made of existing local joints, business, and malls, which serve the same targeted clientele, especially with regards to staging marketing events.

2.1  Start-up Summary

Most of the start-up costs for OfficeElegance are the costs for design and development of the e-commerce website and the costs associated with advertising and marketing of the E-commerce website, both offline and online campaigns in order to increase visibility. The start-up cost is funded by the investment by the owners which amounts to $320,000 and a long-term business loan amounting to $227,100.

Table 2‑1: Start-up summary

Table 2‑2: Start-up Funding

2.2   Company Ownership

James O’Connor and Sherry Brandt, the founders of OfficeElegance, have extensive experience in the fashion industry, especially in the outdoor apparel industry.

3  Products

OfficeElegance will sell office wear, both shoes and clothing online. The office wear that we will offer will be trendy, beautifully, elegant, of great design, and of high value fabrics; that energizes office activity; for both men and women aged between 18 and 24 y. These clothing will be ideal for normal office routine, outdoor office assignments and events, or meetings. OfficeElegance office wear will be durable, comfortable, beautiful, trendy, and makes people feel and look wonderful. The office wear clothing and shoes that will be sold via OfficeElegance.com website will include:

• Men Shirts
• Suits
• Pants
• Rain gear
• Jackets
• Hats
• Sweaters
• Bags
• Belts
• Shoes
• Socks
• Skirts and Dresses
• Watches
• All types of ties and scarfs

4  Market Analysis Summary

Over the past two decades, the demand for quality, durable, beautiful and elegant office wear for both men and women office-goers has tremendously increased. In fact, office wear for both men and women has grown into a multi-billion dollar niche industry. The huge advancements and developments in internet technologyhas seen a rise in a number of online shops selling clothes and shoes, even office wear; however, no garment manufacturing company is exclusively selling their apparels online. As such, there are still a lot of middlemen involved and costs of distribution to retailers’ stores are still very high thus translating into expensive products for consumers. It will be simplistic to argue that the reason behind companies’ not willing to sell directly online is because the e-commerce concept is untested. Schneider (2008, p.142)argues these companies are worried that selling directly online will take away sales from their already established networks and outlets such as department stores and other retail outlets. It is true that customers can actually buy clothes that they can only see online, especially, if the process of buying gives the experience of buying from a local departmental or retail store and if the products on offer are affordable and are of great design and value.

Based on the population statistics from the United States Census Bureau, the population of office goers of the age between 18 and 24 years in 2013 was 10.8 million, 4.2% of the U.S. population. The statistics also suggested that adults aged between 18 and 24 who are working contribute to more than $280 billion dollar in annual spending and have access to close to $120 billion in disposable income. Additionally, this targeted group apparently spends about $20 billion annually and is projected to spend more than $4.6 billion online by end of 2014. On average, working class or office goers aged between 18 and 24 years spend about $120 in a week on fashion, technology, food, and entertainment. This target group are considered as Generation Y; they are the second most growing demographic below the age of 65 and dominate most aspects of the popular culture.

The Internet has become very much accessible to most people as a shopping tool, especially to our target clientele; in fact, with the advancement in technology that has seen more portable devices, including smartphones and tablets having the capability of accessing the internet, most of them can use the internet from wherever they are, any time of the day. Today, most people, especially youths aged between 18 and 24, prefer using the internet rather than watching TV; thus most of them are more likely to own devices that can access the internet such as laptops, tablets, and smartphones.

Youths aged between 18 and 24 who shop online for electronics, clothes, tickets, etc., are expected to spend close to $475 million, this year (2014) alone. This growth is expected to steadily continue and reach about $1.5 billion in online spending annually by 2017; in fact, it is projected that majority of consumers in the U.S. will prefer to shop online. Some of the things that they are most likely to purchase include clothing, computer software, books, and electronics.

It is thus clear that the key to successful marketing to the targeted customers will be embracing on extensive online marketing, especially on social networking sites such as Twitter, Facebook, and LinkedIn, as well as through traditional marketing means such as fashion and professional magazines. The advertisements will be focused on creating awareness of the existence of OfficeElegance.com, its product offering, and on removing middlemen on OfficeElegance’s clothing budget; most importantly, the focus will be on establishing OfficeElegance as a unique, distinct, and elegant style.

4.1  Market Segmentation

The dynamic in population dynamic in the U.S., especially with regards to employment has greatly changed since the 2008 economic crisis; the number of people employed have tremendously grown for adults aged between 18 and 24; most of the people in employment, office goers are in this age bracket. Furthermore, they are the most active internet users, second only to young teenagers. This apparently, has created a small multi-billion market niche for business to offer and sell clothing products to these office goers, whether with urban areas or outside urban area. Regional retail stores, malls, as well as departmental stores offer access to outdoor fashion and styles and not office wear that are in demand by young adults. Thus, OfficeElegance will focus on this unique and distinct group of men and women aged between 18 and 24 years who are office goers. They are the main group that will drive the success of OfficeElegance. This is a relatively mature and target group that knows exactly what they want; they use the internet more often and thus will not be difficult to pull to the website. They also have money and fewer responsibilities, and as such will be willing to spend on elegant and unique office wear. One key feature of generation Y that OfficeElegance will endeavor to capitalize on is the fact that these young adults wear attitude to define their identity and to feel unique and elegant; this extends to not only the music and type of hairstyle they wear, but also on the clothing that they wear. 

The plan and mission of OfficeElegance is to bring elegance and beauty to office wear among the young adults who see office wear as rather boring. OfficeElegance will create an identity that will take advantage of the attitude, nature, and subculture of the targeted clientele.

Table 4‑1: Analysis: Market

Chart 4‑1: Market Analysis

5  Implementation and Strategy Summary

OfficeElegance will capture and win a share of the market in the office wear clothing niche industry by aggressive and extensive online campaign in social media and other traditional marketing avenues such as in fashion magazines in order to increase its online visibility and its target customers’ awareness.

5.1  Competitive Advantage

OfficeElegance competitive advantage is based more on its processes as well as on its products. OfficeElegance has a lot of confidence on the quality, attractiveness, and competitiveness of its products; however, it still considers that creating an efficient access and awareness of its most website as a very important and crucial task. The website is apparently the endpoint of OfficeElegance entire marketing strategy meant to drive and increase the interest of its customers.

The massive experience that the co-owners of OfficeElegance, James O’Connor and Sherry Brandt, have in the fashion industry, particularly in the outdoor apparel industry and the fact that for the past four years, they have been involved in the design of office wear, both men and women clothes, and are thus very apprised of the current fashion trends and consumers preferences and tastes, will ensure that the quality, style, elegance, and beauty of the clothes and shoes that OfficeElegance will sell will meet the expectations, tastes, and preferences of the targeted clientele.

Further, James O’Connor have worked for Levi Strauss, a jeans manufacturing company at a time when they launched they own online e-commerce website, where he played a major role in ensuring that their site averaged five hundred thousand hits per month, will be pivotal to the success of OfficeElegance’s own e-commerce website. Most importantly, his experience will go a long way in assuring the satisfaction of customers, particularly with regards to online shopping experience.

In fact, OfficeElegance will introduce on the website, a component that will enable customers to measure clothing; it will be fun and interesting to use and will eliminate the confusion that customers have with regards to whether or not the clothing will fit. This will go a long way in improving customer experience on the website, their satisfaction, and will reduce return of goods.

Another strong competitive advantage that OfficeElegance has is its contracts with third-parties, Ted Clothing Company and Lambretta Shoes Company, both based in Boston, Massachusetts, which will produce and deliver/ship all the garments and shoes for OfficeElegance, respectively. This will ensure that production costs are low, as well as reduce OfficeElegance’s overhead costs.

5.2  Marketing Strategy

The marketing strategy that OfficeElegance will employ is a rather simple one; it entails extensive online marketing on social media sites, Facebook, LinkedIn, and Twitter, and on online fashion blogs and magazines. OfficeElegance will also embark on extensive SEO, search engine optimization with key words targeting its office wear brand so as to improve its ranking on search engines. Additionally, traditional marketing on fashion and professional magazines, using brochures, and events, will also be considered. These will introduce its products and the website to potential clientele.

Further, OfficeElegance will offer its customers a 10% discount on all purchases over $70 for the first 3 months. Similar discount offers will be offered on strategic periods throughout the year. For purchases exceeding $500 dollars, OfficeElegance will offer free movie and dinner vouchers.

5.2.1  Pricing Strategy

A key feature of OfficeElegance’s pricing strategy is that it will pass on to its customers, most of the store mark-up, by offering reduced and competitive prices for clothing. However, this will not negatively affect OfficeElegance’s sales profits.

5.3  Sales Strategy

OfficeElegance will develop and launch a marketing and advertising campaign worth $700 targeted at the core clientele group, office going men and women aged between 18 and 24. The campaign message will focus on introducing and informing consumers of OfficeElegance’s comfortable, beautiful, durable, unique, and elegant office. The message will be, “Comfort and Elegance in Office wear”. The attractive logo and breathtaking, intuitive slogan will be displayed all the ads and marketing campaign materials. It will approximately take 6 months for OfficeElegance to build up its sales to the point of making profits. As had already been mentioned, discounts and promotions will be offered at different times of the year to build initial awareness of the website and maintain customers, through loyalty rewards.

5.3.1  Sales Forecast

Sales for both men’s office wear and women’s office wear are expected to steadily increase in the first year. The focus for sales shows that in the initial months, the sales will be low; however, as the discounts and promotions offered at different times of the year to build initial awareness of the website and maintain customers, through loyalty rewards, begin to take effect, which will be approximately after the first six months, the sales will pick up with the increase in customer base. This, as has been projected will be at a time when OfficeElegance will have started reaping some profits. After the first year, OfficeElegance’s sales are expected to increase by about 30% into the second year. The owners are optimistic that they will be able to maintain the steady growth even into the third year.

Table 5‑1: Sales Forecast

Chart 5‑1: Sales by Year

6  Management Summary

The design, development, administration, and online marketing of OfficeElegance’s website will be handled and managed byJames O’Connor, who will also be in charge of managing the marketing team. The clothing and shoes design will be managed by Sherry Brandt, who in addition, will also be in charge of monitoring and production of the designs by Lambretta Shoes Company and Ted Clothing Company.

6.1  Personnel Plan

Besides the two owners Sherry Brandt and James O’Connor, OfficeElegance will require additional personnel; initially a staff team of twelve members will be required. However, this is expected to grow as the company will continue to grow and solidify its customer base.

• Two Web administrators
• One accountant
• Office manager
• Four member marketing team
• Four member design team

Table 6‑1: Personnel Plan

7  Financial Plan

The following subsection illustrated the projected financial plan for OfficeElegance

7.1  Break-even Analysis

OfficeElegance’s break-even analysis is not based on fixed costs that otherwise would only be theoretically significant if the business was closing, but, it is based on re-current or running costs, which the business will incur to continue operating. The fixed costs that are not included in the break-even analysis include marketing costs, payroll, utilities, and rent.

Table 7‑1: Break-even Analysis

Chart 7‑1: Break-even Analysis

7.2  Projected Profit and Loss

The chart and the table below are the projected profit and loss for OfficeElegance for the first three years.

Table 7‑2: Pro Forma Profit and Loss

Chart 7‑2: Yearly Gross Margin

Chart 7‑3: Yearly Net Profits

8  Bibliography

• Belew, S. & Elad, J., 2009. Starting an Online Business All-in-One Desk Reference For Dummies 2nd ed., Indianapolis, Indiana: John Wiley & Sons, Inc.
• Carroll, J. & Broadhead, R., 2001. Selling Online: How to Become a Successful E-commerce Merchant, Ontario, Canada: Dearborn Trade.
• Schneider, G., 2008. Electronic Commerce 8th ed., Boston, MA: Cengage Learning.

1. Current Situation

Current Performance

Delta airlines has been in operation since 1924 where it began as Huff Daland Dusters, a crop dusting company. Its performance has been splendid. It has become efficient since with flights to more than 57 countries. Hartsfield-Jackson International Airport is the largest operating hub under delta airline. In addition, it has four other hubs in full operation in U.S cities. It is estimated to be the second largest airline in the world.

In 2008, it made intention of purchasing Northwest Airlines known thus creating one of the largest airlines in the world. The traffic merger was $2.8 billion.  In addition, by October 2011, Delta was named the second largest airline with Continental and UAL Corporation merger (Datamonitor, 2010). For the companies that are most admired in the world, delta appeared in the top 100 scooping the 84^th position. As a result of competition, high price of fuel and effects that the travel sector experienced, delta airline had debt amounting to over $20 billion in 2005. This led to its bankruptcy. Furthermore, in 2007, it made great strides and solved most of its debts thus gaining profits.

1.2. Strategic Posture

1.2.1. Mission Statement

Delta airlines’ mission is to ensure fair treatment of employees by the management, those who are directly or indirectly in business operational environment, and customers exist as a family unit.  Delta exists to positively influence the society and customers in a bid to achieve both local and global good. The backbone of this mission is that fair treatment of the involved stakeholders enhances a better and a more profitable company. Customers’ satisfaction is the main aim of Delta airline though the transcendental finality is to acquire new customers.

1.2.2. Objectives

Delta is made up of people of various backgrounds, faiths, cultures, education, sexual identity, gender preference, family status, regional areas, citizenship, and contact types, as well as social history, expertise, and awareness. It is a strong sponsor of civic groups that concentrate on fitness and societal well-being. Delta Airlines, for example, has supported the American Cancer Society, the Carter Foundation, Breast Cancer Centres, the Network for Children’s Miracle, St. Jude Children’s Hospital, Humanity Habitat, among several other organizations (Datamonitor, 2010).

Delta is also good at assisting community-based organisations. For example, Delta airlines has a relationship with museums that educate, encourage, and exhibit people in order to make them relevant and contribute to the betterment of the community. Such collaborations include: The Tribeca Film Festival, the National Black Arts Festival, the Atlanta Symphony Orchestra, the Minnesota Orchestra, the High Museum of History, the Fox Theatre, and the Guthrie Theater are only a few of the current partners (Datamonitor, 2010). The goals are in agreement with one another, and they fit well with the mission and the surrounding community. Delta, for example, participates in cultural programs in order to accomplish one of its missions.

1.2.3. Strategies

Delta Airlines is a corporation that aims to foster a community that embraces its employees at all levels of the organization. Furthermore, the top management recognizes any degree of contribution from all stakeholders. The management has also established a diversity inclusion strategy in order to ensure mutual respect between people and annual progress review. Community involvement is a vital tool to achieve maximum satisfaction and achieving goal. Delta airline has stood out in acknowledging all the stakeholders as part of its missions and objectives.

1.2.4. Policies

Delta policies exist to enhance its mission: maintaining profitability, naming shareholders, the company’s quest to transform, expand and progress. Thus, the company must invest in ways that adapt to various varying market needs and come up with changes that are can sustain the business. Delta thus makes the decisions that best suits the firm as they continue to evaluate the employees, the environment and customers. The internal and external environment is thus evaluated to identify the weaknesses, opportunities and threats as one of its policy in the operational environment. Under the above three components, the firm can make a step towards achieving a better strategy that can lead to a competitive advantage and in the long run ensure that the mission are achieved (Airlines, 2000).

The current objectives, policies, strategies and mission try to reflect the end result at the long run. It is clear that the analysis above reflects international cooperation globally since Delta airlines’ prime performance is not only a domestic but also a global scale

2.0. Corporate Governance

2.1. Board of Directors

Delta airlines board of directors include Richard H. Anderson, Edward H. Bastian, Roy J. Bo stock, John S. Brinzo, Daniel A. Carp, David G. DeWalt, William “Bill” Easter, Mickey Foret, Shirley C. Franklin, David R. Goode, George N. Mattson, Paula Rosput Reynolds, Kenneth C. Rogers, Kenneth B. Woodrow. The board usually has four regular meetings annually, special meetings, and meeting regularly without having the top management. They usually serve for a period of three years

Furthermore, the board is highly convicted that good corporate governance is an important entity in enhancing and improving the current framework thus the board discharge the duties effectively. In addition, the board has invested in corporate governing principles that are related to its operations, structure and function. The board of directors are people with necessary skills in achieving the goals and objectives of Delta and not necessarily external or internal members. There are selected on the basis of international background, acumen, experience, operational experience, skills, judgement and character (Datamonitor, 2010).

The board do not necessarily own stock but they believe that the Officers in the executive should have a common stock to streamline stakeholders’ interest with their personal interests. Thus, they have incorporated procedures for the executive. Individuals not subject to the executive are required to attain a level of ownership within the stipulated period of five years. Stock is in different classes where a person attains a greater level of ownership as a result of pay increase or promotion is subject to higher ownership. Board members bring wealth of experience in Delta airlines. For instance, they are representatives of all the stakeholders to achieve returns that endure for a longer time. Furthermore, they are involved in solving matters to do with the stakeholders, customers, employees/ government, suppliers and the society (Datamonitor, 2010).

They exist to monitor progress provide advice to the management and ensure that the corporate standards are followed. Since the international background is needed and connections, the board members are required to have international experience in order to be effective in their international operations. In this case, Delta airline is an international company and thus international experience for board members is a requirement. The directors are involved in strategic management although not directly. They are active in implementing what has been suggested by the Top management to avoid conflict of interests. In other words they are useful in directing what the top management has put in place (Airlines, 2000).

2.2. Top Management

The top management is composed of skilled and experienced individuals that assist in the operational environment of Delta airline. Corporate governing body evaluates the individuals in terms of expertise, background, knowledge, and style. Their chief characteristics include operational experience, international background and experience. Furthermore, the top management consist of very knowledgeable individuals with excellent international relation skills that are useful when undertaking international operations (Commission, 2003). The executive and the top management are two separate entities. The executives is part of the management since they delegate on what, and how things are done and also delegate duties to the board of director.

Over the past few years, Delta airline has been making tremendous strides in profit making. However, in 2011 terrorist attack in Washington DC and New York resulted to reduction in the number of flights in the air travel by almost 15 percent (Commission, 2003). This resulted to a great loss record in finance in 6 years. The management in this case is responsible for the performance since they have been trying to streamline their operations by selling their 40 percent reservation since early 2003.

Delta airline has enjoyed a period of ethical governance since the time immemorial. The top management exists to make sure that there is a sustainable and profitable firm governed by various ethical guidelines steered towards achieving the business principles that were established first in early 1940s by the founder and the CEO, C.E. Woolman. In full operation, there have been 13 operating managers. Each manager is chosen on the basis of operational experience, judgment, expertise, international diversity, and character. There are internally hired to give a unique business and management background (Commission, 2003).

The top management is responsible in making decisions and strategic operation that are significant to the well being of the company. For instance, the top management has established a systematic approach to managing delta airlines strategically in terms of the number of airplanes, global diversity all over the world, cargo, customer relationship management and air travel. Furthermore, they are involved in making of the strategies by ensuring that the board members are directing the policies and strategies that they have made.

The level of interaction for delta airlines top governance resonates well especially bearing in mind that employees and board of directors are part of their strategic mission to ensure a well developed airline sector. It aspires to cultivate a community that welcomes all members of the company at all stages of service. Furthermore, the top management recognizes any degree of contribution from all stakeholders. The management has also established a diversity inclusion strategy in order to ensure mutual respect between people and annual progress review (Datamonitor, 2010).

The top management invests in Code of ethics to ensure that the decisions are ethically made for all the stakeholder of the company. The code is further intended to guide the directors in their quest to deal and recognize work ethics and ensure that ethics becomes part and parcel of the company. This further promotes accountability and honesty as a culture that steers it even higher. The stock in the management process plays a pivotal role in compensation of the executives. For instance, when an executive goes bankrupt, the level of stock is used to compensate him or her. In addition, in case of poor health, accidents, poor family health, the management reviews the executive stock for the past five years and if he/she owns a viable amount, then the management uses the review to compensate him (Airlines, 2000).

The top management of delta airline is sufficiently skilled. The way they choose new managers is a clear indication of viability and sufficiency in leadership. For instance, they chose someone with respect to the background management experience like international relations, expertise, style and many other excellent qualities thus they are sufficiently skilled

3.0. Human Resource Management (HRM)

Delta airline or rather the entire airline is commercially competitive. In this regard, individuals, organizations, customers, and employees must be very competent. The end result influences the organization competitiveness, structure, culture, and the operational environment. HRM audit report carried in 2011-2012 financial year has got data on delta airline (Airlines, 2000).

3.1. HRM strategies, Objectives, programs and policies

HRM strategies are the overall plans that results to the actual implementation of certain HRM areas of function. In Delta airlines, the HRM strategies provide guidance in decision making process. The strategies can be divided into four main components: people, culture, resource systems and human organization. The top management influence the success or the failure of a company’s goals. HRM plays a pivotal role in selecting new executives by drawing analysis from previous success in staffing.

The airline industry is a very competitive industry. For this matter, airline culture I one strategy that cannot be replicated so easily. HRM is therefore a set of procedures: i.e. recruitment, appraisal, training, motivation, development, sourcing and selection, and rewarding individuals through correct observance of industrial relations.  The definition above is important in order to select a culture that evaluates, interact, compensate and enriches the employees. Seal and Kleiner argues that good management labor, communication and chief executive officer style are very vital management skills (Airlines, 2000).

Communication is a result of corporate arrangement, which means that employers and workers have a positive partnership. Delta has four major HRM priorities that revolve around culture, roles, people, and organizations in order to ensure productivity and efficacy, as well as to ensure that workers are kept, society standards are preserved, and ethics are upheld. The new HRM tactics are merely mentioned to achieve efficiency since they were attempting to rebound from and achieve reduced costs in order to restore their strategic edge in consumer care and employee relations. They might succeed in the airline industry if they concentrated on leadership.

The objectives fail to reach the consistency level of Delta though for the mission there is an interrelationship existing between thus we can see a consistent but not a sound outlook with the internal and external environment.

4.0. Analysis of Strategic Factors (SWOT Analysis)

Delta Airlines is among the domestic airlines within USA. The company has been able to offer services to more than 378 destinations worldwide within 66 countries. The company merged with the Northwest airlines to enable it improve its services to customers as well as achieve the strategic objectives. Nevertheless, global economic recession hinders the ability to sustain and achieve profitability (Airlines, 2000).

Strengths

• Is a strategic merger: the company focuses on expanding its business, and this has seen it merge with the Northwest airlines. The merger deals with passenger and cargo transportation, and this became a subsidiary of the Delta Airlines.
• International alliances: The Company has multilateral and bilateral marketing alliances with other foreign airlines. This enables it to improve its access in the international markets such as KLM Dutch Airlines, CSA Czech Airlines and Alitalia among others.
• Consistent top-line growth: The company forms the world’s largest airline, and despite the slowdown in world economy.

Weaknesses

• Overdependence on North American Market: the company has been depending heavily on North American markets where the company derives most of the income. Overdependence on one geographic region increases the susceptibility to economic and political factors of that region. This can hinder the effort in top-line boost.
• High indebtness: the company has been witnessing high debt obligations in FY2008 recording the long-term debt of $15,411. This has reduced the ability of the company to use the working capital and any other general requirement.

Opportunities

• The aircraft maintenance in the world: there has been dramatic growth and changes in maintenance repair and the overhaul market.
• Recovery of airline industry in US: there has been increase in airfreight by 10 percent. There has been prediction cargo traffic worldwide will increase an annual rate of 5.8 percent. The company has been able to generate revenues from both local and international markets.

Threats

• Intense competition: the airline industry is very competitive in terms of routes, fares and other services. The domestic routes are prone to competition from the existing and new carriers. The company has been facing competition from hub airports from Atlanta. The intense competition pressurizes operating margins in delta.
• Disease pandemics: some contagious diseases affect the passenger freights. For instance, the swine flu in 2009 affected aviation industry significantly.
• Global economic crisis: the airline industry has been adversely affected by the economic downturn as a result of oil prices volatility and credit crunch. This makes the industry to be highly cynical with the level of air travel correlated with global economies. This has affected the company and hindered its ability in achieving and sustaining profitability (Commission, 2003).

5.0. Analysis of Internal and External Environment

5.1. External Environment

5.1.1. Social factors: the habits of people influence their travelling. The airline hosts people from different income levels to enhance customer satisfaction. The company therefore balances its clientele in their marketing mix strategy.

5.1.2. Technological factors: advancement in technology has provided new opportunities to the airline industry. Such service includes online booking and online enquires.

5.1.3. Forces Analysis of Delta

• Potential entrants: entry into the airline industry requires huge capitals. Other challenges for new entry include increased government restrictions and securing the landing rights among others.  
• Suppliers’ bargaining power: Boeing and Airbus dominate the industry and control over 92 percent of entire market. This reduces intensification of the industry and creates rivalry. Shifting to another supplier may not be easy.
• Buyers’ bargaining power: buyers within the airline industry have low bargaining power due to high costs involved. The threat credibility in the buyer power comes with innovative ticketing.
• Threats from substitutes: due to the increased efficiency of other means of transport, airline travel is gradually decreasing. For instance, electric rains are cheaper and very efficient means of transport.
• Existing rivalry: there has been increased rivalry in terms of routes, hubs and airports. Such factors incorporate low returns due to increased competition.

5.2. Internal Environment

5.2.1. Products: the company is providing harmonized cargo services taking the best characteristics of carriers in order to establish best rates. These include the delta Care, Safe Transport, Live animals and perishables among others.

5.2.2. Sales distribution: the company is facing challenges from the unprecedented declines in revenue as well as the increased volatility in fuel prices. This has seen the decrease in revenues.

5.2.3. Location: the company has been able to operate in leading trans-Atlantic joint venture with other leading airlines worldwide

5.2.4. Image: the company is committed in taking care of the environment and enhancing the social responsibility.   The industry aims at advancing the global diversity.

5.2.5. Internal politics: Delta promotes diversity through appreciation, leveraging and recognizing the different culture, languages and political perspectives.

6.0. Strategic Alternatives and Recommended Strategy

• The industry has been keen in enhancing self sufficiency to reduce overdependence on North American Market. The company aims at forming alliances with other established airlines in the world. Considerable plans have been established to partner with China Airlines, CSA Czech Airlines and Alitalia among others (Datamonitor, 2010).
• To regain a strong competitive position, the company relies on its expertise through their bankruptcy chapter 11 that is considered to be among the most successful and the largest in US.
• The company has been expanding its international operations by flying in international cities.
• The company is improving the management style so as to enable it withstand during the periods of economic crisis. The company strategy is to have a strong leadership team.
• The company has established a fleet of jetliners to maintain their competitive advantage. Also, merging with other airlines enables it to acquire new planes. This has made it possible to do away with the old ones and increase the number of their airplanes.

References

• Airlines, D. (2000).  Delta Airlines. New York, NY: Vault.Com.
• Commission, A. (2003). Concession Audit of Delta Air Lines, Inc. San Francisco: Office of the Controller.
• Datamonitor (2010). Delta Airlines Inc. Retrieved From:
• http://ezproxy.minotstateu.edu:2057/ehost/companyinfo?hid=104&sid=3fed4911-a304-4583-8111-e0d9b218b781%40sessionmgr113&vid=5

The market of eBay has been dominated by auctions as a way of market mechanism, as eBay has been the trend setter for this mechanism. Auctions bring the buyers and the sellers to the eBay platform following competitive procedure. The eBay auction initiative has changed millions of prospects into customers, making their shopping experience cherishing and interesting (Wei and Lin 1). Nevertheless, off late trend has shifted from open auctions to posted-price. Proprietary eBay data indicates how eBay sellers highly prefer posted-price sales to open auctions. From sellers’ perspective, this preference for posted-price over auctions is endogenous. There is ambiguity over market mechanisms’ behavior; how participants are affected and sales materialize, as the trend of posted-price is initiated by sellers. The reason of this compositional changeover in the products being sold cannot be explained as evolving or causal. Rather profits from auctions started decreasing. Buyers also started showing disinterest in the auction market mechanism besides the shrinking margins of the sellers that prompted a shift to the trend of posted prices. Einav et al. (1) find the reason of reducing margins more important for the changeover in online market design from open auctions to posted price. Although the shift has taken place but still auctions are preferred in certain sales by the online sellers; these are prevalent, as sellers prefer them to posted prices for distinct items sales.

The market of eBay connects sellers and buyers on the online platform, presented through its highly interactive website. It is a market with no fixed prices for ever and information is available at just the click of the mouse; both buyers and sellers are bargaining continuously for a better transaction from their own perspectives. eBay is the perfect example of selling goods through auctions, which it has been doing since 2001, propelling its growth through the development of proxy bidding. It allows buyers to place a maximum bid while the machine responds to third-party offers up to that amount. Bidders’ offline or physical appearance in real time is not needed for taking part in the ever-changing business scenario for auction bidding, which decreases transaction costs (Einav et al. 1).

Starting in January 2003 and finishing in January 2012, Figure 1 illustrates the historical pattern of online trading, which has shifted drastically, but has switched toward auctions owing to falling sales since January 2008. As seen in the graph, the sudden drop in the share of active listings can be attributed to the decision in September 2008 to allow “good until cancelled” posted price listings, which culminated in a drop in the share of listings and transaction volume devoted to auction transactions to below fifty percent. The sharp drop in 2008 reflects a change in eBay policy that rendered listed price listings more cost-effective and enabled them to be available for longer periods of time. The graph lacks a number of other sales models, such as “hybrid” auctions that qualify for a pre-emptive posted price discount, or posted rates with the option to create a dropping bid. There is a decline in the amount of listings and purchases in these groups (Einav et al. 1).

A related design for Google searches containing the words “online auctions” and “online rates” as seen in Figure 2. This is an intriguing industry design, not because of the exponential development of online shopping, but because of the selection of sales channels and the rivalry within them (Einav et al. 1).

Sufficient data is available to differentiate opposing causes for the changing online market trends, as taken from eBay. One reason of this shift can be corroborated from the changing composition of online sellers or in the products being showcased online. eBay example, at least, does not corroborate the shift from auctions to posted prices; rather the shift has happened within the routine groupings of sellers and goods to be sold. The next probability is a shift in consumer tastes and choices (Einav et al. 1).

Other extended reason attributed to reducing trend of the auctions as a market design by eBay has been the reducing price finding benefits of auctions across time because making comparison between different prices has became easier, or another associated reason is that higher competition has reduced profit margins of the sellers (Einav et al. 2).

There is sufficient empirical data over decline of auctions. Earlier, auctions were the ideal medium for selling distinct and idiosyncratic items, particularly by fresh sellers. Decline in auctions cannot be attributed to compositional shifts, as there are very small changes in the selling pattern of various cohorts of sellers. It reveals that rather than the compositional change in sellers, it was the shift in sellers’ incentives that has significantly affected the market design change. Data reveals that eBay’s marketplace turnover was 9.3 billion dollars in 2001, which reached to above $67 billion as of 2012. Distinct items sold on eBay used to be like its first item, which was a broken laser pointer. In the year 2002, eBay started permitting sellers to name items at posted prices selecting the “Buy it Now” (BIN) format. Figure1 above reveals that the changeover from auctions to posted prices was smoother (Einav et al. 4). Two interesting features emerge from the eBay marketplace related to pricing mechanisms, one is the presence of both formats at a time – auctions and posted prices, and the second is what type of sellers choose auctions and why. No doubts, the reasons behind are visible. It is due to increasing competition online between companies like eBay that facilitates buyers to compare prices in no time, prompting sellers to choose the posted price option because the online retail is highly competitive market. Another reason is that customer demand for idiosyncratic items is relatively little. Who would like to bid for unique items like a broken laser pointer? Demand of distinct items is therefore, nominal only. Distinct and vintage items can carry higher price tags, and are preferable to be sold through online auctions. Because items of daily use, such as clothing, accessories, and cosmetics are sold by many sellers competitively, their prices are posted. There is no logic in selling them through auctions, as sellers won’t succeed in selling them. On the contrary, if rare items of historic importance are listed through auctions, people of special trait and taste or pursuing a hobby of collecting distinct items would buy them, such as the spinning wheel of Mahatama Gandhi could fetch a seller millions. A seller would prefer and certainly put such an item on auction, setting a minimum bid, but any used item otherwise won’t even get sold through posted price. This is the difference between items to be auctioned and items to be posted price. Unique items have no duplicate, such as a lock of teen heartthrob Justin Bieber’s hair won’t have a duplicate. Data reveals that in the year 2009, eBay selling of individual listings was nearly 75 percent through auctions relatively to 57 percent via duplicate sales (Einav et al. 6). It derives that market for auctions is still there but it is on the reducing relatively to posted-prices marketing of goods.

The trade-offs between auctions and posted rates, as well as market selection decisions, are determined by a variety of variables, including declining uncertainty about an item’s value, increased market competitiveness, and increased demand for comfort; these factors benefit posted prices. Nonetheless, it resembles the simple data architecture, suggesting a strong process through which auction listings may raise selling possibilities while decreasing prices. An examination of auction and posted price transaction returns at different contact points reveals the challenge of accounting for differences between the types of goods offered via auction and posted price, as well as the types of retailers conducting online sales. Also after taking into account their approximating characteristics, products listed by auction may be quite different from products listed by posted price. The rating of the free-text product information, the attractiveness of posted photos, and the seller’s brand are all potential stumbling blocks. Furthermore, details on object peculiarities is lacking, except for a tiny amount of products with catalogue identifiers; only the seller-selected listing title and a smattering of divisions have detail tags (Einav et al. 2).

Sellers arbitrarily list the same items, either at the same moment or over time, when modifying their selling format or other price metrics, which is a typical feature of eBay’s website. Where a vendor lists the same commodity by auction and by posted price, certain instances from the eBay sales dataset from 2003 (when auctions were the most prevalent sales design) to 2009 (when posted prices had lagged behind the prevalence of auctions) provide a “apples-to-apples” distinction. It depicts the expansion of a large “auction discount.” In 2003, auction rates were on average 5% higher than equivalent advertised transactions. The discount had grown to over sixteen percent by 2009. The drop in price cannot be due to dealers decreasing their auction set rates. In reality, as compared to equivalent posted rates, reserve prices usually improved. Furthermore, all consumer formats suffered a decline in growth rates over time, but not in a particular manner (Einav et al. 2).

Seller incentives are essential since they use their versatility to set their posted rates or reserve prices. Changes in values between collections of identical combinations of selling probability and sale price that can be realized with different mechanisms can be used to quantify this. Market curves at the “listing-level” should be used to describe the metrics. By contrasting the measurements from 2003 to 2009, it is apparent that listing-level demand has declined for both formats, with auctions suffering a greater decline. This demonstrates that sellers prefer the price posting format to auction, especially in categories like collectibles, jewelry, and clothes, where products are comparatively distinguished. The high level of listing rivalry seems to have played a bigger position in categories like electronics and computers, which have seen a similar shift toward posted pricing (Einav et al. 2).

Other proof of shifting buyer appetite is found by Einav et al. (3), as compositional changes in the community of customers may not seem to have affected the higher demand for posted rates. Nonetheless, there is substantial variation in the category of customers at every contact stage. Buyers who shop a lot on eBay seem to be bidding more on auctions for great deals during bidding. This means that buyer diversion could be a factor in sellers sticking to the auction model for products that aren’t especially uncommon. In this viewpoint, the logic of auctions moves away from price and toward the usage of discounts and other discount strategies used in brick-and-mortar shops. Platform payments and the rapid speed of industry adaptations may also explain the hybrid usage of sales formats.

Other academicians for study of the pattern for price posting are listed by Einav et al. (4), like Hammond (2010), who stresses the option between auctions and price posting in the online selling of compact disks. Sellers with a higher opportunity cost prefer posted prices, according to his analysis, and seller heterogeneity can explain the prevalence of both mechanisms. The usage of auctions and price posting on the eBay website for the selling of Major League Baseball tickets is examined by Bauner (2011), who finds that not only opportunity costs, but also plurality among consumers, who are divided into “fixed price lovers” and “neutrals,” contribute to the prevalence of auction and fixed price sales. Sweeting (2012) argues that auction rates are usually lower than posted price levels in a separate study of Major League Baseball tickets that reflects on shifting price setting. Finally, Ariely and Simonson (2003) and Malmendier and Lee (2011) equate auction prices to previous posted prices in order to understand that auction prices may be unnaturally high, and they discuss whether bidding trends can preclude traditional economic models from forecasting outcomes.

Regarding improving the trading organization of eBay (IIMK 545), it should focus on widening it further to secure its share from increasing competition. Since 1999, the marketplace for online shopping started getting competitive with not only startup firms but firms like Yahoo and Amazon, having huge user bases. eBay needs to focus more on expanding the core business of both market mechanisms, auctions and posted prices. It should be willing for more strategic acquisitions. There is still huge potential in the market for antique items for selling them through online auctions for reaping high margins. Actually, equal attention needs to be paid on both market mechanisms for improving the organization’s market mechanism.

Works Cited

• Einav, Liran., Farronato, Chiara., Levin, Jonathan., and Sundaresant, Neel. “Sales Mechanisms in Online Markets: What Happened to Internet Auctions?” April 2013. 29 January 2014. <http://www.stanford.edu/~leinav/Auctions_Decline.pdf>.
• Gopalkrishnan, J. and Gupta, V.K. “eBay: The World’s Largest Online Marketplace”- A Case Study.” Conference on Global Competition & Competitiveness of Indian Corporate. 29 January 2014. <http://dspace.iimk.ac.in/bitstream/2259/510/1/543-549.pdf>.
• Wei, Zaiyan and Lin, Mingfeng. “Auction vs. Posted-Price: Market Mechanism, Lender Behaviors, and Transaction Outcomes in Online Crowdfunding.” November 2013. 29 January 2014. <http://econ.arizona.edu/docs/Job%20Market/Wei_jobmarket_Auction%20vs%20%20Posted-Price_Zaiyan%20Wei.pdf>.

Table of Contents

• Introduction
• Ethics and Corporate Social responsibility
• CSR
• Ethics
• Conclusion
• Works Cited

Introduction

In the era of globalization, multinational corporations have benefitted the world by providing them with products and services that are customized or needed by them. The organisations have not only brought in new technologies, but also elevated the standard of living of people. They also concentrated in spreading employment and wealth in the underdeveloped regions of the world. The corporations have responded to the needs of host countries and met the expectations for social responsibility and business ethics.

Ethics deals with the norms and values of an organisation and judge what is right and wrong for it, whereas Corporate Social Responsibility (CSR) is about expressing those values by applying different programmes and policies. Ethical codes are considered by organisations to help members in understanding the right and wrong decisions that are taken by them (Jennings 47). Maximization of shareholder’s wealth and profit are regarded as the main objective of an organisation. However, the management mainly aims at meeting the expectations of customers and create high value for shareholders. Often, it is noticed that organisations or corporations are engaged in such business activities which affects the community and environment. These have led to the development of CSR activities, which have become the means of sustainability for most organisations.  

The essay highlights the theory of CSR and its impact on the community and society. It also elaborates the importance of ethics in leading an organisation in a proper manner. CSR is a philosophy that assists a company in generating sales in an ethical manner. It also has a positive impact on culture and the climate. The study also depicts the role of CSR practices in contemporary organisational practices.

Ethics and Corporate Social Responsibility

CSR

CSR is characterized as the mechanism through which companies discuss their positions in the communities in which they work. Ethics is the analysis of basic principles that are suitable for making choices after evaluating a course of action. For most businesses, the two terms are inextricably intertwined. It has been observed that in today’s dynamic environment, an organization’s effective activity requires sustainable growth. It further improves the consistency of the goods and services they provide to their clients (Aybars and Kutlu, “Managing corporate performance”).

Corporate accountability may be described as an organization’s willingness to follow laws and legal standards that are designed to benefit society (Nicolau, “Corporate social responsibility”). In today’s management activities, notable degrees of understanding between successful and ethical organizational practices are often identified. In today’s environment, customers and shareholders who recognize the value of CSR are focused on integrating corporate processes with social standards, resulting in effective management practices. CSR is a methodology that helps a company evaluate its corporate practices and their effect on the environment and culture by open and responsible decision-making.

According to the World Business Council for Sustainable Growth, CSR is a means of achieving sustainable development by contributing to society. Health and safety, corporate governance and integrity, environmental stewardship, civil rights, and economic growth are also examples of CSR practices. As a result, it focuses on aspects such as societal and community engagement, corporate philanthropy, growth and investment, consumer loyalty, employee volunteering, anti-corruption initiatives, anti-bribery, and commitment to just market standards (Hohnen and Potts, “Corporate social responsibility”). Business activities play an essential role in job and wealth creation but the main concern of the management is efficient utilization of capital. Thus, it can be inferred that CSR activities can assist in well-utilization of capital and human resources and also, helps in employee retention. The company also enhances its brand image by undertaking different CSR activities. The company which recycles their products aims at reducing their capital expenditure and also, takes care of the environment. It is also noticed that customers are attracted towards those companies which practice efficient CSR activities.

The companies which undertake CSR activities are well aware of the fact that the success of the deeds is dependent on the implementation process.  A particular business, thus, has both commercial and non-commercial responsibilities which are of equal importance. The non-commercial responsibilities that are undertaken by the company include the well-being of community, society, environment and government. The stakeholders are also held important, besides the shareholders and investors.

The important concept of The Triple Bottom Line approach, proposed by John Elkington in 1997 in his book, Cannibals with Forks: The Triple Bottom Line of 21st Century Business became very prominent in United Nations. The author has explained the term as the usefulness of social responsibility for development of economy, policy makers and businessman. The CSR activities have become important for justifying activities of business and practices to society in general and also, to the stakeholders. It has been noticed that in the last few decades, many organisations have engaged themselves in undertaking a wide-ranging social activities and have acted as a responsible citizen. (Norman and Carter 364).

According to the author, Smith (1999, cited by Lee and Newell, “Influence of the corporate social responsibility factors and financial factors on REIT performance in Australia”), the budget for social activities are increased so as to improve the business activities. Most of the organisations employ CSR activities, which help in developing plans that will satisfy the demand of stakeholders and shareholders. The CSR activities that are employed by organisations are directly connected with their respective social, financial and environmental performance. The important investment in the innovative activities has assisted the companies for drawing profit from it. Under any social structure or situation, accountability has been referred to as the behaviour that is obtained from an individual. Thus, the concept is very different from accountability. Some tools are used to understand the difference between CSR and accountability (Chen, “The major components of corporate social responsibility”). The effective implementation of the CSR tools will meet the demands of shareholders and stakeholders with respect to certain ethical issues.

The main objective of CSR towards enhancement of organisational effectiveness is to treat all the employees fairly and equally. They are dealt with integrity and according the basic human rights, for sustaining a suitable environment in the future (Moir, “What do we mean by corporate social responsibility?”). It is seen that there exists very limited information on the process undertaken by corporate decision makers for settling the difference between the private goal and public interest. The limitations of the CSR concepts for aligning the personal goals and business goals are not understood accurately. Various difficulties are encountered while utilizing documents of the company and also, for the construction of the detailed approach and activities of the business. The CSR approach is relative in nature and has an objective base (Galbreath, “How does corporate social responsibility benefit firms? Evidence from Australia”).  It is also referred to as radical approach. There are other CSR approaches that help in developing the continuums which actually focus on incorporating business activities within the societal activities. Organizations have also developed various measures that deal with the societal and strategic needs, community and environmental needs and thus, have led to increase in expenditure of the organizations. It is also observed that the small and medium organisations do not have adequate resources for developing or implementing CSR approaches and tools.

When a company feels the need for improving the societal performance, it undertakes social activities like, providing donations to the charities, organisations of the charitable associations and sponsoring various activities (Crane and Matten 256). The company, apart from laying importance on some specific results, also needs to conceptualize managerial responsibility and thus, takes decisions accordingly. The decisions taken should have the ability to enhance the performance of the company. The scope of CSR approach is very wide and it lays emphasis on the support of the community, innovation, diversity, job security, employee security and job involvement. The CSR approaches undertaken by the organisations have specific affect on the evaluation of the products and consumption patterns.  The reason can be depicted as the relationship that exists between the business companies and consumers. The consumers are highly affected by the tangible and acquirable aspects of a company. When a company execute evaluation process for a product and also, manufactures products which are customized, then it is said to have fulfilled the needs and demand of the consumers for delivering exemplary societal performance. This has a very moderate affect on consumers, since evaluative judgment of products has articulated standards for judgment, implied to the contexts of the decisions. The decisions regarding product development requires sufficient suggestion that are made according to the CSR approach. The companies are developing products which are environment-friendly along with the ability to meet the needs and wants of the consumers (Lee and Newell, “Influence of the corporate social responsibility factors and financial factors on REIT performance in Australia”).

Ethics

The corporate responsibility has been realised that it has risen from business ethics. So, it has few dimensions which are elaborated below:

1)Good Governance: The corporations have their own division of control and ownership. The investor relies on the manager or CEO for managing the business on their behalf, as they are also a part of the business. It indicates the fact that the agent principle relationship exists very strongly between the manager and investor. It, thus, helps in forming room for asymmetric information which means that a gap is always present between the information transferred between investors and managers. Hence, the situation demands good or corporate governance which mainly implies transparency. The shareholders are to be provided with true and complete information. There should be lucidity in the processes so that the managers do not have the chance to mismanage the asymmetric information. Thus, the main objective of good governance is to possess a system of control so that the owner’s interests are protected through vital information. 

The case of Nike can be set as an example for elaborating the topic. Nike is a household name in the sportswear and apparel industry with their high quality products that cater to the sports enthusiastic fraternity around the globe. For many years down the line Nike has been accused of child labour exploitation and of producing sports clothing under sweat shop conditions by using cheap labour in the countries of Taiwan, Indonesia, China and South Korea around 1970’s. Nike was heavily criticized internationally. Nike stated that it didn’t have control over its sub- contracted factories. As a result of worldwide protests Nike began to monitor all its factories worldwide, installed a code of conduct for all its factories and spent 10 million dollars to ensure that the code of conduct was followed worldwide. This example denotes that when the companies are faced with uncertainties good governance is the only mean to take care of the situation. 

Another example can be cited as the Astonishing Case of Apple.  Everyone had the desire to have an apple phone but many are unaware of the fact that the Apple phone one uses has been made by children slaves who are forced to work day in and out in conditions that increases the chance of having cancer because the children works in unhealthy conditions inhaling cancerous vapours for 10 hours a day, 7 days a week. This is why Apple has such a high profit margin. Apple’s Foxxcon plant possesses dark, terrific and unhealthy working conditions for the workers. The conditions are so grave that Apple had to install anti- suicide nets to prevent employees jump off from the buildings being not able to withstand the conditions inside the factory. The storm began in 2006 and is still continuing today. Recently Apple has decided to look into the matter and has begun efforts to branch out their operations to some other company other than Foxxcon. This led to good governance of the company which changed its operation.

2)Environmental accountability: The corporate social responsibility has other dimensions too, in form of accountability of the business towards environment. The business has interacted with the natural environment for decades and has drawn useful resources from the same. The business has also influenced the surroundings by different actions. So, the business will be accountable for any impact on the environment.

In earlier days, corporations used to dump their wastes in the environment which affected the society and community along with nature. However, with the increasing awareness programs and concerns over depletion of natural resources (fossil, fuel and water), environmental degradation and the concept of global warming, there has been increasing legal and moral pressure on the corporate, for realizing that earth requires preservation in order to prevent the future generation from being negatively affected.

The concept of corporate responsibility is also closely linked with philosophy of sustainable development. It proposes that organisations are obliged for making decisions which are based not only on economic or financial factors, but also on environmental and social consequences of the activities. Therefore, corporate responsibility basically deals with aligning business values with the expectations of the shareholders and stakeholders. It also identifies the commitment of a company which is accountable to the environment and is also responsible for the people, or the society at large. The company should be lucid in its business practices and should not concentrate on profit only. They should also put in efforts to earn profit for the investors too, which will lead to good governance.

The challenges that are encountered for setting the standards of corporate responsibility, which is required for successful running of business, are elaborated below. The issue regarding the setting of international standards is the extent of the approach which is in the form of CSR principles. It can be evaluated that it deals with problems at a general level. 

Setting Benchmark

The main aim of the process is to modify the criteria for assessment. The main problem faced by the top management is to set a benchmark for the standards. The measurement problems should be eradicated firstly. The success is to be measured and the yardstick is also set for eradication of the main challenge.

Merge of the Standards

The standards set for one aspect are not flexible enough to be changed according to the accountability of the environment. The codes that are used for each of the measures are common for the explicit interpretation of the standards. The other problem in measuring the standard is the ISO which is experienced for laying the standards of the physical measures.

Social Phenomena

The physical phenomena are measured and compared in absolute measures. The social phenomenon may have the requirement of qualitative measures. Relative comparisons are more common in that situation.

Transformation

Transformation always indicates radical change in different departments. It is expected that ISO standards will capture the radical changes and complexity. Thus, it complicates the measurement problems.

The Causal Framework

Another dimension is identified to be the casual framework. A casual framework is to be followed in order to make policies. If the framework is not prepared, then the policies are not effective in the real sense.  Thus, there will be a problem regarding the standards being mandatory or plain voluntary. However, it is obvious that the measurable standards are mandatory (Shimp 423).

For the past few decades, the corporate has adopted The Triple Bottom Line Reporting approach. It is an integrated approach for public reporting about the social, environmental and economic results which are done against certain benchmarks. The major steps taken by the company for integrating the different dimensions of business ethics have been elaborated above. The line of thinking primarily originates from the top management of an organisation. A number of external and internal pressures are the main influencers of these corporate leaders in order to address the increasing use of ethics, which will make an impact on the Non-Government Organizations. It has the ability to knock down the impact of corporate accounting scandals like, Enron. The corporate leaders are also influenced for increasing the legislation, increase the growth for socially responsible investments and change the expectations of the employees and customers. The top management is highly responsible for integrating ethical consideration with the decision of the company for managing the base of personal integrity and values of the organisation. The core goal of management is to put the company’s purpose and purpose statement into action, so that they can profit and fulfil the expectations of the customers (Schwartz 165).

The main foundation of ethics is divided into three categories:

Objective: It describes a set of ethical and moral obligations that exists and the needs are respected by the social entities. There is a naturalistic view of ethics that are highly important for human beings.

Subjective: It is known that the social conditions help in constructing ethical and moral standpoints of human beings.

Social Constructionist: It is observed from different theories that ethics are socially constructed, thereby shaping the views of humans and the actions that are build.

The ethical theories are elaborated as ethics of conduct and ethics of character. Under ethics of conduct, there is consequentialism and deontology. Both are about the conduct of a particular person or an organisation. Few major schools in ethics have elaborated the following concepts which relates to the ethics of a particular organisation or a human being.

1) Utilitarian view: It helps in maximising the goods and offers a straight forward method to decide upon the moral rights in the course of action for a particular observed situation. Firstly, the various courses of actions are identified and then the benefits or harmfulness of the actions are judged. At last, the course of action that provides the greatest benefits is selected, after the cost is taken into account. Therefore, the morality of action can be identified by the consequences (Crowther 165).

2)  Religious principles: It explains that certain omissions, actions and prohibitions are morally right.

3) Egoism: It advocates pursuing one’s own end (Jennings 343).

4) Conformism: It explains the need to meet the norms of the group or codes of conduct.

5) Agapism: It explains the ethics which is based on the concern or love for others. 

6) Deontology: It explains that actions are justified by the consequences. The factors, other than appropriate outcomes, are determined by the rightness of those actions (Weiss 234)

Now, explaining the concept of ethics, in terms of organisation, it can be said that the organisation must justify their goals, control methods and practices according to the well-being of the environment and society in order to keep it ethical. The shareholders concept of ethics lies in the fact that a company exists for maximising their shareholder’s value. While the stakeholder’s concept explains that the company is responsible towards its stakeholders. Thus, it is important for both the shareholders and stakeholders (Simpson 356).

Conclusion

It can be concluded that business ethics and corporate social responsibility have immense importance in development of an organisation. Without following the two fundamental concepts, an organisation will not be successful in the long run and can even face challenges (Sims 187). Corporate social responsibility has evolved into the most important component of a long-term sustainability strategy. For long-term viability, the company must consider the interests of its shareholders, the economy, and society as a whole. Ethics elucidates the proper and improper behavior of every individual person, which may impair the functioning of an organization and, in turn, cause societal disruption. Therefore, ethics and CSR both are required for organisational effectiveness and to run a peaceful business.

Works Cited

• Aybars, Asli, and Ozlem Kutlu. “Managing corporate performance.” International Journal of Productivity and Performance Management, 59(3), pp. 229-254. Web. 31 December 2013.
• Chen, Chih, Hung. “The major components of corporate social responsibility.” Journal of Global Responsibility, 2(1) (2011): pp. 85-89. Web. 31 December 2013.
• Crane, Andrew, and Dirk Matten. Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of Globalization. Oxford: Oxford University Press. 2010. Print.
• Crowther, David. Perspectives on Corporate Social Responsibility. England: Ashgate Publishing Company. 2004. Print.
• Galbreath, Jeremy. “How does corporate social responsibility benefit firms? Evidence from Australia.” European Business Review, 22(4) (2010): pp. 411-431. Web. 31 December 2013.
• Hohnen, Paul, and Jason Potts. “Corporate social responsibility.” International Institute for Sustainable Development, (2007): pp. 01-115. Web. 31 December 2013.
• Jennings, Mariane. Business Ethics Case Studies and Selected Readings. Connecticut: South Western Cengage Learning. 2012. Print.
• Lee, Chi, Ling, and Graeme Newell. “Influence of the corporate social responsibility factors and financial factors on REIT performance in Australia.” Journal of Property Investment & Finance, 30(4) (2010): pp. 389-403. Web. 31 December 2013.
• Moir, Lance. “What do we mean by corporate social responsibility?” Corporate Governance, 1(2) (2001): pp. 16-22. Web. 31 December 2013.
• Nicolau, Juan. “Corporate social responsibility.” Annals of Tourism Research 35(4) (2008): pp. 990-1006. Web. 31 December 2013.
• Norman, Jackson, and Pippa Carter. Rethinking Organisational Behaviour: A Poststructuralist Framework.  London: Prentice Hall. 2007. Print.
• Schwartz, Mark. Corporate Social Responsibility: An Ethical Approach. Moorebank: NewSouth Books. 2011. Print.
• Shimp, Terrance. Integrated Marketing Communications in Advertising and Promotion. California: Thomson Southwestern. 2007. Print.
• Simpson, Justin. Corporate Governance, Ethics and CSR. London: Kogan Page Limited. 2013. Print.
• Sims, Ronald. Ethics and Corporate Social Responsibility: Why Giants Fall. Connecticut: Praeger Publishers. 2003. Print.
• Weiss, Joseph. Business Ethics. New Delhi: Dorling Kindersley Pvt. Ltd. 2011. Print.

Introduction

Electronic games that involve human contact with a user interface in order to create visual reactions on video devices are referred to as video games. The word “video” applies to any form of display system that can generate two-dimensional or three-dimensional images. Individuals may benefit from video games as well as suffer negative consequences. Using two posts, Video Games Boost Brain Power, Multitasking Skills by Trudeau Michelle and The Social Benefits of Video Gaming” by Clay Routledge, this essay would compare and contrast the impact of media on audiences. I’ll compare how the two papers react to the effects of video games on both the people who play them and culture as a whole utilizing the topic to subject model.

According to the first post, several scientific findings suggest that playing anti-social video games, such as violent ones, causes people to engage in violent actions and violence. This is because one is deeply interested with these video games and therefore would have to behave in the way in which he plays. Another explanation is that people who play violent video games sometimes associate with the violent protagonists and therefore behave violently themselves. Violent games often reward violent behaviour, when those that engage in violent behavior while playing are rewarded with money, the ability to advance to the next round, or verbal reinforcement, such as “Great shot!” after killing an enemy. This incentive means that the level of aggression rises.

This was shown in a study where boys were shown to be more violent after playing a challenging video game. For instance, “In a study published in the journal of Experimental Social Psychology this year, participants played either a violent or non-violent video game for 20 minutes per day over 3 days. After playing the game, they then played a competitive task in which, if they won, they could blast their opponent with an unpleasant noise. The researchers found that participants who played violent games blasted their opponents in the secondary task for longer, which was interpreted as an increase in aggressive behavior” (Silvia 54).

If violent video games may induce violence and violent actions, than prosocial video games, such as tit for tat games, can also trigger prosocial behavior, according to Clay Routledge, a counselor. Prosocial behaviour is characterized as behavior that benefits society.  This too was proven through a study in which two sets of groups played a prosocial game while the other played a neutral game. The individuals were then tested to see which group would be more likely to help others. They used a violent ex-boyfriend who began to harass the ex-girlfriend in the laboratory. They used two teams to evaluate their analysis, and it was observed that ten out of the eighteen that engaged in the prosocial game intervened and helped the lady being harassed while for the other neutral game team; just four out of eighteen intervened. Violent video games such as “call of duty” “kill zone” or “battlefield” have been identified to make the blood boil for the individuals playing them.

In the second post, Daphne Bavelieris, a professor of brain and intellectual sciences at the University of Rochester, discusses the impact of computer games on individuals. She was able to investigate the impact of violent games on individuals, and she discovered that people who played violent games improved their gaming abilities, which led to improved real-life skills. This is because they were attentive, had great speed in responding to danger situations,  skills in vision as well as being able to multi-task.

Bavelieris explained that, action game players have a better vision then those who do not play because the games enable them to see smaller type sized focus and so are able to improve on their contrast sensitivity which helps them in real life issues such as driving through a foggy area. She also found out that those who play these actions games are more focused and attentive than those who don’t. The gamers are also able to perceive new information that is coming to them and hence are able to effectively respond to this situations and can do various tasks hence are good at multitasking. She advocated parents not to discourage their kids in playing these games as they were very important in developing their real life skills, and that the parents should only moderate the time spent by the children in playing the games in order to manage the effects.

“A new study has found that video gaming can stimulate neurogenesis through growth of new neurons and connectivity in the brain regions responsible for spatial orientation, memory formation and strategic planning, as well as, fine motor skills. Brain volume was quantified using magnetic resonance imaging (MRI). In comparison to a control group, the video gaming group showed increases of gray matter, which houses the cell bodies of nerve cells in the brain” (Freedman 102).

Another brain researcher, Jay Pratt, a psychology professor at the University of Toronto, looked into the disparities between men and women when it came to psychologically manipulating 3-D photographs. The ability is referred to as spatial cognition, and it is a mental capacity used in Engineering and Mathematics. Pratt discovered that women performed poorly in these spatial cognition tests but when a woman with a little experience in playing games was couched on how to play violent games, then she became good in the tests and hence the gender difference would disappear.

Lauren Sergio, a Neurosurgeon, examined the inside of the brain to determine distinctions of non-gamers and gamers. “Skilled gamers mainly use their frontal cortex, according to Sergio’s fMRI studies. That’s an area of the brain specialized for planning, attention and multitasking. Non-gamers, in contrast, predominately use an area called the parietal cortex, the part of the brain specializing in visual spatial functions” (Mattson 231).

From the two articles on the effect on video games to individuals, it is clear that both show that video games are useful to the people playing them. The first one shows that individuals can develop prosocial behavior from playing prosocial video games and be able to help other individuals in the society. For example, when you play a game in which you are helping out hostages to escape from the villains, then in real life you can also help individuals in similar situations of being hostage. Similarly, the second article shows that individuals can develop real life skills such as good vision, great multitasking skills and great attention and focus from playing video games.

By contrast, the first article shows that violent behaviors only lead to aggression and violent behaviors and that nothing good can come from violent games. However, the second article says that violent games help an individual develop skills in reacting to dangerous situations. For instance, being able to focus well so as to kill the opponent the individuals are able to develop the skill of being diligent and being able to react fast enough in tricky situations.

The second article shows that teaching women violent action video games is the best way to reduce gender differences in the spatial cognition as it ensures that women develop the skill as compared to those who do not play. The first article did not touch on the gender differences effects of video gaming.

The first article attempts to equate violent video games to non-violent video games, claiming that violent games are dangerous but praising prosocial sports, while the second article focuses only on violent video games and the benefits they provide on an individual’s brain growth.

Conclusion

In conclusion, it is clear that some people believe that the violent video games are good because they are therapeutic as they enable one to channel anger into harmless channels. However, scientific research on the same indicates that the violent video games increase aggressive feelings, thoughts, actions and behaviors. They games can also decrease the possibility of the active players in helping other individuals or feeling sorry for them. In some other researches, it indicates that playing violent games help individuals increase eye-hand coordination, and this has been proven by various studies. In my own opinion, I think that in order to obtain benefits from violent games, the games should be designed in a different non- action manner and hence similar benefits will still be obtained.

Works Cited;

• Desilet, Gregory E.. Our faith in evil: melodrama and the effects of entertainment violence. Jefferson, N.C.: McFarland, 2006. Print.
• Freedman, Jonathan L.. Media violence and its effect on aggression: assessing the scientific evidence. Toronto: University of Toronto Press, 2002. Print.
•  Mattson, Mark Paul. Neurobiology of aggression understanding and preventing violence. Totowa, N.J.: Humana Press, 2003. Print.
• ßwald, Silvia. Determinants of prosocial behavior: moral prototypes, social norms and prosocial video games. Aachen: Shaker, 2008. Print.

Abstract

The physical changes that come with aging, physical incapacitation and ill health present challenges to the sexual activity of many people, and for this reason, the development of a mental sexual helmet will eliminate some of these problems. The basis of the technology is the mental nature of sexual intercourse, where different studies have shown that sexual stimulation and satisfaction primarily take place mentally. The technology will work using the concept of brain-to-brain interfacial connectivity, where the brain of one person controls the stimulation of the brain of the other, triggering the desired sexual arousal and activity. The advantages of adopting the technology include that it will offer the aged, the incapacitated and the ill, the opportunity for sexual satisfaction. The technology will also eliminate the challenges of conventional sex, including the monotony of having one partner and the threat of HIV and STDs. More importantly, the adoption of the technology will allow for the eradication of some vices from the society, mainly rape and prostitution.

Introduction

Inelmen et al. (2012) noted that the physical changes that come with aging, ill health and stress lead to a reduction in sexual functioning. The reduction in sexual functioning and sexual interest can be triggered by different factors, including poor mental health, poor physical fitness, a negative attitude towards sex and the lack of a healthy sexual partner. Further, the older members of society among the other groups identified earlier are assumed to have a reduction in sexual desires, mainly because it is difficult for them to discuss their issues with doctors or other members of the society. Particularly, among the older population, the barriers to maintaining a proper sexual activity include that they may lack a befitting sexual partner, they may be suffering from depression and they may feel the monotony of their long-term sexual relationship. Other factors affecting their sexuality include having sexual partners that are not appealing enough, the effects of hormone variability and iatrogenic factors (Inelmen et al., 2012). Towards addressing the wide array of problem, this technology will eliminate the importance of physical sex, which is the major cause for the many problems facing the modern society. Among the problems to be addressed, following the adoption of the technology include child rape, teenage pregnancies, the threat of HIV and STDs and prostitution. This paper will explore the problems related to conventional sexual activity, which can be eliminated by the use of the mental sexual helmet, which offers a variety of advantages to different groups.

The Biological Basis of the Technology

This technology is based on the scientific findings gathered from different studies, showing that women are capable of having mental sex. The process – according to scientific studies – builds on the process of sexual arousal, which can be escalated using the helmet to the level of allowing the woman and their partner to experience an orgasm, without any use of physical stimulation (Rice, 2010). Previous studies report that some women have been engaging in mental sex successfully since time immemorial – according to a UK researcher. This researcher was able to coach his female subjects on the ways of engaging in mental sex, to the level that they would orgasm inside an MRI machine (Komisaruk, Beyer-Flores & Whipple, 2006). According to Dr  Barry Komisaruk, the same parts of the brain that show changes (lighting) during sexual intercourse, can be turned on and off using a little effort; physical stimulation is not needed to realize these results (Komisaruk, Beyer-Flores & Whipple, 2006). Some of the strategies he identified, which can be used to achieve these results include breathing exercises and exposure to erotic fantasies. Similar to the case of men, some women report experiencing powerful orgasms when going through a particularly erotic dream, irrespective of the fact that such experiences cannot be replicated in a conscious state of being (Komisaruk, Beyer-Flores & Whipple, 2006).

The support for a mental sex technology is evidenced by the role played by the mental state of a person in realizing sexual pleasure – including that sexual dysfunction can be caused by physical causes, but it is most times caused by mental blocks among both men and women (McKhann & Albert, 2002). For that reason, creating a technology that eliminates the mental blocks that come in the way of engaging in healthy sexual activity is the goal of this invention. The technology will also expose the relationship between the physical aspect of sexual activity and the brain, which will help eliminate the challenges that are related to physical sexual activity. Arnow et al. (2002), through their study on the relationship between brain activation (mental stimulation) and sexual responses among healthy, young, heterosexual males, pointed out that exposure to erotic videos triggered sexual activity. The relationship shows that the response of males, to mental stimulation is positively related to sexual activity; therefore more advanced mental stimulation will drive them to sexual satisfaction. From the variety of studies incorporating the use of fMRI machines, it was found out that the same brain areas activated during conventional sexual intercourse are the same ones that are activated by mental stimulation (Arnow et al., 2002).

From the different studies exploring the sexuality of women and men, it is clear that mental stimulation affects the individual in ways that are similar to those of sexual intercourse/ activity. For that reason, the development of the mental sex helmet will eliminate the need to bear the adverse consequences that yield from physical sexual activity, but at the same time, guarantee the results borne from conventional sex. Additionally, noting that the mental sex helmet can be used at anytime and place, the new system of sexual activity will offer a more convenient and manageable access to sexual satisfaction, which will fit into the sexual needs of all.          

The Working of the Technology

The mental sexual helmet will work using the principles underlying the brain-to-brain interface developed by Harvard University, which allows a human to control another animal, using their thoughts only (Anthony, 2013). The technology, which is currently under development, is expected to be completed and used by December 2018. Firstly, like the Harvard University brain-to-brain interface, the helmet will be non-invasive for the two parties engaging in mental sex. Similar to the Harvard system, the neural sensors and the brain activity triggers required for the helmet to work will be incorporated, including the focused ultrasound (FUS) interface, which directs the desired thought-signal to the target area in the recipient’s brain. In the case of the mental sexual helmet, the two parties will be engaged in actively projecting pleasurable thoughts from one to the other, and also the system will allow for the replaying of pre-recorded mental stimulation of one party. This will be particularly important, for the people whose sexual activity schedules may not be synchronized, which would allow them to wear the helmets at the same time, and engage in the mental sexual activity consecutively (Horstman, 2010).

In the first case, where the two parties have pre-arranged to engage in the mental sexual activity at the same time, the functional mode of the helmet will be switched to real-time sex, where the two will start the sexual activity by hitting a start button. Hitting the start button from one end of the system, the mental sex helmet of the second party will prompt them to accept the start of sexual activity, and upon accepting the prompt, the two will be off in the real-world virtual sexual activity. Depending on their preferences, the helmet, which will have a screen area where the real-looking virtual form of the other party will be viewed and manipulated, touching the body of the body of the other party will be acted-out in the mind and felt like it is real (Horstman, 2010). More importantly, the thought of touching the other person’s body will trigger the feeling of being touched, from their end, through the use of the focused ultrasound (FUS) interface. The trigger of the FUS will channel radiation to the particular part of the brain, which will trigger the feeling of being touched, as well as the desired physical activity, but in a subtle way. For example, kissing the other party from the first end of the cycle will trigger the part of the mind stimulated by the feeling of a kiss on the lips. As a result, the recipient will immediately reciprocate the kiss, which will re-stimulate the feeling of being kissed back, though the mental stimulation of the first sender (Horstman, 2010).

After moving to the advanced level of sexual intercourse, the start of penetration by one of the parties will trigger the parts of the brain that are stimulated by penetration to light-up, which will trigger the feeling of penetration – in a split-second (Stein, 2007). The combination of the thoughts being projected by the sender, the feedbacks they are receiving from the recipient, as well as the brain activity regulating the acted-out sexual activity will take the two through mental sex, to the level of orgasm. One advantage of the technology, which is impossible using conventional sexual intercourse, is that the male partner – in the case of heterosexual partners – can experience their orgasm, yet continue the mental stimulation of their female partner, until they reach orgasm (Horstman, 2010, p. 97). Further, instead of the man continuing the thought-radiated stimulation, the helmet will be programmed to have an auto-pilot system that continues to stimulate the second party, in the case that one of the parties experiences a deep orgasm, which can break the thought-projected stimulation (Haule, 2012). For example, in the case of women, some are likely to experience a trance-like feeling, immediately after experiencing a fully satisfying orgasm, which can break the stimulation for the male counterpart (Haule, 2012).

In the case of pre-recorded sexual stimulation, the helmet will allow the user to record previous mental sexual experiences, which can be replayed for their stimulation, until they reach orgasm. In this case, the male or the female partner engaging in mental sex without a real-time partner on the second end will choose the recording to replay – but the computer simulation may manipulate their mental stimulation from time to time, depending on their mental activity (Horstman, 2010). In another case, the party engaging in mental sex using the helmet can choose the option of computer-simulated stimulation, where the program replays the pictures of their partner, triggering the brain activity needed for them to go through the sexual experience, until they get an orgasm. The computer-simulated mental sex stimulation will be adjusted by the program built into the helmet, depending on the mental activity of the user, and where necessary, the program may delay stimulation, so as to give maximum stimulation and sexual satisfaction (Komisaruk, Beyer-Flores & Whipple, 2006).

The advantages of the mental sex stimulation provided by the helmet, include that the user of the helmet is stimulated according to their respective mental activity. For that reason, the sexual incompatibility that happens with physical sex partners will not be a possibility, noting that the program will adjust and regulate stimulation according to the needs of the user. Further, the programming for the needs of the user of the helmet will be executed using a computer-based software and program (Horstman, 2010). During the programming of the sexual information of the user, as well as their personal identification system, the program will be restricted to the stimulation of the brain, for the mental activity that can allow the user to use the helmet at any setting and environment, as long as they are in an enclosed area. For example, in programming the system of the helmet, the programmer will eliminate the brain stimulation that triggers the motor movement of body parts like legs and the back, so as to offer the most convenient option for sexual satisfaction (Horstman, 2010). However, depending on the personal preferences of the user, the programming of one helmet can be different from that of another user, including that some may prefer having computer-simulated stimulation with different partners. For instance, in the case of aged users, the lack of a permanent partner, to whom they can be linked to, should not stop them from experiencing the better option for sexual satisfaction.

The Importance of the Technology in Society                   

The development of this technology is mainly aimed at eliminating the problems related to conventional sexual activity, which presents many challenges for different groups, especially the elderly, those that are physically incapacitated, the sickly and those suffering from emotional problems. In the case of the elderly within the society, the barriers to engaging in healthy sexual activity include the lack of a befitting sexual partner, and in addressing this problem, the user will be allowed to chose from a variety of sexual partners (Komisaruk, Beyer-Flores & Whipple, 2006). In making the choice of the partner, aged users will be allowed to choose the partners that are most suited to their health and sexual needs, noting that overstimulation may not be healthy for some aged users. In addressing the problems of the users suffering from depression, the helmet will incorporate the stimulation of the parts of the mind that are known to trigger or stop the feelings of depression and stress. Through the working of the helmet, it is expected that the technology can improve the mental health of the users, noting that it will simulate the resolution of the thought patterns related to stress and depression (Horstman, 2010).

The sexuality of some people is often affected by the feelings of monotony with their long-term sexual partner. Through the use of the mental sexual helmet, the users of the helmet will be offered the option to have a variety of sexual partners, which will allow them to engage in mental sex with more than a single partner. The possibility of having different sexual partners, while at the same time avoiding the threat of the modern problems related to having numerous sexual partners, including HIV and STDs will offer more advantages to the users, when compared to conventional sex. The new technology will eliminate the problem of the men or the women who have developed psychological blocks to their relations with the people of the opposite sex (McCann & Pearlman, 1990, p. 290). This is mainly the case, because many of their problems can be traced to the lack of trust for members of the opposite sex, therefore the helmet will offer them the sexual satisfaction needed, without bearing the consequences anticipated (McCann & Pearlman, 1990).

Among the elderly as well as the young, the mental sex helmet will allow two consenting parties to engage in sex without touching, irrespective of the distance between them. For example, in the case of long term relationships, the signals of the sexual activity tapped from the different parties will be collected by the inbuilt computer system, or an optional external computer system, and communicated across to the other user (Haule, 2012). The transfer of the signals could be radiation based, in this case, for shorter distances, where the recipient and the sender will be linked via radio or Bluetooth waves, among others. In the case of long distance mental sexual activity, the two computer systems of the helmet, or the computers linked to the helmets will be connected to a high-speed internet connection, which will allow for the immediate transmission of the signals. The ability to work over short and long distances will be very helpful to married partners living at different parts of the world, or the people in a relationship and challenged by their geographical position (Tiger, 2007).

The advantages of adopting the helmet technology, to society, include that its ownership will be regulated by law enforcement systems; the helmet will not be sold to people below the age of 18, and this will help to reduce the cases of irresponsible sexual behaviours (Haule, 2012). Due to the versatility of the helmet, the people that would otherwise rape or seek prostitutes will be contained, which will reduce the levels of prostitution and rape cases registered within the society. Following the reduction in the sexual advances channelled to people below the age of 18 years, teenage pregnancies will be reduced considerably.

Conclusion

Different studies show that many people encounter sexual problems, during their ageing years, due to depression or stress and due to ill health. Towards addressing the problems experienced by these different groups, the mental sexual helmet technology is being developed to eliminate these problems. The biological basis of the technology is the arousal of the brain during sexual intercourse, which can be triggered using scientific means. The basis of the technology is supported by different studies about the relationship between the mental functionality of men and women, and their effect on sexual satisfaction. The technology, which is expected to start working in December 2018, will allow two partners engaging in sex to stimulate one another using their thoughts, to the level of climaxing sexually. The benefits to be borne by society, following the implementation of the technology include that it will eliminate the sexual challenges that face different groups of people, including the aged and the incapacitated. The technology will allow the users to have multiple sexual partners, it will allow long distance partners to get sexual satisfaction and it will help in eliminating irresponsible behaviors like prostitution and rape within the society.    

Reference

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