The Cause Of The Current Global Recession Economics Essay - Free Essay Example

Introduction This part of the dissertation seeks to understand and investigate the cause of the current global recession and how it has affected the housing market in the UK. Housing Market Trends After the housing markets spectacular collapse in the 1990s, the UK housing market staged a significant revival. According to the HBOS index, the average house price stood at about  £163,000 in 2005, approximately double the  £82,000 it would have been worth in 2000. Cameron (2005) suggests that house prices surpassed their 1989 peak, relative to average household incomes. The other traditional measure of affordability, the ratio of interest payments to income, is not so overstretched, but only if capital repayments and unsecured debt are ignored. In addition, the strength of the housing market reflects the exceptional economic performance of the economy in 2005, which in turn is partially due to the sensible independent monetary policies pursued by the Bank of England Cameron (2005). As a result, it is suggested that Britain dealt with the world economic slowdown of 2001-2003 a great deal better than the majority of chief economies, producing six per cent growth. This vigorous expansion cannot completely describe the strength of the house price boom. Consequently, numerous economists have argued that there is a bubble in the British housing market, in common with a number of other countries, such as Spain, Australia, Canada, Sweden, and parts of the USA. FIGURE 1 Figure 1 shows the ratio of average house prices to average earnings, a key measure of affordability, for Great Britain and three major regions up to 2004 which is before the economic recession struck. As is visible, there is a positive contrast of cyclical behaviour in each series, with a surprising rise since 1999. According to the HBOS index, prices rose by only 1.3% over the nine months from July 2004 to April 2005. One of the main causes of this poor rise was due to the fact that many households were affected by the increases of the Bank of England base rate. Moreover, the increasing lack of demand within first time buyers, together with decreased numbers of house sales and low request rates for mortgages, implies that house prices have become separated from their underpinnings. The Nature of the Housing Market Housing markets are unusual for a number of reasons Housing markets are peculiar for a number of reasons. First, houses take time to build, so when demand rises, supply can only respond with a considerable lag. Indeed, to all intents, the short-run supply of housing is fixed. Second, houses are an asset that pays an implicit income (that is, the amount of rent that the owner saves by owning a house), so the value of the house should reflect expectations about future rents. But more importantly, since house-ownership in the UK is so widespread, a house is most householdsà ¢Ã¢â€š ¬Ã¢â€ž ¢ most important asset and since prices can go down as well as up, households are thereby exposed to a considerable amount of risk (almost half a million households had their homes repossessed in the 1990s). Unfortunately, it is not really possible to offset this risk since nobody offers insurance against a fall in prices. The Global economic recession It seems to have been agreed that the financial crisis which formed the birth of the current global economic recession was formed in the millennia of 2000 as a result of several factors which influenced increased housing sales and increased mortgage lending. [Sakbani (2009), Turalay (2009), Sel (2009)] One of the main factors which influenced the financial crisis was the boom in the housing market which was the result of increased supply of housing which persuaded financial institutions to increase and extend mortgages at attractive rates which mortgages borrowers could not afford to pay back. At the time of increased mortgage lending, the mortgage lenders had liquid assets that where at a level never seen before and this encouraged them to invest their assets into higher earning assets. This boom gave mortgage lenders an opportunity to double their portfolio of mortgage lending in respect of the past 10 years and mortgages reached some 50 per cent of their total lending assets after 2001 (Sakbani, 2009). The second factor which influenced housing sales was the record low-interest rates which were put in place by major banks to attract would be house buyers into purchasing mortgages at very low interest rates and other influences was the deregulation of financial institutions, there was a attitude throughout the major central banks of self regulation and with the increased financial innovations, major banks tended to regulate themselves. The final major factor was the disappearance of inflation fear as banks began to grow and increase portfolios, their self confidence began also to grow and any fears which were previously held started to disappear and this therefore relaxed their customer vigilance (Sakbani, 2008). As the demand for housing rose in the last decade and a half, this reached a record high in all major countries including the UK and USA. In the USA in particular, housing units sold in 2005 reached a peak of 1,283,000 as compared to an average of 609,000 in 1995-2000. More than 6 million units were sold in the five years up to 2006 (US Economic Forecast, 2009). The affects of this, increased the wealth and amount of disposable income available to households which in turn, increased the growth of the US economy up to 2007. It is recognised however, that this increase in economies and housing sales would not have taken place if there was a reduction in the availability of cheap mortgages being made available in the USA and UK up to 2005 and the substantial increase of low interest rates (IMF, 2008). The major banks began to operate under reduced regulation and with the global financial markets know in full swing, this increased the housing boom in the UK as some mortgages contained grace periods of up to three years and minimal down payments where required and with the introduction of low-interest rates, only fuelled the housing boom. Furthermore, these mortgages that where being taken out by borrowers would have originally been considered as non-credit worthy or, at very least, borrowers who incurred debts beyond their capacity to pay back (Ronald, 2008). As the banks began to run these debts, they ensured that the higher the risk, the higher should be the lending rate which therefore gave rise to the subprime mortgage market; this is a market whose borrowers may have difficulty maintaining the repayment schedule. Proponents of subprime lending maintain that the practice extends credit to people who would otherwise not have access to the credit market. As Professor Rosen of Princeton University explained, The main thing that innovations in the mortgage market have done over the past 30 years is to let in the excluded: the young, the discriminated against, the people without a lot of money in the bank to use for a down payment.à ¢Ã¢â€š ¬? It has now been agreed that this would have only ended in one way, this being collapse of the housing market and financial institutions. As borrowers started to run out of finances to repay their mortgages and defaults began to increase, the rate of increase in housing prices started to fall and could not compete with the rate of debt which therefore meant that borrowers could not refinance their loans or sell their houses at large profits [(The) Economist (2008), Sakbani (2008), Elise (2008)]. One way this could have been prevented is that if banks had extended their mortgage loans under the old conditions of mortgage lending, they would have had to hold them on their books and eventually would have run out of funds. But starting in the late 1980s, financial innovations made it possible for mortgage lenders to unload their loans to pools, which can transform these personalised, non-negotiable obligations into derivative securities guaranteed by the mortgages (Sakbani, 2008). After the crisis erupted, the International Monetary Fund (IMF, 2008) estimated the size of these securities at more than $945 billion, while Goldman Sachs put them at more than $1.0 trillion. In September 2008, the IMF revised its estimate to $1.4 trillion ((The) Economist, 2008). On January 28, 2009 the IMF once more revised its estimate to $2.2 trillion. All these estimates therefore prove that, nobody had any idea of the amount of the non-performing assets. Sakbani (2008) tends to suggest that there were many culprits that where directly related to the financial crisis of 2008 which include: the greedy banks and other financial institutions with their irresponsible and uninformed behaviour, the equally greedy borrowers, the absence of regulations covering all the financial institutions involved and not just banks, the lacunae of vigilant supervision at both the states and federal levels, the non-regulated and non-transparent character of the financial innovations, the failure of the rating agencies to do their job and finally the loose monetary policy of the Greenspan era in the years 2001-2004. Mr Greenspan, testifying on October 23, 2008 before a Congressional Committee, admitted his error in believing that investment managers would exercise prudence in their operations and accepted that the regulatory system was loose and fundamentally obsolete. Since the beginning of the economic recession, there has been a high reduction in new housing starts after a reduced number of sales. Berkeley Homes for example, reported sales down by 50% in the summer of 2008, also with housebuildersà ¢Ã¢â€š ¬Ã¢â€ž ¢ shares falling to low levels, there is major financing problems which continue to suffer. Housing Developments Policy Turalay (2008) appears to suggest that at the beginning of the downturn, the position of the UK housing market did not appear to be that bad as it was expected that there would be a gradual slow down in housing sales and then a fairly rapid recovery process which would not adversely affect the economy, however, this did not prove to be the case and no-one could have predicted what actually happened. Although UK economist Andrew Oswald, famously declared in November 2002; à ¢Ã¢â€š ¬Ã…“I think we are about to go through the great housing crash of 2003 to 2005. . . . I advise you to sell your house, and move into rented accommodation Panic will then set inà ¢Ã¢â€š ¬?(Pickard, 2005, p. 9). When comparing the period of July-October 2007 with July-October 2008, evidence suggests that a fall in average sale prices of around 14 per cent (Land Registry, 2008). It has been noted by Pryce Sprigings (2008) that measuring price change is hampered by the fact that selling times have risen substantially and indices are therefore not comparing like with like à ¢Ã¢â€š ¬Ã¢â‚¬Å" ideally one would like to compare, for example, the acerage price of houses that sold within a month on the market in 2007 with average prices of houses that sold within a month on the market in 2008. Evidence also suggests that transaction volumes have fallen dramatically from around 111,000 sales per month in England and Wales between July and October 2007 to 45,000 sales per month between July and October 2008, which is a fall of 60 per cent (Land Registry, 2008). Other data sources also reported this fall including Halifax, Nationwide, Land Registry and Council of Mortgage Lenders (CML). Some locations are showing even greater falls, with city centre flat and apartment markets appearing to be particularly vulnerable. During Oswaldà ¢Ã¢â€š ¬Ã¢â€ž ¢s prediction, real average house prices rose at one of the steepest rates recorded in modern times, by nearly a quarter in real terms, from  £140,593 in 2003 quarter 1, to  £173,412 in 2006 quarter 1, based on nationwide real mix adjusted house prices see Figure 1 below, and continued to rise for a further two years until quarter 4 of 2007. Figure 1 Real House Prices There appears to have been significant early interventions from the government and the Bank of England to keep both the housing market and the wider economy on course. Consecutive cuts to base rates, addition of  £50bn of liquidity into the finance markets by the Bank of England to alleviate the credit crunch, and  £2.7bn fiscal improvement to balance low-income households for the withdrawal of the 10p tax rate. It was expected that these would all combine to form an apparently positive reinforcement, however this would prove not to be the case as in March 2008, initial indications emerged of a somewhat more speedy slowdown in the housing sector was about to develop. The RICS housing market survey of that month specified that surveyor attitude with regard to house prices had weakened to the lowest point since the survey began in 1978 and the ratio of completed sales in the previous three months to the stock of unsold property on the market fell to 0.224, the lowest since September 1996 (RICS UK Economic Brief, 2008). With mortgage approvals falling by 44 per cent in the same year (2008), this resulted in a significant fall in housing demand which led to banks being unwilling to offer new loans on houses. Although there is no surprise that the housing market has took a downturn and because this has happened before, there are no unexpected events occurring, Pryce and Sprigings tend to suggest that the speed and severity of the decline has been unusual. They go on to express that this leads us to naturally question whether our policies, our regulatory frameworks, our collective approach to housing and cultural obsession with house prices, have in some way exacerbated this particular manifestation of that cycle by sustaining the upswing well beyond mean trend and perhaps resulting an unnecessarily sever and rapid downturn (Pryce and Sprigings, 2008). These questions however are not wholly of interest to housing professionals as links between residential property and the broader market as well recognised. An example of this is stated by Goodhart and Hofmann (2008, p.180), where they find; à ¢Ã¢â€š ¬Ã…“a significant multidirectional link between house prices, monetary variables, and the macroeconomy with the effects of money and credit amplified when house prices are boomingà ¢Ã¢â€š ¬?. It is agreed by Maclennan and Pryce that housing impacts on the real economy via the construction, financial, estate agency and legal sector and through housing equity financed consumption, all of which are sensitive to housing market fluctuations, and all have become increasingly inter-linked across nations as a result of the globalisation of capital and labour (Maclennan and Pryce, 1996). It is also in agreement with numerous authors, Malpass in particular, that housing also impacts on welfare; not only through homelessness caused by repossessions (i.e. owner occupiers and renters affected by landlord default) at a time of crisis, but increasingly through equity release funding of education support (including accommodation) at the start of life and elderly care at the end. (Malpass, 2005). Another article which backs Malpassà ¢Ã¢â€š ¬Ã¢â€ž ¢ suggestion is the announcement of the Homes and Communities Agency (HCA) which has confirmed the closing of Local Authority New Build (LANB) as a national programme. This is a result of the Treasury announcing that it was cutting  £220 million from HCAà ¢Ã¢â€š ¬Ã¢â€ž ¢s budget, this follows on from the cut to the May budget of  £230 million. The new builds where seen as a solution to ease the housing crisis of the UK since the recession and to add to Malpassà ¢Ã¢â€š ¬Ã¢â€ž ¢ argument, Baroness Hanham stated in the House of Lords; à ¢Ã¢â€š ¬Ã…“There will be casualties; I donà ¢Ã¢â€š ¬Ã¢â€ž ¢t have any doubt that there will be casualtiesà ¢Ã¢â€š ¬? Furthermore to this statement, Labours Lord McKenzie warned à ¢Ã¢â€š ¬Ã…“It will force many to move or end up homeless and create ghettos of the poorà ¢Ã¢â€š ¬?. Unfortunately, the literature and policy debates on the nature and consequences of housing markets have evolved rather dichotomously. As Maclennan (2008, p. 424) observed; à ¢Ã¢â€š ¬Ã…“Many nations are now involved in two housing discussions, namely à ¢Ã¢â€š ¬Ã…“homelessness and affordabilityà ¢Ã¢â€š ¬? and à ¢Ã¢â€š ¬Ã‹Å"à ¢Ã¢â€š ¬Ã‹Å"house price booms, bubbles and bustsà ¢Ã¢â€š ¬Ã¢â€ž ¢Ãƒ ¢Ã¢â€š ¬Ã¢â€ž ¢. The first theme has largely been the domain of social policy ministries, lobbies and researchers (Carter and Polevychok, 2004).The second has absorbed the macroeconomic policy community, including central banks, finance ministries, financial institutions and some academic economists, who are concerned about à ¢Ã¢â€š ¬Ã…“stabilityà ¢Ã¢â€š ¬?. Affordability and stability are often discussed as if they are unrelated, not just in the press, but also within policymaking circles.à ¢Ã¢â€š ¬? Researchers can now endeavour to bridge this gap in housing discussions. By using the analogy of sowing and reaping, à ¢Ã¢â€š ¬Ã‹Å"whatsoever a man soweth, that shall he also reapà ¢Ã¢â€š ¬Ã¢â€ž ¢ (Galations 6:7, King James Version). It can be highlighted how scrupulous aspects of the existing recession should require policy makers and researchers to reflect on the failures of policy that have arisen as a result of the à ¢Ã¢â€š ¬Ã…“fragmented nature of housing thinking within modern governmentsà ¢Ã¢â€š ¬? (Maclennan, 2008). Pryce and Sprigings propose that the great correction that is currently underway is a consequence, not only of transcendent global forces, but also significantly of UK policy decisions on financial liberalisation and housing. And if we are reaping what we have sown in domestic policy, who are the winners and losers, and what are the implications for how we evaluate UK post-war policy? It has been made clear that such issues are underpinned by major policy, theoretical, and empirical questions that will most probably be debated at length in the future. What Pryce and Sprigings have done, is highlighted the issues and hope that highlighting these issues will offer some key pointers as to how the future debate should be structured and what might be done to ensure a more integrated approach to modernising UK housing policies. It is argued that successive governments i.e. Conservative Party and Labour Party have promoted homeownership since the end of the Second World War and its benefits it brings financially to the lease holder if they are the occupier as one of the White Papers show from 1953, which states; à ¢Ã¢â€š ¬Ã…“One object of future housing policy will be to continue to promote, by all possible means, the building of new houses for owner occupation. Of all forms of saving this is one of the best. Of all forms of ownership this is one of the most satisfying to the individual and the most beneficial to the nationà ¢Ã¢â€š ¬? (1953White Paper, Houses: The Next Step). Gradually homeownership became deeply embedded in the UK psyche as the tenure of aspiration (Ronald, 2008). However, people then become aware that homeownership may not be best suited for everyone and this is a point that is raised by Sprigings (2008) where he identified that by encouraging low-income households into homeownership, we are subjecting them to the worst of its costs and risks while the market may restrict for them the potential of its benefits. This idea was also backed up by Pickard (2005) where he stated that housing is believed to be a great long-term investment on average, but for the deprived areas, and for the poorest households, homeownership may simply not produce the promised benefits. Housing developments and the global recession can be seen as interlinked with certain groups of society and those in less secure jobs as people on low income will bear the biggest brunt of the recession as low income workers and people in less secure jobs are more than likely to face financial difficulties when it comes to mortgage repayments as they are likely to lose their jobs or see rising inflation and rising interest rates and therefore low income households are likely to leave homeownership at the worst point because they are facing the biggest impact of the recession and also when the market begins to resume to normality again, low-income households may find it harder to re-enter the housing market when house prices are low because there is a proven correlation between credit being made available and housing prices and low-income households may not be able to obtain credit when house prices are still low therefore not enabling them to enter the housing market when it seems mo st beneficial. The CML also back up this idea as figures for October 2008 show that, the value of loans has decreased to 83 per cent of the value of the property therefore, as it has been established that long term dividends on housing can be superior, low-income households will find it difficult to witness these dividends as they will be exiting the housing market when it begins to deteriorate and trying to enter the housing market when it is difficult to obtain credit. Pryce (2008) seems to perceive that the promotion of homeownership by successive UK governments and therefore the rapid increase of owner occupation may have inadvertently produced a money pump working in the opposite direction. Another theory which Pryce (2008) identifies is the fact that low-income and particularly ethnic groups are less likely to enjoy the benefits of inter-generational housing welfare transfer. Keister (2003) also backs up the second theory of Pryce (2008) by identifying that children from larger families accumulate less wealth than do those from smaller families and that siblings dilute parentsà ¢Ã¢â€š ¬Ã¢â€ž ¢ finite financial resources and non material resources. Sibship size also reduced that likelihood of receiving a trust account or an inheritance and decreases home and stock ownership. Buy-to-Let Mortgages Buy-to-Let mortgages where developed in 1995 and where designed as a new financial product in the UK which enabled individuals to purchase a mortgage on a property for the purpose of letting the property out to future tenants. The benefits from these mortgages can include a stable income from rental receipts, as well as an accumulation of wealth if house prices go up. However one of the main factors of risk with taking out a buy-to-let mortgage is leverage speculation where the landlord purchases a property expecting to sell the house at a later date for a higher price or that rental income will exceed the repayment amounts of the initial loan. Buy-to-Let mortgages have became extremely popular with apprentice investors as this type of mortgage attracts middle income people to start to develop into small-scale landlords as a means of investing for their retirement. The volume of these loans grew rapidly in value as shown in Figure 2. Figure 2 BTL loan Pryce (2008) expresses concern at the fact that 90 per cent of total BTL advances since 1999 have been taken out during periods of above-trend house prices, and  £74 billion of BTL mortgages, which is more than half of the total BTL advances since 1999, were issues at the very peak of the housing boom. This can be seen in Figure 3. Fig 3 It is therefore in agreement that, a significant proportion of BTL loans are at risk because there is consensus that the value of securities will fall below the outstanding mortgage debts. This consensus is backed-up by the fact that repossessions on BTL properties as a per cent of all BTL mortgages almost doubled in the space of 18 months from the second half of 2005 to the first half of 2007 before the first round of gloomy house price results were released in late 2007. Latest CML data also reinforces this claim as they show a large increase in BTL accounts over three months in arrears at the third quarter of 2008 having trebled in number in 12 months to around 18,000. (Pryce and Sprigings 2008). If home owners begin to default on their loans then the impact could be significant not only for lenders, but for particular sectors of the housing market as 80 per cent of BTL properties are terraced of flats and these account for almost a third of the entire UK private rented stock (Sprigings, 2008). One of the key features of the BTL which there is much agreement on is the impact it seems to have had on new housing supply with flats coming to dominate supply, particularly in city markets. (Taylor 2008, Sprigings 2008). Fig 4

The Effect Of Digital Technology On The Music Industry

The effect of digital technology on the music industry Nowadays, teenagers are living constantly surrounded by technology. Even if the younger generation may not see it, technology has had an impact on different factors. The widespread use of digital technology in the music industry has allowed consumers to reproduce digital versions of copyrighted songs inexpensively, with the help of many software and websites. There has been an increase in digital copying activities and those are most of the time claimed responsible for producers’ loss in revenues. While some people claim that the increase of digital technology has killed the music industry, in fact it has lead to innovation and new ways of consuming and sharing music, such as†¦show more content†¦VEVO is a joint venture of Universal Music Group, Google (which owns YouTube), Sony Music Entertainment and Abu Dhabi Media. The VEVO record is given to the artist who gets the highest number of views in 24 hours. When a music video has a lot of views, artists are guaranteed that their music is going to be displayed on radio and is going to sell a lot. The holder of the record is currently Miley Cyrus with the song Wrecking Ball. Indeed, her music video received 19 millions views in its first 24 hours. The song was released on August 25, 2013 and as of January 2014 â€Å"Wrecking Ball† has sold three million copies in the United States. The song debuted on the Billboard Hot 100 at number 50 but it soon became number one after the release of the controversial music video, which shows the impact of YouTube on the music industry. Furthermore, the American music magazine Billboard added U.S YouTube data to its platform, which means that it is now a factor into the chart’s ranking: it joins digital download track sales and physical singles sales. ITunes created the first legitimate digital music store that competed with piracy. On April 28, 2003, Apple released the iTunes store. 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Examining Family Businesss Corporate Governance - Free Essay Example

Sample details Pages: 14 Words: 4081 Downloads: 10 Date added: 2017/06/26 Category Statistics Essay Did you like this example? This dissertation sets out a study of the family businessà ¢Ã¢â€š ¬Ã¢â€ž ¢s corporate governance, addressing the relationship between the owners and the management. Family businesses constitute a wide spectrum of enterprises, from small family owned and managed companies to a large internationally operating family controlled corporations. There are several definitions illustrates the family owned businesses, however the majority agree that Nebauer Lank definition illustrate the family business in a simple way and puts it as à ¢Ã¢â€š ¬Ã…“ A firm can be regarded as a family business if a given family holds the voting control of the firmà ¢Ã¢â€š ¬? (Nebauer Lank, 1998). This dissertation argues that, given the duality of the economic and non-economic goals family firms pursue and the complexity of the stakeholders structure, family firms need governance structure that matches the complexity of their constitutes stakeholders. According to that a better research and empirical understanding as how family firms are governed is needed. In this study the focus will be on assessing the level of understanding of the corporate governance concept overall and the codes provided by the Capital Market Authority (CMA), the Capital Market Authority in Oman focusing on strengthen the family owned business by incentives them to go public. The CMA is just recently in the process to create a corporate governance to help the Family business to be prepared to do so. In this study, the focus will be to create an understating and help to create a better code to help the family business sustain in the future. On the other hand there will be an evaluation of the agency theo ry and how the family owners acceptance of this model. Furthermore a research by McKinsey quarterly shows that 95 per cent fails to succeed the generation due to the lacking of succession planning and roles defining, therefore the dissertation will be evaluating the practice and preparation if any on how the existing owner prepare companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s succession planning rules and codes to handover their responsibilities to their successors. Don’t waste time! Our writers will create an original "Examining Family Businesss Corporate Governance" essay for you Create order In this study the focus will be on the family businesses in Sultanate of Oman, a country in the Arabian Gulf with a fledgling capital market. Oman has made significant efforts to improves the level of corporate governance, particularly in the listed companies and now the capital market would like to expand its corporate governance codes to the family owned businesses to strengthen the chances of the sustainability of its growth. Aims And Objective This dissertation will focus on the unique corporate governance challenges that any family business faces and propose structures and practices that can mitigate these challenges and ensure the viability of the business. The detailed objectives that guide the dissertation process are: To review and analyze relevant theoretical, and other, streams of literature that focus on corporate governance and family business Analyzing the practice of the existing code of corporate governance that applied by the CMA and if it fit to be implemented in the family business companies. Asses the ownership structure and polices in the companies and testing the theory of the ownership and control separation. Asses the long term planning by the company owners and how the successor is been appointed. To assess the significance, reliability, and validity of the results; to discuss the theoretical, empirical, and practical implications of the findings; to assess the limitations The impact of corporate governance in family businesses performance. Scope of the dissertation The present study addresses the governance of family firms, focusing on the nature of various governance mechanisms and how they affect firm performance. Family businesses provide a fruitful research context to study corporate governance due to lack of governance research in the area and the distinctive characteristics of family firms. The family business context, especially, enables the study of how aspects of formal and social control vary according to characteristics of ownership structure. Research Approaches and method The methods to gather the required data will be a qualitative, where the participations will be selected based on their history and age of the company in practice. The research will be analyzing their policies and corporate governance practice. Interviews will be placed with the owners and senior managers of the companies to get all the data required for the findings and results. Structure of the dissertation Chapter 1: Introduction This chapter included the background of the study, the aim, purpose of the study, research questions and limitation of the study and it will present the structural framework of the study. Chapter 2: Literature Review This chapter will review the historical perspective, theories and related studies of corporate governance, family business and related theories to corporate governance. This chapter will include the secondary data which will be used in discussing the findings. Chapter 3: Methodology Chapter describes the methodology and procedures that were used to carry out this study. Furthermore, this chapter will review the population and participants of the study, instruments and data collection procedures. Chapter 4: Results and Findings This chapter will present the data and findings related to the research questions Chapter 5: Data Analysis and Discussion This chapter presents the data analysis and the discussion of the finding. Chapter 6: Conclusion In this chapter, the researcher will present a summary of the study and the findings, conclusion and recommendation. The structural framework of the dissertation is illustrated in Figure 1. Figure Literature Review Introduction A growing number of studies have been done on the family business ownership and management separation or combination in the past few years and what is the linkage between the performance and these two elements. In this chapter we will be presenting the theories and the studies that are related to it and selecting a frame work that will be the base of the evolution of the practice we examine in the family businesses. Family Owned Business Family enterprises or family owned businesses represent the oldest form of businesses in the world. The family owned businesses constitutes more than 70 percent of all business in most of the third world countries and in some developed countries (IFC, 2009). In the IFC research à ¢Ã¢â€š ¬Ã…“Family Businesses Corporate Handbookà ¢Ã¢â€š ¬? shows that family owned businesses are the higher contributor in any country growth in terms of economic development and employment. In Spain, for example, about 75 percent of the businesses are family-owned and contribute to 65 percent of the countryà ¢Ã¢â€š ¬Ã¢â€ž ¢s GNP on average. Correspondingly, family businesses contribute to about 60 percent of the cumulative GNP in Latin America (IFC, 2009). in addition to, accordingly to recent researches that 95% percent of employment in the Middle East and especially in the Arabian Gulf Peninsula is in the family owned businesses. There are several definitions that explains the family business corporations, the IFC define it as à ¢Ã¢â€š ¬Ã…“a company where the voting majority is in the hands of the controlling family; including the founder(s) who intend to pass the business on to their descendantsà ¢Ã¢â€š ¬?, in another words is à ¢Ã¢â€š ¬Ã…“A business actively owned and/or managed by more than one member of the same familyà ¢Ã¢â€š ¬Ã…“. There are two systems that control the family businesses; which are the family system, and the management system, the two system overlap due to the dual roles that any family member take, like a family member may be a manger or an employee in the business and here where the conflict arise. The family system is based on emotional, love and care. The family system is based on the relationship in the family and they take most of these values to the business. Where in the business system is the professional values are the edge of the decision. (Managment Resources, 2010) To define a family business need to understand the environment from one to another, here are list of family business definitions that made by researcher past the year that cover the family business from different view but reserving the concept. Table Family business Definitions A company is considered a family business when it has been closely identified with at least two generations of a family and when this link has had a mutual influence on company policy and on the interests and objectives of the family. (Donnelley, [1964] 1988: 428). Controlling ownership rested in the hands of an individual or of the members of a single family. (Barnes Hershon, 1976: 106). Organizations where one or more extended family members influence the direction of the business through the exercise on kinship ties, management roles, or ownership rights. (Tagiuri Davis, [1982] 1996: 199). It is the interaction between the two sets of organization, family and business, that establishes the basic character of the family business and defines its uniqueness. (Davis, 1983: 47). What is usually meant by .family business.is either the occurrence or the anticipation that a younger family member has or will assume control of the business from an elder. (Churchill Hatten, 1987: 52). We define a family business as one that will be passed on for the family.s next generation to manage and control. (Ward, 1987: 252). A business in which the members of a family have legal control over ownership. (Lansberg et al., 1988:2). A family business is defined here as an organization whose major operating decisions and plans for leadership succession are influenced by family members serving in management or on the board. (Handler,1989b: 262). Firms in which one family holds the majority of the shares and controls management. (Donckels FrÃÆ' ¶hlich,1991: 149). A business where a single family owns the majority of stock and has total control. Family members also form part of the management and make the most important decisions concerning the business. (Gallo Sveen, 1991: 181). A business firm may be considered a family business to the extent that its ownership and management are concentrated within a family unit, and to the extent its members strive to achieve, maintain, and/or increase intraorganizational family-based relatedness. (Litz, 1995: 78). A business governed and/or managed on a sustainable, potentially cross-generational, basis to shape and perhaps pursue the formal or implicit vision of the business held by members of the same family or a small number of families. (Sharma et al., 1997: 2). A family enterprise is a proprietorship, partnership, corporation or any form of business association where the voting control is in the hands of a given family. (Neubauer Lank, 1998: 8). Family businesses share some common characteristics, largely due to the interacting and overlapping domains of family, ownership and management (Tagiuri Davis, 1982). Family firms have a complex stakeholder structure that involves family members, top management, and a board of directors. Family members, who are often significant owners, usually play multiple roles in managing and governing the firm (Tagiuri Davis, 1982). This involvement promotes loyalty and also commitment to long-term value creation (Dyer Handler, 1994) and reduces problems that arise from separation of ownership and control, as experienced in large, public corporations (Jensen, 1989). Also, family businesses may enjoy a competitive advantage due, for example, to remaining entrepreneurial in character and having a strong sense of responsibility to society (Neubauer Lank, 1998), fast verbal and nonverbal communication, aided by a shared identity and common language of families (Gersick, Davis, McCollom Hampton Landsberg, 1997), family members. Business expertise gained during early childhood onward (Kets De Vries, 1996), and a strong organizational culture contributing to external adaptation and internal integration (Schein, 1983). However, the familyà ¢Ã¢â€š ¬Ã¢â€ž ¢s involvement in governing the firm may induce a focus on business and non-business goals, possibly leading to inefficiency (Schulze, Lubatkin, Dino Buchholtz, 2001). If the owner family is not regularly informed about the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s affairs, differing visions of the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s future may develop between management and the family. The resulting feuds between family factions may distract managementà ¢Ã¢â€š ¬Ã¢â€ž ¢s attention from value-creating activities and so reduce their commitment to strategic decisions. Owner-managers also may act opportunistically by satisfying their own needs at the expense of the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s performance and long-term survival. Entrenched owner-manager s may not share their powers with others, especially not with the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s board. Furthermore the common characters of all family businesses are illustrated in the diagram below. Figure The individual represent the family members who are directly involved in daily bases with the operation, the family symbolizes the whole family where in some family businesses called the family counsel and the management dimension represents the family managers and non-family managers. McKinsey quarterly stated in the report à ¢Ã¢â€š ¬Ã…“keeping the family in businessà ¢Ã¢â€š ¬? that only 5 percent will continue to create shareholders value after the third generation. Moreover; the IFC also mentioned in the family business hand book, while the third generation takes over; 95 percent of all family businesses will not survive the ownership around. These consequences might be a result to the lack of commitment and proper business education of handling the business demands. In addition, the survival of family firms is often challenged by dictatorial rule, resistance to change, lack of professionalism in management capabilities, confusion in family and business roles, rivalry and enlarged human emotions among family members, conflicts between interests of the family and the business, and a low rate of investment in business development (Donnelley, 1964; Gersick et al., 1997; Kets De Vries, 1993). All the definitions are focusing on the shareholders and their power in voting and management and these two points are actually the core strength and weaknesses of any family business. However there are other dimensions that a family business can be measured of its strength and weaknesses like: Culture Ownership and governance Succession planning Family involvement This dissertation will be reflected somehow in the culture dimension due to the strength of the factor here in the Arabian Gulf Countries and Oman. Different researcher came up with different definitions of the family business; however, the definitions imply six themes for clarifying the boundaries of the domain of family business: (1) ownership, (2) management, (3) generational transfer, (4) the familyà ¢Ã¢â€š ¬Ã¢â€ž ¢s intention to continue as a family business, (5) family goals, and (6) interaction between the family and business. These themes are similar to those found in the extant literature. For example, Handler (1989a) categorized family business definitions under four headings: ownership and management, interdependent subsystems, generational transfer, and multiple conditions. The extant literature on family business research has largely neglected the definition of the family itself. By modifying Winter.s, Fitzgerald, Heck, Haynes Danes (1998) definition of the family, the present study defines it as a kinship group of people related by blood or marriage or comparable relationship. This definition allows a multigenerational view of an extended family. Family Business in Oman According to the family firm institute (FFI) the around the 75% of Omanà ¢Ã¢â€š ¬Ã¢â€ž ¢s private companies are family owned, with their firms creating 70% of the country employment. There are 12 top families who are controlling around 75% of the contribution over all in Oman. The family owned business also control 90% of commercial activity according to Tharawat (Fortunes) Magazine. Oman is a part of the GCC Region where in the region is estimated that family businesses worth more than 1 trillion dollar, that is ready to be handled to the next generation. All family owned business share same characteristics as mentioned above, even the strengths and the weakness are similar to some extant in all family businesses. However, the family business can be categorized to two categories: Listed family businesses Non-listed family business The listed family businesses are set to fulfill the listed companies corporate governance code as per the CMA regulation, but the non-listed are not treated that way; whatà ¢Ã¢â€š ¬Ã¢â€ž ¢s so ever the size or the operations are. The CMA in Oman are concentrating nowadays to establish an attractive market and safe to all sizes of family businesses, à ¢Ã¢â€š ¬Ã…“the CMA is concentrating on converting the family closed family business to go public by Initial Public Offering(IPO) offering them a less strict rules and requirements to commence the IPOà ¢Ã¢â€š ¬? as the Head corporate governance Center declared. Furthermore there are different points that might affect the operation of any family businesses such as: family relations affect the assignment of the management family indirectly runs the company à ¢Ã¢â€š ¬Ã…“major family influence/dominanceà ¢Ã¢â€š ¬? of the management (in terms of strategic decisions) à ¢Ã¢â€š ¬Ã…“significant proportionà ¢Ã¢â€š ¬? of the enterprisesà ¢Ã¢â€š ¬Ã¢â€ž ¢ senior management à ¢Ã¢â€š ¬Ã…“most important decisionà ¢Ã¢â€š ¬? made by the family à ¢Ã¢â€š ¬Ã…“family controlà ¢Ã¢â€š ¬? of the management of the enterprise at least 2 generations having had control over the enterprise These points might be strengthen the family business in the initial stages of the operations but there must be some kind of governance or policies on whom can make a decisions and how is not. Corporate Governance Corporate governance is a topic that has been a subject of significant debate since 2001 Enronà ¢Ã¢â€š ¬Ã¢â€ž ¢s and other US companies crashed. Some analyst say lack of corporate governance was the main reason behind the crash (International Swaps and Derivatives Association, 2002). The international Swaps and Derivatives Association highlight that the failure was due to interests that extended certain managers at the expense of the shareholders. While the United Statesà ¢Ã¢â€š ¬Ã¢â€ž ¢ capital market where busy analyzing the reasons behind the crash of Enron and World Com, Sultanate of Oman has also experienced its share of corporate trouble affecting not only large companies such as Rice Mills SAOG and Oman National Investment Company Holding SOAG but also dozens of smaller companies, which have had to turn to the government for assistance (Dry, 2003). The year 2002 was the birth of the new corporate governance standards from the Capital Market Authority (CMA), but it was only c overing the list companies in the Muscat Security Market only. Since then the CMA focused on upgrading this standards and code and refine it to be in a worldwide acceptable standards and to include the best practice for the companies. The standards have been modernized since 2002 on the listed companies and the closed shared ones but nothing was mentioned on the family business side. In 2009 the CMA established the corporate governance center to help the companies implement the codes of corporate governance and to regulate the practice and monitor it, in addition to create a new standards to fit the family businesses practice. Till today the CMA and the Center did not establish a full concept on how they can produce a set of codes to be acceptable to the share holders of these businesses due to the lack of information on the family owned businesses in Oman. Theoretical framework related to Corporate Governance. The corporate governance model did not came from one framework or a certain theories, but I was built up on different practices and theories which results of different frameworks that today any economic system can customized to suit the needs to regulate the market. There are certain theories that been always associated with corporate governance practice which is set out the relation between the principle (shareholder) and the agent (management): The agency theory Stewardship Theory Stakeholder theory The agency Theory Agency theory having its roots in economic theory was exposited by Alchian and Demsetz (1972) and further developed by Jensen and Meckling (1976). Agency theory is defined as à ¢Ã¢â€š ¬Ã…“the relationship between the principals, such as shareholders and agents such as the company executives and managersà ¢Ã¢â€š ¬?. Agency theory argues that in the modern corporation, in which share ownership is widely held, managerial actions depart from those required to maximize shareholder returns (Berle and Means 1932; Pratt and Zeckhauser 1985). Since Jensen and Meckling (1976) proposed a theory of the firm (Agency Theory) based upon conflicts of interest between various contracting parties à ¢Ã¢â€š ¬Ã¢â‚¬Å" shareholders, company managers and debt holders à ¢Ã¢â€š ¬Ã¢â‚¬Å" a vast literature has been developed in explaining both aspects of these conflicts. Jensen and Meckling (1976) further specified the existence of à ¢Ã¢â€š ¬Ã…“agency costsà ¢Ã¢â€š ¬? which arise owing to the conflict s either between managers and shareholders (agency costs of equity) or between shareholders and debtholders (agency costs of debt). Financial markets capture these agency costs as a value loss to shareholders. The agency theory argues that an agency relationship exists when shareholders (principals) hire managers (agents) as the decision makers of the corporations. The agency problems arise because managers will not solely act to maximize the shareholdersà ¢Ã¢â€š ¬Ã¢â€ž ¢ wealth; they may protect their own interests or seek the goal of maximizing companiesà ¢Ã¢â€š ¬Ã¢â€ž ¢ growth instead of earnings while making decisions. Jensen and Meckling (1976) suggested that the inefficiency may be reduced as managerial incentives to take value maximizing decisions increased. Agency costs are arising from divergence of interests between shareholders and company managers. à ¢Ã¢â€š ¬Ã…“Agency costsà ¢Ã¢â€š ¬? are defined by Jensen and Meckling as the sum of monitoring costs, bonding costs and residual loss. (1) Monitoring Costs Monitoring costs are expenditures paid by the principal to measure, observe and control an agentà ¢Ã¢â€š ¬Ã¢â€ž ¢s behavior. The economic impact of asymmetric information also results in various corporate agency problems. Firm managers (insiders) know more about their firm than shareholders and debt financiers (outsiders). When outsiders are unable to judge over the firms performance, they tend to qualify a firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s performance as moderate. A result of this asymmetric information is that shares of a firm with a great performance are undervalued and vice versa. More specifically, information asymmetries between shareholders or bondholders and corporate executive management creates the necessity of monitoring (costs) and complications for the structuring of financial contracts. They may include the costs of preparing reliable accounting information and audits, writing executive compensation contracts and even ultimately the cost of replacing managers. Denis, Denis, and Sarin (1997) contended that effective monitoring is restricted to certain groups or individuals. Such monitors must have the necessary expertise and incentives to fully monitor manager. In addition, such monitors must provide a credible threat to managementà ¢Ã¢â€š ¬Ã¢â€ž ¢s control of the company. (2) Bonding Costs To minimize monitoring costs, managers tend to set up the principles or structures and try to act in shareholderà ¢Ã¢â€š ¬Ã¢â€ž ¢s best interests. The costs of establishing and adhering to these systems are known as bonding costs. They may include the costs of additional information disclosures to shareholders, but management will obviously also have the benefit of preparing these themselves. Agents will stop incurring bonding costs when the marginal reduction in monitoring equals the marginal increase in bonding costs. As suggested by the agency theory, the optimal bonding contract should aim to entice managers into making all decisions that are in the shareholderà ¢Ã¢â€š ¬Ã¢â€ž ¢s best interests. However, since managers cannot be made to do everything that shareholders would wish, bonding provides a means of making managers do some of the things that shareholders would like by writing a less than perfect contract. (3) Residual Loss Despite monitoring and bonding, the interest of managers and shareholders are still unlikely to be fully aligned. Therefore, there are still agency losses arising from conflicts of interest. These are known as residual loss, which represent a trade-off between overly constraining management and enforcing contractual mechanisms designed to reduce agency problems. There are some other types of agency costs as following: (4) Agency Costs of Debt There are three groups of participants in a firm, suppliers of equity, debt suppliers and firm managers. It is logical that they would try to achieve their goals with different measures. Suppliers of equity, or shareholders, are interested in high dividend ratioà ¢Ã¢â€š ¬Ã¢â€ž ¢s and high share prices. Debt suppliers, on the other hand, are interested in interest and debt repayments, whereas firm managers would be focused on their financial remuneration. These conflicts of interest give rise to opportunity costs (whereby best strategies are often not adopted) and real costs (e.g., inspection costs). These costs decrease the market value of a firm. Kim and Sorensen (1986) investigated the presence of agency costs and their relation to debt policies of corporations. It is found that firms with higher insiders (managers) ownership have greater debt ratios than firms with lower insider ownership, which may be explained by the agency costs of debt or the agency costs of equity. (5) Agency Costs of Free Cash Flow The free cash flow theory presumes that there are enormous conflicts of interest between shareholders and stakeholders. This implies that managersà ¢Ã¢â€š ¬Ã¢â€ž ¢ decisions do not always maximize the value of a firm (Jensen, 1986). Jensen (1986) also emphasized the continuous agency conflicts between top managers and shareholders. These conflicts are especially severe in firms with à ¢Ã¢â€š ¬Ã…“largeà ¢Ã¢â€š ¬? free cash flows. A free cash flow is the balance of money a company is left with when all projects are financed. If top managers hold more cash than profitable investment opportunities, they may overspend money on organization inefficiencies or invest it in projects with net present value (NPV) less than zero. The logic has it that higher debt levels reduces free cash flows and consequently increases the value of the company. The Stakeholders Model The Stewardship Model Corporate Governance in Oman Selection of framework related to this study The agency theory and family businesses ( Ownership Vs. Management) Introduction to the succession planning in the family Business The importance of succession planning Conclusion of Literature Review

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FURPS model determines usability as a non-functional characteristic, which includes human factors, aesthetics, consistency in the user interface, online and context-sensitive help, wizards, user documentation, and access to training materials. According to Dromey’s quality model usability is matched with descriptive product’s properties. TAM is oriented

Industrial Economic Research Paper Free Essays

Qustion1 Identify and explain the market structure in which the company is operating Pos Malaysia Market structure * Monopoly firm Introduction (Pos Malaysia) Pos Malaysia Berhad is Malaysia’s premier physical communications provider. Pos Malaysia also has a widespread network of 701 post offices all over the country, in addition to its network of mini post offices, mobile post offices, postal agents and stamp agents, making it one of the most extensive retail networks in Malaysia. Pos Malaysia’s Strategic Business Units that aim to provide quality, reliable, timely and innovative solutions to its customers, are made up of PosMel (mail and postal services), PosLaju (courier and express mail services), and PosNiaga (retail business services). We will write a custom essay sample on Industrial Economic Research Paper or any similar topic only for you Order Now Pos Malaysia also acts as a counter collection and payment agency for a range of financial transactions, such as bill payments, remittance, insurance and unit trusts. Pos Malaysia consists of 3 Main Core Business Units: Pos Mel ,Pos Laju and Pos Niaga. Poslaju or EMS service caters to all segments of the business community and the general public. There are 37 Poslaju Centres nationwide offer all types of courier services. Besides Mail and Express servicer. Poslaju or EMS service caters to all segments of the business community and the general public. Type of courier services Inbound Logistics * Customs Clearance, Import permit documentation, Transportation, Warehousing, Distribution channel/break bulk, Proof of delivery, Track and trace. Outbound Logistics * Customs clearance ,Export documentation ,Transportations ,Warehousing ,Distribution channel/break bulk ,Proof of delivery ,Track and trace Monopoly market structure (Pos Malaysia) Government protection Pos Malaysia Berhad is a Malaysian postal service company that was privatized in 1992 from a government department into a business corporation. Government also protects and helps pos Malaysia if that firm has shortage cost and losses. was attributed to the pos Malaysia is the first company established to provide these services and the company has long operated, known by society and high cost in the provision of post Malaysia. Society loyalty The society in Malaysia has known about brand of pos Malaysia and the society also has familiar to uses pos Malaysia as services of mail. The public will be more confident in such a service as Pos Malaysia is an agency under the ministry and the government is indirectly involved in ensuring the security of the items kept here. Maximize profit A monopoly market exists when there is huge number of buyers but small or very limited number of sellers in the market. Monopoly is the only supplier of a product for which there is no close substitute. In monopoly market, the firm has get a maximize profit, if the manager has have good skill and knowledge to manages that company. For example, pos Malaysia have a good manages, and that means this company can get a height profit. In monopoly market, pos Malaysia can set its own price and the prices chosen affects the quantity it sells. Pos Malaysia is the only licensed mail services provider in Malaysia and is the leader in the Malaysia Courier Services. Pos Malaysia posted a net profit of RM 61 million for the nine months ended September 2004 – an increase of more than 40 per cent from the corresponding period in the previous year. It is projected to earn a net profit of close to RM100 million this year based on existing postal rates. Power of set prices In monopoly market, pos Malaysia can put the price of the service with a high rate to the profit of the community to obtain greater. This can be carried out in the market as pos Malaysia is the only domestic postal mail offered in Malaysia Advantages in monopoly Stability of prices * In a monopoly market the prices are most of the times stable. This happens because there is only one firm involved in the market that sets the prices if and when it feels like. In other types of market structures prices are not stable and tend to be elastic as a result of the competition that exists but this isn’t the case in a monopoly market as there is little or no competition at all. Source of revenue for the government * The government gets revenue in form of taxation from monopoly firms. Massive profits * Due to the absence of competitors which leads to high number of sales monopoly firms tend to receive super profits from their operations. The massive profits realized may be used in such things as launching other products, carrying out research and development among many other things that may be beneficial to the firm. Question 2 Comment if there are barriers to entry Definition Barriers to entry are designed to block potential entrants from entering a market profitably. They seek to protect the monopoly power of existing (incumbent) firms in an industry and therefore maintain supernormal (monopoly) profits in the long run. Barriers to entry have the effect of making a market less contestable. Defined an entry barrier as â€Å"A cost of producing (at some or every rate of output) which must be borne by a firm which seeks to enter an industry but is not borne by firms already in the industry. Barriers to entry in( pos Malaysia). In pos Malaysia, there are barriers to entry. Among them are: Advertising and marketing * Developing consumer loyalty by establishing branded products can make successful entry into the market by new firms much more expensive. Cost Advantages Lower Costs; through experience of Being in the market for missing time, allows the existing postal company Malaysia’s to cut price and win price wars if another firm enter the market. Absolute cost advantages * Allows an incumbent firm to earn excess profits without feat of new firm entering the market. for example in the market, pos Malaysia price of the service is able to offer a cheaper service player medals RM7 per unit, but oth er companies likes DHL and FedEx only able to offer prices as low as RM 12 mail service. so its pos Malaysia cans set PRICES at rm10. Which is are more chipper, than the more customer use pos Malaysia services and also get a highest profit. Government Restrictions * Government is the source of barriers to entry that are created by patents and copyrights. But these are not the only barriers to entry enabled by government. Government is, after all, the entity that establishes the rules of the game. Governments frequently erect barriers to entry by legally limiting the number of participants in a market. Legal restrictions for public utilities are usually designed to make the most effective use of natural monopoly markets that can create serious inefficiency problems. Other legal restrictions, such as licenses or charters, are generally intended to pursue other goals, but create barriers to entry nonetheless. For example, pos mel only provided by pos Malaysia. Although there are big rivals like FedEx and DHL outside, but pos Malaysia offer cheaper prices. First mover advantages * The first firm to enter incurs lower marketing costs because it faces no rivals. Later firm face higher marketing costs because they must compete against the first firm. If the presence of the incumbent raises the marketing costs of the second firm to enter, then the first firm has permanent advantages and can maintain high prices How to cite Industrial Economic Research Paper, Essays

Industrial Economic Research Paper Free Essays

Qustion1 Identify and explain the market structure in which the company is operating Pos Malaysia Market structure * Monopoly firm Introduction (Pos Malaysia) Pos Malaysia Berhad is Malaysia’s premier physical communications provider. Pos Malaysia also has a widespread network of 701 post offices all over the country, in addition to its network of mini post offices, mobile post offices, postal agents and stamp agents, making it one of the most extensive retail networks in Malaysia. Pos Malaysia’s Strategic Business Units that aim to provide quality, reliable, timely and innovative solutions to its customers, are made up of PosMel (mail and postal services), PosLaju (courier and express mail services), and PosNiaga (retail business services). We will write a custom essay sample on Industrial Economic Research Paper or any similar topic only for you Order Now Pos Malaysia also acts as a counter collection and payment agency for a range of financial transactions, such as bill payments, remittance, insurance and unit trusts. Pos Malaysia consists of 3 Main Core Business Units: Pos Mel ,Pos Laju and Pos Niaga. Poslaju or EMS service caters to all segments of the business community and the general public. There are 37 Poslaju Centres nationwide offer all types of courier services. Besides Mail and Express servicer. Poslaju or EMS service caters to all segments of the business community and the general public. Type of courier services Inbound Logistics * Customs Clearance, Import permit documentation, Transportation, Warehousing, Distribution channel/break bulk, Proof of delivery, Track and trace. Outbound Logistics * Customs clearance ,Export documentation ,Transportations ,Warehousing ,Distribution channel/break bulk ,Proof of delivery ,Track and trace Monopoly market structure (Pos Malaysia) Government protection Pos Malaysia Berhad is a Malaysian postal service company that was privatized in 1992 from a government department into a business corporation. Government also protects and helps pos Malaysia if that firm has shortage cost and losses. was attributed to the pos Malaysia is the first company established to provide these services and the company has long operated, known by society and high cost in the provision of post Malaysia. Society loyalty The society in Malaysia has known about brand of pos Malaysia and the society also has familiar to uses pos Malaysia as services of mail. The public will be more confident in such a service as Pos Malaysia is an agency under the ministry and the government is indirectly involved in ensuring the security of the items kept here. Maximize profit A monopoly market exists when there is huge number of buyers but small or very limited number of sellers in the market. Monopoly is the only supplier of a product for which there is no close substitute. In monopoly market, the firm has get a maximize profit, if the manager has have good skill and knowledge to manages that company. For example, pos Malaysia have a good manages, and that means this company can get a height profit. In monopoly market, pos Malaysia can set its own price and the prices chosen affects the quantity it sells. Pos Malaysia is the only licensed mail services provider in Malaysia and is the leader in the Malaysia Courier Services. Pos Malaysia posted a net profit of RM 61 million for the nine months ended September 2004 – an increase of more than 40 per cent from the corresponding period in the previous year. It is projected to earn a net profit of close to RM100 million this year based on existing postal rates. Power of set prices In monopoly market, pos Malaysia can put the price of the service with a high rate to the profit of the community to obtain greater. This can be carried out in the market as pos Malaysia is the only domestic postal mail offered in Malaysia Advantages in monopoly Stability of prices * In a monopoly market the prices are most of the times stable. This happens because there is only one firm involved in the market that sets the prices if and when it feels like. In other types of market structures prices are not stable and tend to be elastic as a result of the competition that exists but this isn’t the case in a monopoly market as there is little or no competition at all. Source of revenue for the government * The government gets revenue in form of taxation from monopoly firms. Massive profits * Due to the absence of competitors which leads to high number of sales monopoly firms tend to receive super profits from their operations. The massive profits realized may be used in such things as launching other products, carrying out research and development among many other things that may be beneficial to the firm. Question 2 Comment if there are barriers to entry Definition Barriers to entry are designed to block potential entrants from entering a market profitably. They seek to protect the monopoly power of existing (incumbent) firms in an industry and therefore maintain supernormal (monopoly) profits in the long run. Barriers to entry have the effect of making a market less contestable. Defined an entry barrier as â€Å"A cost of producing (at some or every rate of output) which must be borne by a firm which seeks to enter an industry but is not borne by firms already in the industry. Barriers to entry in( pos Malaysia). In pos Malaysia, there are barriers to entry. Among them are: Advertising and marketing * Developing consumer loyalty by establishing branded products can make successful entry into the market by new firms much more expensive. Cost Advantages Lower Costs; through experience of Being in the market for missing time, allows the existing postal company Malaysia’s to cut price and win price wars if another firm enter the market. Absolute cost advantages * Allows an incumbent firm to earn excess profits without feat of new firm entering the market. for example in the market, pos Malaysia price of the service is able to offer a cheaper service player medals RM7 per unit, but oth er companies likes DHL and FedEx only able to offer prices as low as RM 12 mail service. so its pos Malaysia cans set PRICES at rm10. Which is are more chipper, than the more customer use pos Malaysia services and also get a highest profit. Government Restrictions * Government is the source of barriers to entry that are created by patents and copyrights. But these are not the only barriers to entry enabled by government. Government is, after all, the entity that establishes the rules of the game. Governments frequently erect barriers to entry by legally limiting the number of participants in a market. Legal restrictions for public utilities are usually designed to make the most effective use of natural monopoly markets that can create serious inefficiency problems. Other legal restrictions, such as licenses or charters, are generally intended to pursue other goals, but create barriers to entry nonetheless. For example, pos mel only provided by pos Malaysia. Although there are big rivals like FedEx and DHL outside, but pos Malaysia offer cheaper prices. First mover advantages * The first firm to enter incurs lower marketing costs because it faces no rivals. Later firm face higher marketing costs because they must compete against the first firm. If the presence of the incumbent raises the marketing costs of the second firm to enter, then the first firm has permanent advantages and can maintain high prices How to cite Industrial Economic Research Paper, Essays