Thursday, November 28, 2019

Actionable Misrepresentation free essay sample

Misrepresentation is a concept in contract law referring to a false statement of fact made by one party to another party, which has the effect of inducing that party into the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality or nature of the product that the seller has may constitute misrepresentation. A finding of misrepresentation allows for a remedy of rescission and sometimes damages depending on the type of misrepresentation. citation needed] According to Gordon v Selico (1986) 18 HLR 219 it is possible to make a misrepresentation either by words or by conduct, although not everything said or done is capable of constituting a misrepresentation. Generally, statements of opinion or intention are not statements of fact in the context of misrepresentation. [1] If one party claims specialist knowledge on the topic discussed, then it is more likely for the courts to hold a statement of opinion by that party as a statement of fact. We will write a custom essay sample on Actionable Misrepresentation or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page 2] As enacted by the Misrepresentation Act,[3] the statement in question may constitute a representation even if later incorporated into the contract as a term (i. e. a warranty, condition or innominate term). An alternative approach, applied in parallel but in exclusivity to, is to find a collateral contract by interpreting the representation as a promise accompanied by some sort of consideration (see Heilbut, Symons Co. v Buckleton [1913] A. C. 30 (H. L. )). The collateral contract will have the effect of adding the representation as a term to the contract. If the representation is found to be a term then the normal remedies for breach of contract apply. [edit] Criteria for Misrepresentation Misrepresentation is one of several vitiating factors that can affect the validity of a contract. A misrepresentation occurs when one party makes a false statement, inducing another party to contract. For an action to be successful, some criteria must be met in order to prove a misrepresentation. These include: †¢ A false statement of fact has been made, †¢ The statement was directed at the suing party and †¢ The statement had acted to induce the suing party to contract. edit] Distortion of Fact A representor may make a statement which prima facie is technically true; however this may tell only half the story. If a statement of fact is made but the representor fails to include information which would significantly alter the interpretation of this fact, then a misrepresentation may have occurred. In Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563, Krakowski agreed to enter into a contract to buy a shop premises from Eurolynx as long as a strong tenant had been organised. The contract proceeded on the grounds that such a tenant had been arranged. Unbeknown to Krakowski, Eurolynx had entered into an additional agreement with the tenant to provide funds for the first three months rent to ensure the contract went ahead. When the tenant defaulted on the rent and subsequently vacated the premises, Krakowski found out about the additional agreement and rescinded the contract with Eurolynx. It was held that Eurolynx’s failure to disclose all material facts about the strong tenant was enough to constitute a misrepresentation and the contract could be rescinded on these grounds. [edit] Learned Falsity The negotiating stage of a contract can be a time consuming process. Because of this, new information may arise and circumstances may change. This can result in two situations which can result in a misrepresentation if silence is kept. The first is if the representor subsequently discovers that the statement was false, the second being if the statement becomes false at a later time. If a statement is made and it is subsequently made known to the representor that it is false, it would obviously be inequitable to allow the representor to remain silent with the new information. In Lockhart v. Osman [1981] VR 57, an agent had advertised some cattle as being â€Å"well suited for breeding purposes†. Later on it was discovered that the stock had been exposed to a contagious disease which affected the reproductive system. It was held that the agent had a duty to take remedial action and correct the representation. The failure by the agent to take such measures resulted in the contract being set aside. Should a statement be made which is true at the time, but subsequently becomes untrue due to a change in circumstances, the representor is obligated to amend the original statement. In With v O’Flanagan [1936] Ch. 575, the plaintiff entered into a contract to purchase O’Flanagan’s medical practice. During negotiations it was said that the practice produced an income of ? 2000 per year. Before the contract was signed, the practice took a downward turn and lost a significant amount of value. After the contract had been entered into the true nature of the practice was discovered and the plaintiff took action in misrepresentation. In his decision, Lord Wright said a representation made as a matter of inducement to enter into a contract is to be treated as a continuing representation. . 4] This means that the representation must be true till the contract is made; creating the obligation mentioned above and accordingly the plaintiff’s petition was successful. [edit] Special Relationships Some relationships also provide that silence can form the basis of an actionable misrepresentation. †¢ Fiduciary Relationships A fiduciary relationsh ip is one of trust and confidence; it involves one party acting for the benefit of another. For this reason, when entering into a contract, it is important for a fiduciary to disclose all facts which could be considered material even if not expressly asked about. 5] In Lowther v Lord Lowther (1806) 13 Ves Jr 95, the plaintiff handed over a picture to an agent for sale. The agent knew of the pictures true worth yet bought it for a considerably lower price. The plaintiff subsequently discovered the pictures true worth and sued to rescind the contract. It was held that the defendant was in a fiduciary relationship with the plaintiff and accordingly assumed an obligation to disclose all material facts. Accordingly the contract could be rescinded. †¢ Contracts ‘Uberrimae Fidei’ A contract uberrimae fidei is a contract of ‘utmost good faith’. Similarly to fiduciary relationships, the parties are required to make known all material facts influencing the contract. Contracts uberrimae fidei usually arise when one party has knowledge which the other does not have access to. Contracts which are commonly considered to be of such a nature include contracts of insurance and family agreements. When applying for insurance, the person or entity must disclose all material facts so that the insurer can properly assess the risk involved with the offering of insurance. Since the insurer annot have access to all information relating to the insured and their situation which could affect the risk involved, it is necessary for this disclosure so that both parties are entering into the contract on equal grounds. Lord Blackburn addressed the issue in Brownlie v Campbell (1880) 5 App Cas 925 when he noted the concealment of a material circumstance known to you avoids the policy. [6] Another contract considered uberrimae fidei is that of famil y agreements. In Gordon v Gordon (1821) 3 Swan 400, two brothers had reached an agreement regarding the family estate. The elder brother was under the impression that he was born out of wedlock and thus not their fathers true heir. The agreement was reached on this basis. The elder brother subsequently discovered that this was not the case and that the younger brother had knowledge of this during the negotiation of the settlement. The elder brother sued to set aside the agreement and was successful on the grounds that such a contract was one of uberrimae fidei and the required disclosure had not been executed. [edit] Statement of Fact It is a general requirement that for an action in misrepresentation to proceed, that the statement in question be one of present or past fact. This has its grounding in that only facts can be distinguished as being true or untrue at the time they are made. [edit] Opinion Statements of opinion are not often seen as sufficient to produce a misrepresentation. [7] Obviously it would be unreasonable to treat opinions in the same manner as truths as opinions can be based purely on personal beliefs with no additional foundation. There are however some exceptions where opinions can give rise to an action in misrepresentation: †¢ where an opinion is expressed yet this opinion is not actually held by the representor, †¢ where it is implied that the representor has facts on which to base the opinion,[8] †¢ or where one party should have known facts on which such an opinion would be based. [9] [edit] Intention and the Future Statements which are made in relation to the intention of a party or the occurrence of some event in the future do not constitute misrepresentations should they fail to eventuate. This is because at the time the statements were made they can not be categorised as either true or false. However, similarly to the first point above, an action can be brought if the intention never actually existed. This can be illustrated by the decision in Edgington v Fitzmaurice (1885) 29 Ch. D. 459, which deals with a statement of intention by the directors of a company to use loaned money to alter company buildings and make purchases to expand the company’s operating options. It was found that the directors actually intended to repay current debts and according it was held by the judges that the contract was voidable. 10] [edit] Law Statements of law were, in the past, considered to be free from claims of misrepresentation because it is equally accessible by both parties and is as much the business of the plaintiff as of [the defendants] to know what the law [is]. . [11] This has since changed and it is now more recognised that statements of law should be treated as aki n to statements of fact rather than occupy a special isolation. [12] As stated by Lord Denning the distinction between law and fact is very illusory. . [13] [edit] Statement to the Misled An action in misrepresentation can only be brought by a representee. This means that only those who were an intended party to the representation can sue. This principle can be seen in Peek v Gurney (1873) LR 6 HL 377, where the plaintiff sued the directors of a company for indemnity. The action failed because it was found that the plaintiff was not a representee (an intended party to the representation) and accordingly misrepresentation could not be a protection. It is not required that in order to be a representee, the representation must be received directly. It is sufficient that the representation was made to another party with the intention that it would be made known to a subsequent party and ultimately acted upon by them as a representee. [14] [edit] Types of misrepresentation Four types of misrepresentations are identified with different remedies available: †¢ Fraudulent misrepresentation occurs when one makes representation with intent to deceive and with the knowledge that it is false. An action for fraudulent misrepresentation allows for a remedy of damages and rescission. One can also sue for fraudulent misrepresentation in a tort action. Fraudulent misrepresentation is capable of being made recklessly. [15] †¢ Negligent misrepresentation at common law occurs when the defendant carelessly makes a representation while having no reasonable basis to believe it to be true. This type of misrepresentation is relatively new and was introduced to allow damages in situations where neither a collateral contract nor fraud is found. It was first seen in the case of Hedley Byrne v Heller [1964] A. C. 465 where the court found that a statement made negligently that was relied upon can be actionable in tort. Lord Denning in Esso Petroleum Co Ltd v Mardon [1976] Q. B. 801 however, transported the tort into contract law, stating the rule as: if a man, who has or professes to have special knowledge or skill, makes a representation by virtue thereof to another†¦with the intention of inducing him to enter into a contract with him, he is under a duty to use reasonable care to see that the representation is correct, and that the advice, information or opinion is reliable †¢ Negligent misrepresentation under Statute, enacted by the Misrepresentation Act 1967. When dealing with a negligent misrepresentation it is most lucrative[16] (joint with fraudulent misrepresentation, Contributory Negligence notwithstanding[17]) for an action to be brought under statute law as the burden of proof that is required passes to the person who made the statement. So it is for the person who made the negligent statement to prove that the statement was either not one of fact but opinion and that had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true[18] the so-called innocent defence. Innocent misrepresentation occurs when the representor had reasonable grounds for believing that his or her false statement was true. [19] Prior to Hedley Byrne, all misrepresentations that were not fraudulent were considered to be innocent. This type of representation primarily allows for a remedy of rescission, the purpose of which is put the parties back into a position as if the contract had never taken pla ce. Section 2(2) Misrepresentation Act 1967, however, allows for damages to be awarded in lieu of rescission if the court deems it equitable to do so. This is judged on both the nature of the innocent misrepresentation and the losses suffered by the claimant from it. [edit] Misrepresentation (in India under IPC section-90) In India, the federal laws defines misrepresentation under Misconception Of Fact. This is dealt with under the Indian Penal Code in Section 90, which states: Consent given firstly under fear of injury, and secondly under a misconception of fact, is not consent at all. That is what is explained in the first part of Section 90. There are two grounds specified in Section 90 which are analogous to coercion and mistake of fact which are the familiar grounds that can vitiate a transaction under the jurisprudence of India and other countries. The factors set out in first part of Section 90 are from the point of view of the victim; the second part of Section 90 enacts the corresponding provision from the point of view of the accused. It envisages that the accused has knowledge of or reason to believe that the consent was given by the victim in consequence of fear of injury or misconception of fact. Thus the second part lays emphasis on the knowledge or reasonable belief of the person who obtains the tainted consent. The requirements of both parts should be cumulatively satisfied. In other words, the Court has to determine whether the person giving the consent has done so under fear or misconception of fact; the court should also be satisfied that the person doing the act (i. e. the alleged offender) is conscious of the fact or should have reason to think that but for the fear or misconception, the consent would not have been given. This is the scheme of Section 90 which is couched in negative terminology. edit] Remedies [edit] Rescission Main article: Rescission Generally, the effect of misrepresentation is that it makes the contract voidable not void ab initio. This is important for two reasons. Firstly because the representee can continue to be bound by the contract at his or her will. Secondly because the transactions and effects of the (voided) contract are recognised as to have taken place, therefore if a party transfers title of property to a third party of which the former only holds title to pursuant to the voided contract, the third party can retain legal title. 20] Rescission can be done either by informing the representor or by requesting an order from the court. There are certain circumstances where rescission is not possible though. The idea behind rescission is that the parties are restored to the positions they were before entering into the contract. Therefore, if this is not possible, rescission is not an option. [21] If the representee discovers the misrepresentation and fails to take steps to avoid the contract, then he may not be able to rescind it. [22] The time limit for taking such steps varies depending on the type of misrepresentation. In cases of fraudulent misrepresentation, the time limit runs until when the misrepresentation ought to have been discovered, whereas in innocent misrepresentation, the right to rescission may lapse even before the representee can reasonably be expected to know about it. [23] In certain circumstances, third party rights may interfere with rescission and render it impossible. For example, if B contracts with A to sell a house with a misrepresentation and then A sells the house to C, the courts are not likely to permit rescission as that would require C to give up the house. In England and Wales, under Misrepresentations Act 1967 s. 2(2) of the Misrepresentation Act 1967, the court has the discretion to award damages instead of rescission. [edit] Damages In cases of fraudulent misrepresentation, a claim for damages is under the tort of deceit, making the damages tortious, in other words, only actual losses are recoverable. If the losses are calculated under the Misrepresentation Act 1967, damages for misrepresentation are calculated as if the defendant had been fraudulent, even if he has been only negligent. This is a wider scope than usual tortious liability, as it protects the claimants loss even if not reasonably foreseeable. Inclusion of the representation into the contract as a term will leave the remedy for breach in damages as a common law right. The difference is that damages for misrepresentation usually reflect Cs reliance interest, whereas damages for breach of contract protect Cs expectation interest, although the rules on mitigation will apply in the latter case. In certain cases though, the courts have awarded damages for loss of profit, basing it on loss of opportunity.

Sunday, November 24, 2019

Great college admission essay writing

Great college admission essay writing Admission Essay If you want to make your college admission essay flawless, you have to know the secrets of successful writing. There are different guidelines developed for those who are interested in improvement and polishing of an essay. For instance, it is not an easy task to write conclusions which could excite the readers attention and summarize the whole paper effectively. Some of the students cope with the assignments without any difficulties, while others get confused and lost feeling helpless. What is the main purpose of a concluding paragraph? The writer typically aims at giving a sense of completion to the readers making them think over the ideas. A college admissions essay that starts with a personal anecdote always has more chances to be successful than a story that lacks zest. This tip as well as many others presented below will help you master the art of admission essay writing. If the readers understand what you want to talk about, they will follow all your further explanations regarding the significance of the ideas throughout the paper. It is of great help for writers if they can get step-by-step guidance in some book.So, here are some of the most essential pieces of advice that the inexperienced writers highly value. Let us talk about the concluding paragraphs. So, it is a common practice to wrap up any paper with a concise summary of the key points with a broad note at the very end of the story. The readers will never forget the ending of the story if you follow any of the recommendations:Let your story be developed as a complete circleA great admissions essay that starts with a bright anecdote from your personal expe rience should have a conclusion that links to that introductory part. For instance, a story starts with a funny description of how a boy could not do the high jump well because of his insufficient height. So, it is a good idea to include a funny anecdote into the introductory paragraph about this boys jumping at a meeting with stress and high pressure. Outstanding college admission essays always bring the audience to the present and show what is happening now. For example, the story about a high jumper implies that the boy managed to get into that sport with the following sentence: I do not think that high jumping will be still interesting for me in college; besides, this sport requires special setting and you cannot practice anywhere you want. I guess it is likely that in the near future I will not find myself catapulted over a pole. The moment of ecstatic joy when I managed to clear the bar will always stay in my memory. Those hugs and high fives from my friends, acquaintances and people I did not know at all made me feel on cloud nine. I used to be a short boy nobody noticed and I managed to change everything: I saw that people started treating me in a different way and that feeling was unmatched. The introductory paragraphs and anecdotes at the beginning of the story can be linked back to in a variety of ways. However, all those methods are in the framework of strict college admission essay format. Besides, every technique brings the audience to the current state of things and shows the experience and memorable moments from the past. It is natural that a story is related to an incident that happened in the past; therefore, the conclusion should bring this event that has already taken place to the present. The present-day reality should be linked with the story from the past presented in the introduction. The range of college admission essay topics is wide; however, it is advisable to draw special attention to your ambitions and aspirations in the concluding paragraph. Any experience from the past should be linked to the present in the final paragraph. For instance, if you talk about getting stuck in a refrigerator box, there should be some method of relating this incident to the present and the future. I still sometimes feel the inclination to hide from the problems (at least in a refrigerator box), although I realize that behaving in such a way I cannot resolve anything. Recently, I have realized that hiding causes more problems than solutions. You can find a lot of college admission essays online to see how to make the paper perfect. For instance, a story of someone you know who was struggling against some disease or died of it should be related to the present as well. I still talk to my mom and ask her for advice in my mind, although she passed away two years ago. I miss her badly, but I feel that my pain gets less acute when I am busy with everyday things. Another short story or an anecdote about a peer who tried to avoid you although you admired him a lot should be linked to the present-day reality. You used to be a child who lacked confidence and respect from the others because of your appearance; however, now, that peer is your best friend. I was so big that people who did not know me looked at me with certain fear. Every stranger was expecting danger from me. Towering over the children of my age, I did not feel comfortable; neither did other children. I am still heavy and big, but I learned how to help other people feel nice. I do not feel embarrassed any more. These college admission essay prompts can help you when you are working on the paper. Furthermore, the conclusions of college admissions can do the restating of the key points with the focus on the lessons learnt. Besides, it is highly recommendable to use humor and not to take any issues too seriously. Never bore the readers; instead, focus on your plans for the future and ambitions. Look ahead and tell about your dreams. NB: A great college admission essay always has a so-called kicker phrase. Do not be afraid of being too sincere. Your idealism will touch the readers. Besides, you can play with words and try to make the readers smile. Finally, get a valuable feedback from your teacher, friend, or parent first to see whether you really managed to create a masterpiece.

Thursday, November 21, 2019

The Rise and Fall of the Roman Empire and How It Mirrors the United Essay

The Rise and Fall of the Roman Empire and How It Mirrors the United States - Essay Example Importantly, the rise of both Roman and American empires follow almost same trajectory of consolidation of ‘pockets of power’ to large scale annexation through combined constitutional, economic and military assaults. The American quagmire in Afghanistan and Iraq, and the growing fallacies of the American empire gives a sense that its doom too would follow the Roman course. The purpose of the paper is to give a glimpse at the rise and fall of Roman empire and see the parallels with the case of the America empire, by examining some of the constitutive features of both the political formations in a brief and concise manner. The Making and the Unmaking of the Empires From the ancient period to the present time, world has seen the rise and fall of many empires. Roman, Greek, ancient Egypt, Persian, British, and American empires are a few to name. The timeline of these empires varies from each other. The chances of survival of an empire in ancient times were more than the mode rn ones. However, a country has more chances to survive than an empire. Decline or fall of an empire is inevitable and only depended upon on time whereas a country can survive for longer period. When a country goes for territorial expansion and succeeds in it, the country then transforms itself into an empire. After acquiring a status of an empire, the nation precipitates the unavoidable decline and fall of the empire. This is the basic but generalized story both the Roman empire and the American empire tell to us. The fall of empire reflects the decaying of the society. After the disintegration of an empire, the society experiences too much hardships and the life of the people become miserable. Experiences of fall of the Roman, ancient Egyptian empire show that the lives of the citizens later were never as good as it was during empires’ height. Now itself, we can sense that America citizens’ hardships are growing day after day and it certainly sheds light into the wea kening core of the American empire. Roman Empire lasted around one thousand years whereas American empire started stumbling only after two hundred and twenty years. There are certain parallels between fall of Roman Empire and the contemporary scenario in the United States. Romans started up with a republic, later transformed it into an Empire. The twentieth century saw America metamorphosing from a nation into an empire. It is very interesting to see that how these two most sophisticated republics of their times ended up as being vicious empires! Importantly, cold war with the former Soviet Union and the subsequent triumph of an American new global order have many parallels between the Romans’ eternal tension with the Carthage. Same as in the case of American empire, the Roman empire was also fully constituted only with the complete disintegration of Carthage. America too became an empire with truly global capabilities only after the collapse of Soviet Union in 1991. It is im portant to remember that â€Å"the Roman Republic was an unabashed plutocracy; the citizen-body was carefully graded according to stringent property qualifications. In turn, this classification regulated voting rights: all adult male citizens were enfranchised, but a system of electoral colleges guaranteed that the rich, if united, would always be able to out-vote the poor. In addition, the heavy costs of electioneering and office-holding ensured that all who were most prominent in government were

Wednesday, November 20, 2019

Ethics in infofmation systems Term Paper Example | Topics and Well Written Essays - 1500 words

Ethics in infofmation systems - Term Paper Example However, in order to prevent customer data, a number of strategies can be defined are demonstrated below: Persistently maintaining data protection controls and procedures aiding in optimum data integrity An incident response plan that can be triggered, whenever a security breach is found within the network or servers maintaining customer data. An intelligent spyware, ad-ware and antivirus installation on workstations, in order to protect threats emerging from a workstation within the network. Moreover, information technology facilitates CRM to maintain data in databases including customer names, contact details, buying history and usability of services. Likewise, the information retrieved from databases connected to CRM provides personalized processes for an organization to target customers. Likewise, the personalized processes provide value for the customers along with increment in customer loyalty for the organization (Payne & Frow, 2006). For instance, notifications of new service s and products are transmitted via emails; short message services (SMS), phone calls, or WAP services. Consequently, customers are updated related to new services and products (Buttle, Ang, & Iriana, 2006). ... In order to evaluate the value for customers, they need to demonstrate at least one of the three factors listed below (Buttle, Ang, & Iriana, 2006): Customers demonstrating significant life time value Customers demonstrating targeting other customers Customers encouraging modification of suppliers In order to disseminate customer information, cookies can be used, as they are isolated with textual information that is redirected from the web server to a web browser. Likewise, the cookies that are transmitted via hypertext transfer protocol (HTTP) are responsible for authenticating, tracking, and managing precise information related to the user. For instance, they can manage precise information related to site preferences and data associated with shopping carts (Cookie.2007, n.d). 2 Legislation and Other Policy 2.1 Associated and Applicable Legislation To sidestep for any legal issues or security breaches, organization needs to define, document and demonstrate compliance with all applic able statutory, regulatory and contractual requirements for each information system. Owners of the systems must take advice from the information security officers for all issues related to Legal and security information. Local regulations must be addressed that are applicable where data is handled, stored or protected. Likewise, legal officer of the organization will examine applicable laws and regulations of policies at different regions. The legal officer will consult chief information security officer for establishing required exceptions to policies and specific policies to different regions. 2.2 Intellectual Property Rights All employees at the organization will conform to the legal

Sunday, November 17, 2019

Volkswagen Strategic Management Case Study Example | Topics and Well Written Essays - 3250 words

Volkswagen Strategic Management - Case Study Example VW group have 8 automobile brands with 44 vehicle and component production plants in European countries as well as in six countries in America; Asia & Africa. Sales operations spread around 150 countries across the globe. The group has eight major brands of vehicles namely Volkswagen passenger cars, Audi, Bentley, Bugatti, Lamborghini SEAT, Skoda and Volkswagen commercial Vehicles- each deal autonomously with their own vehicle business includes development and production to marketing & servicing (Accessed from the website www.volkswagen.com). 1. As part of the corporate governance and strategic management, VW group has adopted various strategic choices. Strategic fit is developing strategy by identifying opportunities in the business environment and adopting resources and competences to take advantage of these (Porter, 1980). Strategic choices are concerned with decisions about an organization's future and the way in which it needs to respond to the market pressure and influences. At different level of organization, executives are faced with choices as to how to meet the expectations of stakeholders' whilst satisfying the needs and expectation of the users, often-in competition with other organizations. Hannan & Freeman (1977) suggest that as organizations, adaptor of a particular environment they become less flexible. Organization's choices are constrained not only by an explicit cultural dimension in the sense of what we believe around here but also by what skills and resources are available and in what context those s kills and resources become valuable. Prahalad & Bettis (1986) argue that organizations have dominant logics and that these logics are based on the mental maps developed in the organizations core business. Michel Porter's (1985) five forces strategies low cost strategies and strategic choices are some of the strategies have been adopted for competitive advantages for the organizations. Campbell-Hunt (2000) suggests that differentiation can take on number of forms based on marketing variables, sales variables, quality reputation variable and product innovation variables. Sustainable competitive advantage depends on companies being able to develop and protect resource advantages by focusing on particular market position. Finally, organization's ability to succeed in a business arena depends on is ability to develop a market position that is supported by appropriate assets and capabilities. Strategic choices include corporate strategy, Business or competitive strategy and directions and methods of development. Corporate level strategy (Andrews, 1987) is concerned with the overall purpose and scope of an organization and how value will be added to different parts of (business units) the organizations. Corporate level strategy includes portfolio decisions extent of diversity and management and control of subsidiaries. The second level can be thought of in terms of business unit strategy (Hall, 1978) which is about how to complete successfully in particular markets. Business strategy includes sustainability, competitive advantages competitive strategy and strategies in hyper-competitive conditions. Finally, the directions and methods of development include market development, product development, diversification, acquisitions alliances as well as critical success criteria. It also includes the concept of suitability, acceptability and

Friday, November 15, 2019

Grey Marketing Activities Within the Software Industry

Grey Marketing Activities Within the Software Industry Future ABSTRACT The research work has presented an enlarged view of the operation within the grey markets, their functioning, pricing structure, the customer base lastly the arguments in favour, thereby evaluating -‘Can grey be good? It has also focussed on grey markets- as a subject of annoyance for the IT players OEMs. Counter-arguments hostile measures adopted to combat grey goods have also been the point of discussion. Overall, this piece of research is being successful in presenting a balanced view of the goods the bads of the grey industry from the perspective of industry players, grey entrepreneurs as well as consumers. INTRODUCTION 1.1 AIMS To obtain information insights about grey marketing activities within the software industry. With the help of Journals, case studies secondary research activities shed light on the present scenario of the grey markets (consumer targeting inclination, pricing etc). The pros cons of grey marketing shall also be presented to have an equalised view. To know what are the hostile measures adopted by firms to prevent grey activities. Present cases to depict the preventive measures adopted by firms like HP Microsoft to combat grey market products. The paper also focuses on the initiatives adopted by independent agencies such as AGMA BSA towards grey market activities. Market Penetration Grey Markets Can grey market ever be an alternative to market penetration? If yes, to which extent can it be possible? In addition, understanding the concept of ‘free riding as a way for market penetration, as mentioned in the Journal of Business Venturing (Vol 4). To evaluate: Can grey ever be good? Based on the research undertaken, evaluating thereby concluding the positives negatives of grey markets. Should they be encouraged? Can they boost an economic scenario of a country? lastly how effective can they be in increasing sales of a product? 1.2 OBJECTIVES The methodology that is to be adopted for fulfilment of the above aims is as under: Journals, Newsweekly, Internet (secondary research) along with white papers provided by firms shall be the main sources of information for this research. Primary data obtained through interviewing shall be the most vital aspect (it shall be considering not only the consumer perspective towards grey markets its products, but also of dealers operating within this arena). finally, the crux of the research (insights, analysis evaluation) will be presented to obtain a concluding perspective. 1.3 GREY MARKET: AN NTRODUCTION Majority of distribution companies are flourishing thanks to distribution channels that shepherd product from a manufacturer eventually direct them to the consumers through a chain of legitimate distributors across the world. But a mounting quite detrimental market subsists that can cause ignorant customers to buy technology products with untrue warranties, several designed for use in other countries or worse products consisting counterfeit parts. These practices can erode customer satisfaction harm brand integrity, causing major profit attrition for manufacturers. Welcome to the global ‘Grey Market where branded products have been sidetracked from the authorised supply channel within a country or are imported into a country without the approval or awareness of the manufacturer. Grey market goods are usually sold at lesser prices than those proposed by the legitimate distributors. And the pricing disparity amongst various legitimate markets customers generates an opportunity for the brokers to procure labelled products at discounted prices move them to markets where they can fetch high income. A research study by KMPG demonstrates that grey market goods pose a grave challenge to information technology manufacturers their authorised dealers. The study reveals that IT manufacturers are communally losing up to US$5 billion in profits on yearly basis, a figure that is mounting. While the grey market affects many businesses, including automobiles, consumer products, pharmaceuticals, fashion accessories others, this study shall validate that computers related products are the industry segments most affected by grey market actions. 1.4 INTRODUCTION TO THE PROBLEM (a) Software Counterfeiting Counterfeiting is amongst the most exigent problem facing the information technology (IT) industry today. Illegal replicas of brand-name high tech products are flooding the marketplace, causing harm to legitimate companies profits and dropping their aptitude to invest in research and development (RD). Multiplication of technology employed to make computers, servers, and a host of high tech products—as well as a lack of regulatory enforcement in developing countries—is speeding up counterfeiting. It is now estimated that as much as 10 percent of all high tech products sold globally are counterfeit. (b) Free Riding: A Way To Penetrate Markets? ‘Free Riding is a term which comes into picture when software products have been counterfeited. Free-riding was first introduced by Tan et al. (1995, 1997) as an alternative explanation for the incidence of grey marketing, whereby grey entrepreneurs are provided with the opportunity to enter money-making markets that are presently supplied by big firms. However, hostile measures have been taken to prevent grey market activities by agencies like AGMA BSA as well as biggies like Microsoft, HP etc. HP is administrating reseller spot checks and distie reviews to stamp out the grey market in a variety of regions without being hesitant to exercise the law courts against resellers who â€Å"breach contractual requisites†. The firm, at the moment, is taking legal action in opposition to one UK reseller for violation of agreement and cautions it has other cases under review. While, Microsoft has collared another plagiarist in the UK for flogging grey software on eBay. The software giant has scored  £35,000 in compensation against an internet trader for copyright violations and illegitimately bringing in cheap American software to Europe. Meanwhile, an agency like Business Software Alliance (BSA) is outing bandits by setting a bounty on their heads. The group announced its Blow the Whistle operation which presents $1m to workers who squeal on their companies. Certain firms are trying to launch software which might allow manufacturers detect sales through unofficial mediums. 1.5 SCOPE FOR THE REASERCH The main reason behind the proposed research subject is to obtain information on the grey markets the practices that are being carried out. The scope for undertaking the research work is as under: Understanding the global phenomenon of ‘grey marketing. Understanding the logistics within grey markets. The precautionary measures adopted by the firms agencies to prevent grey activities. The concept of free riding to penetrate markets within the software arena. lastly analysing evaluating the research produced to gather provide insights. 1.6 LIMITATIONS TOWARDS THE REASERCH The possible shortcomings for the proposed research topic are as under: Being an unconventional subject for research, obtaining information can be tough. Tracking the right sources of information is a major challenge. Information gathered through ground research cant be entirely relied upon, as it can be manipulative. Information obtained from grey suppliers may not be fruitful, as they might not give out precise information about the present scenario Interviewing people from companies or firms who are being targeted by grey marketers may prefer to remain low profile on the preventive measures they plan to adopt in future. 1.7 REASEARCH STRUCTURE The research has five focus groups (in order to understand the information.) The first chapter offers an inside view of the topic with its backdrop. It also contains the customary objectives which form the foundation for a focused research study. Meanwhile, it also describes how the established purpose will be achieved and the manner they would provide help. This section gives rationale and importance of conducting this research. The second chapter comprises the prior literature on grey markets, constructed by a range of authors and researchers in earlier years. This would aid to shed light on the pros cons in grey marketing. In addition; this chapter provides live cases published in reputed newsweekly. The third chapter talks about the type of methodology the researcher has employed to achieve the study. It gives out the arguments in favour against of each method in order to gain understanding. Furthermore, it exemplifies of some important sources which have been accessed to complete the study. Thus, this chapter explains the different techniques to achieve the objectives. The fourth chapter forms the body of the thesis as it entails the detailed analysis of the various aspects to establish the objectives. This chapter generates convincing points to support the study. The fifth and the last chapter of the paper summarises all the information gathered, finally, concluding the thesis. 1.8 SUMMARY HYPOTHESIS To summarise the above literature in few words, I shall be basically focusing weather grey markets can influence the sales of a product, thereby helping towards market penetration. Concepts, rather strategies, such as free riding shall be looked researched upon to present realistic as well as optimistic view towards grey markets, thereby analysing -‘Can grey ever be good? ‘Can grey goods help in market penetration? LITREATURE REVIEW Almost exclusively, the existing literature on grey marketing regards the occurrence as a pricing problem but falls short to identify it as a market entry opportunity for start-up entrepreneurs. The grey marketing strategy forms apt for start-up entrepreneurs in view of their resource limitations and the risk of being a first-mover in market development. Within this paper, the researcher shall be focusing on how an entrepreneur can effectively penetrate an established market by adopting suitable approaches. This is most favorable for an incumbent trader to accommodate the entrepreneur/grey marketer even if the former could compel the latter out of the market through hostile counter actions. Moorthy (1985) demonstrated the game theoretic methodology is most appropriate to investigating the behavior of market participants in such a state. This game theory is being pursued by Lim G.H., Lee K.S., Tan S.J. (Journal of Business Venturing, Jul 2001, Vol 16) to depict the strategic communications between parties concerned in grey markets and to recognise the circumstances under which entrepreneurs can effectively enter these markets. 2.1 THE POSITIVES OF GREY MARKETING A study offered by USC Marshall Research in fall 2004 by Mark Bergen (Carlson School of Management, Kersi D. Antia (University of West Ontario, London) Shantanu Dutta (Marshall School of Business, University of California) portrays the optimism towards grey markets. According to the paper, grey markets are often an helpful way to react to competitive demands, control distribution channels, fragment markets, reach unexploited markets alter the changes in market conditions. Some of the positive aspects of grey markets are being highlighted below: Incremental Sales: Grey markets are favourable if they reach formerly untapped markets. Grey markets also disclose the existence of new markets. Cell phone manufacturers competing in Malaysia, for instance, discovered a buying segment keen to pay premium prices for the newest phone gadgetry. Supply restrictions: Grey markets are advantageous if they permit dealers to overcome supply constraints scarcities. For example, IBM relied on the illegal outlets in China to get around government policies requiring the participation of local companies. Rather than make huge investments to fake partnerships with local distributors, IBM turned a blind eye to a flood of grey market imports from Hong Kong. Competitive need of opportunity: Competitors will frequently exploit grey markets if they are lucrative companies which do not follow trail shall lose significant market share, position power. This is precisely what happened to Indian-branded manufacturers of PCs. With the evident competition and sales went on at high-end retailers, the actual sales volume that led to economies of scale market penetration took place in the unorganised sector, accounting nearly 60% of total market. Several branded PC maker in India, uncared for this market, failing to reach a large unexploited segment of customers whose wants were not being met by the existing channel. Competitors that did sell to this sector have since grown to be key players. Market Segmentation: It is at times complicated to segment market within an existing distribution channel structure. Grey markets permit firms to segment their customer base more profitably than they could if they employ only a constricted base of distributors, customer uncertainty branded dilution that arrives from selling through a multi-channel network of legitimate dealers. IBM used a twofold channel approach to sell profitably in high end markets while still attaining more price responsive consumers with grey market goods; this strategy helped the company meet sales targets, spawn profits produce sales economies in manufacturing. Channel Management: Occasionally it is less expensive to abide grey market activity than to close it entirely. Shutting down grey market can be very pricey in terms of management time other resources required sensing breach, filing them, communicating them internally with distributors, and punishing the lawbreakers. Grey markets may also be a less expensive means to serve small customer sections that do not have access to authorised outlets or customers who do not value the services offered by authorised dealers. Varying market environment: In many situations, distribution channels cannot modify adequately to meet new market realities. For example, auto dealers have supply networks in places that are hard to switch. But in an epoch of soft sales, sustained incentives continually growing competition, they are struggling for numbers, even if it means forgone revenues. With effect, dealers have been more tolerant to grey markets as long as these markets let them to get in touch with a broader set of customers at improved prices. Market Aptitude: Companies that reveal grey market activities the causes following them discover about their customers their markets. Since grey markets materialise on their own, outside existing supply channels structures, they are frequently driven by influential market forces (such as short supply to a particular segment that wants the product) therefore put forward some of the purest forms of market intelligence accessible. 2.2 CONS OF GREY MARKETING 1. Dilution of exclusivity: Perhaps the most instant outcome of grey market is the draining down of exclusive rights to distribute a product. Instead of being the solitary distributor or one of a select few enterprises for delivering a product, the authorised distributor becomes merely one of several sources. The consequence is a radical drop in margins as multiple outlets struggle for the same customer. What follows promptly thereafter is only to be expected: loud complaints from the legitimate distributors and calls to the company to â€Å"do something concerning it!† 2. Free riding: But what if a manufacturer turns blind eye or, worse yet, writes off its authorized distributors complaints? While it is improbable that a distributor would split relations with the supplier in protest, there are several indirect but possibly more insidious ways of reaching the manufacturer. One of these is free riding. Free-riding was initially offered by Tan et al. (1995, 1997) as an alternative justification for the event of grey markets. In such situations, authorised traders, dispirited by anemic margins and manufacturers ineffectiveness, begin skimping on the imperative services they generally offer—such as presale service, consumer awareness education on product features, salesperson training and so on—in an attempt to lessen their expenses and match grey marketers price. This approach can weaken the value-added services and activities that often lay at the heart of several enterprises sources of differentiation and competitive plan in the market place. As one automobile dealer put it, â€Å"We invest millions in sales and service facilities. Its hard to compete with someone whose only investments are a briefcase and a cell phone.† The under provision of services is the death knell of high-end brands, as customers who value service will discard the brand in droves. 3. Damage to channel relations: Perhaps the prime cost of grey marketing is its impact on the relations and trust amid members of the distribution system. When a manufacturer has made major investments in official channel members or is dependent on one or a few associates (or both), grey markets that rip off these relationships can be particularly pricey. Visualise an official supplier that has recently coughed up $2 million to set up a new outlet and its related trappings—all to accomplish its contractual obligations. The manufacturer has guaranteed the dealer that ownership of an exclusive region will more than add up for his venture. Just as the distributor begins to foresee the promised sales, he receives word that the cash cow of the product line is offered down the street at a markdown of 15% to 20% off its own posted price. Frenzied phone calls to the manufacturer are met with empty reassurances or even stony silence. What should the enterprise do? Should it (a) match the price of its grey market opponent, doing whatsoever necessary to cut costs, (b) complain robustly to the manufacturer or (c) seek assistance from the courts, suing whoever appears liable for his current remorseful situation? 4. Undermining segmented pricing schemes: The spill over from this distribution headache expands with equivalent viciousness to most essential elements of a marketing strategy, including pricing. A basic characteristic of multinational operational strategy is the facility to price goods at levels that every local market can bear. As long as a company can fragment each market, it has a winning hand. But globalisation tosses a twist in the works. Tumbling trade barriers, easy accessibility of information and improved logistical potentials have collectively made the watertight local market a quaint belief; these factors also make it easier for grey market operators to flourish. 5. Repute and legal liability: A manufacturers ability to support its product is taken for granted. In the case of grey market goods, however, the manufacturer loses control of the product. FOR AN EXAMPLE OF how these five fundamentals can work together, consider the troubles faced by manufacturers of new, high-end IT products. High levels of services are often required to instruct customers on the features and benefits of these products. To really understand quality new product features and their functioning with other technologies, it is obligatory for the customers to learn from a salesperson at the retail outlet. To make such services available, the manufacturer time and again needs to develop a relatively elite set of distributors, fostering strong contacts and supporting the distributors actions with subsidies and an opportunity to achieve high margins. Authorised suppliers are chiefly vulnerable to grey markets in this condition. Illegitimate dealers can free ride, allowing other dealers invest in the service and offering the similar products at lower prices. Budding customers can take what they discover from authorised dealers and hunt for low-service, lower-price grey markets. The authorised sellers thus face high costs, shrinking margins and low sales. Often, the clarification they opt is to provide less service and to be more price competitive. As their margins contract, channel clashes grow, and the dealers start routing customers to competitors products which offer higher margins. The difficulty, then, eventually budges from the authorised distributors and comes to rest on the shoulders of the manufacturer. Below presented are two different cases providing two different perspectives towards grey practices. The first consist of a comparative study amongst countries the pricing structure of the grey goods that are being sold. The second case depicts the current scenario of grey activities in China. The case focuses mainly on the problem of counterfeiting of IT products the preventive measures that can be taken to minimise this nuisance. CASE 1: BUYING FROM THE GREY MARKET Are you tempted to buy cheap and cheerful goods from the grey market or should you take the authorised route? asks Sean Fleming. Anyone who has visited the US or the Far East will have found themselves going misty-eyed and waxing lyrical on the subject of how cheap things are over there. But you dont have to cross an ocean to see bargains. The difference in the price of new cars in Britain and mainland Europe they are often as much as 20% cheaper on the continent has many people hopping mad. The UKs Director General of Fair Trading has concluded the market isnt working, and has now ordered the Monopolies and Mergers Commission to investigate whether or not cartels exist in the car industry. Whatever the cause, people are realising that we must be paying over the odds in the UK for a whole range of goods and services. But do we complain? No, thats not the British way, is it? So that decision to investigate high prices in the UK will come as music to many peoples ears. Trade and industry minister Stephen Byers says he has identified this as a key obstacle to the concept of a harmonised Europe. If you want proof that things cost more here in the UK, there is plenty of it around. Bureau European des Unions de Consommateurs (BEUC), the European consumers organisation, carried out a survey last year in 52 cities across Europe in which it compared the prices of 400 different products. From this it produced an index of the cheapest and most expensive countries. The UK turned out to be the dearest of the 10 countries sampled, with a rating of 124 overall. By comparison, France scored 107, Luxembourg 102 and Germany a rating of 100. Report after report, survey after survey, they all come back with the same result when you compare like-for-like goods, we in the UK are paying more than just about everyone else in the developed world. Sure enough, its the same story with IT equipment both hardware and software. Feel like paying through the nose? No? Thats unfortunate, because the chances are youre going to. There is a painfully simple solution to all of this, of course. If stuff is cheaper somewhere else, then go somewhere else to buy it. Plenty of people import cars from Holland and Germany, and even from the Far East, so why not do it with IT? The practice of buying from non-standard, unauthorised outlets is often referred to as buying from the grey market. The grey market is a bit like the black market, except in this case no ones actually breaking the law just risking the annoyance of original manufacturers. There are big savings to be had from going grey. For example, an IBM PC 300GL, with PII 400MHz chip, 32Mb memory and a 4.2Gb hard drive running Windows 98 would set you back about #814 in the UK, but bought on the European mainland, the same PC will cost you #689. Thats a 15% saving. How about a Cisco 1601CH router? Itll cost you about #779 here and only #649 on the other side of the channel. Mike Almond is business development manager at ProSource, a company which specialises in finding this sort of deal for its customers. Using a combination of overseas contacts and the Net, ProSource keep tracks of international prices on a daily basis. When asked by a customer for a particular product, it can go out and find the best price. Were not saying were better than established channels or that our approach is the right one for organisations to adopt, but our results speak for themselves. More importantly, we offer an alternative option to our customers. Thats what a free market should deliver, Almond says. Its not difficult to find this stuff. Some manufacturers will discount heavily in particular countries to make in-roads into that market. We can use those markets to buy products back cheaper. There is, of course, a catch buy your kit from another country and the manufacturers warranty is invalid when you get home. No warranty means no technical support, no helpline advice and certainly no upgrades. Some manufacturers are so inflamed at the thought of people saving money like this that they will not just refuse support; they will also claim the law is being broken. This is despite the fact that Europe is now a single market. Phil Humphries is head of IT services at Surrey Police and it is no surprise that hes extremely cautious about ending up on the wrong side of the law, whether statutory or a manufacturers warranty rule. As part of his forces year 2000 project, a lot of equipment has been replaced, at the same time as migrating to Windows NT. He may have seen lots of expensive equipment being bought, but Humphries is not tempted by the lure of the grey market. I am aware that some of the things we use could be bought cheaper overseas by using the grey market, but I dont think the differences are as great as they used to be, he says. Apart from which, the hassle factor would be enough to put me off. This is an important factor for many people. All too often you dont know exactly what youre buying and who you are buying it from. In the event of a problem, can you be sure youll be able to get hold of them? Humphries said. But theres more to it than that. Saving money on initial capital outlay may have its attractions, but Humphries feels this is a short-term gain had at the expense of longer term success. We are moving away from a situation where we are buying boxes. Now we want to deal with a partner which can offer the right support we need from start to finish. Most of the bargain-basement IT offers that crop up in the small ads will be for software. Adverts purporting to have US versions of Microsoft Office at less than half price are fairly commonplace. David Gregory, Microsoft UKs customer legal licensing manager, warns there is more to these offers than meets the eye. He explains: Our biggest problem with people using unauthorised sources is that the overwhelming majority of this software is counterfeit. It will be passed off as being from the US, but in about 90% of cases it is pirated. The individual serial number on the product tells us where that product was bought or if it is a copy. Finding anyone with IT purchasing responsibility who will admit to using the grey market is difficult, although one IT manager confided anonymously: Most of our procurement has to go through a centralised process. However, some stand-alone projects are bought on an ad-hoc basis and thats when buying on the cheap becomes a viable option. But why is any of this stuff priced so much higher in the UK in the first place? Almost all the major manufacturers operate different pricing policies in different countries, but few can explain why the UK gets clobbered quite so comprehensively. As far as Microsoft is concerned, Gregory says: The majority of software originates from the US and there are certain unavoidable costs incurred when taking that software into other territories local support services, language support, translating documentation and so on. Not to mention currency fluctuations. But with the worlds foremost software vendor moving toward shipping single every-language versions of its products, this position is set to become obsolete. On the hardware front, the worlds number one in PCs, Compaq, also varies prices between the countries that it sells to. David Petts, Compaq UK commercial unit business manager, explains: Local pricing exists because different markets have different patterns of economic behaviour. In Europe, Compaq prices are set by the companys European HQ in Munich, and individual countries are then able to fix their own prices within a given range. So, if one were to charge at the top end of the range and another charged at the lower end, you could, in theory, see material price differences, he says. Why the UK is hit hardest by these price differentials is obviously a difficult subject for manufacturers to discuss candidly. One source within a major hardware company begrudgingly admits: Lots of things are cheaper in the US and Japan. Its the way of the world people just need to face up to it. So, there you have it put up and shut up. If you dont put up, and instead succumb to the grey market, your warranties wont work. However, there are ways to get around the warranty issue. In the case of Compaq, any warranty in operation in the UK will also cover the rest of Europe and vice-versa. You can buy Compaq kit in Holland, for example, and not have to worry about your warranty. ProSources Almond explains that it is important to keep geography in mind when venturing into the grey market. Manufacturers will claim warranties are not valid, but under EC law there is nothing to stop you buying things from any other EC country. If we have a customer that is very sensitive about maintaining the warranties, well be careful to only buy from within the right region, he says. In the case of IBM, things are even more straightforward: good old Big Blue offers global support on all its products, so it doesnt matter if you bought your ThinkPad in Durban but you live in Doncaster. A long-standing champion of the grey market is Cirencester-based RBR Networks, Ciscos largest European distribution partner. Before getting its Cisco accreditation in October 1997, RBR was something of a thorn in Ciscos side. It was doing so much business in grey-market Cisco product that in the end the company had to be brought into the fold. RBR marketing director, Jos White, takes a fairly pragmatic view of the subject. He does, however, prefer the term second sourcing to grey market he believes it doesnt sound so grubby. Using second sourcing, we could make a healthy margin and still sell cheaper than most of the competition, says White. It has to be up to the manufacturer to make it worth everyones while to use the authorised channels, he adds. Manufacturers cannot simply try and ban this sort of thing and it is definitely not on for them to throw their weight around, threatening everyone by saying that their licences are invalid and they may be breaking the law. It comes as no surprise that a manufacturer such as Compaq is against the use of the grey market. It has nothing to Grey Marketing Activities Within the Software Industry Grey Marketing Activities Within the Software Industry Future ABSTRACT The research work has presented an enlarged view of the operation within the grey markets, their functioning, pricing structure, the customer base lastly the arguments in favour, thereby evaluating -‘Can grey be good? It has also focussed on grey markets- as a subject of annoyance for the IT players OEMs. Counter-arguments hostile measures adopted to combat grey goods have also been the point of discussion. Overall, this piece of research is being successful in presenting a balanced view of the goods the bads of the grey industry from the perspective of industry players, grey entrepreneurs as well as consumers. INTRODUCTION 1.1 AIMS To obtain information insights about grey marketing activities within the software industry. With the help of Journals, case studies secondary research activities shed light on the present scenario of the grey markets (consumer targeting inclination, pricing etc). The pros cons of grey marketing shall also be presented to have an equalised view. To know what are the hostile measures adopted by firms to prevent grey activities. Present cases to depict the preventive measures adopted by firms like HP Microsoft to combat grey market products. The paper also focuses on the initiatives adopted by independent agencies such as AGMA BSA towards grey market activities. Market Penetration Grey Markets Can grey market ever be an alternative to market penetration? If yes, to which extent can it be possible? In addition, understanding the concept of ‘free riding as a way for market penetration, as mentioned in the Journal of Business Venturing (Vol 4). To evaluate: Can grey ever be good? Based on the research undertaken, evaluating thereby concluding the positives negatives of grey markets. Should they be encouraged? Can they boost an economic scenario of a country? lastly how effective can they be in increasing sales of a product? 1.2 OBJECTIVES The methodology that is to be adopted for fulfilment of the above aims is as under: Journals, Newsweekly, Internet (secondary research) along with white papers provided by firms shall be the main sources of information for this research. Primary data obtained through interviewing shall be the most vital aspect (it shall be considering not only the consumer perspective towards grey markets its products, but also of dealers operating within this arena). finally, the crux of the research (insights, analysis evaluation) will be presented to obtain a concluding perspective. 1.3 GREY MARKET: AN NTRODUCTION Majority of distribution companies are flourishing thanks to distribution channels that shepherd product from a manufacturer eventually direct them to the consumers through a chain of legitimate distributors across the world. But a mounting quite detrimental market subsists that can cause ignorant customers to buy technology products with untrue warranties, several designed for use in other countries or worse products consisting counterfeit parts. These practices can erode customer satisfaction harm brand integrity, causing major profit attrition for manufacturers. Welcome to the global ‘Grey Market where branded products have been sidetracked from the authorised supply channel within a country or are imported into a country without the approval or awareness of the manufacturer. Grey market goods are usually sold at lesser prices than those proposed by the legitimate distributors. And the pricing disparity amongst various legitimate markets customers generates an opportunity for the brokers to procure labelled products at discounted prices move them to markets where they can fetch high income. A research study by KMPG demonstrates that grey market goods pose a grave challenge to information technology manufacturers their authorised dealers. The study reveals that IT manufacturers are communally losing up to US$5 billion in profits on yearly basis, a figure that is mounting. While the grey market affects many businesses, including automobiles, consumer products, pharmaceuticals, fashion accessories others, this study shall validate that computers related products are the industry segments most affected by grey market actions. 1.4 INTRODUCTION TO THE PROBLEM (a) Software Counterfeiting Counterfeiting is amongst the most exigent problem facing the information technology (IT) industry today. Illegal replicas of brand-name high tech products are flooding the marketplace, causing harm to legitimate companies profits and dropping their aptitude to invest in research and development (RD). Multiplication of technology employed to make computers, servers, and a host of high tech products—as well as a lack of regulatory enforcement in developing countries—is speeding up counterfeiting. It is now estimated that as much as 10 percent of all high tech products sold globally are counterfeit. (b) Free Riding: A Way To Penetrate Markets? ‘Free Riding is a term which comes into picture when software products have been counterfeited. Free-riding was first introduced by Tan et al. (1995, 1997) as an alternative explanation for the incidence of grey marketing, whereby grey entrepreneurs are provided with the opportunity to enter money-making markets that are presently supplied by big firms. However, hostile measures have been taken to prevent grey market activities by agencies like AGMA BSA as well as biggies like Microsoft, HP etc. HP is administrating reseller spot checks and distie reviews to stamp out the grey market in a variety of regions without being hesitant to exercise the law courts against resellers who â€Å"breach contractual requisites†. The firm, at the moment, is taking legal action in opposition to one UK reseller for violation of agreement and cautions it has other cases under review. While, Microsoft has collared another plagiarist in the UK for flogging grey software on eBay. The software giant has scored  £35,000 in compensation against an internet trader for copyright violations and illegitimately bringing in cheap American software to Europe. Meanwhile, an agency like Business Software Alliance (BSA) is outing bandits by setting a bounty on their heads. The group announced its Blow the Whistle operation which presents $1m to workers who squeal on their companies. Certain firms are trying to launch software which might allow manufacturers detect sales through unofficial mediums. 1.5 SCOPE FOR THE REASERCH The main reason behind the proposed research subject is to obtain information on the grey markets the practices that are being carried out. The scope for undertaking the research work is as under: Understanding the global phenomenon of ‘grey marketing. Understanding the logistics within grey markets. The precautionary measures adopted by the firms agencies to prevent grey activities. The concept of free riding to penetrate markets within the software arena. lastly analysing evaluating the research produced to gather provide insights. 1.6 LIMITATIONS TOWARDS THE REASERCH The possible shortcomings for the proposed research topic are as under: Being an unconventional subject for research, obtaining information can be tough. Tracking the right sources of information is a major challenge. Information gathered through ground research cant be entirely relied upon, as it can be manipulative. Information obtained from grey suppliers may not be fruitful, as they might not give out precise information about the present scenario Interviewing people from companies or firms who are being targeted by grey marketers may prefer to remain low profile on the preventive measures they plan to adopt in future. 1.7 REASEARCH STRUCTURE The research has five focus groups (in order to understand the information.) The first chapter offers an inside view of the topic with its backdrop. It also contains the customary objectives which form the foundation for a focused research study. Meanwhile, it also describes how the established purpose will be achieved and the manner they would provide help. This section gives rationale and importance of conducting this research. The second chapter comprises the prior literature on grey markets, constructed by a range of authors and researchers in earlier years. This would aid to shed light on the pros cons in grey marketing. In addition; this chapter provides live cases published in reputed newsweekly. The third chapter talks about the type of methodology the researcher has employed to achieve the study. It gives out the arguments in favour against of each method in order to gain understanding. Furthermore, it exemplifies of some important sources which have been accessed to complete the study. Thus, this chapter explains the different techniques to achieve the objectives. The fourth chapter forms the body of the thesis as it entails the detailed analysis of the various aspects to establish the objectives. This chapter generates convincing points to support the study. The fifth and the last chapter of the paper summarises all the information gathered, finally, concluding the thesis. 1.8 SUMMARY HYPOTHESIS To summarise the above literature in few words, I shall be basically focusing weather grey markets can influence the sales of a product, thereby helping towards market penetration. Concepts, rather strategies, such as free riding shall be looked researched upon to present realistic as well as optimistic view towards grey markets, thereby analysing -‘Can grey ever be good? ‘Can grey goods help in market penetration? LITREATURE REVIEW Almost exclusively, the existing literature on grey marketing regards the occurrence as a pricing problem but falls short to identify it as a market entry opportunity for start-up entrepreneurs. The grey marketing strategy forms apt for start-up entrepreneurs in view of their resource limitations and the risk of being a first-mover in market development. Within this paper, the researcher shall be focusing on how an entrepreneur can effectively penetrate an established market by adopting suitable approaches. This is most favorable for an incumbent trader to accommodate the entrepreneur/grey marketer even if the former could compel the latter out of the market through hostile counter actions. Moorthy (1985) demonstrated the game theoretic methodology is most appropriate to investigating the behavior of market participants in such a state. This game theory is being pursued by Lim G.H., Lee K.S., Tan S.J. (Journal of Business Venturing, Jul 2001, Vol 16) to depict the strategic communications between parties concerned in grey markets and to recognise the circumstances under which entrepreneurs can effectively enter these markets. 2.1 THE POSITIVES OF GREY MARKETING A study offered by USC Marshall Research in fall 2004 by Mark Bergen (Carlson School of Management, Kersi D. Antia (University of West Ontario, London) Shantanu Dutta (Marshall School of Business, University of California) portrays the optimism towards grey markets. According to the paper, grey markets are often an helpful way to react to competitive demands, control distribution channels, fragment markets, reach unexploited markets alter the changes in market conditions. Some of the positive aspects of grey markets are being highlighted below: Incremental Sales: Grey markets are favourable if they reach formerly untapped markets. Grey markets also disclose the existence of new markets. Cell phone manufacturers competing in Malaysia, for instance, discovered a buying segment keen to pay premium prices for the newest phone gadgetry. Supply restrictions: Grey markets are advantageous if they permit dealers to overcome supply constraints scarcities. For example, IBM relied on the illegal outlets in China to get around government policies requiring the participation of local companies. Rather than make huge investments to fake partnerships with local distributors, IBM turned a blind eye to a flood of grey market imports from Hong Kong. Competitive need of opportunity: Competitors will frequently exploit grey markets if they are lucrative companies which do not follow trail shall lose significant market share, position power. This is precisely what happened to Indian-branded manufacturers of PCs. With the evident competition and sales went on at high-end retailers, the actual sales volume that led to economies of scale market penetration took place in the unorganised sector, accounting nearly 60% of total market. Several branded PC maker in India, uncared for this market, failing to reach a large unexploited segment of customers whose wants were not being met by the existing channel. Competitors that did sell to this sector have since grown to be key players. Market Segmentation: It is at times complicated to segment market within an existing distribution channel structure. Grey markets permit firms to segment their customer base more profitably than they could if they employ only a constricted base of distributors, customer uncertainty branded dilution that arrives from selling through a multi-channel network of legitimate dealers. IBM used a twofold channel approach to sell profitably in high end markets while still attaining more price responsive consumers with grey market goods; this strategy helped the company meet sales targets, spawn profits produce sales economies in manufacturing. Channel Management: Occasionally it is less expensive to abide grey market activity than to close it entirely. Shutting down grey market can be very pricey in terms of management time other resources required sensing breach, filing them, communicating them internally with distributors, and punishing the lawbreakers. Grey markets may also be a less expensive means to serve small customer sections that do not have access to authorised outlets or customers who do not value the services offered by authorised dealers. Varying market environment: In many situations, distribution channels cannot modify adequately to meet new market realities. For example, auto dealers have supply networks in places that are hard to switch. But in an epoch of soft sales, sustained incentives continually growing competition, they are struggling for numbers, even if it means forgone revenues. With effect, dealers have been more tolerant to grey markets as long as these markets let them to get in touch with a broader set of customers at improved prices. Market Aptitude: Companies that reveal grey market activities the causes following them discover about their customers their markets. Since grey markets materialise on their own, outside existing supply channels structures, they are frequently driven by influential market forces (such as short supply to a particular segment that wants the product) therefore put forward some of the purest forms of market intelligence accessible. 2.2 CONS OF GREY MARKETING 1. Dilution of exclusivity: Perhaps the most instant outcome of grey market is the draining down of exclusive rights to distribute a product. Instead of being the solitary distributor or one of a select few enterprises for delivering a product, the authorised distributor becomes merely one of several sources. The consequence is a radical drop in margins as multiple outlets struggle for the same customer. What follows promptly thereafter is only to be expected: loud complaints from the legitimate distributors and calls to the company to â€Å"do something concerning it!† 2. Free riding: But what if a manufacturer turns blind eye or, worse yet, writes off its authorized distributors complaints? While it is improbable that a distributor would split relations with the supplier in protest, there are several indirect but possibly more insidious ways of reaching the manufacturer. One of these is free riding. Free-riding was initially offered by Tan et al. (1995, 1997) as an alternative justification for the event of grey markets. In such situations, authorised traders, dispirited by anemic margins and manufacturers ineffectiveness, begin skimping on the imperative services they generally offer—such as presale service, consumer awareness education on product features, salesperson training and so on—in an attempt to lessen their expenses and match grey marketers price. This approach can weaken the value-added services and activities that often lay at the heart of several enterprises sources of differentiation and competitive plan in the market place. As one automobile dealer put it, â€Å"We invest millions in sales and service facilities. Its hard to compete with someone whose only investments are a briefcase and a cell phone.† The under provision of services is the death knell of high-end brands, as customers who value service will discard the brand in droves. 3. Damage to channel relations: Perhaps the prime cost of grey marketing is its impact on the relations and trust amid members of the distribution system. When a manufacturer has made major investments in official channel members or is dependent on one or a few associates (or both), grey markets that rip off these relationships can be particularly pricey. Visualise an official supplier that has recently coughed up $2 million to set up a new outlet and its related trappings—all to accomplish its contractual obligations. The manufacturer has guaranteed the dealer that ownership of an exclusive region will more than add up for his venture. Just as the distributor begins to foresee the promised sales, he receives word that the cash cow of the product line is offered down the street at a markdown of 15% to 20% off its own posted price. Frenzied phone calls to the manufacturer are met with empty reassurances or even stony silence. What should the enterprise do? Should it (a) match the price of its grey market opponent, doing whatsoever necessary to cut costs, (b) complain robustly to the manufacturer or (c) seek assistance from the courts, suing whoever appears liable for his current remorseful situation? 4. Undermining segmented pricing schemes: The spill over from this distribution headache expands with equivalent viciousness to most essential elements of a marketing strategy, including pricing. A basic characteristic of multinational operational strategy is the facility to price goods at levels that every local market can bear. As long as a company can fragment each market, it has a winning hand. But globalisation tosses a twist in the works. Tumbling trade barriers, easy accessibility of information and improved logistical potentials have collectively made the watertight local market a quaint belief; these factors also make it easier for grey market operators to flourish. 5. Repute and legal liability: A manufacturers ability to support its product is taken for granted. In the case of grey market goods, however, the manufacturer loses control of the product. FOR AN EXAMPLE OF how these five fundamentals can work together, consider the troubles faced by manufacturers of new, high-end IT products. High levels of services are often required to instruct customers on the features and benefits of these products. To really understand quality new product features and their functioning with other technologies, it is obligatory for the customers to learn from a salesperson at the retail outlet. To make such services available, the manufacturer time and again needs to develop a relatively elite set of distributors, fostering strong contacts and supporting the distributors actions with subsidies and an opportunity to achieve high margins. Authorised suppliers are chiefly vulnerable to grey markets in this condition. Illegitimate dealers can free ride, allowing other dealers invest in the service and offering the similar products at lower prices. Budding customers can take what they discover from authorised dealers and hunt for low-service, lower-price grey markets. The authorised sellers thus face high costs, shrinking margins and low sales. Often, the clarification they opt is to provide less service and to be more price competitive. As their margins contract, channel clashes grow, and the dealers start routing customers to competitors products which offer higher margins. The difficulty, then, eventually budges from the authorised distributors and comes to rest on the shoulders of the manufacturer. Below presented are two different cases providing two different perspectives towards grey practices. The first consist of a comparative study amongst countries the pricing structure of the grey goods that are being sold. The second case depicts the current scenario of grey activities in China. The case focuses mainly on the problem of counterfeiting of IT products the preventive measures that can be taken to minimise this nuisance. CASE 1: BUYING FROM THE GREY MARKET Are you tempted to buy cheap and cheerful goods from the grey market or should you take the authorised route? asks Sean Fleming. Anyone who has visited the US or the Far East will have found themselves going misty-eyed and waxing lyrical on the subject of how cheap things are over there. But you dont have to cross an ocean to see bargains. The difference in the price of new cars in Britain and mainland Europe they are often as much as 20% cheaper on the continent has many people hopping mad. The UKs Director General of Fair Trading has concluded the market isnt working, and has now ordered the Monopolies and Mergers Commission to investigate whether or not cartels exist in the car industry. Whatever the cause, people are realising that we must be paying over the odds in the UK for a whole range of goods and services. But do we complain? No, thats not the British way, is it? So that decision to investigate high prices in the UK will come as music to many peoples ears. Trade and industry minister Stephen Byers says he has identified this as a key obstacle to the concept of a harmonised Europe. If you want proof that things cost more here in the UK, there is plenty of it around. Bureau European des Unions de Consommateurs (BEUC), the European consumers organisation, carried out a survey last year in 52 cities across Europe in which it compared the prices of 400 different products. From this it produced an index of the cheapest and most expensive countries. The UK turned out to be the dearest of the 10 countries sampled, with a rating of 124 overall. By comparison, France scored 107, Luxembourg 102 and Germany a rating of 100. Report after report, survey after survey, they all come back with the same result when you compare like-for-like goods, we in the UK are paying more than just about everyone else in the developed world. Sure enough, its the same story with IT equipment both hardware and software. Feel like paying through the nose? No? Thats unfortunate, because the chances are youre going to. There is a painfully simple solution to all of this, of course. If stuff is cheaper somewhere else, then go somewhere else to buy it. Plenty of people import cars from Holland and Germany, and even from the Far East, so why not do it with IT? The practice of buying from non-standard, unauthorised outlets is often referred to as buying from the grey market. The grey market is a bit like the black market, except in this case no ones actually breaking the law just risking the annoyance of original manufacturers. There are big savings to be had from going grey. For example, an IBM PC 300GL, with PII 400MHz chip, 32Mb memory and a 4.2Gb hard drive running Windows 98 would set you back about #814 in the UK, but bought on the European mainland, the same PC will cost you #689. Thats a 15% saving. How about a Cisco 1601CH router? Itll cost you about #779 here and only #649 on the other side of the channel. Mike Almond is business development manager at ProSource, a company which specialises in finding this sort of deal for its customers. Using a combination of overseas contacts and the Net, ProSource keep tracks of international prices on a daily basis. When asked by a customer for a particular product, it can go out and find the best price. Were not saying were better than established channels or that our approach is the right one for organisations to adopt, but our results speak for themselves. More importantly, we offer an alternative option to our customers. Thats what a free market should deliver, Almond says. Its not difficult to find this stuff. Some manufacturers will discount heavily in particular countries to make in-roads into that market. We can use those markets to buy products back cheaper. There is, of course, a catch buy your kit from another country and the manufacturers warranty is invalid when you get home. No warranty means no technical support, no helpline advice and certainly no upgrades. Some manufacturers are so inflamed at the thought of people saving money like this that they will not just refuse support; they will also claim the law is being broken. This is despite the fact that Europe is now a single market. Phil Humphries is head of IT services at Surrey Police and it is no surprise that hes extremely cautious about ending up on the wrong side of the law, whether statutory or a manufacturers warranty rule. As part of his forces year 2000 project, a lot of equipment has been replaced, at the same time as migrating to Windows NT. He may have seen lots of expensive equipment being bought, but Humphries is not tempted by the lure of the grey market. I am aware that some of the things we use could be bought cheaper overseas by using the grey market, but I dont think the differences are as great as they used to be, he says. Apart from which, the hassle factor would be enough to put me off. This is an important factor for many people. All too often you dont know exactly what youre buying and who you are buying it from. In the event of a problem, can you be sure youll be able to get hold of them? Humphries said. But theres more to it than that. Saving money on initial capital outlay may have its attractions, but Humphries feels this is a short-term gain had at the expense of longer term success. We are moving away from a situation where we are buying boxes. Now we want to deal with a partner which can offer the right support we need from start to finish. Most of the bargain-basement IT offers that crop up in the small ads will be for software. Adverts purporting to have US versions of Microsoft Office at less than half price are fairly commonplace. David Gregory, Microsoft UKs customer legal licensing manager, warns there is more to these offers than meets the eye. He explains: Our biggest problem with people using unauthorised sources is that the overwhelming majority of this software is counterfeit. It will be passed off as being from the US, but in about 90% of cases it is pirated. The individual serial number on the product tells us where that product was bought or if it is a copy. Finding anyone with IT purchasing responsibility who will admit to using the grey market is difficult, although one IT manager confided anonymously: Most of our procurement has to go through a centralised process. However, some stand-alone projects are bought on an ad-hoc basis and thats when buying on the cheap becomes a viable option. But why is any of this stuff priced so much higher in the UK in the first place? Almost all the major manufacturers operate different pricing policies in different countries, but few can explain why the UK gets clobbered quite so comprehensively. As far as Microsoft is concerned, Gregory says: The majority of software originates from the US and there are certain unavoidable costs incurred when taking that software into other territories local support services, language support, translating documentation and so on. Not to mention currency fluctuations. But with the worlds foremost software vendor moving toward shipping single every-language versions of its products, this position is set to become obsolete. On the hardware front, the worlds number one in PCs, Compaq, also varies prices between the countries that it sells to. David Petts, Compaq UK commercial unit business manager, explains: Local pricing exists because different markets have different patterns of economic behaviour. In Europe, Compaq prices are set by the companys European HQ in Munich, and individual countries are then able to fix their own prices within a given range. So, if one were to charge at the top end of the range and another charged at the lower end, you could, in theory, see material price differences, he says. Why the UK is hit hardest by these price differentials is obviously a difficult subject for manufacturers to discuss candidly. One source within a major hardware company begrudgingly admits: Lots of things are cheaper in the US and Japan. Its the way of the world people just need to face up to it. So, there you have it put up and shut up. If you dont put up, and instead succumb to the grey market, your warranties wont work. However, there are ways to get around the warranty issue. In the case of Compaq, any warranty in operation in the UK will also cover the rest of Europe and vice-versa. You can buy Compaq kit in Holland, for example, and not have to worry about your warranty. ProSources Almond explains that it is important to keep geography in mind when venturing into the grey market. Manufacturers will claim warranties are not valid, but under EC law there is nothing to stop you buying things from any other EC country. If we have a customer that is very sensitive about maintaining the warranties, well be careful to only buy from within the right region, he says. In the case of IBM, things are even more straightforward: good old Big Blue offers global support on all its products, so it doesnt matter if you bought your ThinkPad in Durban but you live in Doncaster. A long-standing champion of the grey market is Cirencester-based RBR Networks, Ciscos largest European distribution partner. Before getting its Cisco accreditation in October 1997, RBR was something of a thorn in Ciscos side. It was doing so much business in grey-market Cisco product that in the end the company had to be brought into the fold. RBR marketing director, Jos White, takes a fairly pragmatic view of the subject. He does, however, prefer the term second sourcing to grey market he believes it doesnt sound so grubby. Using second sourcing, we could make a healthy margin and still sell cheaper than most of the competition, says White. It has to be up to the manufacturer to make it worth everyones while to use the authorised channels, he adds. Manufacturers cannot simply try and ban this sort of thing and it is definitely not on for them to throw their weight around, threatening everyone by saying that their licences are invalid and they may be breaking the law. It comes as no surprise that a manufacturer such as Compaq is against the use of the grey market. It has nothing to

Tuesday, November 12, 2019

The Process of Video Game Design and Creation Essay example -- Gamin

Video games have become a substantial influence on the curriculum of the modern entertainment industry. From first-person shooters to role-playing games, the video game industry has became accessible to nearly every kind of player, whether it be a person who enjoys invigorating storytelling, or somebody who just wants to reduce armies into nothing more than bloody shrapnel. â€Å"†¦developing a ‘major’ game title can be a significant task – writers, game designers, sound designers, visual artists and more must work together to create the actual game.†(â€Å"The Process of Game Creation & the Game Design Document.") One thing not often taken into consideration, though, is the hard work and dedication that goes into many of the games people play. Every video game out there had to go through a rigorous process before it could reach the public’s hands. Every game usually starts out with a basic idea, a very basic concept, whether it is a story idea, or a game play idea. An idea might consist of something as simple as â€Å"A knight tries to save a princess from a monster,† or maybe â€Å"cars race with guns attached to their hull.† These ideas are so basic that one could argue a child could come up with them, but every idea has a start. Some games also draw inspiration from other media, such as movies or books, or television shows. A game play idea is only the start, though. This idea is usually put into a â€Å"Game Design Document,† a document that all the team members working on a game use to base their work off. Concept development is where the game starts to really become pieced together. â€Å"The concept development phase takes the germ of an idea for a game, works it up as a game outline, and tests it out on potential audiences.†("The Process of Game Cr... ...s into it. It requires a lot of work, polishing, and, when working with a staff, teamwork. Nobody makes a good game in one night. A single game may take years to complete. Not every game is great, but anyone who works in the industry understands what work goes into a game. It is not just, as one might say, â€Å"Fun and games.† Works Cited "The Process of Game Creation & the Game Design Document." Digital Worlds. N.p., n.d. Web. 15 Aug. 2011. . "Brainy Gamer: The Cave Story story." Brainy Gamer. N.p., n.d. Web. 15 Aug. 2011. . "Game Development Process - Design for Development."public wiki - Design for Development. N.p., n.d. Web. 15 Aug. 2011.

Sunday, November 10, 2019

Global Financial Imbalances Essay

Global Financial Imbalances Essay – How the arrangements of global trade act as a driver of global imbalances Abstract This paper looks at the different factors causing trade imbalance on the global trade arena. This global financial imbalances essay identifies the different factors that affect the global trade imbalances of trade as envisioned in the global trade agreements. The findings reveal that there is need for countries to look into better ways of ensuring that a level playing field is provided for all and proper mechanisms enacted to ensure that no member state flouts the rules and policies. Introduction Pettis (2013, p. 65) claims that trade is a very controversial issue around the world because many people hold the perception that trade agreements and even trade itself undermines some human rights like labour rights, and even affordable medicine in some cases. Many international institutions have emerged to act as a means for countries to foster new economic order. Some of the institutions include bodies like World Trade Organisation which has eventually replaced the General Agreement on Tariffs and Trade to help reduce trade tariffs; the European Union (EU), the North American Free Trade Agreement (NAFTA) and the Asian Pacific Economic Cooperation Group (APEC). These trade agreements are being formed to help regions integrate and enable smooth trading among the trading partners. In addition to the aforementioned regional trade agreements, countries are still negotiating other bilateral trade agreements in all parts of the world. (Rebucci et al 2009, p.44). All these efforts are being directed at liberalising the world economy in order to ensure smooth flow of goods and services in the global market. This liberalisation of trade and investment around the globe has made a large contribution to an increase in global trade volumes, portfolio investment and foreign direct investments, all of which have made significant impacts on the member countries. Despite all the advantages that accompany neoliberalism, it has flaws because it has created trade imbalances in the member states. Liberalisation of trade has been appealing to states because of the logic of comparative advantage as it relocates the factors of production to areas where they would yield a greater advantage through subjection to international competition and trade. This is what guided the formation of associations like World Trade Organisation and the European Union. However, this is part of the causative agents for global trade imbalance because the international economy and the financial system are increasingly becoming vulnerable to the policies of the surplus countries as some countries intentionally refuse to play along the rules of liberalisation (Koo 2011, p. 77). You can also review Free Politics Essay – International Political Economy Global Financial imbalances Liberalisation of trade is pursued by states because it defends international mobility of investment in sites of production, free trade, trade and financial liberalisation in services. Therefore economic efficiency lies in the increase in specialisation in production and circulation of goods and services, and reallocation of capital in the global market. However, the recession being suffered by the developed states has leftthe future of trade liberalisation in the balance as these countries may decide to opt for protectionism in order to shield their economies from such adverse effects (Fardoust et al 2011, p. 54). In contrast to the situation in 2008, countries now have some tools which they can use to mitigate the renewed economic downtown which increases the chances of it generating into a recessionIf the economic downtown continues then the protectionist pressure is likely to increase. However Koo (2011, p. 19) asserts that the first countries that will erect trade barriers to cushion themselves against economic downtown will obviously be blamed for the eventual damage that will be made to the global trading system. However, the countries that will be more responsible for this are the ones that skew their industrial structures, exchange rate policies and tax systems to gain competitive advantage. The irony of this scenario is that the governments that are most dependent on the free trade i.e. the ones that produce more commodities than they can consume will be the biggest hindrance to the sustainable recovery of the global economy (Pettis 2013, p. 55). It is therefore advisable for these countries to change course before it is too late for them to act, or else they will suffer adversely if other governments decide to erect new trade barriers because it will affect their market segments. The countries with surplus production have a tendency of exhorting the governments with deficits to live within their means, pay their debts and save more. However the real challenge facing the global economy is the acute lack of aggregate demand. The globe is already awash with savings but profitable investment opportunities are very minimal which manifests itself in the weakness of consumption (Morrison et al 2007, p. 31). The implication for this is that saving more is not a solution to the countries with trade deficits. Indeed saving more will be extremely disastrous as it will reduce consumption. Reducing consumption will depress investment because households will no longer be buying more and as a consequence, aggravate the fiscal problems. If the governments with big trade deficits opt to save more, then those with surplus will be forced to spend more and save less. Fund (2010, p. 66) claims that the weakness of domestic demand in the United Kingdom, United States and the rest of the Eurozone is grossly affecting the global demand but there is nothing to offset it. The governments with big surpluses like Japan, Germany and China are not doing anything to help ease the contraction in demand elsewhere. Such a situation is fraught with risks because for the world to continue enjoying the benefits of global trade and finance, then there must be a mechanism for unwinding the global trade imbalances. This then leads the discussion to the definition of trade imbalance in order to be able to identify its causes and effects. You can also review UK Trademark and Fashion Brands Essay What is trade imbalance? Duncan (2013, p.65) defines trade balance of a government as a reflection of what it spends less what it produces. A country has a trade surplus if its income exceeds its expenditure which enables it to lend the surplus to the countries where their expenditures exceed their income. In so doing these countries are able to accumulate international assets. The countries with a deficit on the other hand are on the flipside of this as they spend more than their income and have to borrow from the governments with surpluses to cover for the difference. However, in the process of covering their difference, they end up accumulating international debts or liabilities. Surplus economies are dependent on the deficit economies just like the deficit economies are dependent on the surplus economies which imply that there is a mutual relationship of dependency. Therefore it is not possible for all governments to run in surpluses or deficits as both must be in existence for the relationship to subsis t. This then leads to the question of whether trade imbalances are sustainable or not. Trade imbalances and the eventual capital flows between governments are not necessarily the problem. The fast ageing wealthy governments often have excess savings which enables them to make investments in economies with insufficient savings to meet their investment needs (Duncan 2013, p.90). Historically, this meant putting more investments in the rapidly developing economies. As long as the current account deficits remain modest and governments invest the surplus in ways that promote economic growth, then such imbalances are sustainable. However, the current trade imbalances around the world are of a different type (Hall et al 2011, p. 70). They are much bigger than was ever anticipated. For instance the most serious is that between China and the United States where China is still maintaining a huge trade surplus with the United States. Most of the other trade imbalances are between economies with the same levels of development, for example Japan and the United States, and between the Eurozone members. Such imbalances are far from benign as they destabilize the flow of capital between economies. For instance the 2007 global financial crisis and the resultant Eurozone crisis were caused by capital flaws between countries (Haddad and, Shepherd 2011, p. 43). The banks that were overleveraged made matters worse as they further amplified the crisis. However, the underlying reason for the capital outflows was economies with surpluses seeking higher returns. The surplus economies like the United Kingdom, United States and the rest of the Eurozone failed to find productive uses for their surpluses. Instead of boosting productivity, the inflow investments ended up raising assets prices leading to excessive borrowing by the households. The trade imbalances survived both crisis and are even growing again at high levels. However, this is not sustainable. Unlike in the period preceding the 2007 crisis, the current deficit has nothing to do with excess demand in the economies with deficit. It is occurring against a backdrop of stagnation and a decrease in the living standards of these economies. Firms and households of the deficit economies are even saving more and there is no offsetting decline in savings in the private sector within the economies with surpluses (Chen et al 2012, p. 47). Against such kind of economic activities, the trade deficits constitute a major hindrance to economic activities as they reduce employment and demand and as a consequence forces governments to intervene by running huge fiscal deficits. The external demand that the surplus economies rely on is heavily dependent on unsustainable policies in the economies with deficits. You can also review Finance Essay on Savings and Loans Crisis Theoretical foundation – Unger: institutional arrangements and outcomes Roberto Unger proposes an institutional arrangement for the organisation of civil societies, democracies and market economies. He claims that neo-liberalisation of trade is based on theory of comparative advantage that is too partial. It is this partiality that has created global trade imbalances. Roberto Unger argues that the current model of comparative advantage used for free trade arguments is not only partial but is also incomplete and empirically inaccurate to permit the formulation of global business policies. His major concern is the trade policies and designs of the global trading systems which he thinks are inherently designed to create trade imbalances (Claessens, et al 2010, p.81). The theory of comparative advantage is incomplete because it has as a premise the existence of an established comparative advantage. The comparative advantage in the real world is a function of a complex array of economic, social, and political factors. As such it is not possible to determine a case for free trade until fully taking into account the manner in which these factors interact to create the regime of an economy. It is these differences relative to unit costs across countries that create comparative advantage. Different trade agreements often have an effect on the patterns of advantage that an economy can develop and then eventual gains it can attain from free trade. In addition to this, the trade theories often find that multiple world equilibriums exists both in the presence of increasing returns and scale economies as well as the conventional return models (Unger 2005, p. 89). Whichever of these equilibriums the global economy leads a country into affects the aggregate efficiency and distribution of the gains from trade across nations. In the process of selecting equilibrium, broader political and social processes are likely to play a significant role. Only once the effects of trade restrictions on social and political forces have been determined and the eventual selection of an equilibrium made, can a definitive case for or against liberal trade policies be made. This is the reason why Unger proposed the development of a more complex theory of trade premised on a set of basic ideas that play analogous role for labelling the assumptions of a formal model. Without the formal model that takes into account all the factors that affect equilibrium, then the trade imbalances will continue to exist. Other Causes of Trade Imbalance Some countries like China are fuelling imbalance in the global economy by devaluing the Yuan like the Japanese did 26 years ago (Aaronson & Zimmerman 2008, p.81). The country is accused of intentionally devaluing its exchange rates. Although it is not easy to accurately calculate the exchange rate of the Yuan, economists believe it is undervalued by up to 40% and consensus indicate that the policy of China of stockpiling foreign exchange reserves is responsible for this (Aaronson & Zimmerman 2008, p.33). The country has been able to use its huge trade surplus to buy US currency and treasuries in order to maintain a high demand for the US Dollar and make the Yuan appear relatively cheap. This raises the price competitiveness of China against the United States. Acts of money intervention by China to create trade imbalance is deliberate as it spends a lot of money in the market to keep the Yuan undervalued. This market interference by China is fuelling trade deficits in the United States because American companies are forced to outsource jobs to China in order to be able to enjoy cheap labour (Claessens, Evenett & Hoekman 2010, p. 64). The purchasing power of the Chinese is equally suppressed because they are less able to afford foreign products and increase their living standards. This makes it hard for foreign companies to sell their products in the country because the weak Yuan renders them expensive for the average Chinese consumer. The manipulation of trade by China is also fuelling overconsumption in the United States by buying up government treasuries. The artificial suppression of the value of Yuan allows the treasury department to lower the long term interest rates. This fuels the western and American debt, over consumption and ensures that the demand for the Chinese exports is sustained. Although such a practice is not illegal, it creates imbalance in the global trade arena. Although the East and China have played a major role in the provision of attractively priced commodities and financing the western debts, the west has also been responsible for the creation of trade imbalance owing to their inability to control their over consumption (Berger and Nitsch 2010, p. 62). Other than the manipulation of currency by China, the country also supresses labour rights thus lowering the costs of production in the country. The repression of labour by the Chinese government has lowered the manufacturing wages of the workers by approximately 47% to 86% (Chen et al 2012, p.86). The country also provides huge direct export subsidies to its major industries in order to boost production for the export market. Finally, China maintains strict non-tariff barriers to imports. This has ensured that the country maintains trade imbalance with other countries and as at 2011 the Chinese exports to the US were more than four times what the United States exported to China. This trade imbalance from China was further enhanced partly when the country was accepted into the World Trade Organisation without inclusion of a clause to improve the environmental standards and the labour conditions. The entry of China into the economic playing field has further worsened things for the domestic workers in the United States in favour of the multinational companies working in China. You can also review Free International Relations & Trade Dissertation Essay Conclusion This essay has identified the different factors affecting the balance of trade on the international arena. Some countries are deliberately carrying out actions to influence the balance of trade in their favour at the expense of the other partners. Although there are countries that are interfering with the global balance provided by the international market, there is need for countries to look into better ways of ensuring that a good business environment is provided for all and proper mechanisms enacted to ensure that no member state flouts the rules and policies You can also review International Business Environment Essay References Aaronson, S. A., & Zimmerman, J. M. (2008). Trade imbalance: The struggle to weigh human rights concerns in trade policymaking. New York, N.Y., : Cambridge University Press. Berger, H., Nitsch, V., & International Monetary Fund. (2010). The Euro?s Effect on Trade Imbalances. Washington, D.C: International Monetary Fund. Chen, R., Milesi-Ferretti, G.-M., Tressel, T., International Monetary Fund., & International Monetary Fund. (2012). External imbalances in the Euro area. Washington, D.C.: International Monetary Fund. Claessens, S., Evenett, S. J., & Hoekman, B. M. (2010). Rebalancing the global economy: A primer for policymaking. London: Centre for Economic Policy Research. Duncan, R. (2013). The dollar crisis: Causes, consequences, cures. Hoboken, N.J: Wiley. Fund, I. M. (2010). European Financial Linkages. Washington: International Monetary Fund. Haddad, M., Shepherd, B., & World Bank. (2011). Managing openness: Trade and outward-oriented growth after the crisis. Washington, D.C: W orld Bank. Hall, P. V., McCalla, R. J., Comtois, C., & Slack, B. (2011). Integrating seaports and trade corridors. Farnham, Surrey: Ashgate. Koo, R. C. (2011). The Holy Grail of Macroeconomics: Lessons from Japans Great Recession. Hoboken: John Wiley & Sons. Korea-World Bank High Level Conference on Post-Crisis Growth and Development, Fardoust, S., Kim, Y., Sepulveda, C. P., World Bank., & Taeoe Kyo?ngje Cho?ngch’aek Yo?n’guwo?n (Korea). (2011). Postcrisis growth and development: A development agenda for the G-20. Washington, D.C: World Bank. Morrison, C. E., Pedrosa, E., Pacific Economic Cooperation Council., APEC Business Advisory Council., & Institute of Southeast Asian Studies. (2007). An APEC trade agenda?: The political economy of a free trade area of the Asia-Pacific. Singapore: Institute of Southeast Asian Studies. Pettis, M. (2013). The great rebalancing: Trade, conflict, and the perilous road ahead for the world economy. Princeton: Princeton University Press. Rebucci, A., Batini, N., Cova, P., & Pisani, M. (2009). Global Imbalances. Washington: International Monetary Fund. Unger, R. M. (2005). What should the Left propose?. London: Verso. For other resources, please take a look at our site Journal. 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